2026 Tax Calendar

To help you meet all of the important 2026 deadlines, we’re providing this summary of when various tax-related forms, payments and other actions are due. Please review the calendar and let us know if you have any questions about the deadlines or would like assistance meeting them.

February 2

Businesses: Provide Form 1098, Form 1099-MISC (except for those with a February 17 deadline), Form 1099-NEC and Form W-2G to recipients.

Employers: Provide 2025 Form W-2 to employees.

Employers: Report Social Security and Medicare taxes and income tax withholding for fourth quarter 2025 (Form 941) if all associated taxes due weren’t deposited on time and in full.

Employers: File a 2025 return for federal unemployment taxes (Form 940) and pay tax due if all associated taxes due weren’t deposited on time and in full.

Employers: File 2025 Form W-2 (Copy A) and transmittal Form W-3 with the Social Security Administration.

Individuals: File a 2025 income tax return (Form 1040 or Form 1040-SR) and pay any tax due to avoid penalties for underpaying the January 15 installment of estimated taxes.

February 10

Employers: Report Social Security and Medicare taxes and income tax withholding for fourth quarter 2025 (Form 941) if all associated taxes due were deposited on time and in full.

Employers: File a 2025 return for federal unemployment taxes (Form 940) if all associated taxes due were deposited on time and in full.

Individuals: Report January tip income of $20 or more to employers (Form 4070).

February 17

Businesses: Provide Form 1099-B, 1099-S and certain Forms 1099-MISC (those in which payments in Box 8 or Box 10 are being reported) to recipients.

Employers: Deposit Social Security, Medicare and withheld income taxes for January if the monthly deposit rule applies.

Employers: Deposit nonpayroll withheld income tax for January if the monthly deposit rule applies.

Individuals: File a new Form W-4 to continue exemption for another year if you claimed exemption from federal income tax withholding in 2025.

March 2

Businesses: File Form 1098, Form 1099 (other than those with a February 2 deadline), Form W-2G and transmittal Form 1096 for interest, dividends and miscellaneous payments made during 2025. (Electronic filers can defer filing to March 31.)

March 10

Individuals: Report February tip income of $20 or more to employers (Form 4070).

March 16

Calendar-year partnerships: File a 2025 income tax return (Form 1065 or Form 1065-B) and provide each partner with a copy of Schedule K-1 (Form 1065) or a substitute Schedule K-1 — or request an automatic six-month extension (Form 7004).

Calendar-year S corporations: File a 2025 income tax return (Form 1120-S) and provide each shareholder with a copy of Schedule K-1 (Form 1120-S) or a substitute Schedule K-1 — or file for an automatic six-month extension (Form 7004). Pay any tax due.

Employers: Deposit Social Security, Medicare and withheld income taxes for February if the monthly deposit rule applies.

Employers: Deposit nonpayroll withheld income tax for February if the monthly deposit rule applies.

March 31

Employers: Electronically file 2025 Form 1097, Form 1098, Form 1099 (other than those with an earlier deadline) and Form W-2G.

April 10

Individuals: Report March tip income of $20 or more to employers (Form 4070).

April 15

Calendar-year corporations: File a 2025 income tax return (Form 1120) or file for an automatic six-month extension (Form 7004). Pay any tax due.

Calendar-year corporations: Pay the first installment of 2026 estimated income taxes and complete Form 1120-W for the corporation’s records.

Calendar-year trusts and estates: File a 2025 income tax return (Form 1041) or file for an automatic five-and-a-half-month extension (six-month extension for bankruptcy estates) (Form 7004). Pay any tax due.

Employers: Deposit Social Security, Medicare and withheld income taxes for March if the monthly deposit rule applies.

Employers: Deposit nonpayroll withheld income tax for March if the monthly deposit rule applies.

Household employers: File Schedule H, if wages paid equal $2,800 or more in 2025 and Form 1040 isn’t required to be filed. For those filing Form 1040, Schedule H is to be submitted with the return and is thus extended to the due date of the return.

Individuals: File a 2025 income tax return (Form 1040 or Form 1040-SR) or file for an automatic six-month extension (Form 4868). (Taxpayers who live outside the United States and Puerto Rico or serve in the military outside these two locations are allowed an automatic two-month extension without requesting one.) Pay any tax due.

Individuals: Pay the first installment of 2026 estimated taxes (Form 1040-ES) if not paying income tax through withholding or not paying sufficient income tax through withholding.

Individuals: Make 2025 contributions to a traditional IRA or Roth IRA (even if a 2025 income tax return extension is filed).

Individuals: Make 2025 contributions to a SEP or certain other retirement plans (unless a 2025 income tax return extension is filed).

Individuals: File a 2025 gift tax return (Form 709), if applicable, or file for an automatic six-month extension (Form 8892). Pay any gift tax due. File for an automatic six-month extension (Form 4868) to extend both Form 1040 and Form 709 if no gift tax is due.

April 30

Employers: Report Social Security and Medicare taxes and income tax withholding for first quarter 2026 (Form 941) and pay any tax due if all associated taxes due weren’t deposited on time and in full.

May 11

Employers: Report Social Security and Medicare taxes and income tax withholding for first quarter 2026 (Form 941) if all associated taxes due were deposited on time and in full.

Individuals: Report April tip income of $20 or more to employers (Form 4070).

May 15

Calendar-year exempt organizations: File a 2025 information return (Form 990, Form 990-EZ or Form 990-PF) or file for an automatic six-month extension (Form 8868). Pay any tax due.

Calendar-year small exempt organizations (with gross receipts normally of $50,000 or less): File a 2025 e-Postcard (Form 990-N) if not filing Form 990 or Form 990-EZ.

Employers: Deposit Social Security, Medicare and withheld income taxes for April if the monthly deposit rule applies.

Employers: Deposit nonpayroll withheld income tax for April if the monthly deposit rule applies.

June 10

Individuals: Report May tip income of $20 or more to employers (Form 4070).

June 15

Calendar-year corporations: Pay the second installment of 2026 estimated income taxes and complete Form 1120-W for the corporation’s records.

Employers: Deposit Social Security, Medicare and withheld income taxes for May if the monthly deposit rule applies.

Employers: Deposit nonpayroll withheld income tax for May if the monthly deposit rule applies.

Individuals: File a 2025 individual income tax return (Form 1040 or Form 1040-SR) or file for a four-month extension (Form 4868) if you live outside the United States and Puerto Rico or you serve in the military outside those two locations. Pay any tax, interest and penalties due.

Individuals: Pay the second installment of 2026 estimated taxes (Form 1040-ES) if not paying income tax through withholding or not paying sufficient income tax through withholding.

July 10

Individuals: Report June tip income of $20 or more to employers (Form 4070).

July 15

Employers: Deposit Social Security, Medicare and withheld income taxes for June if the monthly deposit rule applies.

Employers: Deposit nonpayroll withheld income tax for June if the monthly deposit rule applies.

July 31

Employers: Report Social Security and Medicare taxes and income tax withholding for second quarter 2026 (Form 941) and pay any tax due if all associated taxes due weren’t deposited on time and in full.

Employers: File a 2025 calendar-year retirement plan report (Form 5500 or Form 5500-EZ) or request an extension.

August 10

Employers: Report Social Security and Medicare taxes and income tax withholding for second quarter 2026 (Form 941) if all associated taxes due were deposited on time and in full.

Individuals: Report July tip income of $20 or more to employers (Form 4070).

August 17

Employers: Deposit Social Security, Medicare and withheld income taxes for July if the monthly deposit rule applies.

Employers: Deposit nonpayroll withheld income tax for July if the monthly deposit rule applies.

September 10

Individuals: Report August tip income of $20 or more to employers (Form 4070).

September 15

Calendar-year corporations: Pay the third installment of 2026 estimated income taxes and complete Form 1120-W for the corporation’s records.

Calendar-year S corporations: File a 2025 income tax return (Form 1120-S) and provide each shareholder with a copy of Schedule K-1 (Form 1120-S) or a substitute Schedule K-1 if an automatic six-month extension was filed. Pay any tax, interest and penalties due.

Calendar-year S corporations: Make contributions for 2025 to certain employer-sponsored retirement plans if an automatic six-month extension was filed.

Employers: Deposit Social Security, Medicare and withheld income taxes for August if the monthly deposit rule applies.

Employers: Deposit nonpayroll withheld income tax for August if the monthly deposit rule applies.

Individuals: Pay the third installment of 2026 estimated taxes (Form 1040-ES), if not paying income tax through withholding or not paying sufficient income tax through withholding.

