Should a Married Couple Use a Joint Trust or Separate Trusts?

There are many benefits of including a revocable trust in your estate plan. This trust type allows you to minimize probate expenses, keep your financial affairs private and provide for the management of your assets in the event you become incapacitated. Importantly, they offer flexibility: You’re free to amend the terms of the trust or even revoke it altogether at any time.

If you’re married, you and your spouse must decide whether to use a joint trust or separate trusts. The right choice depends on your financial and family circumstances, applicable state law, and other factors.

Maintaining a joint trust is simpler

If you’re comfortable with your spouse inheriting your combined assets (and vice versa), a joint trust can be less complex to set up and administer than separate trusts. Funding the trust is a simple matter of transferring assets into it and avoids the need to divide assets between two separate trusts.

In addition, during your lifetimes, you and your spouse have equal control over the trust’s assets, which can make it easier to manage and conduct transactions involving the assets. On the other hand, separate trusts may be the way to go for spouses who aren’t comfortable sharing control of their combined assets.

Separate trusts may provide greater asset protection

If shielding assets from creditors is a concern, separate trusts usually offer greater protection. With a joint trust, if a creditor obtains a judgment against one spouse, all trust assets may be at risk. A spouse’s trust is generally protected from the other spouse’s creditors.

Also, when one spouse dies, his or her trust becomes irrevocable, making it more difficult for creditors of either spouse to reach the trust assets. Keep in mind that the degree of asset protection a trust provides depends on the type of debt involved, applicable state law and the existence of a prenuptial agreement.

Factor in taxes

For most couples today, federal gift and estate taxes aren’t a concern. This is because they enjoy a combined gift and estate tax exemption of more than $27 million in 2024 and 2025.

However, if a couple’s wealth exceeds the exemption amount, or if they live in a state where an estate or inheritance tax kicks in at lower asset levels, separate trusts offer greater opportunities to avoid or minimize these taxes. For example, some states have exemption amounts as low as $1 million or $2 million. In these states, separate trusts can be used to make the most of each spouse’s exemption amount and minimize exposure to death taxes.

It’s also important to consider income tax. As previously mentioned, when one spouse dies, his or her trust becomes irrevocable. That means filing tax returns for the trust each year and, to the extent trust income is accumulated in the trust, paying tax at significantly higher trust tax rates.

A joint trust remains revocable after the first spouse’s death (it doesn’t become irrevocable until both spouses have passed). In this case, income is taxed to the surviving spouse at his or her individual tax rate.

Review the pros and cons

Joint and separate trusts each have advantages and disadvantages. Contact us to determine which is right for you. We’d be pleased to review your circumstances and help you make a final decision.

When start-ups launch, their focus is often on tightly controlling expenses. Most need to establish a brand and some semblance of stability before funding anything other than essential operating activities.

For companies that make it past that tenuous initial stage, there comes a time when they must loosen up the purse strings and start investing in, among other things, their employees. One way to do so is to sponsor a retirement plan. Offering this fringe benefit lets staff know the business cares about them and their financial futures.

Has your company reached this point? Or is it almost there? If so, let’s review three of the most popular plan types that growing businesses should consider.

1. Traditional 401(k) plans

These are available to any employer with one or more employees. Under the plan, participants are given accounts that they own. This means their contributions are immediately vested, and they retain ownership even if they leave their jobs. Participants typically contribute via pretax payroll deductions, which reduce their taxable income. Distributions, however, are taxable.

For 2025, 401(k) participants can contribute up to $23,500 (up from $23,000 in 2024). Those age 50 or older by the end of the year can make additional “catch-up” contributions of $7,500 (the same amount as in 2024). Your business may also opt to contribute to participants’ accounts under a vesting schedule of your choosing. In 2025, the total combined limit for employee and employer contributions is $70,000. Within limits, your company can deduct contributions made on behalf of eligible employees.

Many companies’ plans now have Roth 401(k) features. This means participants can choose to make some contributions with compensation that’s already been taxed. The upside is that qualified distributions are tax-free.

Establishing a 401(k) plan typically requires, among other steps, adopting a written plan and arranging a trust fund for plan assets. Annually, employers must file Form 5500 and perform discrimination testing to ensure the plan doesn’t favor highly compensated employees. However, with a “safe harbor” 401(k), the plan isn’t subject to discrimination testing. There are also several other 401(k) variations worth considering.

2. SEP-IRAs

If choosing a 401(k) plan and administering it seems a bit overwhelming, there are simpler options. Case in point: Simplified Employee Pension Individual Retirement Accounts (SEP-IRAs). Businesses of any size can establish a plan to offer these accounts by completing Form 5305-SEP, “Simplified Employee Pension — Individual Retirement Accounts Contribution Agreement.” But there’s no annual filing requirement.

From there, you set up and wholly fund a SEP-IRA for each participant. Employer contributions immediately vest with participants, who own their respective accounts. What’s nice is you can decide each year whether and how much to contribute. In 2025, contribution limits will be 25% of an employee’s compensation, up to $70,000 (up from $69,000 in 2024).

3. SIMPLE IRAs

Another less complex approach is sponsoring Savings Incentive Match Plan for Employees (SIMPLE) IRAs. However, only businesses with 100 or fewer employees can offer them.

Like SEP-IRAs, these are accounts you set up for each participant. They may choose to contribute to their SIMPLE IRAs but don’t have to. Employer contributions are required, but you can opt to either:

Match employee contributions up to 3% of compensation, which can be reduced to as low as 1% in two of five years, or
Make a 2% nonelective contribution, including to employees who don’t contribute.

Participants are immediately 100% vested in contributions, whether those funds come from you or their own paychecks. The contribution limit in 2025 will be $16,500 (up from $16,000 in 2024).

Many options

To be clear, these are but three options among many different retirement plan types that growing businesses can sponsor for their employees. Our firm can help you weigh the pros and cons of all of them, including forecasting the costs involved and understanding the tax implications.

On November 15, 2024, a federal court struck down the Department of Labor (DOL) rule that raised the salary threshold for executive, administrative, and professional employees to be exempt from minimum wage and overtime pay under the Fair Labor Standards Act (FLSA). This nationwide ruling affects all businesses and nullifies:

The July 1, 2024, increase from $684 per week to $844 per week.
The January 1, 2025, planned increase to $1,128 per week.
Future automatic increases every three years starting July 1, 2027.

