Selling a Business, Rental, or Large Asset This Year? Call Your CPA Before You Sign

There’s a moment in almost every significant asset sale when the seller realizes they should have called their accountant sooner. The deal is done, the documents are signed, and the question becomes: how do we minimize the damage? The honest answer is that the best options are often gone by then.

If you’re thinking about selling a business, rental property, or other large asset this year, the time to understand what’s at stake is before that call happens. 

The tax consequences of a large sale are not simple

When a major asset changes hands, several tax issues typically come into play at once. Understanding them ahead of time is what separates a planned outcome from an unpleasant surprise.

Capital gains tax

Long-term capital gains receive preferential tax rates of 0%, 15%, or 20%, but those rates depend on your total taxable income for the year, not just the gain itself. The gain stacks on top of your other income when determining which rate applies. 

For married couples filing jointly in 2026, the 0% rate applies up to $98,900 of taxable income, the 15% rate applies from there up to $613,700, and the 20% rate applies above that. For single filers, the 20% rate kicks in above $545,500. A large sale can push you across those lines even if your ordinary income alone would not. 

Consider a couple with $200,000 in taxable income before a sale. A $2 million long-term gain brings their total to $2.2 million. The first $413,700 of that gain (the portion that fits under the $613,700 threshold) is taxed at 15%. The remainder is taxed at 20%. The difference between the 15% and 20% rates on that upper portion is roughly $79,000. However, that’s a number you might be able to influence through deal structure, timing, or installment planning if you plan ahead.

Depreciation recapture

Every year you own a rental property or business asset, you’re generally entitled to deduct depreciation on your tax return, and most owners do. Those deductions reduce taxable income while you hold the property. When you sell, the IRS collects on them. This is called depreciation recapture. Basically, the portion of your gain that represents previously deducted depreciation gets taxed at a higher rate than the standard long-term capital gains rate. 

For rental real estate, the recaptured amount is taxed at a maximum of 25% under what the tax code calls “unrecaptured Section 1250 gain.” For business equipment and other personal property, recapture under Section 1245 is taxed as ordinary income, potentially as high as 37%.

Let’s say you purchased a rental property ten years ago for $300,000, with $50,000 allocated to land, which isn’t depreciable, and $250,000 to the building. Residential rental property depreciates over 27.5 years, so your annual deduction has been roughly $9,100. Over ten years, that’s approximately $91,000 in depreciation deductions.

Those deductions reduced your adjusted basis in the property to about $209,000. If you sell for $400,000, your total gain is roughly $191,000, but it breaks down into two pieces:

• $91,000 of unrecaptured gain for the depreciation you took, taxed at a maximum of 25%, and
• $100,000 of remaining long-term capital gain, eligible for the standard 0%, 15%, or 20% rates.

On $91,000 of recapture, that’s approximately $22,750 in federal tax before any consideration of the remaining $100,000 gain or state taxes. 

What catches some sellers off guard is that recapture doesn’t require the property to have appreciated. If you purchased that same property for $300,000 and sold it for $260,000, you’d appear to have lost money on the deal, but your adjusted basis after ten years of depreciation is only $209,000. You’d owe tax on $51,000 of gain, almost all of it recapture. You sold at a loss and still got a tax bill.

This is why basis documentation and a pre-sale tax analysis matter. A CPA who knows the full depreciation history of the property can tell you exactly what you’re walking into before you’re at the closing table.

Net investment income tax

For higher-income sellers, a 3.8% net investment income tax may apply on top of capital gains rates. Whether it applies depends in part on your level of participation in the business or property being sold. This is one of several reasons why entity structure and involvement matter.

Estimated taxes

Many sellers overlook estimated taxes entirely. A large, unexpected gain can result in a significant underpayment of quarterly estimated taxes. Depending on when you close, you may owe a penalty even if you pay the full bill by April. Your CPA can help you plan the right payment timing to avoid that outcome.

The installment sale option

One of the most powerful planning tools available is the installment sale election, which allows you to spread gain recognition across multiple years as you receive payments rather than reporting everything in the year of sale. This can be especially effective when spreading income keeps you below a rate threshold or reduces your exposure to the net investment income tax.

But installment sales come with limits that aren’t always obvious. For instance, depreciation recapture must be reported in the year of sale, even if you elect installment reporting. Understanding which portion of your gain is recapture and which qualifies for installment deferral requires a full analysis of the asset’s tax history.

Basis records matter more than you think

Your taxable gain is the difference between what you receive and your adjusted tax basis. For rental properties, basis includes the original purchase price plus qualifying capital improvements, minus accumulated depreciation. For a business, it may involve goodwill, asset allocations from a prior acquisition, or contributed property with a carryover basis.

Gaps in documentation can increase your taxable gain. Incomplete records also create problems if your return is ever examined. Gathering and organizing this information before you’re in active negotiations gives your CPA time to work through it carefully.

Entity and structural issues

How you hold the asset also has a direct bearing on how the sale is taxed. A sale of C-corporation stock versus an asset sale within a C-corp, for example, produces very different outcomes. Asset sales inside a C-corp may be subject to double taxation. S-corporations that converted from C-corp status within the past five years face a built-in gains tax on appreciated assets. Partnership and LLC sales involve their own allocation and basis considerations.

Buyers and sellers often have competing preferences on deal structure, and those preferences have real tax consequences. Pre-transaction planning gives you a clear picture of what each structure means for your after-tax proceeds, so you can negotiate from an informed position.

Timing is a variable, not a fixed constraint

Closing a sale before or after December 31st can shift gain into a different tax year, which may affect your rate bracket, net investment income tax exposure, or your installment sale elections. It can also affect how estimated tax obligations are calculated and sequenced.

This flexibility exists, but it requires action before the deal closes. Once you sign, your options narrow considerably.

The case for a pre-transaction conversation

Tax planning after a transaction is largely damage control. Planning before it is strategic. The difference can be tens of thousands of dollars, or more.

If a sale is on your horizon, the right time to contact your CPA is before you’re in active negotiations. Even an initial conversation can surface issues worth addressing before you’re at the table. For more personalized guidance, please contact our office. 

Most business owners have a rough number in their heads of what they think the business is worth. That number is usually based on some combination of what a competitor sold for, what a banker once mentioned, or a gut sense built over years of reinvestment. It is not a valuation, and the gap between that mental estimate and a defensible, documented figure has cost business owners real money in taxes, negotiations, and disputes.

A formal business valuation is an independent, methodology-based determination of what your business is worth under a specific standard of value at a specific point in time. “Fair market value,” for example, is considered the price at which a business would change hands between a willing buyer and a willing seller, neither under compulsion, both with reasonable knowledge of the relevant facts. While that definition may seem like legalese, it matters – because the IRS, courts, and lenders all hold valuations to it.

Here is when you need one, and why.

Sale, succession, or exit

The most obvious trigger is also the one most business owners think about too late. If you are planning to sell your business, whether to a third party, a private equity buyer, or a family member, you need a valuation before you enter negotiations, not during them.

A buyer will come with their own number, supported by their own analysis. Without an independent valuation in hand, you are negotiating from memory and instinct. With one, you have documentation of your earnings, a reasoned view of what drives your value, and the foundation to push back when a buyer’s adjustments do not hold up.

The same applies to succession planning. If you are transferring ownership to a co-owner, a key employee, or a next-generation family member through a structured buyout, the purchase price has to be grounded in something. A valuation protects both sides and reduces the likelihood that the transaction gets challenged later by the other party, or the IRS.

Buy-sell agreements

If your business has more than one owner, you almost certainly have (or should have) a buy-sell agreement. That document governs what happens when an owner wants to leave, becomes disabled, dies, or is forced out. It is one of the most important contracts a business can have.

The problem is that many buy-sell agreements are written with valuation language that becomes unworkable over time. A fixed price set years ago no longer reflects current reality. A formula tied to a multiple of earnings may produce a number that is easy to calculate but difficult to defend. And when the triggering event actually happens, that is exactly the wrong time to be arguing about what the business is worth.

A current, third-party valuation, updated on a regular schedule, eliminates most of that friction. It also gives life insurance coverage a defensible target, which matters when funding a buyout.

Estate planning and gifting

Revenue Ruling 59-60, which the IRS has used since 1959 to evaluate closely held business interests for estate and gift tax purposes, sets out factors for determining fair market value. When a business interest transfers at death or through a gifting strategy, the IRS can, and does, challenge valuations it considers aggressive.

If you are transferring business interests to family members, establishing a family limited partnership, or using a trust structure that includes a business stake, the valuation underlying those transfers will be scrutinized. In this context, a well-supported valuation is not a formality. It’s the documentation that helps the transaction withstand IRS review. 

Discounts for lack of marketability and lack of control, which reflect the reality that a minority interest in a closely held business is worth less than a proportionate share of the whole, are legitimate and recognized under federal tax law. But they require professional support to withstand IRS review. An undocumented discount is not a discount; it’s an audit finding waiting to happen.

Consider a business owner with an estate that includes a 40% interest in an S corporation worth $5 million as a whole. A properly supported valuation with applicable discounts might value that 40% interest at $1.6 million rather than $2 million – a $400,000 difference in the taxable estate. That difference, at the federal estate tax rate, is material. But, without documentation, it does not exist.

SBA and commercial lending

When a business is acquired using an SBA loan, the lender is required in many cases to obtain an independent business valuation. This protects the lender and, indirectly, the buyer, from overpaying for a business relative to its actual income-producing capacity.

Even outside of SBA transactions, commercial lenders often request valuations when a business is pledged as collateral, when a significant change of ownership is involved, or when the loan amount is large relative to verifiable business income. Having a current valuation on file can accelerate this process and reduce friction at closing.

Divorce and shareholder disputes

A business interest is a marital asset in most states. When a business owner divorces, the business has to be valued by someone. If both spouses commission their own valuations, those numbers frequently differ by significant margins, and litigation becomes the mechanism for resolving the gap.

The same dynamic plays out in shareholder disputes. When a minority shareholder claims they are being squeezed out, or when a departing partner disputes the buyout price, the absence of a current, agreed-upon valuation turns a business disagreement into prolonged legal conflict.

A periodically updated valuation (ideally one that all owners have reviewed and accepted) reduces that exposure. It does not eliminate the possibility of conflict, but it can remove the question of value from the center of the dispute.

Equity compensation

If your business grants stock options or other equity-based compensation to employees, IRC Section 409A requires that the strike price of those options be set at no less than the fair market value of the underlying stock at the time of grant. For private companies, that typically requires a properly supported independent appraisal or valuation process that meets the applicable 409A requirements. 

Getting this wrong has consequences for both the employee and the company: accelerated income recognition, excise taxes, and penalties. A 409A valuation is not expensive relative to those risks, and it needs to be updated whenever there is a material change in the business.