September 30

Calendar-year trusts and estates: File a 2025 income tax return (Form 1041) if an automatic five-and-a-half-month extension was filed. Pay any tax, interest and penalties due.

October 13

Individuals: Report September tip income of $20 or more to employers (Form 4070).

October 15

Calendar-year bankruptcy estates: File a 2025 income tax return (Form 1041) if an automatic six-month extension was filed. Pay any tax, interest and penalties due.

Calendar-year C corporations: File a 2025 income tax return (Form 1120) if an automatic six-month extension was filed and pay any tax, interest and penalties due.

Calendar-year C corporations: Make contributions for 2025 to certain employer-sponsored retirement plans if an automatic six-month extension was filed.

Employers: Deposit Social Security, Medicare and withheld income taxes for September if the monthly deposit rule applies.

Employers: Deposit nonpayroll withheld income tax for September if the monthly deposit rule applies.

Individuals: File a 2025 income tax return (Form 1040 or Form 1040-SR) if an automatic six-month extension was filed (or if an automatic four-month extension was filed by a taxpayer living outside the United States and Puerto Rico or serving in the military outside those two locations). Pay any tax, interest and penalties due.

Individuals: Make contributions for 2025 to certain existing retirement plans or establish and contribute to a SEP for 2025 if an automatic six-month extension was filed.

Individuals: File a 2025 gift tax return (Form 709), if applicable, and pay any tax, interest and penalties due if an automatic six-month extension was filed.

November 2

Employers: Report Social Security and Medicare taxes and income tax withholding for third quarter 2026 (Form 941) and pay any tax due if all associated taxes due weren’t deposited on time and in full.

November 10

Employers: Report Social Security and Medicare taxes and income tax withholding for third quarter 2026 (Form 941) if all associated taxes due were deposited on time and in full.

Individuals: Report October tip income of $20 or more to employers (Form 4070).

November 16

Calendar-year exempt organizations: File a 2025 information return (Form 990, Form 990-EZ or Form 990-PF) if a six-month extension was filed. Pay any tax, interest and penalties due.

Employers: Deposit Social Security, Medicare and withheld income taxes for October if the monthly deposit rule applies.

Employers: Deposit nonpayroll withheld income tax for October if the monthly deposit rule applies.

December 10

Individuals: Report November tip income of $20 or more to employers (Form 4070).

December 15

Calendar-year corporations: Pay the fourth installment of 2026 estimated income taxes and complete Form 1120-W for the corporation’s records.

Employers: Deposit Social Security, Medicare and withheld income taxes for November if the monthly deposit rule applies.

Employers: Deposit nonpayroll withheld income tax for November if the monthly deposit rule applies.

Normally businesses must furnish certain information returns to workers and submit them to the federal government by January 31. But this year, that date falls on a Saturday. So the deadline is the next business day, which happens to be Groundhog Day: February 2, 2026.

W-2s for employees

By February 2, employers must furnish and/or file these 2025 forms:

Form W-2, Wage and Tax Statement. Form W-2 shows the wages paid and taxes withheld for the year for each employee. It must be furnished to employees and filed with the Social Security Administration (SSA). The IRS notes that “because employees’ Social Security and Medicare benefits are computed based on information on Form W-2, it’s very important to prepare Form W-2 correctly and timely.”

Form W-3, Transmittal of Wage and Tax Statements. Anyone required to file Form W-2 must also file Form W-3 to transmit Copy A of Form W-2 to the SSA. The totals for amounts reported on related employment tax forms (Form 941, Form 943, Form 944 or Schedule H) for the year should agree with the amounts reported on Form W-3.

1099-NECs for independent contractors

The February 2 deadline also applies to Form 1099-NEC, Nonemployee Compensation. This form generally must be furnished to independent contractors and filed with the IRS if the following conditions are met:

You made a payment to someone who wasn’t your employee,
The payment was for services in the course of your trade or business,
The payment was to an individual, partnership, estate, or, in some cases, a corporation, and
You made total payments of at least $600 to the recipient during the year.

You may have heard that the One Big Beautiful Bill Act, signed into law in 2025, increased the threshold to $2,000. That change goes into effect for payments made this year (that will be reported on the 2026 1099-NECs you’ll furnish and file in early 2027). The threshold will be annually adjusted for inflation beginning in 2027.

Other forms

Your business may also have to furnish a Form 1099-MISC to each person to whom you made certain payments for rent, medical expenses, prizes and awards, attorney’s services, and more. The deadline for furnishing Forms 1099-MISC to recipients is also February 2.

The deadline for submitting these forms to the IRS depends on the filing method. If you’re filing on paper, the 2026 deadline is March 2 (because the normal February 28 deadline falls on a Saturday this year). If you’re filing them electronically, the deadline is March 31.

Furnish and file on time

When the IRS requires you to “furnish” a form to a recipient, it can be done in person, electronically or by first-class mail to the recipient’s last known address. If 2025 W-2 or 1099-NEC forms are mailed, they must be postmarked by February 2.

Don’t cast a shadow over tax filing season by missing the Groundhog Day deadline. Failing to meet applicable deadlines (or include the correct information on the forms) may result in penalties. Contact us with any questions about Form W-2, Form 1099-NEC or other tax forms and the applicable filing requirements. We’d be happy to answer them and help you stay in compliance.

Financial statements aren’t built solely on fixed numbers and historical facts. Many reported amounts rely on accounting estimates — management’s best judgments about uncertain future outcomes. Estimates are inherently subjective and can significantly affect reported results. How do external auditors evaluate whether amounts reported on financial statements seem reasonable?

Understanding management’s assumptions and data

External auditors pay close attention to accounting estimates during audit fieldwork. They review the methods and models used to create estimates, along with supporting documentation, to ensure they’re appropriate for the specific accounting requirements. In addition, auditors examine the company’s internal controls over the estimation process to ensure they’re robust and designed to prevent errors or manipulation.

For instance, they may inquire about the underlying assumptions (or inputs) used to make estimates to determine whether the inputs seem complete, accurate and relevant. Estimates based on objective inputs, such as published interest rates or percentages observed in previous reporting periods, are generally less susceptible to bias than those based on speculative, unobservable inputs. This is especially true if management lacks experience making similar estimates.

Challenging estimates and assessing bias

When testing inputs, auditors assess the accuracy, reliability and relevance of the data used. Whenever possible, auditors try to recreate management’s estimate using the same assumptions (or their own). If an auditor’s independent estimate differs substantially from what’s reported on the financial statements, the auditor will ask management to explain the discrepancy. In some cases, an external specialist, such as an appraiser or engineer, may be called in to estimate complex items.

Auditors also may conduct a “sensitivity analysis” to see if management’s estimate is reasonable. A sensitivity analysis shows how changes in key assumptions affect an estimate, helping to evaluate the risk of material misstatement.

In addition, auditors watch for signs of management bias, such as overly optimistic or conservative assumptions that could distort the financial statements. They also consider the objectivity of those involved in the estimation process, ensuring there’s no undue influence or pressure that could affect the estimate’s outcome.

Auditors also may compare past estimates to what happened after the financial statement date. The outcome of an estimate is often different from management’s preliminary estimate. Possible explanations include errors, unforeseeable subsequent events and management bias. If management’s estimates are consistently similar to actual outcomes, it adds credibility to management’s prior estimates. But if significant differences are found, the auditor may be more skeptical of management’s current estimates, necessitating the use of additional audit procedures.

Why estimates matter

Accounting estimates are a key focus area for auditors because small changes in management’s assumptions can have material effects on a company’s financial statements. Through rigorous testing, professional skepticism and independent analysis, auditors can help promote accurate, reliable financial reporting.

As audit season gets underway for calendar-year businesses, now’s a good time to review significant accounting estimates and address gaps in documentation. Taking these proactive measures can help streamline the audit process and reduce the risk of unnecessary delays. Contact us with questions or for assistance preparing for your audit.

A competitive benefits package can help employers attract and retain talent. And with the passage of last year’s One Big Beautiful Bill Act (OBBBA), you have a new option to consider. The law introduced Trump Accounts (TAs), which the IRS describes as “a new type of individual retirement account (IRA) for eligible children.” The OBBBA also allows employers to contribute to these accounts through TA Contribution Programs (TACPs). In December 2025, the IRS issued guidance that, in part, lays out a framework for sponsoring this benefit.

Purpose and ground rules

Beginning July 4, 2026, eligible parents, guardians or other qualified parties may establish a TA for any child who has a Social Security number and is under age 18 at the end of the tax year. No contributions may be accepted before that date. The accounts are intended to help children build cash reserves for various purposes when they reach adulthood.