What should employers do?

Salary Adjustments: Employers who raised salaries to meet the July 1 threshold or in anticipation of the January 1 increase may revert to previous pay rates but should consider employee morale.
Reclassification: Workers reclassified as nonexempt under the 2024 rule may be switched back to exempt if they meet the duties test, with advance notice where required.

This ruling offers a chance to review employee classifications and job duties. Yeo & Yeo’s HR Advisory and Payroll Solutions Groups can help you navigate these changes. Contact us.

As the end of the year draws near, savvy taxpayers look for ways to reduce their tax bills. This year, the sense of urgency is higher for many because of some critical factors.

Indeed, many of the Tax Cuts and Jobs Act provisions are set to expire at the end of 2025, absent congressional action. However, with President-Elect Donald Trump set to take power in 2025 and a unified GOP Congress, the chances have greatly improved that many provisions will be extended or made permanent. With these factors in mind, here are tax-related strategies to consider before year end.

Bunching itemized deductions

For 2024, the standard deduction is $29,200 for married couples filing jointly, $14,600 for single filers, and $21,900 for heads of households. “Bunching” various itemized deductions into the same tax year can offer a pathway to generating itemized deductions that exceed the standard deduction.

For example, you can claim an itemized deduction for medical and dental expenses that are greater than 7.5% of your adjusted gross income (AGI). Suppose you’re planning to have a procedure in January that will come with significant costs not covered by insurance. In that case, you may want to schedule it before year end if it’ll push you over the standard deduction when combined with other itemized deductions.

Making charitable contributions

Charitable contributions can be a useful vehicle for bunching. Donating appreciated assets can be especially lucrative. You avoid capital gains tax on the appreciation and, if applicable, the net investment income tax (NIIT).

Another attractive option for taxpayers age 70½ or older is making a qualified charitable distribution (QCD) from a retirement account that has required minimum distributions (RMDs). For 2024, eligible taxpayers can contribute as much as $105,000 (adjusted annually for inflation) to qualified charities. This removes the distribution from taxable income and counts as an RMD. It doesn’t, however, qualify for the charitable deduction. You can also make a one-time QCD of $53,000 in 2024 (adjusted annually for inflation) through a charitable remainder trust or a charitable gift annuity.

Leveraging maximum contribution limits

Maximizing contributions to your retirement and healthcare-related accounts can reduce your taxable income now and grow funds you can tap later. The 2024 maximum contributions are:

$23,000 ($30,500 if age 50 or older) for 401(k) plans.
$7,000 ($8,000 if age 50 or older) for traditional IRAs.
$4,150 for individual coverage and $8,300 for family coverage, plus an extra $1,000 catch-up contribution for those age 55 or older for Health Savings Accounts.

Also keep in mind that, beginning in 2024, contributing to 529 plans is more appealing because you can transfer unused amounts to a beneficiary’s Roth IRA (subject to certain limits and requirements).

Harvesting losses

Although the stock market has clocked record highs this year, you might find some losers in your portfolio. These are investments now valued below your cost basis. By selling them before year end, you can offset capital gains. Losses that are greater than your gains for the year can offset up to $3,000 of ordinary income, with any balance carried forward.

Just remember the “wash rule.” It prohibits deducting a loss if you buy a “substantially similar” investment within 30 days — before or after — the sale date.

Converting an IRA to a Roth IRA

Roth IRA conversions are always worth considering. The usual downside is that you must pay income tax on the amount you transfer from a traditional IRA to a Roth. If you expect your income tax rate to increase in 2026, the tax hit could be less now than down the road.

Regardless, the converted funds will grow tax-free in the Roth, and you can take qualified distributions without incurring tax after you’ve had the account for five years. Moreover, unlike other retirement accounts, Roth IRAs carry no RMD obligations.

In addition, Roth accounts allow tax- and penalty-free withdrawals at any time for certain milestone expenses. For example, you can take a distribution for a first-time home purchase (up to $10,000), qualified birth or adoption expenses (up to $5,000 per child) or qualified higher education expenses (no limit).

Timing your income and expenses

The general timing strategy is to defer income into 2025 and accelerate deductible expenses into 2024, assuming you won’t be in a higher tax bracket next year. This strategy can reduce your taxable income and possibly help boost tax benefits that can be reduced based on your income, such as IRA contributions and student loan deductions.

If you’ll likely land in a higher tax bracket in the near future, you may want to flip the general strategy. You can accelerate income into 2024 by, for example, realizing deferred compensation and capital gains, executing a Roth conversion, or exercising stock options.

Don’t delay

With the potential for major tax changes on the horizon, now is the time to take measures to protect your bottom line. We can help you make the right moves for 2024 and beyond.

If you own a growing, unincorporated small business, you may be concerned about high self-employment (SE) tax bills. The SE tax is how Social Security and Medicare taxes are collected from self-employed individuals like you.

SE tax basics

The maximum 15.3% SE tax rate hits the first $168,600 of your 2024 net SE income. The 15.3% rate is comprised of the 12.4% rate for the Social Security tax component plus the 2.9% rate for the Medicare tax component. For 2025, the maximum 15.3% SE tax rate will hit the first $176,100 of your net SE income.

Above those thresholds, the SE tax’s 12.4% Social Security tax component goes away, but the 2.9% Medicare tax component continues for all income.

How high can your SE tax bill go? Maybe a lot higher than you think. The real culprit is the 12.4% Social Security tax component of the SE tax, because the Social Security tax ceiling keeps getting higher every year.

To calculate your SE tax bill, take the taxable income from your self-employed activity or activities (usually from Schedule C of Form 1040) and multiply by 0.9235. The result is your net SE income. If it’s $168,600 or less for 2024, multiply the amount by 15.3% to get your SE tax. If the total is more than $168,600 for 2024, multiply $168,600 by 12.4% and the total amount by 2.9% and add the results. This is your SE tax.

Example: For 2024, you expect your sole proprietorship to generate net SE income of $200,000. Your SE tax bill will be $26,706 (12.4% × $168,600) + (2.9% × $200,000). That’s a lot!