Strategic planning and benchmarking

Valuations are not exclusively triggered by transactions or legal requirements. A business owner who understands what drives their company’s value is in a better position to make decisions.

If your business relies heavily on a single customer, employee, or product line, a valuator can reflect that concentration risk in the number. If your Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) margins are below what buyers in your industry typically pay for, that gap will be visible. Understanding these factors while you have time to address them is different from learning about them at the closing table.

Some owners commission informal valuations every three to five years simply to track progress and understand where they stand relative to an eventual exit goal. This isn’t excessive; it is the kind of planning that makes exits go smoothly.

What makes a valuation defensible

Not every valuation carries the same weight. The level of support needed depends on the purpose. A valuation used for estate or gift tax planning, a shareholder dispute, divorce, SBA financing, or equity compensation generally needs more formal documentation than an internal planning estimate.

A defensible valuation will apply one or more standard approaches – the income approach, based on earnings capacity; the market approach, based on comparable transactions or public company multiples; or the asset approach, based on the fair value of underlying assets. It should also explain why the selected methodology is appropriate for your business, document key assumptions, address risk factors, and produce a written report that can be reviewed by the relevant parties, whether that is a buyer, lender, court, tax authority, or other stakeholder.

An informal estimate from a broker, banker, or industry rule of thumb may be useful as a starting point for discussion. But when the number will be relied on for tax, legal, lending, or transaction purposes, it should be supported by appropriate valuation analysis and documentation.

How your CPA fits in

Your CPA is often the right starting point when a valuation is needed. A CPA who knows your business can help you understand why the valuation is being requested, what type of report or analysis may be appropriate, and what financial information will be needed to support the process.

If you have not had a business valuation performed, it’s worth a conversation. The right time to know what your business is worth is before you need to act on that number. For more personalized guidance, please contact our office. 

If you own or control more than one business entity, you likely move money, goods, or services between them on a regular basis. Maybe your holding company charges a management fee to your operating company. Maybe one LLC sells inventory to another. Maybe you have a real estate entity that leases space to your main business.

These transactions may feel like internal bookkeeping, but in the eyes of the IRS, they are not. They are intercompany transactions subject to transfer pricing rules, and if the prices you charge between your related entities are not set correctly, the consequences can be significant.

What is transfer pricing? 

Transfer pricing refers to the prices set for transactions between related or commonly controlled parties. The concept is most commonly associated with large multinational corporations shifting profits between countries, but the underlying rules apply broadly. Under IRC Section 482, the IRS has authority to reallocate income, deductions, and credits between related entities whenever it determines that the prices used do not clearly reflect income.

That authority is not limited to international arrangements. Any two entities under common control, whether that means common ownership, family relationships, or other control structures, can be subject to Section 482 scrutiny.

The arm’s length standard

The governing principle in transfer pricing is the arm’s length standard. In plain terms, this means that transactions between your related entities should be priced as if they were conducted between two unrelated parties negotiating freely in the marketplace.

If your management company charges your operating company a $25,000 monthly management fee, the IRS can ask: would an unrelated business pay $25,000 for those services? If the answer is clearly no, the IRS can recharacterize the transaction and reallocate income accordingly.

The arm’s length standard applies across common transaction types, including:

• Loans and advances between entities
• Services performed by one entity for another
• Rent or licensing of property
• Sales of goods or inventory
• Use of intellectual property

The test is always the same: would an unrelated party transact on similar terms under similar circumstances?

Why it matters for domestic business owners

The transfer pricing concern that makes headlines typically involves multinationals routing profits through low-tax jurisdictions. But domestic business owners with related entities face real exposure too.

The most common trigger is an IRS audit in which the agent questions whether intercompany pricing reflects economic reality. If your holding company charges your operating company above-market rent, for example, the IRS may conclude that income has been shifted in a way that reduces taxable income at the operating entity level. It can then reallocate that income and assess back taxes, interest, and penalties.

The IRS can also look unfavorably at below-market loans between related entities. If your entity loans money to a related party at zero interest or a rate below the IRS’s applicable federal rates the IRS can impute interest income on the lending entity, even if no interest was actually charged.

The penalty risk

Under IRC Section 6662, transfer pricing penalties apply to underpayments attributable to valuation misstatements. The structure works in two tiers.

The first tier, a 20% penalty, applies when a reported transfer price is 200% or more (or 50% or less) of the arm’s length price determined by the IRS, or when the IRS’s total income reallocation for the year exceeds the lesser of $5 million or 10% of gross receipts.

To illustrate: let’s say your management company charges your operating company $180,000 per year for management services, but the IRS determines the arm’s length value of those services is $60,000. Your reported price is 300% of the correct price, well above the 200% threshold. The IRS reallocates $120,000 of income, assesses back taxes on that amount, and then applies a 20% penalty on top of the resulting underpayment.

The second tier, a 40% penalty, applies to more severe misstatements: when a reported price is 400% or more (or 25% or less) of the correct price, or when the total reallocation exceeds the lesser of $20 million or 20% of gross receipts.

Using the same scenario: if your management company had charged $300,000 for those same $60,000 worth of services, your reported price is 500% of the arm’s length amount, crossing the 400% threshold for the gross valuation misstatement tier. The penalty on the resulting tax underpayment doubles to 40%.

These thresholds are calibrated for larger transactions, but the underlying principle applies broadly: the IRS treats transfer pricing violations seriously, and the further your pricing strays from arm’s length, the steeper the consequences.

Documentation: your first line of defense

The single most important protective step for any business owner with related entities is documentation. The IRS expects that intercompany pricing decisions are made deliberately and supported by a rationale, not set arbitrarily or based solely on what is most tax-advantageous in a given year.

At minimum, your documentation should establish:

• What the transaction is and why it exists
• How the price was determined
• Why that price is consistent with what unrelated parties would pay

For many small and mid-size businesses, this does not need to be a formal transfer pricing study. A written intercompany agreement, a basic comparability analysis, and consistent application of the agreed pricing is often sufficient to demonstrate good faith and reduce audit risk.

If your related-entity transactions are significant in volume or complexity, a more formal analysis with written documentation may be warranted to fully meet the penalty protection provisions in the regulations. Your CPA can help assess the appropriate level of documentation for your situation.

What to do now

If you have related entities and have not reviewed your intercompany pricing recently, that review is worth putting on your agenda. The questions to work through with your advisor are straightforward: Are your intercompany transactions documented? Are the prices defensible under an arm’s length analysis? Are intercompany loans charging at least the applicable federal rate?

Transfer pricing compliance does not require complex structures or expensive studies for most small business owners. It requires intentionality – setting prices deliberately, documenting the rationale, and applying them consistently. That foundation is far easier to build proactively than to reconstruct under audit.

If you have related entities and want to make sure your intercompany pricing is on solid ground, reach out to our office. We can help you assess where you stand and put the right documentation in place.

Yeo & Yeo, a leading Michigan-based accounting and advisory firm, announces the relocation of its Lansing office to East Lansing, Michigan, effective July 1, 2026.

The office is located in building six of the Eyde Park Professional Office Complex at 2843 Eyde Parkway, Suite 230, East Lansing, Michigan.

Founded in 1923, Yeo & Yeo expanded into the Lansing market in 1980 and continues to support organizations and businesses throughout Michigan with accounting, audit, tax, and a full range of connected services, including wealth management, technology, medical billing, and HR solutions. The East Lansing professionals serve a diverse client base locally and throughout Michigan, with specialized expertise and a longstanding focus on the nonprofit and real estate sectors.

“Our team is excited about this next chapter in East Lansing,” said Brad DeVries, Managing Principal. “We’ve built meaningful relationships across the Lansing area over the years, and this move allows us to continue serving our clients from a location that is accessible, welcoming, and well-connected to the community.”

The East Lansing office is home to ten professionals and represents an investment in Yeo & Yeo’s future in the Lansing area. East Lansing offers access to emerging talent, strong community connections, and a dynamic business environment near Michigan State University. The office features approximately 4,300 square feet of newly renovated space, including updated workspaces, meeting areas, and amenities that support collaboration and connection. The team previously operated from its 3,800-square-foot office in the Capital Commerce Center on Centennial Way.

“At Yeo & Yeo, we are focused on building for the future, for our clients and our professionals,” said Dave Youngstrom, President & CEO of Yeo & Yeo. “This move represents another step forward as we continue strengthening our presence across Michigan and investing in the long-term success of our teams.”

The relocation reflects Yeo & Yeo’s broader commitment to thoughtful growth. Recent investments include expanding its Ann Arbor office to accommodate Yeo & Yeo HR Advisory Solutions earlier this year and expanding in Troy last year. Together, these moves strengthen Yeo & Yeo’s ability to serve clients and communities throughout the state.

Yeo & Yeo, a leading Michigan-based accounting and advisory firm, has been selected as the 2026 Employer of the Year by the Michigan Career Educator & Employer Alliance (MCEEA). The award recognizes an employer organization’s outstanding contributions to promoting and sustaining high-quality internship and cooperative education programs, as well as career opportunities for students and emerging professionals across the state of Michigan.

The recognition reflects Yeo & Yeo’s longstanding commitment to developing future talent through hands-on internship experiences and strong partnerships with colleges and universities. Each year, the firm welcomes nearly 30 interns across its offices and service lines, providing meaningful exposure to careers in accounting and business advisory services. Through client work, mentorship, and professional development opportunities, interns gain valuable experience that helps prepare them for full-time careers.

Yeo & Yeo also invests in early talent development through its annual two-day Summer Leadership Program, which brings together 25 students to explore career opportunities while experiencing the firm’s culture. The program connects participants with firm leaders and professionals through workshops, networking, and educational sessions that provide insight into public accounting and potential future career paths.

“We are intentional about creating meaningful experiences for students, whether through internships, leadership programs, or campus engagement,” said Bill Stec, Manager of Recruitment & Campus Relations at Yeo & Yeo. “Our goal is to help students see what a career in this profession can look like and give them the support and confidence to succeed.”

Beyond early talent development, Yeo & Yeo places strong emphasis on creating an environment where all employees can thrive. The firm supports continual professional growth through a dedicated Learning and Development department that provides year-round training opportunities, while also investing in programs that strengthen connection and well-being, including personalized coaching through Boon Health, firm-wide appreciation events, and summer half-day Fridays that promote work-life balance. Together, these initiatives reflect Yeo & Yeo’s commitment to creating a workplace where employees feel supported both personally and professionally.

“At Yeo & Yeo, we know our success starts with our people,” said Dave Youngstrom, President & CEO. “Creating opportunities for students to learn and grow, while building a workplace where our entire team feels supported and connected, is an important part of who we are and how we continue to invest in the future.”