Parents, guardians, other qualifying relatives, and governmental and taxable entities (including employers) can contribute up to $5,000 in aggregate annually to an account during the child’s “growth period,” which generally ends before January 1 of the year the beneficiary turns 18. Notably, children who are U.S. citizens born after December 31, 2024, and before January 1, 2029, may qualify for a one-time government-funded “pilot program contribution” of $1,000. This and other exempt contributions aren’t subject to the annual $5,000 limit.

TA contributions aren’t tax deductible. However, contributions and earnings grow tax-deferred as long as those funds remain in the account. During the growth period, distributions generally aren’t permitted except for limited items, such as certain rollovers, returns of excess contributions or distributions following a child’s death. From the end of the growth period on, a TA is treated as a traditional IRA and is generally subject to the same rules as other traditional IRAs.

It’s important to note that TA funds must be invested in exchange-traded funds or mutual funds that track a qualified index of primarily U.S. equities. In addition, the investments must meet other IRS criteria, including limitations on leverage and fees.

Points of clarification

In December, the IRS issued Notice 2025-68. The guidance opens with a statement of intent to propose regulations and provide further guidance on TAs. Specifically relevant to employers, it addresses some key points about TACPs.

For instance, it confirms that employee-participants may begin excluding from income up to $2,500 annually in employer contributions, effective July 4, 2026. (The limit will be adjusted for inflation after 2027.) The guidance clarifies that the employer contribution limit applies per employee — not per dependent. So, participants with more than one dependent are still subject to the $2,500 employer limit, no matter how many dependents they may have.

Another noteworthy point raised by the guidance is that, when making a contribution, employers must notify TA trustees (financial institutions administering the accounts) that it’s:

A TACP employer contribution, and
Excludable from the employee’s gross income.

In addition, employers can allow employees to fund a TACP through pretax salary reductions under a cafeteria plan — but only when those payroll deductions are contributed directly to a dependent’s account. Employees can’t use salary reductions to fund their own TAs because cafeteria plan rules prohibit pretax compensation deferrals for an employee’s benefit.

The guidance indicates that a TACP must be maintained under a separate written plan and directs employers to compliance requirements similar to those for Section 129 dependent care assistance programs. These include nondiscrimination and notice/reporting rules.

The IRS intends to further address how TACPs will coordinate with existing cafeteria plan rules in future guidance. It’s also requested public comments on TAs, which will be considered in drafting the forthcoming proposed regulations.

Further exploration

To be clear, Notice 2025-68 doesn’t provide comprehensive instructions for employers on how to set up TACPs. But a careful reading does reveal the basic framework for this benefit. If interested, perhaps the first issue to address is whether to offer the program on its own or under an existing cafeteria plan. You’ll also need to establish contribution-tracking processes and an employee communication strategy. We’d be happy to help you explore the feasibility of a TACP for your organization.

It’s not uncommon for family members to contest a loved one’s will or challenge other estate planning documents. But you can take steps now to minimize the likelihood of such challenges after your death and protect both your wishes and your legacy.

Family disputes often arise not from legal flaws, but from confusion, surprise or perceived unfairness. By preparing a well-structured estate plan and clearly communicating your intentions to loved ones, you can reduce the risk of misunderstandings that can lead to challenges. There are also specific steps you can take to help fortify your plan against challenges.

Demonstrate a lack of undue influence

Family members might challenge your will by claiming that someone asserted undue influence over you. This essentially means the person influenced you to make estate planning decisions that would benefit him or her but that were inconsistent with your true wishes.

A certain level of influence over your final decisions is permissible. For example, there’s generally nothing wrong with a daughter encouraging her father to leave her the family vacation home. But if the father is in a vulnerable position — perhaps he’s ill or frail and the daughter is his caregiver — a court might find that he was susceptible to the daughter improperly influencing him to change his will.

There are many techniques you can use to demonstrate the lack of any undue influence over your estate planning decisions, including:

Choosing reliable witnesses. These should be people you expect to be available and willing to attest to your testamentary capacity and freedom from undue influence years or even decades down the road.

Videotaping the execution of your will. This provides an opportunity to explain the reasoning for any atypical aspects of your estate plan and can help refute claims of undue influence (or lack of testamentary capacity). Be aware, however, that this technique can backfire if your discomfort with the recording process is mistaken for duress or confusion.

In addition, it can be to your benefit to have a medical practitioner conduct a mental examination or attest to your competence at or near the time you execute your will.

Follow the law for proper execution

Never open the door for someone to contest your will on the grounds that it wasn’t executed properly. Be sure to follow applicable state laws to the letter.

Typically, that means signing your will in front of two witnesses and having your signature notarized. Be aware that laws vary from state to state, and an increasing number of states are permitting electronic wills.

Consider a no-contest clause

If your net worth is high, a no-contest clause can act as a deterrent against an estate plan challenge. Most, but not all, states permit the use of no-contest clauses.

In a nutshell, a no-contest clause will essentially disinherit any beneficiary who unsuccessfully challenges your will. For this strategy to be effective, you must leave heirs an inheritance that’s large enough that forfeiting it would be a disincentive to bringing a challenge. An heir who receives nothing has nothing to lose by challenging your plan.

Be proactive now to avoid challenges later

Other aspects of your estate plan, such as trusts and beneficiary designations for retirement plans and life insurance, could also be challenged. Taking steps now to minimize the risk of successful challenges to any of your estate planning documents can help protect your legacy and provide clarity and peace of mind for your loved ones. We can help you draft an estate plan that will meet legal requirements and accurately reflect your intentions, reducing the risk of challenges.

Yeo & Yeo, a leading Michigan-based advisory firm, is pleased to announce the promotions of two members of the firm’s administration team. David Milka has been promoted to Chief Financial Officer, and Melissa Lindsey has been promoted to Practice Growth Senior Manager. These promotions reflect the firm’s continued investment in strengthening internal operations and positioning the administrative team for long-term growth.

“David and Melissa have demonstrated exceptional commitment and have played instrumental roles in supporting our people and driving firmwide initiatives,” said Dave Youngstrom, President & CEO. “Their promotions reinforce our strategic focus on building a strong internal foundation to support future growth and continue delivering an outstanding experience for our clients and our team.”

Milka joined Yeo & Yeo in 2002 and has grown alongside the firm for more than 20 years, becoming a central leader in how the organization manages its resources and plans for the future. His financial acumen, deep knowledge of the firm, and steady leadership have earned him the trust of partners and team members across the firm’s companies and offices. He transforms benchmarking data and financial reporting into insights that guide major firm decisions. As Chief Financial Officer, he oversees Yeo & Yeo’s financial strategy, budgeting, and core operational support functions, ensuring resources are aligned with the firm’s long-term priorities.

Lindsey joined Yeo & Yeo in 2015 and has become a key leader in advancing the firm’s growth strategy. As Practice Growth Senior Manager, she leads firmwide efforts to align people, services, culture, and client experience in support of sustainable growth. She has led the design of the firm’s Client Experience program, driven service and niche development, and supported M&A integrations as the firm expands its capabilities. Lindsey is also a trusted coach to professionals across the organization, strengthening the firm’s advisory mindset and confidence while ensuring Yeo & Yeo’s value is communicated with clarity and consistency. In this expanded role, she will advance firmwide strategic priorities and lead cross-company growth initiatives that strengthen the foundation of supporting the firm’s people, clients, and long-term success.

These promotions reflect the firm’s commitment to cultivating a high-performing team. By empowering leaders like Milka and Lindsey, Yeo & Yeo reinforces the supportive, growth-minded culture that enables the entire firm to thrive.

The manufacturing industry had a challenging year in 2025, despite some favorable tax developments under the One Big Beautiful Bill Act. Tariff uncertainty and escalating costs were among the factors creating difficulties, and how they’ll play out in 2026 remains to be seen.

To keep your manufacturing company’s cash flow healthy and your business on course despite such complications, you must do the legwork to create an accurate, reasonable budget — and continue to employ smart budgeting practices year-round. Here are five tips for budgeting success.

1. Review your company’s goals

Your budget should reflect the goals you’ve set for the budget period and beyond, especially if you’ll be setting the foundation for long-term goals or taking further steps toward them. Your goals — whether launching a new product, expanding market share or improving efficiency through automation — should influence resource allocation in your budget.

Financial goals are important, too. They must be realistic and attainable. If they’re not, they can lead to a budget that’s more aspirational than useful.