Projected tax ceilings for 2026–2033

The current Social Security tax on your net SE income is expensive enough, but it will only worsen in future years. That’s because your business income will likely grow, and the Social Security tax ceiling will continue to increase based on annual inflation adjustments.

The latest Social Security Administration (SSA) projections (from May 2024) for the Social Security tax ceilings for 2026–2033 are:

2026 – $181,800
2027 – $188,100
2028 – $195,900
2029 – $204,000
2030 – $213,600
2031 – $222,900
2032 – $232,500
2033 – $242,700

Could these estimated ceilings get worse? Absolutely, because the SSA projections sometimes undershoot the actual final numbers. For instance, the 2025 ceiling was projected to be $174,900 just last May, but the final number turned out to be $176,100. But let’s say the projected numbers play out. If so, the 2033 SE tax hit on $242,700 of net SE income will be a whopping $37,133 (15.3% × $242,700).

Disconnect between tax ceiling and benefit increases

Don’t think that Social Security tax ceiling increases are linked to annual Social Security benefit increases. Common sense dictates that they should be connected, but they aren’t. For example, the 2024 Social Security tax ceiling is 5.24% higher than the 2023 ceiling, but benefits for Social Security recipients went up by only 3.2% in 2024 compared to 2023. The 2025 Social Security tax ceiling is 4.45% higher than the 2024 ceiling, but benefits are going up by only 2.5% for 2025 compared to 2024.

The reason is that different inflation measures are used for the two calculations. The increase in the Social Security tax ceiling is based on the increase in average wages, while the increase in benefits is based on a measure of general inflation.

S corporation strategy

While your SE tax bills can be high and will probably get even higher in future years, there may be potential ways to cut them to more manageable levels. For instance, you could start running your business as an S corporation. Then, you can pay yourself a reasonably modest salary while distributing most or all of the remaining corporate cash flow to yourself. That way, only your salary would be subject to Social Security and Medicare taxes. Contact us if you have questions or want more information about the SE tax and ways to manage it.

As year end closes in and you prepare for 2025, Yeo & Yeo’s Payroll Solutions Group would like to inform you of important payroll updates that will affect you and your employees next year.

Our 2025 Payroll Planning Brief includes several payroll changes that take effect in the coming year and items to consider before year end. Most notably, beginning February 21, 2025, almost all businesses and organizations operating in Michigan will be subject to new minimum wage and paid sick time requirements. Learn more about the Improved Workforce Opportunity Wage Act (IWOWA) and Earned Sick Time Act (ESTA) changes on Yeo & Yeo’s resource page.

Note: On November 7, two bills were introduced in the Michigan House to amend both IWOWA and ESTA. With the legislative session ending on December 16, swift action on these bills is expected, which would revamp what is currently in place.

Watch Yeo & Yeo’s website and future eAlerts for new developments.

Need guidance on closing 2024, preparing for 2025 payroll, or meeting payroll deadlines? Contact the payroll professionals at Yeo & Yeo.

Download 2025 Payroll Planning Brief

If you’re charitably inclined and itemize deductions, you may be entitled to deduct charitable donations. The key word is “may” because there are requirements you must meet. One such requirement is the need to substantiate charitable gifts with proper documentation that will satisfy the IRS. Indeed, a charitable gift may be legitimate, but if the taxpayer fails to substantiate it properly, the deduction may be lost.

Making cash donations

Cash donations, regardless of the amount, must be substantiated with one of the following:

Bank records. These can include bank statements, electronic fund transfer receipts, canceled checks (including scanned images of both sides of a check from the bank’s website) or credit card statements.

Written communication. This can be in the form of a letter or email from the charitable organization, showing the donee’s name, the contribution date and the amount. A blank pledge card furnished by the donee isn’t sufficient.

In addition to the above, cash donations of $250 or more require a contemporaneous written acknowledgment (CWA) from the donee that details the following:

The contribution amount, and
A description and good faith estimate of the value of any goods or services provided in consideration (in whole or in part) for the donation.

You can use a single document to meet both the written communication and CWA requirements. For the CWA to be “contemporaneous,” you must obtain it by the earlier of 1) the extended due date of your tax return for the year the donation is made, or 2) the date you file your return.

Making noncash donations

You must substantiate noncash donations of less than $250 with a receipt from the donee showing the donee’s name and address, the date of the contribution, and a detailed description of the property. For noncash donations of $250 or more, there are additional substantiation requirements depending on the size of the donation:

Donations of $250 to $500 require a CWA.
Donations over $500 but not more than $5,000 require a CWA and you must complete Section A of Form 8283 and file it with your tax return. Section A includes a description of the property, its fair market value and the method of determining that value.
Donations over $5,000 require all the above, plus you must obtain a qualified appraisal of the property and complete Section B of Form 8283 (signed by the appraiser and the donee). There may be additional requirements in certain situations. For instance, if you donate art of $20,000 or more, or any donation valued over $500,000, you must attach a copy of the appraisal to your return. Note: No appraisal is required for donations of publicly traded securities.

Additional rules may apply to certain types of property, such as vehicles, clothing, household items or securities.

The rules are complex

The regulations on substantiating charitable donations are complex, and one mistake can cause you to lose valuable tax deductions. When in doubt, contact us to ensure you follow all the rules correctly.

President-elect Donald Trump will return to the White House in 2025 — a year that already was expected to see significant activity on the federal tax front. A projected unified GOP Congress is poised to help him notch early legislative tax victories. (Republicans have won back a majority in the U.S. Senate and retained a majority in the U.S. House of Representatives.) The most obvious legislative win will likely be the extension and expansion of Trump’s signature 2017 tax legislation, the Tax Cuts and Jobs Act (TCJA).

While Trump didn’t issue detailed tax policies during the campaign, he briefly proposed several measures on the trail that could be included in a TCJA update or other law. Let’s take a closer look at what might be on the table for business and individual taxpayers in 2025 and beyond.

The TCJA’s ticking clock

The TCJA brought wide-ranging changes to the federal tax landscape, including:

A 21% corporate income tax rate,
Lower marginal tax rates for individuals,
A higher standard deduction,
The doubling of the Child Tax Credit for some parents,
The creation of a qualified business income deduction for pass-through entities, and
The doubling of the federal gift and estate tax exemption.