Awards were presented at the MCEEA Annual Conference at Crystal Mountain in Thompsonville, Mich., on June 16.

For many nonprofit leaders, budgeting is a familiar annual exercise. A budget is created, approved, and used as a guide for the year ahead. While budgets remain important, I’ve found that the organizations best equipped to navigate uncertainty don’t stop there. They treat forecasting as an ongoing process rather than a once-a-year event.

After serving as a fractional and interim CFO for numerous nonprofits, I’ve seen firsthand how effective forecasting helps organizations make informed decisions, adapt to changing conditions, and position themselves for long-term sustainability. Forecasting isn’t about predicting the future with perfect accuracy. It’s about understanding what may lie ahead and preparing your organization to respond.

Building Stability Through Diverse Revenue Streams

One of the biggest forecasting challenges nonprofits face is uncertainty around funding. Economic conditions, donor behavior, grant availability, and community needs can all shift unexpectedly. When that happens, organizations that rely heavily on a single source of revenue often find themselves in a difficult position.

That’s why I encourage nonprofits to think strategically about diversifying their revenue streams. Organizations with multiple funding sources are generally better positioned to weather unexpected changes. This may mean strengthening annual giving campaigns, pursuing additional grant opportunities, developing corporate partnerships, or identifying other sources of support that align with the mission.

Consider asking: How dependent are we on a single funding source?

Organizations that are actively evaluating funding risk often look for opportunities to diversify through:

• Annual giving campaigns
• Local and regional grant opportunities
• Corporate sponsorships and partnerships
• Individual donor development
• Fee-for-service or earned revenue programs, when appropriate

Even small shifts toward diversification can improve financial resilience over time.

What If Your Nonprofit Relies Primarily on Donations or Grants?

A question I frequently hear is how to forecast when an organization relies primarily on donations or grant funding.

The answer often starts with looking backward before looking forward.

Historical information can provide valuable context, especially during periods of economic uncertainty. If current conditions resemble a previous period your organization has experienced, that historical data can offer useful insights into donor behavior, funding patterns, and financial performance.

For example, if donations are slowing due to economic conditions, reviewing comparable periods from prior years may help establish realistic expectations. The same principle applies to grant-funded organizations. If the most recent year was unusually strong or unusually weak, it may not be the best benchmark for future planning. Looking at broader trends often produces a more reliable forecast than focusing on a single year.

Forecasting is most effective when it combines historical performance, current realities, and informed assumptions about what may come next.

A Simple Forecasting Reality Check

When evaluating your forecast, ask:

• Are we basing projections on current conditions or last year’s assumptions?
• Have donor or grant trends changed significantly?
• What happens if a key funding source decreases?
• Do we have a contingency plan if revenue falls short?

These conversations often uncover risks—and opportunities—that may not be obvious in the budget alone.

Moving Beyond the Static Budget

One of the most valuable forecasting tools available to nonprofits is the rolling forecast.

Unlike a traditional annual budget, which is typically developed once and revisited periodically, a rolling forecast is continuously updated. As one month ends, another month is added to the forecast horizon. The organization is always looking ahead rather than relying solely on assumptions made many months earlier.

In my experience, rolling forecasts provide nonprofit leaders with a much clearer picture of where the organization is headed. They allow leadership teams to identify challenges earlier, evaluate opportunities more effectively, and make adjustments before small issues become larger problems.

A budget remains an important planning tool, but a rolling forecast helps organizations stay connected to current conditions throughout the year.

What If Your Nonprofit Doesn’t Have Historical Data?

New and emerging nonprofits face a unique challenge: they often don’t have years of financial history to guide their planning.

When that’s the case, I encourage leaders to look outside their own organization. Similar nonprofits can provide valuable benchmarks for understanding revenue expectations, staffing needs, program costs, and growth patterns.

One of the strengths of the nonprofit sector is the willingness of organizations to share knowledge and experiences. Reaching out to leaders at organizations with similar missions, sizes, or service models can provide practical insights that help build more realistic forecasts.

No forecast will be perfect, especially for a newer organization. The goal is to create a reasonable framework that can be refined as more information becomes available.

Creating Ownership Across the Organization

Forecasting should never be the sole responsibility of the finance department.

The most effective budgeting and forecasting processes involve department leaders, program managers, and key decision-makers throughout the organization. In fact, I believe those closest to the work are often best positioned to help build realistic budgets and forecasts.

When leaders participate in the planning process, they gain a greater understanding of financial expectations and are more likely to take ownership of the results. Regular meetings to review actual performance against the budget or forecast create opportunities to answer questions, identify issues, and make corrections when needed.

These conversations also help uncover common challenges, such as revenue or expense misclassifications, before they become larger concerns.

Whether an organization has three departments or thirty, the principle remains the same: consistent communication creates accountability.

Forecasting as a Leadership Tool

The nonprofits that navigate uncertainty most successfully are not necessarily the ones with the largest budgets or the most resources. More often, they are the organizations that consistently evaluate their financial position, adapt to changing circumstances, and make decisions based on reliable information.

Forecasting provides leaders with the visibility needed to do exactly that.

When viewed as an ongoing process rather than a once-a-year exercise, forecasting becomes much more than a financial tool. It becomes a strategic tool that helps nonprofit leaders make informed decisions, manage risk, and create a stronger future for the organizations and communities they serve.

You’re Not Alone in Navigating These Challenges

Whether you’re evaluating funding risks, strengthening internal financial processes, preparing for growth, improving board effectiveness, or planning for leadership transitions, having the right advisors can make a meaningful difference.

At Yeo & Yeo, our nonprofit team brings together professionals with experience in audit and assurance, accounting and advisory services, outsourced and fractional CFO support, strategic planning, governance, HR consulting, and operational improvement. Because these areas are often interconnected, we work collaboratively to help organizations build stronger foundations for long-term success.

If you’d like to discuss your organization’s goals, challenges, or planning process, get in touch.

You may already know that hiring a family member in your small business can create tax advantages. In the right situation, the arrangement can support a business deduction, shift income within the family, potentially reduce payroll taxes, and create earned income for retirement savings. 

But, it’s not as simple as just putting a relative on payroll. You have to identify a legitimate business role, pay reasonable compensation, and structure the arrangement in a way that matches the tax rules. That’s where many owners get into trouble. The tax benefits can be meaningful, but only when the arrangement is handled with the same discipline as any other employment relationship. 

Start with the right question

Hiring a relative works best when you start with substance. Is there real work in your business that a family member can perform?

That’s how these arrangements usually begin. A child might be able to help with inventory, filing, basic marketing tasks, or seasonal work. A spouse may already be handling bookkeeping, scheduling, or client communication. A parent may be helping with administrative support. The tax benefit is not the reason the role exists; it’s the byproduct of formalizing a role the business actually needs. 

Once that role exists, formality matters. The IRS looks to the actual facts of the relationship, not just what you call it. A written job description, time tracking, reasonable pay, and proper payroll reporting help establish that this is real employment, not a personal payment dressed up as a wage. 

Where the tax advantages can be real

Wages paid for legitimate services are generally deductible whether the employee is related to you or not. The opportunity here is that, in the right circumstances, hiring a family member can stack several planning benefits at once. 

You may be able to deduct the wages at the business level, move income to a family member in a lower tax bracket, reduce payroll taxes if you are hiring a child through the right type of entity, and create earned income that can support an IRA contribution. That combined effect is what makes the strategy valuable. 

But those results depend heavily on structure and execution. 

Hiring your child

Hiring your child is where the tax planning opportunity is usually strongest, but only when the facts support it.

In a sole proprietorship, or in a partnership in which each partner is a parent of the child, wages paid to a child under 18 are generally exempt from Social Security and Medicare taxes, and wages paid to a child under 21 are generally exempt from FUTA. Those wages are still subject to income tax withholding rules. If the business is a corporation, or a partnership in which even one partner is not that child’s parent, the special exception generally doesn’t apply. 

That can add up quickly in practice. Let’s say your sole proprietorship pays your 16-year-old child $10,000 for legitimate summer and after-school work, and the pay is reasonable for the job. The business may deduct the $10,000 wage, reducing the income that would otherwise flow through to you as the owner. Because the child is under 18 and employed in a parent’s sole proprietorship, those wages are generally not subject to Social Security and Medicare taxes. Using the current combined 15.3% FICA rate, that’s about $1,530 of payroll tax avoided. 

The income-tax side can be just as meaningful. If that same $10,000 had remained in the business, it generally would have flowed through to you and been taxed at your marginal rate. If your combined marginal tax rate is around 30%, that is about $3,000 of tax on the same $10,000. By contrast, if your child has no other income, a $10,000 wage would generally be fully sheltered by the dependent standard deduction for 2026, which is earned income plus $450, up to $16,100. In that fact pattern, the child would typically owe no federal income tax on the $10,000. So between the income-tax shift and the payroll-tax savings, the family-level benefit on $10,000 of wages could easily exceed $4,500, depending on your tax bracket and overall facts. 

And the benefit doesn’t have to end there. If the child is otherwise eligible, some of those wages may also be contributed to an IRA. For 2026, the IRA contribution limit is $7,500, or the amount of the child’s taxable compensation if less. That can turn a short-term payroll decision into long-term tax-advantaged savings. And those dollars aren’t necessarily untouchable for decades. IRA rules generally include exceptions to the 10% early distribution penalty for certain higher education expenses and up to $10,000 for a first-time home purchase, although a traditional IRA withdrawal is generally still taxable. 

None of this means any amount of pay works. It still has to be reasonable. Paying a teenager an inflated salary for minor tasks is exactly the kind of fact pattern that turns planning into a problem. 

Hiring your spouse or parent

Hiring your spouse is usually less about a special payroll-tax break and more about aligning compensation with reality. Wages paid to a spouse in your trade or business are generally subject to income tax withholding and Social Security and Medicare taxes, but not FUTA. That can still matter if your spouse is already doing meaningful work and formal compensation may support retirement plans or benefit participation that depends on employee status, compensation, and plan terms. 

Hiring a parent can also make sense, but the rules are different. In a child’s trade or business, wages paid to a parent are generally subject to income tax withholding and Social Security and Medicare taxes, but not FUTA. As with any family hire, the work has to be real, the pay has to be reasonable, and the records need to support the arrangement. 

The mistakes to avoid

The biggest risk in family payroll planning is not that you hired a relative. It’s failing to treat the arrangement like real employment. 

The first mistake is unreasonable pay. If compensation is inflated, poorly documented, or disconnected from the work performed, the deduction becomes harder to defend. 

The second is worker misclassification. A family relationship does not let you skip the employee-versus-contractor analysis. If you control what work is done and how it is done, the worker may well be an employee. 