2. Forecast your revenue, expenses and cash flows

Your sales forecast plays a pivotal role in budgeting, so it must be realistic. It not only provides the estimated revenue that will be available to cover the expenses on the other side of the ledger, but also determines estimated production volume (that is, how much will be required to fulfill the expected sales). In turn, you can calculate the amount of raw materials, labor hours, and fixed and overhead costs required. That information will inform pricing decisions.

Don’t overlook your cash flows, because you’ll also need to forecast them. Your budget may project sufficient revenues to cover your costs and leave you with a solid profit margin, but your business can take a hit if you run into an unforeseen cash crunch. You might, for example, need to obtain financing to bridge the gap. Rolling 13-week cash flow forecasts allow you to take into account variables that are subject to rapid fluctuation and prepare for any cash shortfalls.

3. Avoid over-reliance on historical data

Historical data is an essential ingredient when formulating your budget. It can give you valuable information on trends, seasonal variances and areas where you fell short on previous budgets. But you shouldn’t base your upcoming budget entirely on the past (for example, simply increasing all of the prior year’s figures by a set percentage). History isn’t always the best predictor of the future in manufacturing.

You must also collect information on other factors that may affect your revenues and expenses, and adjust your budget accordingly. Examples include industry and market trends, macroeconomic conditions, equipment age and capacity, workforce availability, and relevant legislative and regulatory developments.

4. Solicit stakeholder input

The need for the additional information referenced above is one reason the days of “top-down” budgeting — where executives or senior management devise a high-level budget that department managers must then implement — have largely passed. Savvy manufacturing leaders realize that a more comprehensive, holistic approach is more effective.

Executives, department managers and project managers all should be involved in the budgeting process. It’s too easy for accounting and finance staff to miss critical information that the individuals immersed in day-to-day operations often possess. Involving these people can significantly improve budget accuracy.

5. Make your budget a living document

Budgets shouldn’t be treated as static documents, especially when so much data is now available thanks to artificial intelligence, data analytics and similar technological advances. If you run into supply chain disruptions, shifts in demand or other unexpected circumstances, you don’t have to be tied to a budget that was drafted in a very different environment.

These days, you can easily monitor your budget, comparing it against actual revenues and costs in real time — not just at year-end. When you identify the possibility of notable variances, you can adjust the budget’s figures, implement measures to get back on track (such as cost-cutting) or both.

Get to work

Drafting and implementing a credible budget can improve strategic planning and operations, while also making it easier for your manufacturing company to secure financing. If you have questions about your company’s budget, we can help provide the answers.

Highlights From the Roth Catch-up Contribution Regulations

Key Dates
9/16/2025	IRS released the final regulations on Roth catch-up contributions under SECURE 2.0. Note: SIMPLE IRA plans are not subject to the Roth catch-up regulations.
1/1/2026	New SECURE 2.0 catch-up rules took effect on January 1, 2024, but the IRS delayed compliance until January 1, 2026.
12/31/2026	Plan amendment deadline for qualified plans.
12/31/2028	Plan amendment deadline for union plans and those under collective bargaining agreements.
12/31/2029	Plan amendment deadline for governmental plans and 403(b) plans sponsored by public schools.

Eligible Plans and Participants
401(k), 403(b), governmental 457(b)	New Roth catch-up regulations affect these retirement plans.
50+	Participants age 50 or older can contribute more than the plan limits.
60, 61, 62, 63	Ages at which participants are eligible to make super catch-up contributions
$150,000	Employees age 50 or older that earn $150,000 or more in 2025 Social Security wages (Box 3 of Form W-2) (i.e., “highly paid participants” or HPPs) are required to make any catch-up contributions as Roth contributions (after-tax instead of pre-tax).

Contribution Limits
$24,500 (2026)	General limit on salary deferrals for 2026.
$72,000 (2026)	Annual defined contribution limit.
$8,000 (2026)	Standard catch-up contribution limit.
$11,250 (2026)	Contribution limit for super catch-up contributions.

The final Roth catch-up regulations the IRS issued on Sept. 16 are in effect, detailing SECURE 2.0’s requirements and deadlines for most ERISA-based retirement plans. However, it is important to note that SIMPLE IRA plans and self-employed individuals are not subject to these regulations. Plan sponsors should act now to determine how the new regulations affect their plans and take steps to comply.

The IRS will allow 2026 to be a “gap year,” allowing plan sponsors time to adjust to the new catch-up requirements, since the IRS did not extend the non-enforcement transition period that ends on December 31, 2025. During 2026, plan sponsors will be required to demonstrate a reasonable, good faith interpretation of the SECURE 2.0 changes, but stricter compliance enforcement begins on January 1, 2027.

Most plans must be amended to comply with the new requirements by December 31, 2026, regardless of whether the plan operates on a fiscal year or calendar year basis. The 12-month runway to the new amendment date may seem long, but most plan sponsors will need to coordinate with third parties — such as payroll providers, advisors, legal counsel, or recordkeepers — each with their own priorities and timelines. Additionally, plan sponsors must not only understand how the rules affect their plans but also explain these changes effectively to plan participants.

This article offers five steps for plan sponsors to consider as they implement Roth catch-up contribution requirements. For more information about these regulations, please review IRS Final Catch-Up Contribution Regulations for Salary Deferrals in Retirement Plans: What Employers Need to Know.

1. Identifying Eligible Participants

Are any of the company’s employees eligible for Roth catch-ups or super catch-ups?

Eligibility may not be immediately apparent, and several considerations are at play:

Age: Employees age 50 or older can make additional deferrals to their retirement plans beyond the typical contribution limit. Super catch-ups are available to employees in the calendar year they reach age 60, 61, 62, or 63.
Prior-year wages: Employees whose 2025 Social Security wages exceed $150,000 are considered highly paid participants (HPPs). This is not simply another name for highly compensated employees (HCEs): it’s a completely new classification. In addition, the HPP prior-year Social Security wage limit is a new data point that employers never had to track before. The HPP Social Security wage limit ($150,000) is lower than the 2025 Social Security wage base ($176,100). Thus, employers cannot simply assume that everyone who hits the Social Security wage base cap is an HPP, because others below that level could also be HPPs.
Owners with self-employment income are exempt. The new mandatory Roth “age and wage” catch-up rules apply only to W-2 employees and do not apply to self-employed individuals, including partners and LLC profits or capital interest owners who receive K-1s instead of W-2s.

It’s important for employers to identify employees whose age and salary meet the IRS requirements for mandatory Roth (after-tax) deferrals. As employees reach these milestones, plan sponsors must direct deferrals to the appropriate pre-tax and after-tax funds.

2. Updating Payroll and Plan Systems

What steps should employers take to comply with the new Roth catch-up contribution regulations?

Employers should immediately discuss the new IRS guidance with payroll providers, recordkeepers, and any other critical stakeholders. To help verify compliance with SECURE 2.0 Roth catch-up deferral regulations, employers can take the following steps:

Evaluate the payroll system to determine if it can track employee eligibility.
Establish procedures to accurately process Roth catch-up contributions.
Monitor contribution limits, participant ages, and participant salaries continuously.
Communicate regularly with payroll providers and third-party administrators to assess the efficiency and accuracy of the new processes.

Plan participants may be unaware of changes to their retirement plans. It’s critical to inform participants about how the Roth catch-up provisions may affect them.

3. Communicating with Participants

Do employers need to notify participants of the new Roth catch-up regulations?

Employees who prefer to make pre-tax rather than after-tax contributions to their retirement plan may find the new SECURE 2.0 regulations an unwelcome surprise. Employers are strongly encouraged to inform participants that, based on their age and Social Security wages, their catch-up contributions may automatically be treated as Roth (after-tax) contributions. Communications to plan participants should provide them the opportunity to make an informed decision about their deferral elections.

4. Amending Plan Documents

When should employers amend plan documents?

Conversations about plan amendments should begin immediately. A thorough review of plan provisions will reveal the extent of any changes needed, including those related to the Roth catch-up regulations. For example, what if a company’s current plan doesn’t offer Roth contributions as an option? To allow HPPs to make catch-up contributions, the plan sponsor must amend the plan document to allow Roth contributions from all eligible employees.

Typically, amending an ERISA retirement plan may involve coordinating with other entities, including third-party administrators and payroll providers. Adapting to another organization’s timelines and priorities can extend the process — another good reason to start reviewing your company’s plan now. Doing so can help plan sponsors comply before deadlines approach and reduce errors that may occur if amendments are rushed at the last minute.

5. Remaining Up to Date

How can the company continue to maintain compliance with Roth catch-up regulations?