Although most of the corporate provisions are permanent, many TCJA provisions regarding individual taxes, as well as the doubled gift and estate tax exemption, are scheduled to expire at the end of 2025. Trump has endorsed extending those tax breaks. The nonpartisan Congressional Budget Office has estimated that the 10-year cost of permanently extending the expiring provisions will ring in at $4.6 trillion.

Additional proposals affecting business taxes

During the campaign, Trump proposed several tax changes that businesses would welcome. For example, he would further reduce the corporate tax rate, to 15%, for companies that make their products in the United States.

He also has called for two changes that may have bipartisan support. Trump would allow companies to immediately expense their research and experimentation costs, rather than capitalize and amortize them, and return to 100% first-year bonus depreciation for qualifying capital investments. Under the TCJA, the allowable first-year bonus deduction is 60% for 2024, and for 2025 it’s slated to be 40%. Without congressional action, it will drop to zero in 2027.

In addition, Trump has spoken of doubling the ceiling on the Sec. 179 expensing deduction for small businesses’ qualifying investments in equipment. The TCJA permanently capped the deduction at $1 million, adjusted annually for inflation ($1.22 million for 2024). The deduction is subject to a phaseout when the cost of qualifying purchases exceeds $2.5 million ($3.05 million for 2024, adjusted for inflation).

Additional proposals affecting individual taxes

One TCJA provision that Trump has expressed second thoughts about is the $10,000 cap on the state and local tax deduction. The cap, which hits taxpayers hardest in states with high property taxes, is set to expire after 2025. Congress could just let it expire or even terminate it early, depending on how quickly lawmakers can move tax legislation.

A TCJA expansion or additional legislation could incorporate Trump’s promises to eliminate taxes on tips for restaurant and hospitality workers. (It’s unclear if he was referring only to federal income taxes or also payroll taxes.) Without limitations, such a provision could benefit individuals who restructure their compensation to reduce their tax bills by, for example, classifying bonuses as tips.

Trump has also proposed excluding overtime pay and Social Security payments from taxation. It’s worth noting that a Trump administration may reduce the number of employees eligible for overtime. And exempting Social Security benefits would shrink the funding for both that program and Medicare. In addition, the president-elect has proposed a new deduction for interest on car loans for vehicles manufactured in the United States and a reduction in taxes for Americans living abroad.

Trump also said he’d consider making police officers, firefighters, active duty military members and veterans exempt from paying federal taxes. And in a social media post, he wrote that if he won, hurricane victims could deduct the cost of a home generator, retroactive to September 1, 2024.

The threat of tariffs

Trump has repeatedly pledged to impose a baseline tariff of 10% on imported goods, with a 60% tariff on imports from China and possibly a higher tariff on imports from Mexico. Taxpayers likely will face higher prices as a result.

Although Trump routinely claims that the exporting countries will bear the cost of the tariffs, history suggests otherwise. The more common scenario is that U.S. companies that buy imported goods pass the tariffs along to their customers, opening the door for their competitors that don’t purchase imports to similarly raise their prices. Some major U.S. companies and the National Retail Federation have already warned that if Trump’s tariff proposals come to fruition, higher prices on many products may follow.

Rollback of the IRA

The GOP has had the Inflation Reduction Act (IRA) in its crosshairs since the law first passed with zero Republican votes. Trump has vowed to cut unspent funds allocated for the IRA’s tax incentives for clean energy projects. He also may want to eliminate the business and individual tax credits going forward.

But a significant number of clean energy manufacturing projects that rely on the credits are planned or underway in Republican districts and states, which could give the GOP pause. In fact, a group of Republican legislators signed a letter to Speaker of the House Mike Johnson this past August, opposing a full repeal of the IRA. Trump could instead advocate for keeping some of the tax credits or restricting them, for example, through tighter eligibility requirements.

Stay tuned

While it’s always dicey to assume that candidates can deliver on big campaign promises, one thing is certain — 2025 will be a critical year for tax legislation. In addition to the issues discussed above, so-called “tax extenders” for various temporary business and individual tax provisions will come up for debate. We’ll keep you apprised of the developments that could affect your tax liability.

Properly prepared financial statements provide a wealth of information about your company. But the operative words there are “properly prepared.” Classifying information accurately isn’t always easy — especially as the business grows and its financial transactions become more complex.

Case in point: your statement of cash flows. Customarily, it shows the sources (money entering) and uses (money exiting) of cash. That may sound simple enough, but optimally classifying different cash flows can be complicated.

Under U.S. Generally Accepted Accounting Principles (GAAP), statements of cash flows are typically organized into three sections: 1) cash flows from operating activities, 2) cash flows from investing activities, and 3) cash flows from financing activities. Let’s take a closer look at each.

Operating activities

This section of the statement of cash flows usually starts with accrual-basis net income. Then, it’s adjusted for items related to normal business operations. Examples include income taxes; stock-based compensation; gains or losses on asset sales; and net changes in accounts receivable, inventory, prepaid assets, accrued expenses and payables.

The cash flows from operating activities section is also adjusted for depreciation and amortization. These noncash expenses reflect wear and tear on equipment and other fixed assets.

The bottom of the section shows the cash used in producing and delivering goods or providing services. Several successive years of negative operating cash flows can signal that a business is struggling and may be headed toward liquidation or a forced sale.

Investing activities

If your company buys or sells property, equipment or marketable securities, such transactions should show up in the cash flows from investing activities section. It reveals whether a business is reinvesting in its future operations — or divesting assets for emergency funds.

Business acquisitions and disposals are generally reported in this section, too. However, contingent payments from an acquisition are classified as cash flows from investing activities only if they’re paid soon after the acquisition date. Later contingent payments are classified as financing outflows. Any payment over the liability is classified as an operations outflow.

Financing activities

This third section of the statement of cash flows shows your company’s ability to obtain funds from either debt from lenders or equity from investors. It includes new loan proceeds, principal repayments, dividends paid, issuances of securities or bonds, additional capital contributions by owners, and stock repurchases.