The third is ignoring labor law. Tax rules and employment rules are not the same system, especially when minors are involved. Federal youth-employment rules may allow children to work in a parent-owned business in some cases, but hazardous occupation restrictions still apply, and state law may be stricter. 

A fourth issue to review is the impact on any retirement plan your business already sponsors. If you have a 401(k) or other qualified plan, adding relatives to payroll can affect the analysis because family attribution rules may cause a spouse, child, parent, or grandparent of a 5% owner to be treated as a 5% owner for highly compensated employee purposes. That can affect nondiscrimination testing and other plan compliance considerations, so it’s worth reviewing before you add family members to payroll. 

The simplest way to protect yourself is to create the same paper trail you would want for any employee. Write down the role. Describe the duties. Track hours. Use payroll. Pay by check or direct deposit, not with vague year-end adjustments. Match the wage to market reality.

The real planning opportunity

Hiring a family member can be smart tax planning, but only when it reflects a real job, a reasonable wage, and correct payroll treatment. The opportunity is not in treating relatives casually. It’s in treating them formally enough that the tax benefits are actually defensible. 

If you’re considering hiring a family member, this is a good issue to review before you run payroll, not after. Our office can help you evaluate whether the role is structured properly, whether the wages are reasonable, and whether the expected tax benefits actually apply to your entity and family situation. Reach out if you would like guidance before putting a relative on payroll. 

A new tax year brings new contribution limits, but the real planning opportunity is in using them early enough to matter.

For 2026, the IRS has increased several key retirement plan and IRA contribution limits, while HSA limits have also moved higher. For high-income households, these limits should be viewed as a planning prompt. The earlier the year’s savings strategy is set, the easier it becomes to coordinate payroll deferrals, tax projections, cash flow, employer matches, Roth decisions, and health care planning.

The households who benefit most are often not the ones that simply “max everything out.” They are the ones that decide, deliberately, which account should receive the next dollar.

The 2026 retirement limits are higher

The headline number for many employees is the 2026 elective deferral limit. Participants in 401(k), 403(b), most governmental 457 plans, and the Thrift Savings Plan may contribute up to $24,500 in employee deferrals for 2026. For participants age 50 or older, the general catch-up contribution limit is $8,000, allowing total employee contributions of up to $32,500 where the plan permits catch-up contributions.

There is also a special catch-up opportunity for certain older workers. Under SECURE 2.0, employees who are ages 60-63 may be eligible for a higher catch-up contribution. For 2026, that higher catch-up limit is $11,250 for many 401(k), 403(b), governmental 457, and Thrift Savings Plan participants.

That means a 62-year-old employee in an eligible plan may be able to defer up to $35,750 in 2026: the $24,500 regular limit plus the $11,250 enhanced catch-up amount.

For business owners and highly compensated employees, several other 2026 limits also matter. The annual additions limit for defined contribution plans increases to $72,000, and the annual compensation limit for qualified retirement plan purposes increases to $360,000. These figures can affect profit-sharing plans, owner-only 401(k)s, safe harbor plans, and other plan design strategies.

The practical takeaway is simple: if you intend to use these limits, waiting until the fourth quarter may leave too little time to adjust payroll elections, manage cash flow, and capture the full planning benefit. 

Why early action matters

A contribution limit is an annual number, but most employees fund retirement plans paycheck by paycheck. That makes timing important.

For example, an employee who wants to contribute the full $24,500 to a 401(k) over 26 pay periods would need to defer roughly $942 per paycheck. A participant age 50 or older using the full $32,500 limit would need to defer $1,250 per paycheck. A participant aged 60 through 63 eligible for the enhanced catch-up amount would need to defer roughly $1,375 per paycheck to reach $35,750 over 26 pay periods.

Starting early makes those numbers more manageable. It can also help you invest more consistently throughout the year, rather than trying to time the market or making one large contribution at a single point in time. Contributing from each paycheck can create a dollar-cost averaging effect, which may reduce the risk of investing a large amount immediately before a market decline. 

Early action can also reduce the risk of deferring too aggressively early in the year and maxing out before receiving all available employer matching contributions. 

This is especially important for executives, employees with large bonuses, and workers with uneven compensation. Some employer plans provide a “true-up” contribution if an employee reaches the annual limit before year-end. Others do not. Without a true-up, maxing out too early can unintentionally leave employer match dollars on the table.

Early planning also gives you time to decide whether contributions should be made on a pretax basis, Roth basis, or a combination of both. That decision should not be made in isolation. It belongs inside a broader tax conversation that considers current tax brackets, future retirement income, Roth conversion opportunities, charitable giving, equity compensation, business income, and estate planning goals.

IRAs remain useful, but be mindful of the rules

The IRA contribution limit increases to $7,500 for 2026. The catch-up contribution limit for individuals age 50 or older increases to $1,100, allowing eligible older taxpayers to contribute up to $8,600.

However, for many affluent households, the IRA conversation is less about the limit and more about eligibility, deductibility, and tax reporting.

For traditional IRAs, income can limit deductibility when the taxpayer or spouse is covered by a workplace retirement plan. For Roth IRAs, income can limit the ability to contribute directly. Importantly, these limits are based on modified adjusted gross income (MAGI), which may differ from taxable income or gross compensation. 

In 2026, the Roth IRA contribution phaseout range is $153,000 to $168,000 for single filers and heads of household, and $242,000 to $252,000 for married couples filing jointly.

That doesn’t mean IRA planning is unavailable for high earners. It does, however, require a more deliberate strategy. Backdoor Roth IRA contributions may be appropriate for some, but existing pretax IRA, SEP IRA, or SIMPLE IRA balances can create pro rata tax consequences. Nondeductible IRA contributions also need proper tax reporting, including Form 8606.

For higher income households, the question should not be, “Can I put money into an IRA?” The better question is, “What kind of IRA contribution makes sense, and what are the tax consequences of making it?”

HSAs deserve retirement-level attention

Health Savings Accounts are often treated as benefit-plan side notes. If you are eligible to contribute to one, that can be a missed opportunity. 

For 2026, the HSA contribution limit is $4,400 for self-only high-deductible health plan coverage and $8,750 for family coverage. The 2026 minimum deductible for an HSA-compatible high-deductible health plan is $1,700 for self-only coverage and $3,400 for family coverage. The maximum out-of-pocket limit is $8,500 for self-only coverage and $17,000 for family coverage.

The HSA catch-up contribution for individuals age 55 or older remains $1,000.

If you are eligible and can afford to pay current medical costs from cash flow, an HSA can be a powerful long-term planning account. Contributions may be deductible or made pretax through payroll. Growth is tax-deferred. Distributions are tax-free when used for qualified medical expenses.

That combination can make the HSA especially valuable in retirement planning, where health care expenses are often a significant and underappreciated future cost. An HSA can help cover qualified medical expenses later in life, including certain Medicare premiums, out-of-pocket health care costs, and eligible long-term care expenses.

But HSAs also come with rules that require coordination. Employer contributions count toward the annual contribution limit. Married spouses who are both age 55 or older generally need separate HSAs if both want to make catch-up contributions. And Medicare timing matters: once you are enrolled in Medicare, your HSA contribution limit generally becomes zero beginning with the first month of Medicare coverage. That does not mean you lose access to your existing HSA. You can still use HSA funds for qualified medical expenses, but you generally can no longer make new HSA contributions after Medicare enrollment begins.

If you are approaching Medicare age, that timing deserves attention. Depending on your employment, health coverage, and Medicare enrollment decision, you may want to evaluate whether it makes sense to contribute more to your HSA before enrolling. You should also be careful with delayed Medicare enrollment, because retroactive Medicare coverage can cause contributions made during the retroactive coverage period to be treated as excess contributions.

This is another reason early-year planning matters. HSA contributions should be coordinated with health coverage, employer funding, payroll elections, Medicare timing, and household cash flow.

Business owners should look beyond the basic limits

If you own a business, the higher 2026 limits are a reason to revisit plan design, not just contribution amounts.

A SIMPLE IRA may be appropriate for some smaller employers because of its administrative simplicity. For 2026, the general SIMPLE IRA and SIMPLE 401(k) salary reduction contribution limit increases to $17,000, with a general age-50 catch-up limit of $4,000. Certain SIMPLE arrangements may have different enhanced limits under SECURE 2.0 rules.

But simplicity is not always the highest-value answer. If your business has strong and stable cash flow, it may be worth comparing a SIMPLE IRA with a SEP IRA, solo 401(k), safe harbor 401(k), profit-sharing plan, or even a cash balance plan. The right design can substantially change how much you can contribute, how much must be contributed for employees, how predictable the annual funding obligation is, and how the tax deduction works.

The 2026 defined contribution limit of $72,000 and annual compensation limit of $360,000 are particularly relevant in this analysis. For owner-only businesses, closely held companies, and professional practices, those limits may create room for more meaningful retirement funding than a basic IRA strategy would allow.

This is not a December conversation. Plan design, payroll setup, employee notices, nondiscrimination testing, and cash-flow projections require lead time. Safe harbor 401(k) plans, for example, may require annual notices to eligible employees before the start of the plan year. IRS guidance generally treats a safe harbor notice as timely if it is provided at least 30 days, and no more than 90 days, before the beginning of the plan year. 

If you are considering a new plan, changing an existing plan, or adding safe harbor features, those discussions should happen as early as possible. Waiting until year-end may leave too little time to evaluate the options, prepare documents, notify employees, coordinate payroll, and implement the plan properly. 

Roth catch-up rules add another layer

If you are a higher-income employee and age 50 or older, you should also pay attention to the Roth catch-up rules created by SECURE 2.0.

For 2026, the wage threshold tied to mandatory Roth catch-up treatment increases to $150,000. In general, if your prior-year wages from the same employer exceed the applicable threshold, you may be required to make catch-up contributions as Roth contributions rather than pretax contributions, if you make catch-up contributions at all.

This rule makes coordination with your employer, payroll provider, and plan administrator more important. It also makes tax planning more nuanced. A Roth catch-up contribution does not reduce current taxable income, but it can improve future tax diversification by shifting more retirement savings into an account that may be distributed tax-free if Roth distribution requirements are met.

That trade-off may be attractive if you are intentionally building Roth assets or expect higher tax rates in the future. But if you are in peak earning years and are counting on pretax catch-up contributions to reduce current taxable income, the Roth catch-up requirement may call for broader planning adjustments elsewhere in your tax strategy.

Common mistakes to avoid

The most common mistake is also the simplest: failing to update your contribution elections. A deferral percentage that was adequate in 2025 may not fully use the higher 2026 limit.

Other mistakes are more technical. You may max out a 401(k) too early and miss employer match dollars if your plan does not provide a true-up contribution. You may contribute directly to a Roth IRA despite being over the income limit. You may fund an HSA without accounting for employer contributions, which count toward the annual limit. You may continue making HSA contributions after Medicare enrollment begins, even though you can still use an existing HSA for qualified medical expenses. Or you may attempt a backdoor Roth IRA without first considering existing pretax IRA balances and the pro rata rule.