As these rules evolve, administrative burdens on employers and plan sponsors could shift. It’s important to monitor new guidance or updates from the IRS, as these may require employers and plan administrators to take additional action.

Some content borrowed with permission from BDO USA. Our firm is an independent member of the BDO Alliance USA, a nationwide association of independently owned local and regional accounting, consulting, and service firms.

Yeo & Yeo is pleased to announce the promotion of Mackenzie Doyle, CPA, and Sierra Roy, CPA, from Senior Accountant to Manager. Doyle and Roy are members of the firm’s Assurance Service Line, helping organizations navigate audits and compliance requirements.

Mackenzie Doyle joined Yeo & Yeo in 2021 and has steadily advanced, earning recognition for her strong technical skills and reliability across engagements. Based in the Alma office, she focuses on assurance services for government entities, school districts, and for-profit organizations, with advanced proficiency in employee benefit plan audits. Her work with plans subject to ERISA, including 401(k) and 403(b) audits, has made her a go-to resource for both colleagues and clients navigating complex reporting requirements. Mackenzie holds a Bachelor of Business Administration in Accounting from Northwood University and is a Certified Public Accountant. She is a member of the Michigan Association of Certified Public Accountants and the American Institute of Certified Public Accountants.

Sierra Roy joined Yeo & Yeo in 2021 and is based in the Ann Arbor office. A member of the firm’s Education Services Group, Sierra specializes in assurance services for government entities, school districts, and nonprofit organizations. She has extensive experience auditing under government auditing standards, including single audits and audits conducted in accordance with 2 CFR 200. Known for her strong technical knowledge and thoughtful approach to complex compliance requirements, Sierra is a trusted resource for both clients and colleagues. She holds a Bachelor of Business Administration in Accounting from the University of Michigan–Dearborn and is a Certified Public Accountant. She is a member of the Michigan Association of Certified Public Accountants and the American Institute of Certified Public Accountants.

“Mackenzie and Sierra have consistently demonstrated the technical skill, accountability, and professionalism our clients rely on,” said Jamie Rivette, Principal and Assurance Service Line Leader. “Their promotions reflect their growth, dedication, and readiness to take on greater leadership responsibilities while continuing to deliver exceptional service.”

Do you operate a business as a partnership, a limited liability company (LLC) treated as a partnership for tax purposes or an S corporation? In tax lingo, these are called “pass-through” entities because their taxable income items, tax deductions and tax credits are passed through to their owners and taken into account on the owners’ federal income tax returns. These entities generally don’t owe any federal income tax themselves. Here are some important things to know about tax filing for pass-through entities.

March 16 deadline

Even though pass-through entities generally don’t owe federal income tax at the entity level, they still must file a federal income tax return. Partnerships and LLCs treated as partnerships for tax purposes file Form 1065, “U.S. Return of Partnership Income.” S corporations file Form 1120-S, “U.S. Income Tax Return for an S Corporation.”

If your pass-through entity uses the calendar year for tax purposes, as most do, the deadline for filing the federal income tax return for its 2025 tax year is March 16, 2026 (because March 15 falls on a Sunday).

The March 16 deadline can be extended by six months to September 15, 2026, by filing IRS Form 7004, “Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns,” by March 16.

Keep in mind that if you file an extension for the pass-through entity’s return, you (and any other owners) will also likely also need to file extensions to October 15, 2026, for your individual 2025 return.

Schedules K-1

For each tax year, pass-through entities must send out Schedules K-1 to their owners. These forms report each owner’s share of the entity’s tax items. Schedules K-1 can be sent to owners electronically. And they must be included with the entity’s federal income tax return for the year.

Because pass-through entity owners rely on Schedules K-1 to prepare their returns, it’s desirable to get them out as early as possible. However, if an entity’s 2025 return filing deadline is extended to September 15, 2026, that also becomes the deadline for providing Schedules K-1 to the owners.

3 tax law changes to note

The One Big Beautiful Bill Act (OBBBA), signed into law July 4, 2025, included several tax changes that will affect 2025 returns of pass-through entities. Here are three of the most important:

1. First-year depreciation. The OBBBA permanently restored 100% first-year depreciation for eligible assets acquired and placed in service after January 19, 2025. Before the OBBBA, 100% bonus depreciation was last allowed for eligible assets placed in service in 2022.

For eligible assets placed in service in tax years beginning in 2025, the OBBBA increased the maximum amount that can be immediately deducted via the first-year Section 179 expensing election to $2.5 million (up from $1.25 million before the OBBBA). The deduction begins to phase out dollar for dollar when asset acquisitions for 2025 exceed $4 million (up from $3.13 million before the OBBBA).

The OBBBA also established 100% first-year depreciation for nonresidential real estate that’s classified as qualified production property. That basically means factory buildings.

2. R&E expenditures. The OBBBA allows businesses to immediately deduct eligible domestic research and experimental (R&E) expenditures that are paid or incurred in tax years beginning in 2025 and beyond. Before the OBBBA, these expenditures had to be amortized over five years.

Eligible small businesses can elect to apply the new immediate deduction rule retroactively to pre-2025 tax years beginning in 2022, 2023 or 2024. Also, all taxpayers that made R&E expenditures in tax years beginning in 2022 through 2024 can elect to write off the remaining unamortized amount of their R&E expenditures over a one-year or two-year period starting with the tax year beginning in 2025.

3. Business interest expense deductions. For tax years beginning in 2025 and beyond, the OBBBA permanently installed more favorable rules for determining how much business interest expense can be currently deducted. While most small and midsize businesses are exempt from the business interest expense deduction limitation rules, check with us regarding the status of your pass-through entity.

Time to get rolling

The filing deadline for the 2025 federal income tax returns of most pass-through entities is looming. While the deadline can be extended by six months, you must take action by March 16, at minimum, to file for an extension. Contact us to get things rolling.

Do your company’s 2026 strategic plans include a business acquisition? Whether you already have your eye on a target or are still weighing options, plan now for extensive financial due diligence. To help ensure a successful transaction, it’s critical to review a seller’s statements and other records for signs of owner or employee fraud.

Subtle warning signs

Forensic accountants can add significant value during mergers and acquisitions (M&A) due diligence. Fraud professionals generally scour financial statements for subtle warning signs, including:

Excess inventory,
Significant write-offs of inventory, accounts receivable or other assets,
An unusually high number of voided transactions or excessive returns,
Insufficient documentation of sales,
Increased purchases from new vendors, and
Progressively higher accounts payable and receivable combined with dropping or stagnant revenues and income.

Suspicious revenue, cash flow and expense patterns, as well as unreasonable-seeming growth projections, warrant further investigation.

Note: Although findings such as these can prove to be the tip of the fraud iceberg, they might also indicate unintentional errors. Some small businesses may lack the internal financial expertise to prepare reliable statements and may not engage external auditors to review them. But whether financial irregularities are accidental or intentional, you’ll want to know exactly what you’re getting into.

Insider activity

To determine whether unusual income figures indicate systematic manipulation, forensic professionals usually consider whether insiders had the opportunity to commit fraud — for example, if the business has failed to implement and enforce solid internal controls. Regulatory disapproval, customer complaints and suspicious supplier relationships can also raise red flags. If warranted, an expert may perform background checks on a target company’s principals.

It’s important to know that some sellers adopt legitimate accounting practices to present a selling business in the best possible light. However, if your forensic accountant finds misrepresentations — especially by executives — you’ll probably want to rethink your acquisition offer. In less serious cases, you may need to make purchase price adjustments or change the deal’s structure. In severe cases, you may need to walk away.

One way to protect your transaction, even if a seller successfully hides financial manipulation and other illegal activities, is to include an indemnification clause in your purchase agreement. Your M&A advisors may have to negotiate with the seller over liability limits and other details, such as the definition of “fraud.” But such clauses can help you manage acquisition risk.

Professional expertise

M&As are transactions you never want to attempt without the guidance and expertise of professional advisors. Effective deal teams typically include investment bankers or brokers, attorneys and accountants with various specialties. To avoid M&A fraud, make sure you include a forensic accountant on your team.

The balance sheet shows your company’s financial condition — its assets vs. liabilities — at a specific point in time. However, the balance sheet is more than a static report. It can also serve as a diagnostic tool for managers and other stakeholders to analyze historical performance and plan for future growth. Taking your balance sheet to the next level requires context, judgment and forward-looking analysis.