Noncash transactions are reported in a separate schedule at the bottom of the statement of cash flows or in a narrative footnote disclosure. For example, suppose a business buys equipment using loan proceeds. In such a case, the transaction would typically appear at the bottom of the statement rather than as a cash outflow from investing activities and an inflow from financing activities.

Other examples of noncash financing transactions are:

Issuing stock to pay off long-term debt, and
Converting preferred stock to common stock.

In those two instances and others, no cash changes hands. Nonetheless, financial statement users, such as investors and lenders, want to know about and understand these transactions.

Help is available

As you can see, deciding how to classify some transactions to comply with GAAP can be tricky. Whenever confusion or uncertainty arises, give us a call. We can work with you and your accounting team to make the best decision. We can also help you improve your financial reporting in other ways.

Financial statements help managers, lenders and investors evaluate a company’s financial performance. But they tell only part of the story — and they might not reveal financial distress until it’s too late, especially for companies that issue only annual reports. So it’s critical to watch for these five common warning signs indicating a company may be struggling to make ends meet:

1. Financial reporting delays. Late financial statements may signal unqualified accounting personnel, inadequate recordkeeping or even fraud. In some cases, the company’s controller or CFO may be reluctant to show uninformed owners how severe the situation has become. Or management may procrastinate over concerns that lenders will call loans or refuse to waive covenant violations.

2. High employee turnover. Employees, who are often the first to recognize problems, may abandon ship when they’re aware of financial distress. In particular, stock options motivate employees to leave the company before their options lose additional value. Turnover is especially problematic when it involves hard-to-replace executives because it can have a ripple effect that lowers morale for the remaining staff.

3. Fixed asset auctions. Healthy companies routinely invest in new equipment and upgrades. However, struggling companies may sell fixed assets to boost operating cash flow. Auctions bridge temporary cash shortages and help purge a company of idle or outdated equipment. Unfortunately, they don’t always work as intended. Auctioning equipment compromises a company’s ability to generate future income, especially if management liquidates valuable operating assets at fire-sale prices.

4. Questionable accounting practices. When business owners try to hide deteriorating performance, they often devise creative accounting strategies to increase sales and profits. For example, a company may engage in above- or below-market, related-party transactions. Management might also make aggressive accounting estimates to overstate asset values or earnings.

5. Frequent or haphazard loan requests. Maxed-out credit lines and frequent new loan applications may indicate something’s awry. Each time a company asks for loan proceeds, it should have a detailed plan for how management will use the funds. When cash is tight and loan requests are denied, stressed business owners may become desperate. For instance, they might take on debt with unfavorable terms or use their personal credit cards to fund their companies’ working capital needs.

Be on the lookout

Company insiders are usually better equipped to notice these distress signals sooner than outside stakeholders. However, ongoing due diligence can help. For instance, if you have a financial interest in a particular company, consider reviewing news stories for recent developments, following the company and key employees on social media, scheduling quarterly meetings with management, and visiting facilities that are publicly accessible (such as retail stores and job sites). A lender or franchisor who suspects a company’s performance is deteriorating may even request an agreed-upon procedures engagement that targets perceived weaknesses and recommends possible improvements. Contact us for more information.

The outcome of the November 5 election is likely to significantly impact taxes. Many provisions in President-elect Donald Trump’s signature tax legislation from his first time in the White House, the Tax Cuts and Jobs Act (TCJA), are scheduled to expire at the end of 2025. Now, there’s a better chance that most provisions will be extended.

This is especially true as Republicans have won back a majority in the U.S. Senate. As of this writing, Republicans have 52 seats, with a few seats yet to be called, so their majority could grow. The balance of power in the U.S. House of Representatives remains up in the air, with quite a few seats yet to be called.

In addition to the TCJA, the former and future president has suggested many other tax law changes during his campaign. Here’s a brief overview of some potential tax law changes:

Expiring provisions of the TCJA. Examples of expiring provisions include lower individual tax rates, an increased standard deduction, and a higher gift and estate tax exemption. The president-elect would like to make the TCJA’s individual and estate tax cuts permanent. He’s also indicated that he’s open to revisiting the TCJA’s $10,000 limit on the state and local tax deduction.

Business taxation. President-elect Trump has proposed decreasing the corporate tax rate from its current 21% to 20% (or even lower for companies making products in America). He’d also like to expand the Section 174 deduction for research and development expenditures.

Individual taxable income. The president-elect has proposed eliminating income and payroll taxes on tips for restaurant and hospitality workers, and excluding overtime pay and Social Security benefits from taxation.

Housing incentives. President-elect Trump has alluded to possible tax incentives for first-time homebuyers but without specifics. The Republican platform calls for reducing mortgage rates by slashing inflation, cutting regulations and opening parts of federal lands to new home construction.

Tariffs. The president-elect has called for higher tariffs on imports, suggesting a baseline tariff of 10%, with a 60% tariff on imports from China. (In speeches, he’s proposed a 100% tariff on certain imported cars.)

Which extensions and proposals will actually come to fruition will depend on a variety of factors. For example, Congress has to pass tax bills before the president can sign them into law. If you have questions on how these potential changes may affect your overall tax liability, please contact us.

The IRS has issued its 2025 inflation-adjusted contribution amounts for retirement plans in Notice 2024-80. Many retirement-plan-related limits will increase for 2025 — but less than in prior years. Thus, depending on the type of plan you have, you may have limited opportunities to increase your retirement savings.