None of these issues are unusual. Most are preventable when you review the rules, update elections early, and coordinate retirement and HSA contributions with your broader tax plan.

Turn higher limits into better planning

The 2026 limits create more room for tax-advantaged saving. But room is not the same as results.

If you act early, you can spread contributions across the year, protect employer match opportunities, coordinate Roth and pretax decisions, use HSAs more strategically, and align retirement funding with the rest of your tax plan.

A good savings year can be wasted by waiting too long or funding accounts without a clear strategy. Before simply increasing contributions, consider which accounts to prioritize, how much to contribute, and how those choices fit within your broader retirement, tax, estate, and cash-flow plan.

Our office can help you evaluate the 2026 limits in the context of your full financial picture and identify planning moves that make sense for your situation. Reach out to discuss how to use this year’s retirement and HSA opportunities deliberately.

Are you newly married or about to get married this year? Congratulations. But somewhere between the honeymoon and unpacking, there’s a list of tax changes that most couples simply don’t think about. And that’s exactly the problem. The IRS treats marriage as a significant life event, which means your tax situation changes whether you’re ready for it or not. For many couples, especially dual-income earners, missing these changes can mean a surprise tax bill in April.

The good news is that many of these issues are straightforward to address now, before the year ends. Handling them proactively keeps you from scrambling in March or discovering problems when you file. Here’s what you need to know.

Your filing status just changed, even if nothing else did

Your marital status on December 31st determines your filing status for the entire tax year. Even if you get married in May, June, or later this year, you’ll file as married for 2026. This single change affects your tax brackets, standard deduction, and eligibility for certain credits, which is why it matters far more than most couples realize.

For most married couples, filing jointly is the right move. You’ll benefit from wider tax brackets, a higher standard deduction, and access to valuable credits like the child tax credit and education credits that may not be available if you file separately. Filing jointly also simplifies your return and often results in a lower overall tax bill.

However, there are situations where married filing separately deserves consideration. If one spouse is pursuing income-driven repayment on federal student loans, filing separately can keep that spouse’s income lower on their individual return, which directly lowers their monthly payment obligation. Similarly, if one spouse has significant liability concerns or anticipates collection issues, filing separately can provide a layer of protection. These scenarios are nuanced, and the decision hinges on your specific circumstances. Before you choose to file separately, talk to your CPA. The tax savings or liability protection may be real, but so are the downsides you might not see coming.

The withholding problem no one warns you about

Once your filing status is settled, the next thing to address is your withholding. And for two-income couples, this is where the most expensive surprises tend to hide.

Federal income tax is a pay-as-you-go system. Your employer withholds tax from each paycheck based on the information you provide on Form W-4, and the default withholding tables were designed with a single income in mind. When two earners file jointly, their combined income gets taxed at rates that reflect the full household total, but each employer is only withholding based on one salary in isolation.

Here’s what that looks like in practice: if you each earn $70,000, your household income is $140,000. The marginal rate that applies to the top portion of $140,000 is higher than what either employer assumed when calculating withholding for a $70,000 earner on their own. Unless you both update your W-4s to account for this, you will likely end up owing money next April. 

The IRS has a free withholding estimator at IRS.gov that walks through this calculation. It takes about ten minutes and tells you exactly how much additional withholding to request on each spouse’s W-4. Federal underpayment penalties are modest but entirely avoidable, and discovering a large tax balance due on April 15th is a stressful way to start a marriage.

One additional note for couples with self-employment income or significant non-W-2 earnings: estimated quarterly payments may also need to be revisited. Underpaying throughout the year can trigger penalties even if you settle the full balance when you file.

Update your name and address in the right order

If you changed your name after marriage, the Social Security Administration needs to hear about it before you file your tax return. Your name on the return must match what is on file with Social Security. A mismatch will delay your refund and can generate a notice that takes time and paperwork to resolve.

The fix is straightforward: file Form SS-5 with the SSA to update your records. Do this first, then update your name with your employer for W-2 purposes.

Address changes are simpler. If you moved, file Form 8822 with the IRS to update your address on file. This is not just administrative tidiness. Notices, refund checks, and correspondence go to the address the IRS has on record. If a notice sits undelivered at an old address, response deadlines keep running regardless.

Healthcare coverage gets more complicated

Marriage is a qualifying life event that allows both spouses to make mid-year changes to employer-sponsored health plans. That flexibility is valuable, but the decisions that follow it have real tax implications.

If you both carry employer-sponsored coverage, consider whether it makes more financial sense to consolidate onto one plan or maintain separate coverage. The answer depends on the quality and cost of each plan, but do not overlook the tax treatment of premiums. Employer-paid premiums are excluded from your taxable income. If one spouse’s employer offers a significantly better or cheaper plan, consolidating may reduce your combined tax liability in addition to simplifying your coverage.

If either spouse has a Health Savings Account (HSA), marriage changes the contribution limits and household eligibility rules in ways that are easy to mishandle. HSA eligibility requires enrollment in a High Deductible Health Plan (HDHP). If one spouse moves to a non-HDHP plan, they can no longer contribute to their HSA going forward, and the timing of that change matters for calculating the annual contribution limit. Excess HSA contributions carry a 6% excise tax, so getting this right before year-end is worth a quick review.

Dependents: who claims whom, and what changes

If either spouse has children from a prior relationship, the dependency picture becomes more layered. Dependency exemptions have been eliminated under current law, but the child tax credit, the child and dependent care credit, and head-of-household filing status all hinge on who qualifies as a dependent on whose return.

Generally, the custodial parent claims the child unless there is a written agreement or court order directing otherwise. That arrangement may have worked cleanly when each parent filed as a single individual, but it interacts with your new joint return and your spouse’s income in ways that can affect credit eligibility. The child tax credit, for instance, phases out at higher income levels. Adding a second income to the household may reduce or eliminate credits that were previously available.

If your spouse has no children but you do, updating your W-4 to reflect dependent-related credits is one of the withholding adjustments that often gets missed in the transition.

A note on state taxes

This article focuses on federal taxes, but your state may have its own wrinkles. Some states do not conform to federal filing status rules. A small number of states require or allow separate returns regardless of federal treatment. If you moved to a new state in connection with your marriage, you may have a part-year residency situation on both state returns. These scenarios are worth confirming before you assume your federal approach carries over cleanly.

What to do now

The adjustments covered here are time-sensitive because withholding corrections and benefits elections need to happen before year-end to affect your current-year return. Waiting until you sit down to file in February or March means absorbing any underpayment consequences rather than preventing them.

Getting these details right in year one sets a much cleaner foundation for everything that follows. If you have questions about what you need to do we’re glad to work through it. 

If you run your own business and contribute to a SEP IRA, SIMPLE IRA, or solo 401(k), there’s a good chance you have mishandled the deduction; not by missing it, but by reporting it in the wrong place on your return.

It’s one of the most common errors among self-employed taxpayers, and it’s easy to understand why: you own the business. The money came out of your business account. Naturally, you assume the deduction belongs on Schedule C, with business expenses.

But, it usually doesn’t. And where a deduction lands on your return isn’t just an accounting formality. It can affect how much tax you owe, distort other calculations, and in some cases, cause you to leave money on the table.

Here’s what you need to know.

The basic rule and why it exists

If you are a sole proprietor (or a single-member LLC treated as a sole proprietor for tax purposes), contributions you make to a retirement plan for yourself are generally deducted on Schedule 1 of Form 1040, not on Schedule C.

Contributions made for your employees are a different story. Those generally belong on Schedule C as an ordinary business expense.

The owner-versus-employee distinction is the entire issue. As a self-employed owner, your retirement contribution isn’t calculated like a regular business expense. It’s determined under a special formula tied to your net earnings from self-employment (earnings that must first be adjusted for the self-employment tax deduction before the retirement contribution calculation can even begin). Because the deduction is computed under a separate set of rules, the IRS treats it separately. It belongs on the individual side of your return, not embedded in the business profit calculation.

What happens when you get it wrong

Deducting your own contribution on Schedule C instead of Schedule 1 isn’t just a technical error; it creates a cascade of downstream problems.

Consider a simple example. Say you have $100,000 in net Schedule C profit and make a $20,000 retirement contribution for yourself.

If the deduction is incorrectly placed on Schedule C:

• Reported Schedule C profit: $80,000
• Self-employment tax is computed on $80,000 (understated)
• The SE tax deduction is too small
• The allowable retirement contribution itself may be miscalculated, since the formula depends on correctly stated SE earnings

If reported correctly on Schedule 1:

• Schedule C profit: $100,000 
• SE tax is computed on the full $100,000
• SE tax deduction is taken on Schedule 1
• The retirement deduction is then calculated correctly and also taken on Schedule 1

Misplacing the deduction doesn’t just move a number; it corrupts the sequence of calculations that flow from it. When preparers catch this, the fix typically requires unwinding several connected figures.

Does this apply to you? It depends on your entity

These rules generally apply to sole proprietors, single-member LLCs disregarded for federal tax purposes, and partners in a partnership. For partners, the same logic holds: the partnership can deduct contributions made for common-law employees on the partnership return, but each partner’s own retirement contribution is deducted on the partner’s individual return through Schedule 1.

S corporation shareholders are a meaningful exception. An S corp shareholder-employee is treated as an employee of the corporation, receiving W-2 wages. Retirement plan contributions (both the elective deferral and any employer match) are generally handled at the entity level on Form 1120-S, not through the shareholder’s individual Schedule 1. The planning dynamics, tax treatment, and reporting mechanics are all materially different for S corp owners, and that distinction often factors into the entity selection conversation.

If you operate as an S corp or are weighing whether to make that election, the retirement contribution treatment is one of several factors worth analyzing carefully.

A note on SIMPLE IRAs

SIMPLE IRAs sit in an interesting position. If you have employees, their SIMPLE contributions, including any matching contributions you make as the employer, are generally deductible as business expenses. Your own contributions as the self-employed owner are handled separately, through the self-employed retirement deduction rules.

So within a single plan, contributions can flow to different parts of the return depending on who they’re for. 

The Solo 401(k) question: when you’re both employer and employee

Solo 401(k) plans create another layer of confusion (and a genuine planning opportunity) because they use terminology borrowed from traditional employer plans: employee elective deferral and employer profit-sharing contribution. As a self-employed individual, you’re technically filling both roles.

Here’s the important clarification: for a sole proprietor, both components are still deducted on Schedule 1. The plan’s internal labeling doesn’t change where the deduction lands on your tax return. What it does change is how much you can potentially contribute.