Look beyond what’s reported

Under U.S. Generally Accepted Accounting Principles (GAAP), not everything that creates value or risk for a business appears on the balance sheet. For example, internally generated intangible assets (such as brands, proprietary processes or customer relationships) are often critical to business operations. But they’re generally excluded on a GAAP-basis balance sheet unless acquired from third parties.

Likewise, accounting for potential obligations — such as pending litigation, governmental investigations and other contingent losses — depends on the circumstances. These “contingencies” may be reported on the balance sheet as an accrued liability, disclosed in the footnotes or omitted from the financial statements, depending on how they’re classified under GAAP. Accounting Standards Codification (ASC) Topic 450, Contingencies, requires companies to classify contingent losses as “probable” (likely to occur), “remote” (chances that a loss will occur are slight), or “reasonably possible” (falling somewhere between remote and probable). These determinations rely heavily on professional judgment.

Identify what matters most

Once you understand the limitations of reported numbers, the next step is determining which balance sheet items matter most to your business model. A “common-sized” balance sheet — where each line item is expressed as a percentage of total assets — can help highlight concentrations and priorities.

Items with the largest percentages often warrant the most attention, both from an operational and risk perspective. For example, inventory may dominate a retailer’s balance sheet, while accounts receivable may be more critical for professional services firms.

Use ratios to assess strength

Ratios compare line items on your company’s financial statements. They may be grouped into four categories: 1) profitability, 2) liquidity, 3) asset management and 4) leverage. While profitability ratios focus on the income statement, the others compare items on the balance sheet. Common examples include:

The current ratio (current assets ÷ current liabilities), a short-term liquidity measure that helps assess whether your company has enough current assets to meet current obligations,
The days-in-receivables ratio (accounts receivable ÷ annual sales × 365), which measures collection efficiency, and
The debt-to-equity ratio (interest-bearing debt ÷ equity), which reflects the use of debt vs. equity to finance growth.

Tracking these ratios over time — and against industry benchmarks — can reveal emerging issues before they become problems.

Set goals and forecast the impact

After identifying key metrics, establish realistic targets based on your strategy and risk tolerance. For instance, you may aim to increase cash reserves, improve liquidity or reduce your debt-to-equity ratio.

Importantly, forecast how these changes will flow through the financial statements. Strengthening one area often constrains another — for example, building up cash reserves may limit debt reduction. Forecasting helps test whether goals are achievable and highlights trade-offs early in the process.

A clearer, stronger financial picture

Reinforcing your balance sheet isn’t just about increasing assets or reducing liabilities. It’s about understanding what’s missing, evaluating risk with informed judgment and proactively managing key drivers. With thoughtful analysis and planning, your balance sheet can become a powerful tool for resilience. Contact us to learn more.

Earned wage access (EWA) has been getting increased attention in recent months. In December 2025, for example, the Consumer Financial Protection Bureau (CFPB) issued an advisory opinion on how employer-sponsored EWA programs should be treated under federal lending law. As adoption grows and regulatory guidance evolves, many employers are assessing the potential role of this benefit in their payroll strategies.

Many names, same concept

EWA goes by several other names — including early pay, same-day pay, instant pay and daily pay. Whatever its moniker, the perk allows employees to access some or all earned but unpaid wages before their next payday. Participants can usually receive the funds within one to three business days, free of charge, or sooner if they pay a fee. Funds can be disbursed as a direct deposit to the worker’s bank account, a prepaid card or a digital wallet.

Although employees may engage an EWA provider directly, employer-sponsored programs are becoming more common. Under this model, an employer usually contracts with a third-party provider to fund early payroll disbursements based on time and attendance records. Because the provider typically funds the early payments, these arrangements usually don’t significantly affect the employer’s cash flow and may require minimal changes to payroll operations. Generally, providers are repaid through deductions from participants’ paychecks, but some also charge fees for setup, integration, maintenance or transactions.

Demand for EWA has been driven in part by the fact that many workers are paid weekly, biweekly or semi-monthly. The delay between payments can create a cash crunch for some employees, who may turn to payday loans, credit cards, cash advances, bank overdrafts or other costly options for relief.

Advantages for both parties

The benefits of EWA for employees are fairly obvious. EWA can help them manage short-term liquidity needs and reduce reliance on high-cost alternatives. And it doesn’t involve a traditional credit check or meeting an income requirement. Even when instant-access fees apply, EWA is typically less expensive than a payday loan. Perhaps best of all, participants don’t have to worry about collection agencies, high interest rates or damage to their credit scores.

The advantages for employers might not be as apparent, but they can be significant. For starters, personal financial troubles are a leading cause of stress for workers. These worries often undermine performance, causing distraction and lowering productivity. They may even drive employees to look for new jobs. In short, employees’ financial concerns affect your organization. EWA can help alleviate some of that stress.

Additionally, in today’s on-demand world, some workers now expect employers to offer EWA. And many applicants prioritize job offers that include it. So, offering EWA could give your organization a competitive hiring edge — especially with younger applicants who are accustomed to the concept.

Risks and practical considerations

Despite these potential benefits, EWA also presents risks that you must consider before rolling out a program. First, employees may hold unrealistic expectations about the benefit and grow disgruntled if it doesn’t solve their financial woes. To guard against this, you’ll need to design your program carefully and clearly communicate all its features and limitations. In other words, implementing and administering EWA will consume time and internal resources.

Second, if you partner with a third-party EWA provider and participants encounter problems, your organization will take the blame. It’s critical to carefully vet potential vendors and choose one you can trust and work with comfortably. Also, as mentioned, some providers charge various fees for their services. Before entering into an agreement, identify all the costs involved and project their impact on cash flow and operations.

In the news

As mentioned, EWA made the news recently when the CFPB published its advisory opinion in the Federal Register on December 23, 2025. Essentially, the agency stated that certain EWA products offered through “employer-partnered” arrangements aren’t loans under the Truth in Lending Act — provided they meet certain criteria. (Note: Advisory opinions aren’t statutes or regulations; state requirements may still apply.) The bureau also formally rescinded a July 2024 proposed rule that would have subjected most EWA payments to federal lending law.

“The U.S. EWA market is set to expand by about 300% between 2024 and 2034,” the agency stated in the opinion, citing a November report from research firm Market.us. Indeed, this benefit is expected to become an increasingly popular employer payroll tool. If you decide to implement a program, consult a qualified attorney to ensure it complies with applicable federal and state laws.

Workforce investment

EWA can be a meaningful benefit for employees — and potentially a strategic advantage for your organization. However, before rolling out a program, evaluate whether and how it would integrate with your existing payroll structure, identify the total and true costs, and carefully vet prospective providers. We can help you assess EWA and other workforce investments to ensure they align with your budget, operations and strategic objectives.

The Qualified Opportunity Zone (QOZ) program, created by the Tax Cuts and Jobs Act, was slated to expire after 2026. The One Big Beautiful Bill Act (OBBBA), however, extends and expands it.

The QOZ program incentivizes business investment in designated low-income communities around the country. Manufacturers that are considering re-shoring operations to the United States or building new facilities may find it easier to attract funding if they locate in a QOZ, especially one in a rural area.

QOZ program overview

The QOZ program generally allows taxpayers to defer eligible short- or long-term capital gains on sales of their investments by reinvesting those gains in a qualified opportunity fund (QOF) within 180 days. The main requirement to be a QOF is that the fund must maintain at least 90% of its assets in QOZ property. This includes investments in QOZ businesses, as well as new or substantially improved commercial buildings and equipment in a QOZ.

A manufacturer that’s set up as a corporation or partnership generally can become a QOZ business — and in turn qualify for QOF funding — if:

At least 50% of its gross income comes from business activities within a QOZ,
At least 70% of the tangible property it owns or leases is QOZ business property used in the business,
At least 40% of its intangible property is used for business activities within a QOZ, and
Less than 5% of the average unadjusted bases of its property is attributable to nonqualified financial property.

QOF investors receive an equity interest in the fund, plus valuable tax perks. For example, under the original program, capital gains tax on the “rolled over” gains from the investment the investor sold are deferred until the earlier of 1) the sale or exchange of the taxpayer’s QOF investment, or 2) December 31, 2026. After five years, the taxpayer receives a 10% step-up in tax basis, so only 90% of the rollover gain is taxable. After seven years, the step-up in tax basis increases to 15%. If a QOF investment is held for at least 10 years, gains attributable to appreciation of the QOF investment itself are fully excludable.

OBBBA changes

The OBBBA establishes a permanent QOZ program that features rolling 10-year QOZs that will first be available for investment on January 1, 2027. It also amends certain tax advantages.