Type of limitation	2024 limit	2025 limit
Elective deferrals to 401(k), 403(b), 457(b)(2) and 457(c)(1) plans	$23,000	$23,500
Annual benefit limit for defined benefit plans	$275,000	$280,000
Contributions to defined contribution plans	$69,000	$70,000
Contributions to SIMPLEs	$16,000	$16,500
Contributions to traditional and Roth IRAs	$7,000	$7,000
Catch-up contributions to 401(k), 403(b) and 457 plans for those age 50 or older	$7,500	$7,500
Catch-up contributions to 401(k), 403(b) and 457 plans for those age 60, 61, 62 or 63*	N/A	$11,250
Catch-up contributions to SIMPLE plans for those age 50 or older	$3,500	$3,500
Catch-up contributions to SIMPLE plans for those age 60, 61, 62 or 63*	N/A	$5,250
Catch-up contributions to IRAs for those age 50 or older	$1,000	$1,000
Compensation for benefit purposes for qualified plans and SEPs	$345,000	$350,000
Minimum compensation for SEP coverage	$750	$750
Highly compensated employee threshold	$155,000	$160,000

* A change that takes effect in 2025 under SECURE 2.0

Your MAGI may reduce or even eliminate your ability to take advantage of IRAs. Fortunately, IRA-related MAGI phaseout range limits all will increase for 2025:

Traditional IRAs. MAGI phaseout ranges apply to the deductibility of contributions if a taxpayer (or his or her spouse) participates in an employer-sponsored retirement plan:

For married taxpayers filing jointly, the phaseout range is specific to each spouse based on whether he or she is a participant in an employer-sponsored plan:
- For a spouse who participates, the 2025 phaseout range limits will increase by $3,000, to $126,000–$146,000.
- For a spouse who doesn’t participate, the 2025 phaseout range limits will increase by $6,000, to $236,000–$246,000.
For single and head-of-household taxpayers participating in an employer-sponsored plan, the 2025 phaseout range limits will increase by $2,000, to $79,000–$89,000.

Taxpayers with MAGIs in the applicable range can deduct a partial contribution; those with MAGIs exceeding the applicable range can’t deduct any IRA contribution.

But a taxpayer whose deduction is reduced or eliminated can make nondeductible traditional IRA contributions. The $7,000 contribution limit for 2025 (plus $1,000 catch-up, if applicable, and reduced by any Roth IRA contributions) still applies. Nondeductible traditional IRA contributions may also be beneficial if your MAGI is too high for you to contribute (or fully contribute) to a Roth IRA.

Roth IRAs. Whether you participate in an employer-sponsored plan doesn’t affect your ability to contribute to a Roth IRA, but MAGI limits may reduce or eliminate your ability to contribute:

For married taxpayers filing jointly, the 2025 phaseout range limits will increase by $6,000, to $236,000–$246,000.
For single and head-of-household taxpayers, the 2025 phaseout range limits will increase by $4,000, to $150,000–$165,000.

You can make a partial contribution if your MAGI falls within the applicable range, but no contribution if it exceeds the top of the range.

(Note: Married taxpayers filing separately are subject to much lower phaseout ranges for traditional and Roth IRAs.)

Revisit your retirement plan

To better ensure that your retirement plans remain on track, consider these 2025 inflation-adjusted contribution limits. We can help you review your plans and make any necessary modifications.

Recently, a 401(k) plan participant was defrauded of approximately $740,000 when he fell victim to an elaborate scheme perpetrated by overseas criminals. However, even friends, family members and employers have been discovered stealing from 401(k) accounts, adding up to millions of dollars in losses every year. Here’s what your organization can do to help keep your employees’ retirement savings safe from theft.

Assessing existing protections

If your organization sponsors a 401(k) plan, assessing plan service providers’ protection systems and policies is essential. Most providers carry cyber fraud insurance that they extend to plan participants. But there may be limits to this protection if, for example, the provider determines that you (the sponsor) or employees (participants) opened the door to a security breach.

Your plan’s documents may say that participants must adopt the provider’s recommended security practices. These could include checking account information “frequently” and reviewing correspondence from the administrator “promptly.” Make sure you and your employees understand what these terms mean — and follow them.

Using technology to foil thieves

In recent years, several 401(k) plan sponsors have been sued for not adequately protecting the personal data of participants whose accounts were hacked. Although every business needs comprehensive and up-to-date cybersecurity protection, you should be even more vigilant if you keep 401(k) plan information on your servers.

Know that two-factor authentication when signing in to an account may not be enough. Some professionals now encourage plan sponsors to enable three-factor authentication to foil fast-evolving fraud schemes. Also, employees should be strongly encouraged to follow strict security protocols when managing their 401(k) accounts. For example, they should:

Choose complex passwords they don’t use on other sites — and change them often,
Never write down account logins/passwords or store them in their browsers,
Be suspicious if they have trouble logging in to their account or if the sign-in page looks different from what they’re used to, and
Independently confirm the identity of anyone who contacts them claiming to be from the government, law enforcement, their 401(k) plan sponsor or a financial institution, and asks for account information.

Some more complex 401(k) plan schemes have involved crooks pretending to be fraud investigators. These criminals usually instruct account holders to move their savings to “safer” locations. Then they abscond with the funds. Make sure employees have a number they can call for official plan information or if they need to verify someone who has contacted them.

A rare but worrisome issue

Finally, although employer theft of employees’ 401(k) plan funds is relatively rare, some financially troubled companies have been accused of illegally withdrawing or retaining participants’ 401(k) contributions. According to the DOL, 401(k) sponsors must deposit participants’ contributions as soon as they can be segregated from the organization’s assets — no later than the 15th business day of the month after the amounts were withheld. A safe harbor rule for smaller companies (fewer than 100 participants) says that employers should deposit contributions within seven business days of the withholding pay date.

For questions about protecting your organization’s assets and workers from fraud, contact us.

As a business owner, you may travel to visit customers, attend conferences, check on vendors and for other purposes. Understanding which travel expenses are tax deductible can significantly affect your bottom line. Properly managing travel costs can help ensure compliance and maximize your tax savings.

Your tax home

Eligible taxpayers can deduct the ordinary and necessary expenses of business travel when away from their “tax homes.” Ordinary means common and accepted in the industry. Necessary means helpful and appropriate for the business. Expenses aren’t deductible if they’re for personal purposes, lavish or extravagant. That doesn’t mean you can’t fly first class or stay in luxury hotels. But you’ll need to show that expenses were reasonable.

Your tax home isn’t necessarily where you maintain your family home. Instead, it refers to the city or general area where your principal place of business is located. (Special rules apply to taxpayers with several places of business or no regular place of business.)

Generally, you’re considered to be traveling away from home if your duties require you to be away from your tax home for substantially longer than an ordinary day’s work and you need to get sleep or rest to meet work demands. This includes temporary work assignments. However, you aren’t permitted to deduct travel expenses in connection with an indefinite work assignment (more than a year) or one that’s realistically expected to last more than a year.