This is where structure matters for planning purposes. Compare two self-employed individuals, each with $100,000 in net Schedule C profit in 2026:

SEP IRA contributor: The SEP contribution is limited to roughly 25%  of net self-employment earnings after the SE tax deduction (approximately $23,200 in this scenario).

Solo 401(k) contributor:

• Employee elective deferral: up to $24,500 (up to $32,000 if age 50-59 or 64+; up to $35.750 if age 60-63).
• Employer profit-sharing contribution: approximately $23,200 (up to 25% of net earnings) Total limit lesser of 100% of compensation or $72,000 ($80,000 if 50-59 or 64+; $83,250 if 60-63)
• Combined total: approximately $47,700 (if under age 50)

Same income. Same tax situation. Roughly twice the deduction and tax-sheltered growth, simply by choosing the right plan.

The gap narrows at higher income levels, and at very high incomes the two plans approach the same ceiling (the 2026 IRC §415 limit is $72,000, or $80,000/$83,250 for those in the applicable catch-up ranges). But for self-employed individuals with moderate incomes who want to maximize contributions, the solo 401(k)’s ability to stack an employee deferral on top of the employer contribution can be a meaningful advantage.

The Schedule 1 placement is actually a feature, not a consolation

Here’s a framing shift worth making: the fact that your retirement deduction lands on Schedule 1 rather than Schedule C isn’t a quirk to work around. In some respects, it’s advantageous.

Schedule 1 deductions reduce your AGI and AGI is the input for a number of other calculations that Schedule C profit, on its own, doesn’t directly affect. A lower AGI can:

• Help you stay below IRMAA thresholds that trigger Medicare premium surcharges (2026 initial threshold $109,000 single/$218,000 MFJ)
• Reduce exposure to the 3.8% net investment income tax, which applies above $200,000 single/$250,000 MFJ
• Keep you within the QBI deduction range before phase-outs begin (2026 thresholds, $197,300 single/$394,600 MFJ) 

When retirement contributions are large enough to meaningfully affect AGI, these secondary benefits can be worth more than the straightforward income tax savings on the contribution itself. That’s not a reason to over-contribute, but it is a reason to think holistically about how the deduction interacts with the rest of your return.

The right reporting does more work than most people realize

The mechanics aren’t necessarily complicated once you understand the logic, but they’re easy to get wrong.

If you’re not certain where your retirement contributions are landing, or whether you’re in the right plan to begin with, it’s worth a conversation with your CPA before the next filing season arrives. 

For more personalized guidance, please contact our office. 

For many organizations, an employer-sponsored retirement plan is a major workforce investment. Yet employees may not fully appreciate it if they don’t understand how the plan works or fits into their long-term financial goals. As a result, some employers can fall short of strategic objectives such as strengthening retention and engagement.

That’s why you shouldn’t view retirement education as a one-time handout during onboarding or even a reminder during annual enrollment. It should be an ongoing part of your broader benefits communication strategy.

Thirst for knowledge

Surveys often show that many employees want to learn about financial planning. For example, Bank of America’s 2025 Workplace Benefits Report explores employee financial well-being, retirement preparedness and the role of workplace benefits. It’s based on nationwide surveys of nearly 1,000 employees and 800 employers.

Among the report’s findings, 36% of employees said they need financial wellness resources related to retirement education and planning. Employees also expressed interest in learning how to generate income in retirement and developing good financial skills and habits, each cited by 33% of respondents.

The takeaway is clear: Retirement education can be an important supplemental benefit. Many employees need help understanding both the plan you sponsor and how to save for the future while grappling with today’s financial pressures. As an employer, you’re in a unique position to provide this education because you have a ready-made audience — your workforce — and multiple avenues to communicate with them.

Topics and teaching methods

A good place to start educating employees about retirement benefits and planning is by teaching them the basics of investing. Many employees are unfamiliar or at least not entirely comfortable with how it works. To stay on safe legal ground, don’t provide individualized investment advice. Focus on general educational guidance. For instance, you might teach them about compounding growth, the tax implications of different types of savings plans, and how much they’ll likely need to save to reach a certain sum at retirement.

Naturally, you should explain in plain language how your retirement plan functions, too. For instance, once enrolled, how do employees decide how much to contribute, how does employer matching work (if you offer it), and how can they adjust their savings rate or investment elections over time? It may also be helpful to address topics employees increasingly ask about, such as:

• Roth vs. pretax contributions,
• Automatic enrollment features, and
• Catch-up contributions for older workers.

As you put together a retirement planning education strategy, be prepared to provide information in various formats. Email campaigns or other online communication methods will resonate with some employees, while others will prefer printed material. By offering a mix of options, you’ll increase the odds of reaching different segments of your workforce.

Strongly consider in-person or virtual learning sessions as well. Even if your business offers printed and electronic materials, seminars or “lunch-and-learns” can help employees better understand your plan and the key concepts of saving for retirement. In addition, these sessions enable you to reinforce the value of your retirement plan as part of each employee’s overall compensation package.

Last, offer educational opportunities regularly. Obviously, open enrollment is a major event, but spread retirement education efforts throughout the year.

Many payoffs

Employers have much to communicate to employees these days, and retirement planning may not always make the top of the list. But helping your workers understand their retirement benefits and how to save for the future can pay off in many ways.

Better-informed employees are more likely to actively participate in your plan — boosting its value and your return on investment. That, in turn, can help support your organization’s broader retention and engagement objectives. Contact us for help assessing the financial, tax and strategic implications of your retirement plan.

© 2026

Many parents assume an estate plan is only necessary for older adults or those with substantial wealth. However, once your child turns 18, he or she legally becomes an adult, and that change can create unexpected complications for your family. Without basic estate planning documents in place, you may be unable to help your child during an emergency when he or she is away at school. If your child recently graduated from high school and is planning to attend college in the fall, consider these estate planning documents before he or she leaves home.

Health-care-related documents

Perhaps the most critical estate planning document for a college-age child is a health care power of attorney. Because children age 18 or older are usually treated as adults, without a health care power of attorney, you might have no say in your child’s medical treatment should he or she become incapacitated. This document (sometimes referred to as a “health care proxy” or “durable medical power of attorney”) allows your child to appoint someone, such as you, to make health care decisions on his or her behalf.

Your child’s health care power of attorney should provide guidance on how to make medical decisions. Although it’s impossible to anticipate every potential scenario, the document can provide guiding principles.

Another important health-care-related document for college students is a HIPAA release form. Federal privacy laws, including those under the Health Insurance Portability and Accountability Act, prevent doctors and hospitals from sharing medical information with parents once a child reaches adulthood.

If your child is injured in an accident or becomes seriously ill, you may not be able to access information about his or her condition or treatment options. A HIPAA authorization form signed by your child allows you to communicate with his or her health care providers and stay informed during a medical crisis.

Financial power of attorney

Financial matters are another important consideration. College-age students typically have bank accounts and credit cards, and they may also have car loans, apartments or part-time jobs. If an illness or accident prevents your child from handling financial responsibilities, you may not automatically have the legal authority to step in.

A financial power of attorney appoints an individual, such as you, to make financial decisions or execute transactions on your child’s behalf under certain circumstances. For example, a power of attorney might authorize you to handle your child’s affairs while he or she is studying abroad or, in the case of a “durable” power of attorney, incapacitated.

Will

Speaking of financial matters, it isn’t too early to have a will drawn up for your college-age child. It allows your child to specify how personal belongings, financial accounts and digital assets should be distributed in the event of his or her untimely death. It also gives your child the opportunity to express personal wishes.

Without a will, state laws determine how assets are handled. This can create unnecessary complications for your family during an already difficult time.

Peace of mind while away from home

A simple estate plan for your college-age child can help ensure you can provide support when it matters most. If you have questions about any of the documents discussed, don’t hesitate to contact us.

© 2026

For the 12 months ending in April 2026, the U.S. inflation rate was 3.8%, according to the U.S. Bureau of Labor Statistics. Prices for your business’s products, materials and other operating costs may have risen faster in recent months than you anticipated, making planning and forecasting challenging. How can your business counteract inflation? Start by making prudent cost-cutting decisions and acting swiftly when you spot opportunities.

First things first

Given that periods of elevated inflation are typically temporary, it can be tempting to assume inflation rates will fall in a few months. However, movements in inflation rates have been less predictable since the COVID-19 pandemic began. Waiting it out may work for some businesses, but inaction could also eventually lead to more difficult decisions. For example, delaying pricing adjustments could force you to make steeper increases later.

Although it’s always important to monitor expenses, frugal purchasing decisions become even more necessary when prices are rising. If raw material prices jump, consider whether new suppliers might offer discounts. If your cash flow and space can handle it, consider ordering some extra supplies and inventory to help mitigate the impact of future price increases. Also, review your business’s longer-term expenses. If a significant number of employees are working remotely, you might be able to reduce your office footprint or relocate to a less expensive part of the country.

Other ideas

Your ability to slash expenses and boost cash flow will depend largely on your industry and operations. But here are some ideas that most organizations can implement:

Assess the impact. Review the effect of inflation, product line by product line, to help determine whether you need to change your product mix. For instance, it may make sense to boost production or shelf space for items that will appeal to budget-conscious buyers.

Rethink prices. Few customers welcome price increases, but many understand the need for them. Be sure to communicate new prices before they take effect so customers can adjust their budgets.

Consider credit. If your business anticipates needing additional liquidity, determine if it makes sense to secure a loan or a line of credit now. Adequate cash can provide breathing room and enable you to take advantage of unexpected opportunities.

Monitor accounts receivable. If you see customers falling behind on their payments, act quickly. You may need to update your terms and even consider dropping some slow- or nonpaying buyers.

Act on the margins. Be on the lookout for small savings. Can you renegotiate your business’s mobile phone package? Is it possible to reuse packaging materials? Can you place a moratorium on overtime work? Little amounts can add up quickly.

Surviving and thriving

Probably the most important quality for business leaders navigating an inflationary period is flexibility. Be prepared to discontinue lines and strategies if you can no longer contain their costs. Know when to jump on an opportunity that could expand your reach. Remain open to new business partnerships. We can help by reviewing your financial situation and proposing measures that will enable you to survive — and even thrive — in today’s volatile market conditions.

© 2026

Late customer payments don’t just create temporary cash shortages. Over time, inconsistent collections can disrupt budgeting, increase borrowing needs and make it harder to plan for growth. In response to cash flow challenges, many businesses focus heavily on increasing revenue while overlooking how efficiently they convert receivables into cash. But even a strong top line can mask underlying collection problems. Evaluating your receivables process from a broader perspective may reveal opportunities to improve liquidity and reduce financial strain.

Look beyond the invoice

When payments arrive late, the problem isn’t always the customer’s unwillingness to pay. In many cases, breakdowns elsewhere contribute to collection delays.