Rollover gains can still be deferred temporarily, and taxpayers will continue to receive the 10% step-up in tax basis on the fifth year of the QOF investment. They must recognize the gain at that point, though, and no additional step-up is triggered after seven years. The permanent exclusion of gains attributable to appreciation of the QOF investment itself if the QOF is held for at least 10 years remains intact. It’s available for up to 30 years after investment in the QOF.

Notably, the OBBBA also creates a new type of QOF, the qualified rural opportunity fund (QROF). Similar to a standard QOF, it must invest at least 90% in a rural QOZ. But it offers more generous tax benefits. Specifically, after five years, investors will receive a 30% step-up in tax basis on their rollover gain, rather than just 10%.

New guidance

The IRS has released Notice 2025-50, which addresses two critical aspects of the new QROF program:

1. “Rural area” definition. It defines “rural area” as any area other than:

A city or town with a population greater than 50,000, and
Any urbanized area contiguous and adjacent to such a city or town.

The IRS reports that over 3,300 of the more than 8,700 existing QOZs in the United States are entirely rural areas.

2. Threshold for satisfying the “substantial improvements” requirement for existing buildings. For standard QOZs, existing buildings are considered substantially improved if, during any 30-month period after the property is acquired, investments in the building exceed 100% of its initial adjusted basis. For rural areas, though, these investments need only exceed 50% of the building’s initial adjusted basis.

More to come

Additional IRS guidance on QROFs is expected, but existing regulations already provide useful insights into standard QOFs. We can help you explore how the program could benefit your manufacturing company.

Your income statement indicates whether your business is profitable — but it doesn’t always explain why. For many small businesses, traditional cost accounting can mask where time and money are really being spent. Activity-based costing offers a practical way to understand the true cost of the work you perform, helping you make better decisions about pricing, profitability and operational efficiency.

How does activity-based costing work?

With activity-based costing, you assign costs to specific activities based on the resources they consume. Think of activities as the building blocks of your operations — such as setting up equipment, processing invoices, completing service calls or performing quality checks. Implementing activity-based costing generally involves four steps:

1. Identify activities. Create a list of tasks your company performs to deliver a product or service. Define each activity in such a way that there’s no overlap and everyone understands what’s included.

2. Allocate resources. For each activity, identify the resources used, such as materials, equipment time, labor hours and subcontracted services.

3. Calculate the per-unit cost of each resource. Choose a standard, measurable unit for each resource and calculate the cost per unit. For example, if a box of 100 screw anchors costs $30, the per-unit cost is 30 cents per anchor. For labor, the unit is typically an hourly wage or fully burdened labor rate.

4. Determine resource consumption and allocate indirect costs. Estimate how many units of each resource each activity consumes, then multiply by the per-unit cost. Indirect costs — such as rent, equipment leases, administrative salaries and software subscriptions — are allocated using reasonable cost drivers, such as square footage, machine hours or transaction volume, to arrive at the total cost of each activity.

What insights can activity-based costing provide?

Activity-based costing can provide meaningful insights into what’s working — and what’s not. For example, if a job or service line is consistently less profitable than expected, whether from excessive labor time, inefficient processes or underutilized equipment, it can help pinpoint where costs are accumulating. This approach can help management identify inefficiencies early and take corrective action before margins erode.

You may also uncover spending patterns that lead to better purchasing decisions and improved cost control. From a strategic standpoint, activity-based costing provides a clearer picture of which products, services and customers contribute most to profitability — and which may need to be repriced, redesigned or discontinued.

Estimating and pricing can also improve with activity-based costing. By breaking work into well-defined activities, businesses can build more accurate estimates and adjust them more easily when scope changes. Activities essentially become flexible line items that can be added, removed or refined as projects evolve.

Is it right for your business?

Activity-based costing is designed to supplement, not replace, your traditional accounting system. It works best for businesses with multiple offerings, significant overhead or processes with varying complexity. While the methodology can seem intimidating at first, modern accounting and project management software can significantly reduce your data burden. Contact us to discuss whether activity-based costing is a good fit for your business and how it can be implemented in a practical, scalable way based on your operations, goals and resources.

With 2025 in the rear view mirror and the tax filing deadline on the road ahead, it’s a good time for businesses to start gathering information about their deductible expenses for 2025. But what’s deductible (and what’s not) might not be as clear-cut as you think.

Most business deductions aren’t specifically listed in the Internal Revenue Code (IRC). The general rule is what’s stated in the first sentence of IRC Section 162, that you can write off “all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business.” In addition, you must be able to substantiate the expenses.

Ordinary and necessary

In general, an expense is ordinary if it’s considered common or customary in the particular trade or business. For example, a landscaping company’s costs for fuel and routine maintenance on its lawn equipment would typically qualify as ordinary expenses because such costs are customary for that type of business.

A necessary expense is defined as one that’s helpful or appropriate. For instance, a retail store that invests in security cameras may be able to operate without them, but the expense is helpful for reducing theft and protecting employees and customers.

To be deductible, an expense must be both ordinary and necessary. An ordinary expense may be unnecessary because the amount isn’t reasonable in relation to the business purpose. For example, let’s say a construction business upgrades to premium, top-of-the-line tools when standard professional-grade tools already meet job requirements. Tool purchases are ordinary, but excessive upgrades may be unreasonable and, thus, unnecessary.

Cases in point

The IRS and courts don’t always agree with taxpayers about what qualifies as a deductible business expense. Often substantiation is the primary issue. Sometimes the question hinges not on the expense itself, but on whether the taxpayer was actually operating a trade or business.

For example, the U.S. Tax Court denied deductions claimed by an engineering firm owner for the value of his own time spent developing a program. Self-performed labor isn’t “paid or incurred,” the court noted. Therefore, it’s not deductible. The court disallowed other deductions due to insufficient records and lack of a clear business purpose.

In another case, a taxpayer engaged in real estate activities. His business expense deductions were denied by the Tax Court. The court ruled that the activities didn’t constitute an active trade or business. Instead, the real estate was held for investment purposes. In addition, the deductions weren’t substantiated because adequate records weren’t kept. The taxpayer appealed. The U.S. Court of Appeals for the Ninth Circuit agreed with the Tax Court. The court ruled the taxpayer “failed to provide sufficient evidence of his claimed deductions.”

What can you deduct for 2025?

Determining the deductibility of business expenses can be complicated, and proper substantiation is critical. We can help you determine what you can deduct on your 2025 tax return.

The IRS has increased the standard mileage rate for business use of cars, vans, and pickup or panel trucks by 2.5 cents for 2026. The rates for vehicle use for certain other purposes will decline or remain the same. (IR 2025-128, 12/29/2025)

The standard mileage rates provide an optional method that taxpayers can use to calculate the deductible costs of operating a vehicle for business, charitable, medical, and certain moving purposes. Taxpayers can also use the actual-costs method.

2026 Standard Mileage Rates

Beginning January 1, 2026, the standard mileage rates for the use of a car, van, or pickup or panel truck will be:

72.5 cents per mile driven for business use, up 2.5 cents from 2025.
20.5 cents per mile driven for medical purposes, down a half cent from 2025.
20.5 cents per mile driven for moving purposes for certain active-duty members of the Armed Forces (and now certain members of the intelligence community), reduced by a half cent from last year.
14 cents per mile driven in service of charitable organizations, equal to the rate in 2025.

Note. These rates apply to fully-electric and hybrid automobiles, as well as gasoline and diesel-powered vehicles.

Other Vehicle Deduction Amounts

The IRS has also provided other amounts that taxpayers will use to calculate their deductible vehicle expenses in specific circumstances in 2026.

Basis reduction amount: For taxpayers calculating their basis reduction for depreciation taken under the business standard mileage rate, the portion of the business standard mileage rate treated as depreciation is 35 cents per mile.

Maximum cost under FAVR plan: The maximum standard automobile cost for computing the allowance under a fixed and variable rate (FAVR) plan is $61,700 for automobiles (including trucks and vans).

Maximum value for employer-provided vehicles: For purposes of the fleet-average valuation rule and the vehicle cents-per-mile valuation rule, the maximum fair market value for employer-provided automobiles first made available to employees for personal use in 2026 is $61,700.

Miscellaneous Itemized Deductions Under OBBBA

The notice also reminds taxpayers that the One Big Beautiful Bill Act (OBBBA) permanently suspends all miscellaneous itemized deductions that are subject to the 2% of adjusted gross income floor, including unreimbursed employee travel expenses. As a result, the business standard mileage rate can’t be used to claim an itemized deduction for unreimbursed employee travel expenses.