Deductible expenses

Assuming you meet these requirements, common deductible business travel expenses include:

Air, train or bus fare to the destination, plus baggage fees,
Car rental expenses or the cost of using your vehicle, plus tolls and parking,
Transportation while at the destination, such as taxis or rideshares between the airport and hotel, and to and from work locations,
Lodging,
Tips paid to hotel or restaurant workers, and
Dry cleaning / laundry.

Meal expenses are generally 50% deductible. This includes meals eaten alone. It also includes meals with others if they’re provided to business contacts, serve an ordinary and necessary business purpose, and aren’t lavish or extravagant.

Claiming deductions

Self-employed people can deduct travel expenses on Schedule C. Employees currently aren’t permitted to deduct unreimbursed business expenses, including travel expenses.

However, businesses may deduct employees’ travel expenses to the extent they provide advances or reimbursements or pay the expenses directly. Advances or reimbursements are excluded from wages (and aren’t subject to income or payroll taxes) if they’re made according to an “accountable plan.” In this case, the expenses must have a business purpose, and employees must substantiate expenses and pay back any excess advances or reimbursements.

Mixing business and pleasure

If you take a trip in the United States primarily for business, but also take some time for personal activities, you’re still permitted to deduct the total cost of airfare or other transportation to and from the destination. However, lodging and meals are only deductible for the business portion of your trip. Generally, a trip is primarily for business if you spend more time on business activities than on personal activities.

Recordkeeping

To deduct business travel expenses, you must substantiate them with adequate records — receipts, canceled checks and bills — that show the amount, date, place and nature of each expense. Receipts aren’t required for non-lodging expenses less than $75, but these expenses must still be documented in an expense report. Keep in mind that an employer may have its own substantiation policies that are stricter than the IRS requirements.

If you use your car or a company car for business travel, you can deduct your actual costs or the standard mileage rate.

For lodging, meals and incidental expenses (M&IE) — such as small fees or tips — employers can use the alternative per-diem method to simplify expense tracking. Self-employed individuals can use this method for M&IE, but not for lodging.

Under this method, taxpayers use the federal lodging and M&IE per-diem rates for the travel destination to determine reimbursement or deduction amounts. This avoids the need to keep receipts to substantiate actual costs. However, it’s still necessary to document the time, place and nature of expenses.

There’s also an optional high-low substantiation method that allows a taxpayer to use two per-diem rates for business travel: one for designated high-cost localities and a lower rate for other localities.

Turn to us

The business travel deduction rules can be complicated. In addition, there are special rules for international travel and travel with your spouse or other family members. If you’re uncertain about the tax treatment of your expenses, contact us.

It’s critical for business owners and managers to understand how to present contingent liabilities accurately in the financial statements. Under U.S. Generally Accepted Accounting Principles (GAAP), some contingent losses may be reported on the balance sheet and income statement, while others are only disclosed in the footnotes. Here’s an overview of the rules for properly identifying, measuring and reporting contingencies to provide a fair and complete picture of your company’s financial position.

Likelihood vs. measurability

Under GAAP, contingent liabilities are governed by Accounting Standards Codification (ASC) Topic 450, Contingencies. It requires companies to recognize liabilities for contingencies when two conditions are met:

The contingent event is probable, and
The amount can be reasonably estimated.

If these criteria aren’t met but the event is reasonably possible, companies must disclose the nature of the contingency and the potential amount (or range of amounts). If the likelihood is remote, no disclosure is generally required unless required under another ASC topic. However, if a remote contingency is significant enough to potentially mislead financial statement users, the company may voluntarily disclose it.

Common examples

For instance, a company must estimate a contingent liability for pending litigation if the outcome is probable and the loss can be reasonably estimated. In such cases, the company must recognize a liability on the balance sheet and record an expense in the income statement. If the loss is reasonably possible but not probable, the company must disclose the nature of the litigation and the potential loss range. However, when disclosing contingencies related to pending litigation, it’s important to avoid revealing the company’s legal strategies. If the outcome is remote, no accrual or disclosure is required.

Other common types of contingent liabilities include:

Product warranties. If the company can reasonably estimate the cost of warranty claims based on historical data, it should record a warranty liability. Otherwise, it should disclose potential warranty obligations.

Environmental claims. Some businesses may face environmental obligations, particularly in the manufacturing, energy and mining sectors. If cleanup is probable and measurable, a liability should be recorded. If the obligation is uncertain, the business should disclose it, describing the nature and extent of the potential liability.

Tax disputes. If a company is involved in a dispute with the IRS or state tax agency, it should assess whether it is likely to result in a payment and whether the amount can be estimated.

Under GAAP, companies are generally prohibited from recognizing gain contingencies in financial statements until they’re realized. These may involve potential benefits, such as the favorable outcome of a lawsuit or a tax rebate.

Transparency is essential in financial reporting. However, some companies may be reluctant to recognize contingent liabilities because they lower earnings and increase liabilities, potentially raising a red flag for stakeholders.

Best practices

To help ensure transparency when reporting contingencies, companies must maintain thorough records of all contingencies. Proper documentation may include contracts, legal filings, and communications with attorneys and regulatory bodies. Legal and financial advisors can provide insights into the likelihood of contingencies and help estimate potential losses.

As new information becomes available, management may need to reassess contingencies. For instance, if new evidence in a lawsuit makes a favorable outcome more likely, the financial statements may need to be updated in future accounting periods.

We can help

In today’s uncertain marketplace, accurate, timely reporting of contingencies helps business owners and other stakeholders manage potential risks and make informed financial decisions. Contact us for help categorizing contingencies based on likelihood and measurability and disclosing relevant information in a clear, concise manner.

The U.S. Department of Health and Human Services reports that roughly 70% of Americans age 65 or over will require some form of long-term care (LTC). How will you pay for these services?

For many people, the possibility that they’ll incur significant LTC expenses is one of the biggest threats to their estate plans. These expenses — such as for nursing home stays or home health aides — can quickly deplete funds you’ve set aside for retirement or to provide for your family. A practical solution is to purchase an LTC insurance policy.

What does LTC insurance cover?