For example, unclear proposals, inconsistent pricing, incomplete project documentation or poor communication between departments can lead to disputes after invoices are issued. Customers who are confused about deliverables or billing details may postpone payment while seeking clarification.

Your business can reduce these issues by creating more consistent internal workflows. Sales, operations and accounting teams should communicate clearly about pricing terms, timelines, discounts and customer expectations before work begins. Strong coordination upfront often prevents collection problems later.

Review your payment policies

Some businesses use outdated billing practices simply because they’ve always done things a certain way. But customer expectations and payment technologies have changed significantly in recent years.

Review whether your current processes create unnecessary friction. Questions to consider include:

• Are invoices easy to understand?
• Do customers have convenient payment options?
• Are payment deadlines realistic and clearly communicated?
• Is your collection approach consistent across all accounts?

Modernizing payment methods may help accelerate collections. Digital payment portals, automated reminders and recurring billing tools can simplify the process for both your staff and your customers.

Reviewing collection trends may also help you segment customers based on payment behavior. Long-standing customers with reliable histories may deserve greater flexibility, while higher-risk accounts may require deposits, shorter payment terms or more frequent follow-up.

Proactively monitor warning signs

An accounts receivable balance can develop gradually, making it easy to overlook warning signs until cash flow problems become severe. Regularly reviewing aging reports may help identify trends before they escalate. For example, increases in partial payments, repeated billing questions or customers requesting extended terms may indicate elevated collection risk.

Also pay attention to operational metrics tied to receivables performance, such as the average collection period, the percentage of overdue accounts and the frequency of disputed invoices. Additionally, to gauge customer concentration risk, evaluate how much of your revenue each customer generates. Tracking these indicators over time can help you make more informed financial decisions and identify weaknesses in your collection process.

Formalize your collection procedures

Many business owners hesitate to follow up promptly on overdue invoices because they worry about damaging customer relationships. However, avoiding difficult conversations often allows collection problems to worsen.

Establishing a professional, consistent collection process can improve results while preserving goodwill. Staff members responsible for collections should understand when to send reminders, when to escalate concerns and when outside assistance may be necessary.

Document all payment discussions carefully, especially when customers request revised terms or promise future payments. Thorough documentation may be important if legal action, write-offs or insurance claims are later required.

Strengthen your receivables strategy

Receivables management plays an important role in maintaining operational flexibility and financial stability. Businesses that actively monitor customer payment trends and refine their collection practices are often better positioned to manage uncertainty and support long-term growth. We can help you assess your current receivables procedures, strengthen internal controls and identify practical ways to improve cash flow management. Contact us for guidance.

© 2026

Occupational fraud often starts with an employee’s small behavioral change. For example, a salesperson might suddenly download an unusually large amount of customer data. Or an accounting staffer might access vendor records outside of normal working hours.

Behavioral analytics help detect such anomalies by tracking electronic device, website and other digital activities (often using AI) that might increase your business’s risk. In a nutshell, these results allow you to evaluate the behavior and determine whether it warrants a broader investigation.

Pattern spotting

Behavioral analytics tools generally notify owners and managers when worker activity falls outside expected patterns. The types of patterns and trends considered “abnormal” depend on the business, but might include:

• Unusual technology access,
• Significant data downloads or file transfers,
• Questionable requests for payments or refunds, and
• Use of privileges in ways that don’t align with an employee’s role.

It’s important to stress that a behavioral analytics alert should never be viewed as incontrovertible proof that an employee is committing fraud. There are many reasons an employee might trigger an alert — for example, by working late. For this reason, you should carefully consider the worker, context and any other factors before escalating your response.

Ideally, alerts should be investigated by someone knowledgeable about fraud, such as a forensic accountant. Be careful to respect employees’ legal rights. Depending on your location and industry, employee monitoring activities may be subject to privacy, data protection and employment law requirements. If you’re ever in doubt about what you’re allowed to track or investigate, consult legal counsel.

Policies and procedures

Govern your use of behavioral analytics software with a detailed policy. Your policy should answer such questions as: What must employees be told about tracking, and how will it be used? Who may review analytics data? When should alerts be referred for further investigation? And how long should analytics records be retained?

Ask an employment attorney to review your policy for potential legal violations before it’s finalized. And revisit the policy frequently to ensure it reflects changes to your organization and your use of threat detection tools.

Prudent management

If your business conducts a fraud risk assessment, directly link your behavioral analytics to that assessment. Fraud risk assessment reports generally tell you where your business should focus its risk management efforts (possibly through new internal controls) to combat criminal activity. Behavioral analytics helps you monitor the warning signs identified in the report.

However, you should use behavioral analytics sparingly, as part of your broader risk management strategy. Used excessively, these tools may violate employees’ rights, leading to lawsuits, poor morale and costly worker turnover. Even the perception of widespread surveillance can discourage prospective and current employees. So be sure to tie behavioral analytics to actual fraud risks and implement clear policies and procedures. You should also limit data access to authorized personnel with a legitimate business need, including owners and executives, HR leaders, IT security personnel, legal counsel, and outside forensic accounting professionals.

Getting started

We can help you evaluate fraud risks, choose affordable behavioral analytics software, set parameters based on your business’s operations and needs, and train you to use the tools effectively. Contact us to learn more.

© 2026

Although your business may seem big to you, you may wonder how the government classifies it for tax purposes. If your organization qualifies as a “small business,” you may enjoy several important tax advantages. But the rules for specific tax provisions vary. So, depending on your size, you might be eligible for some so-called small business breaks but not others. Here’s a closer look.

No universal definition

Under federal tax law, there’s no one definition of a small business. Instead, several definitions apply depending on the context, various criteria and certain thresholds. Criteria may include a business’s:

• Gross assets,
• Gross receipts, and
• Number of shareholders and employees.

Even if a criterion such as gross receipts is the same across definitions, different thresholds may apply. Also, for some purposes, the tax code might define a small business in more than one way. Depending on how your performance and operations change over time, you might meet the government’s definition of a small business one year but not the next year.

5 special breaks for certain small businesses

The Section 448(c) gross receipts test serves as a common eligibility standard for several tax provisions available to qualifying small businesses. Under this test, your business may qualify for five potential tax breaks if it had average annual gross receipts of $25 million or less for the prior three-year period. This threshold is adjusted for inflation — for 2026, businesses that had average gross receipts up to $32 million are eligible for:

1. Cash accounting. You’re generally permitted to use the cash method of accounting for tax purposes even if you have inventories or use the accrual method for financial reporting. With certain exceptions, larger businesses — particularly those that carry inventory — must use accrual accounting. Using the cash method will likely allow you to defer more taxable income than you could under the accrual method.

2. Inventory simplification. You’re generally exempt from complex inventory accounting rules and may account for inventories by:

• Treating them as nonincidental materials and supplies, or
• Conforming to the inventory method you use in your financial statements or books and records.

Treating inventories as nonincidental materials or supplies allows you to deduct their cost when they’re “used or consumed.” Final IRS regulations clarify that materials aren’t used and consumed until the inventory is sold. So businesses can’t treat raw materials as used and consumed when converted into work-in-progress or finished goods.

3. Relief from UNICAP rules. You’re exempt from the uniform capitalization (UNICAP) rules, which require taxpayers to capitalize certain direct and indirect production costs to inventory, rather than deduct them when incurred. Not only can these rules increase your tax liability, but they also make tax reporting more complex.

4. Exemption from the business interest deduction limitation. You’re not subject to the cap on business interest write-offs, which generally limits deductions of net business interest expense to 30% of adjusted taxable income.

5. The completed contract method. If your business is in construction, manufacturing or another industry where long-term contracts are common, you may use the completed contract method rather than the percentage-of-completion method to account for long-term contracts expected to be completed within two years. The completed contract method allows you to defer tax until the contract is substantially complete, while the percentage-of-completion method can accelerate the tax.

When determining your business’s gross receipts, you may need to include those earned by certain related entities, such as those with common control. Special rules apply to organizations in existence for less than three years. Also, tax shelters, including syndicates, don’t qualify for small business status, even if their gross receipts are below the threshold.

Sizing up your business

Of course, these five relief measures aren’t the only tax-saving opportunities for small business owners at the federal and state levels. And determining eligibility can be more complicated than it appears. We can help evaluate your eligibility for these breaks and others — and develop a long-term plan that’s tailored to your situation. Contact us to explore the potential tax benefits of small business status.

© 2026

One of the greatest risks to your estate plan is the chance of incurring substantial long-term care (LTC) costs. These costs, for services such as nursing home stays or home health aides, can quickly erode the savings you want to pass on to your family after your death. One solution is to purchase an LTC insurance policy.

Understanding the terms

An LTC policy’s terms dictate the amount of benefits you’ll receive each day or month, up to a defined lifetime maximum or number of years. These limits depend on the type of care provided, such as in-home care or a nursing facility.

LTC policyholders are typically subject to a waiting period of 30 to 180 days before being eligible for benefits (90 days is generally the norm). Important: The shorter the waiting period, the more expensive the policy. Similarly, you can expect to pay more for a policy with higher maximum benefits.

LTC policies generally provide benefits when you can’t perform multiple basic activities of daily living — including bathing, dressing, eating, transferring and managing incontinence — or if you experience cognitive impairment. Generally, once benefits start, premium payments stop. But if you stop paying on the policy first, you usually forfeit any future benefits. Be aware that coverage may be affected by several factors. For example, you may not qualify for coverage because of a pre-existing condition.

What to consider before buying insurance

Factors to consider before purchasing an LTC insurance policy include your:

Financial situation. Do you have the funds to pay for long-term care assistance without jeopardizing your overall financial situation? Take an objective look at your entire financial picture.

Estate planning objectives. An LTC policy may make sense if preserving wealth to pass on to your family is a primary estate planning objective.

Age and health. As you grow older, LTC insurance premiums may rise. Additionally, if you have a pre-existing condition, you may pay higher rates or even be denied coverage. Applying early may increase the likelihood that you won’t be denied coverage and that you’ll pay lower rates. But you’ll probably be paying premiums for more years.

There might be ways to obtain coverage without buying a policy privately. For instance, you may be able to participate in a group policy offered by your employer or another affiliation. This can be especially helpful if health conditions would otherwise cause insurers to charge you high premiums or deny you coverage.

Planning for your (and your family’s) future

An LTC insurance policy offers financial protection and peace of mind. With the escalating costs of extended care, this coverage can also allow you to leave more to your family. As with any major financial decision, carefully compare policy options, costs and benefits to find the best fit for your needs and goals. We can help you evaluate what’s appropriate for your situation.