However, certain educator expenses are excepted. In addition, deductions for expenses that are deductible in determining adjusted gross income are still permitted.

Does your business let regulars run tabs? Customers who maintain tabs in restaurants, bars and retail shops are often profitable, and it may be in your best interest to offer them credit. Yet unpaid balances, informal notes and missing records can quickly become unmanageable — and unprofitable. So it’s important to monitor customer credit, set limits and collect overdue amounts.

Smart business?

When customers can conveniently access credit from your business, they may spend more time and money at your establishment than they otherwise would. Nonetheless, the informal nature of tabs can make it hard to identify who’s overdue and how much they owe. Worse, some may disappear without settling their accounts.

To avoid confusion and potential financial losses, make your tab policy easy to understand with a simple statement posted prominently near your register and on any menus. For example, you might state: “We cap tabs at $250 and settle weekly.”

Also, decide who qualifies for the program. In most cases, a tab makes sense for regulars who visit often — and you should define “often” in your policy. Those individuals should be willing to provide proof of basic contact information, such as their full name, phone number and email address. You might also ask whether you can run a default debit or credit card to settle their tab if they don’t do so in person by your due date.

Advantages of one method

Track customers’ tabs using one method consistently. This could be as simple as a spreadsheet or as sophisticated as the latest point-of-sale system tools. Include such key data fields as the customer’s:

Name,
Contact information,
Tab start and due date,
Current balance,
Credit limit, and
Status, such as current, due or overdue.

Employees should update the tabs in your system after each shift, and you should review the top balances, tabs nearing their limit and overdue accounts weekly. Color-coding — with green indicating “under limit or current,” yellow indicating “near limit or due soon,” and red indicating “overdue or over limit” — can make management easier. Also consider starting small with new customer credit. As customers make on-time payments and give you more of their business, you might increase their limits.

Collecting overdue accounts

Staying on top of payment due dates is critical to running a tab program. For one to three days past due, text or call customers to confirm they know their balance and offer easy ways to pay. For seven to 10 days past due, text or call, clearly stating the amount owed and date due, and ask customers to settle within 24 hours. For accounts more than 14 days past due, contact customers and let them know you won’t extend additional credit until the balance is cleared.

If you have good reason to think a tab customer is a bad actor who has no intention of paying you, file a police report, notify your insurance company and talk to your tax advisor. You may be able to deduct the loss from your federal business tax return.

When collecting on past-due accounts, make it as easy as possible for customers by texting a link to an online payment system. Or, if you have a customer’s card on file, simply request approval to charge it. Just keep in mind that all communications to collect debt should take place via private messaging (such as email and text) and discreet face-to-face conversations. Don’t reveal the existence of outstanding balances to anyone beyond the customer and your employees.

Don’t get scammed

Running tabs doesn’t mean you have to risk being scammed. Establish a simple policy, track balances and follow a consistent collections process. And to ensure your program is fair and straightforward, apply the same terms to every customer. Following these simple steps will help you protect cash flow without alienating repeat customers.

A new year brings many new tax-related figures for businesses. Here’s an overview of key figures for 2026. Be aware that exceptions or additional rules or limits may apply.

Depreciation-related tax breaks

Bonus depreciation: 100%
Section 179 expensing limit: $2.56 million
Section 179 phaseout threshold: $4.09 million

Qualified retirement plan limits

401(k), 403(b) and 457 plan deferrals: $24,500
401(k), 403(b) and 457 plan catch-up contributions for those age 50 or older: $8,000
401(k), 403(b) and 457 plan additional catch-up contributions for those age 60, 61, 62 or 63: $3,250
SIMPLE deferrals: $17,000
SIMPLE catch-up contributions for those age 50 or older: $4,000
SIMPLE additional catch-up contributions for those age 60, 61, 62 or 63: $1,250
Contributions to defined contribution plans: $72,000
Annual benefit limit for defined benefit plans: $290,000
Compensation defining highly compensated employee: $160,000
Compensation defining key employee (officer) in a top-heavy plan: $235,000
Compensation triggering Simplified Employee Pension contribution requirement: $800

Other benefits limits

Health Savings Account (HSA) contributions: $4,400 for individuals, $8,750 for family coverage
Health Flexible Spending Account (FSA) contributions: $3,400
Health FSA rollover: $680
Child and dependent care FSA contributions: $7,500
Employer contributions to Trump account: $2,500
Monthly commuter highway vehicle and transit pass: $340
Monthly qualified parking: $340

Miscellaneous business-related limits

Income range over which the Section 199A qualified business income deduction limitations phase in: $201,750 – $276,750 (double those amounts for married couples filing jointly)
Threshold for the excess business loss limitation: $256,000 (double that amount for joint filers) — note that this is a reduction from 2025
Limitation on the use of the cash method of accounting: $32 million (also affects other tax items, such as the exemption from the 30% interest expense deduction limit)

Planning for 2026

We can help you factor these changes and others into your 2026 tax planning. Contact us to get started.

Strategic planning can feel overwhelming for business owners juggling sales goals, cash flow challenges, staffing needs and day-to-day operational issues. Although you may rely heavily on financial reports to make key decisions, numbers alone don’t always tell the full story. Introduced in the early 1990s, the balanced scorecard approach still offers a practical framework for translating vision into action that’s worth revisiting.

4 critical areas

The balanced scorecard approach was unveiled in a 1992 Harvard Business Review article entitled “The Balanced Scorecard — Measures That Drive Performance.” Essentially, it segments strategic planning into four critical areas:

Customers. Every business owner understands the importance of customer satisfaction. However, to truly understand and meet their needs, you must identify the right metrics. Just as critical is determining which customer segments your company is best equipped to serve. Under the balanced scorecard approach, you consider how your business can attract, retain and deepen relationships with customers that are most likely to support sustainable profitability.
Finance. Many companies rely on financial results as the sole indicator of overall stability and success. However, the results that show up in, say, your financial statements are typically lagging indicators; they reflect past events rather than future performance. To be clear, you should continue generating accurate financial statements. But the balanced scorecard approach encourages businesses to track metrics, such as sales growth and workforce efficiency, that reveal more timely financial outcomes.
Processes. To operate more productively and efficiently, business owners and their leadership teams must identify and solve process-related problems. Simply paying closer attention to a shortcoming isn’t enough. For example, measuring productivity won’t automatically increase it. The balanced scorecard approach motivates you to analyze the internal components of your operations — from design and production to delivery, billing and collections — and implement process improvements that support strategic objectives.
Learning and professional growth. Continuing education often calls for more time and effort than companies are willing or able to devote. Learning must go beyond training new hires to include, for instance, mentoring and knowledge sharing through performance management programs. For many businesses, success largely depends on the development and preservation of intellectual capital. The balanced scorecard approach focuses strategic planning on better retaining institutional knowledge, encouraging ongoing learning and preparing employees for future roles.

Best practices

Following the balanced scorecard approach involves clearly defining your strategic objectives in each of the four areas, choosing a few metrics to track and expressing the results on a “scorecard.” Many leadership teams use a simple table or spreadsheet for their scorecards, while others use digital dashboards that update key metrics in real time.

Remember, too many measures can dilute focus and obscure what truly drives business performance. The most effective scorecards concentrate on a small set of meaningful indicators aligned directly with the company’s strategic objectives in each area.

For instance, suppose a growing manufacturing company wants to improve profitability while maintaining quality and on-time delivery. To support this strategic objective, leadership develops a balanced scorecard to track:

On-time delivery and customer complaints (customers),
Operating margin and cash flow (finance),
Production cycle time and scrap rates (processes), and
Safety incidents and workforce training hours (learning and professional growth).

Another best practice is to ensure balance among leading and lagging indicators. As mentioned, financial results show what has already happened. In contrast, customer surveys, employee engagement data and operational benchmarks can highlight emerging opportunities or risks before they appear in financial statements. Reviewing these measures together can help you and your leadership team identify connections across the business rather than evaluating each area in isolation.

Finally, consistency and accountability are essential. Review your scorecard regularly — quarterly at a minimum — and integrate it into leadership meetings and performance discussions. Assign clear ownership to each metric so responsibilities are clear and progress can be monitored. As your business evolves, revisit your scorecard to ensure it continues to reflect your strategy and priorities.

An intriguing concept

When exercised diligently and properly, the balanced scorecard approach can become a vibrant business practice that supports better decisions and keeps strategic objectives front and center. But it’s not for every company. If you’re intrigued by the concept, explore it further before committing. And no matter what strategic planning approach you choose, we’re here to help organize your financials and support measured, long-term growth.