© 2026

Tax identity theft isn’t limited to individual taxpayers — businesses are also targeted through their Employer Identification Numbers (EINs), payroll systems and tax filings. The financial impact of these crimes can be significant. Businesses may face delayed or stolen tax refunds, unauthorized payroll filings, and the time and expense of resolving IRS issues. There may even be credit damage or, if employee or customer data is compromised, reputational harm. Here’s what you need to know to protect your business.

How tax identity theft happens

Business tax identity theft comes in many forms and can affect sole proprietors, corporations, partnerships and limited liability companies. For example, criminals may file fraudulent returns using a company’s EIN, impersonate executives to steal employee W-2 data, or use forged IRS documents to pose as a business for financial or tax-related activity. In more advanced cases, hackers combine stolen data from breaches with synthetic identities to create entirely fake businesses capable of filing returns and securing credit.

These schemes often go undetected until the IRS rejects a legitimate tax filing or flags duplicate activity. Other warning signs may include rejected extension requests, unexpected IRS transcripts or notices, or missing IRS correspondence.

You also might receive a Letter 5263C or 6042C from the IRS. If your business receives one of these notices, don’t panic — it may stem from an IRS verification issue or a filing inconsistency, such as transposed numbers on your return. But it could signal something more serious. So contact your tax advisor to help answer all the questions in the letter within the timeframe specified in the notice (typically within 30 days). In some cases, the IRS may require you to file Form 14039-B, “Business Identity Theft Affidavit,” to report suspected identity theft.

How to protect your business

Tax identity theft can be costly, so prevention and early detection are critical. Consider the following seven security measures to help protect your business:

1. Prioritize cybersecurity. Your business should have a formal cybersecurity plan that provides a step-by-step approach for detecting identity theft. When breaches happen, your plan should trigger a prompt, thorough response. Review your plan regularly and update it to reflect changes in your business operations and emerging cyber risks.

2. Safeguard sensitive business data. Store employee and customer data, along with other proprietary records, such as financial statements and prior years’ tax returns, in a secure location. Keep your EIN information up to date with the IRS, including the responsible party and contact details. Shred nonessential documents before throwing them out, and limit access to your EIN to parties with whom you initiated the contact. Share sensitive information via the internet or email only if the recipient is trusted (such as your lender or tax preparer) and the site is secure or the email is encrypted.

3. Guard your logins and passwords. Some businesses store account logins and passwords in a single location, which can be convenient but risky. If a dishonest employee or hacker gains access, they could reach sensitive systems, including those tied to your EIN and tax filings. Use strong security controls to protect this information.

4. Use the latest cybersecurity technology. This includes firewalls, antivirus and antimalware software, spam filters, encryption and multi-factor authentication. Also exercise common sense: Don’t download files, click links or open attachments sent from unknown sources. It’s also prudent to back up sensitive data to a secure, external source not connected to your network.

5. Educate employees. Conduct periodic training sessions to remind employees about the latest scams, such as phishing emails that impersonate familiar businesses or colleagues to steal sensitive information. Employees should be aware of your cybersecurity plan and each person’s role if a breach occurs. Also remind them that the IRS doesn’t initiate contact by telephone, email, text or social media to request sensitive information.

6. Monitor business credit reports. It doesn’t take much effort to monitor your company’s profiles from the three major business credit bureaus: Equifax, Experian and TransUnion. Subscribe to their monitoring services and real-time alerts for suspicious activity, which may signal unauthorized accounts or broader identity theft affecting your business.

7. Secure your tax filings and accounts. Work with a trusted tax professional and use secure portals to share tax documents. Review IRS notices promptly and investigate any rejected filings, unexpected transcripts or unusual activity tied to your EIN.

Be proactive, not reactive

No preventive measure is 100% fail-safe, so identifying suspicious activity is also critical. Uncovering identity theft early makes it easier to address.

Contact us if you have questions about protecting your business’s tax filings, employee tax data or IRS account information. We can help you review your risks, implement practical data security measures and determine the next steps if something looks suspicious.

© 2026

Cash hasn’t disappeared — but it’s no longer the preferred payment method for many customers. As electronic and digital options continue to expand, more businesses are evaluating how much they rely on physical currency. Rather than eliminating cash entirely, many are exploring a “cash-light” approach. Here’s a look at current payment trends and the practical considerations for business owners.

Payment trends continue to shift

Consumer payment behavior has shifted in recent years, with noncash options steadily gaining ground. Card payments, including credit and debit, now dominate, alongside growing use of mobile wallets and peer-to-peer apps.

At the same time, cash hasn’t vanished. Many consumers keep cash on hand for budgeting, emergencies or small purchases. This dual reality — declining usage but persistent demand — is one reason many businesses are opting for a cash-light model instead of going fully cashless.

Customer preferences aren’t one-size-fits-all

Payment preferences often vary by age, income level and access to financial services. Younger consumers, including Millennials and Generation Z, tend to favor cards and mobile payment platforms such as Apple Pay, Google Pay and Venmo. These methods are fast, convenient and increasingly integrated into everyday transactions.

However, other groups still rely heavily on cash. Some older consumers prefer it for its simplicity and familiarity. In addition, unbanked and underbanked individuals, who may lack access to traditional financial services or smartphones, often depend on cash as their primary payment method.

For businesses, this creates a balancing act. Limiting cash too aggressively could alienate certain customers, while continuing to rely heavily on it may create operational inefficiencies. Evaluating your customer mix, average transaction size and industry norms can help determine how far you can shift away from cash without adversely affecting revenue or customer satisfaction.

The real cost of handling cash

While cash offers immediacy (funds are received instantly without processing delays), it also comes with hidden costs. Managing cash requires time, labor and internal controls, including:

• Maintaining sufficient bills and coins to make change,
• Counting and reconciling registers daily,
• Transporting and depositing funds at the bank, and
• Implementing safeguards such as cameras, safes and segregation of duties.

Cash also carries risk. Theft, employee fraud and counterfeit bills remain ongoing concerns. These risks can increase insurance costs and require additional oversight.

On the other hand, noncash payments may involve transaction fees. Credit card processors and payment platforms charge a percentage of each sale, which adds up over time. These costs can reduce margins and influence pricing strategies, so they should be weighed against the operational savings and reduced risk associated with handling less cash.

Legal and regulatory considerations

Before reducing or eliminating cash acceptance, it’s important to understand the legal landscape. While U.S. currency is considered legal tender for debts, no federal law requires private businesses to accept cash for everyday transactions.

However, to protect consumers who rely on it, several states and municipalities have enacted laws requiring businesses to accept cash. These requirements vary by jurisdiction and may include exceptions. For example, certain types of transactions — such as app-based services — may still be cashless. For businesses operating in multiple locations, these variations can create compliance complexity and heighten the risk of unintended violations.

Legislation in this area continues to develop. In recent years, policymakers have debated measures that would require businesses nationwide to accept cash and prohibit differential pricing based on payment method. Business owners should stay informed about applicable state and local rules before changing their policies.

Finding the right balance

As payment technology continues to evolve, businesses have more flexibility than ever in how they accept and manage transactions. Before making changes, however, it’s important to consult with your accounting and legal advisors to evaluate the financial and compliance implications for your specific situation. The right payment mix depends on your customer base, cost structure and risk profile. Contact us to discuss whether a cash-light approach makes sense for your business and how to implement it effectively.

© 2026

For today’s small and midsize employers, payroll management is critical. Your employees expect to be paid accurately and on time. Meanwhile, federal, state and local agencies require you to meet a wide range of tax, reporting and wage-related obligations.

Getting it right supports staff trust, helps control compliance risk and provides insights into labor costs. Letting it slip can lower morale, increase turnover and even bring on costly penalties. Here are some big-picture ways to strengthen payroll management.

Create a written policy

Every employer should create a formal, written policy outlining its payroll philosophy, rules and procedures. Your policy should do more than state when employees get paid. It should address timekeeping, overtime approval, paid leave, expense reimbursements, payroll corrections, final pay procedures, and wage or status changes. If you have remote or multistate employees, your policy should also clarify how location changes are reported and reviewed.

Ultimately, your payroll policy needs to be a comprehensive, living document that you regularly reevaluate and revise as needed. (It’s a good idea to consult a qualified attorney when doing so.)

Prioritize compliance

Payroll management means payroll compliance. At the federal level, among the most important laws is the Fair Labor Standards Act (FLSA). Under it, you must generally categorize employees as either exempt or nonexempt. Covered nonexempt employees generally must receive overtime pay at the required rate for hours worked over 40 in a workweek. However, some salaried employees may still be nonexempt. So your organization must monitor job duties, compensation and applicable exemptions carefully.

Also, be diligent when engaging independent contractors. Ensure they’re not managed the same way as employees. Worker classification is an especially important area to monitor because the rules are complex and continue to evolve at the federal and state levels, making this a frequent source of disputes and audits. Should any questions arise regarding how to classify a worker, contact your employment attorney.

Of course, there are other laws to consider. Examples include the Federal Insurance Contributions Act, Federal Unemployment Tax Act and Equal Pay Act. Your organization needs reliable, compliant procedures for:

• Withholding, depositing and reporting payroll taxes,
• Issuing W-2 forms,
• Maintaining required records, and
• Addressing state and local requirements that may apply.

Agencies such as the IRS and U.S. Department of Labor may conduct payroll compliance investigations. Be sure your staff and payroll services provider, if you have one, keep up with the latest regulations and guidance.

Simplify and streamline

To the extent possible, keep your payroll processes simple and streamlined. You may want to use a centralized portal or a cloud-based “software as a service” application to help facilitate an efficient, affordable approach. Ideally, your payroll system should integrate with timekeeping, human resources and accounting systems to reduce manual entry, improve consistency and create a reliable audit trail. However, automation shouldn’t replace oversight. Maintain clear approval workflows, access controls and review procedures before each payroll is finalized.

Under the right circumstances, outsourcing can increase efficiency, ease compliance, and save time and money. But perform a cost-benefit analysis before investing in a third-party payroll services provider. Remember, even when outsourcing, your organization remains responsible for providing accurate data, reviewing reports, and ensuring tax deposits and filings are properly handled.

Invest in training

If you’re keeping payroll in-house, train every staff member involved appropriately. This should include occasional refresher sessions on procedural or technological changes. Even if you outsource payroll, some employees may need to be taught how to work effectively with the provider.

Don’t limit training to payroll personnel. Supervisors may need guidance on time approvals, overtime rules and how to avoid informal practices that create compliance problems. Employees should know how to submit hours, review pay statements, update withholding information and report discrepancies.

Stay on top of it

Payroll management is an ongoing responsibility that demands vigilance and continuous improvement. Regulations, technologies, and staffing and operational needs can all change over time. Contact us for help evaluating your current payroll practices, identifying potential tax and reporting issues, and making needed improvements.

© 2026