Most LTC policies operate like some other forms of insurance that you’re probably familiar with, such as homeowners or auto insurance. The policy’s terms control the amount of benefits you’ll receive daily or monthly, up to a stated lifetime maximum or number of years. This is predicated on the type of care provided, for example, in-home care or a nursing home. You may be able to add to your coverage over time.

Typically, you’re subject to a waiting period of 30 to 180 days before you’re eligible for benefits (90 days is the norm). Generally, the shorter the waiting period, the more expensive the policy. Similarly, you can expect to pay more for policies with higher maximum benefits.

LTC policies typically provide benefits when you can no longer perform several basic activities of daily living — including bathing, dressing, eating, transferring and managing incontinence — or if you’re cognitively impaired. Once that occurs and you start receiving benefits, your premiums cease. However, if you stop paying on the policy first, you usually forfeit any future benefits. Note that coverage may be affected by several factors. For example, you may not qualify for coverage because of a preexisting condition.

Any factors to take into account?

Unlike homeowners and auto insurance, you typically have only one good shot at buying LTC insurance. Should you take the plunge, there are several key factors to consider, including your:

Financial situation. Do you have the wherewithal 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 continue to age, the cost of LTC insurance premiums will increase. Also, you may have to pay more if you have a preexisting condition (if you can secure coverage at all). Apply for a policy as soon as possible and check for more lenient policies at a relatively reasonable cost.

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

Assess your options

To determine whether an LTC policy is right for you, compare the costs, benefits and tax implications of various LTC insurance options. Your advisor can assess your specific needs and help you make an informed decision.

Artificial intelligence (AI) is a powerful tool that can enhance your staff’s productivity, efficiency, and creativity. However, AI also comes with some challenges and risks.

Establishing clear and ethical guidelines, or “AI rules,” for staff interaction is essential. Otherwise, you may not know when AI is used for business data. Employees may also be scared to use AI without direction. This can leave them missing out on incredible time savings.

This article will share some tips for setting up AI rules for your staff. These tips can help you harness the benefits of AI while avoiding the pitfalls.

Define the scope and purpose of AI use.

Before introducing AI to your staff, you must have a clear vision. Know what you want to achieve with AI and how it aligns with your business goals and values.

You also need to communicate this vision to your staff. Explain how AI will support their work and improve their outcomes. This will help you set realistic expectations and avoid confusion or frustration.

Establish ethical principles and guidelines.

AI can have significant impacts on your staff, customers, and partners. As well as society at large. So, you must ensure that your AI use is ethical, fair, transparent, and accountable. You can do this by developing a set of ethical principles and guidelines. They should reflect your organizational culture and values. As well as follow relevant laws and regulations. You must also educate your staff on these guidelines and track their compliance.

Involve stakeholders in the decision-making process.

AI rule-setting should not be a top-down process. Involve key stakeholders, including employees, in the decision-making process. Gather insights from different departments and roles. This helps ensure that AI rules are reflective of diverse perspectives. This collaborative approach enhances the quality of the rules. It also fosters a sense of ownership and engagement among staff members.

Assign roles and responsibilities.

AI is not a magic solution that can replace human judgment and oversight. You still need to have a clear division of roles and responsibilities. This would be between your staff and the AI systems they use.

It would be best if you defined who handles the following AI system tasks:

Design
Development
Deployment
Maintenance
Auditing
Updating

Define who is accountable for the outcomes and impacts of AI use. Ensure you support your staff with training, enablement, and change management.

Provide training and support.

Empower your staff with the skills necessary to work effectively alongside AI. Offer comprehensive training programs. They should cover the basics of AI technology, its applications within the organization, and guidelines for AI interaction. Providing ongoing support ensures employees feel confident and capable in their roles within an AI-enhanced environment.

Ensure data security and privacy.

AI systems often rely on vast amounts of data. As such, it emphasizes robust data security and privacy measures. Communicate the steps taken to safeguard sensitive information. Adhere to data protection regulations. Establish a strong cybersecurity framework. One that protects both employee and organizational data from potential breaches.

Put a feedback loop in place.

Create a system for gathering feedback from employees about their interactions with AI. This feedback loop serves as a valuable mechanism. It helps identify areas for improvement and refine AI rules, as well as address any concerns or challenges that arise during implementation. Actively listen to employee feedback to foster a culture of continuous improvement.

Review and update your AI rules regularly.

AI is a dynamic and evolving field. It requires constant adaptation and improvement. You cannot set up your AI rules once and forget about them. You need to review and update these rules regularly. This is to ensure that they are still relevant and practical. As well as aligned with your business goals and values. You also need to evaluate the performance, outcomes, and impacts of your AI use. Use this information to make adjustments as needed.

Encourage a growth mindset.

Foster a culture of curiosity and a growth mindset within your organization. Encourage employees to embrace AI as a tool for augmentation. But not a replacement. Communicate that AI is here to enhance their capabilities and streamline processes. It allows them to focus on more strategic and creative aspects of their roles.

Get Professional Guidance with an AI Transformation

AI can be a game-changer for your business. That is, if you use it wisely and responsibly. You can set up AI rules for your staff by following these tips. Do you need an expert guide for a digital or AI transformation? Call us today to schedule a chat.

The article is used with permission from The Technology Press.

Running a closely held business is challenging. Owners usually prioritize core business operations — such as managing employees, serving customers and bringing in new sales — over tedious bookkeeping tasks. Plus, the accounting rules can be overwhelming.

However, access to timely, accurate financial data is critical to your business’s success. Could outsourcing bookkeeping tasks to a third-party provider be a smart business decision? Here are five reasons why the answer might be a resounding “Yes!”

1. Lower costs and scalability

Your company could hire a full-time bookkeeper, but the expenses of hiring an employee go beyond just his or her salary. You also need to factor in benefits, payroll taxes, office space and equipment. It’s one more employee for you to manage — and accounting talent may be hard to find these days, especially for smaller companies. Plus, your access to financial data may be interrupted if your in-house bookkeeper takes sick or vacation time — or leaves your company.

With outsourcing, you pay for only the services you need. Outsourcing firms offer scalable packages for these services that you can dial up (or down) based on the complexity of your business at any given time. Outsourcing also involves a team of bookkeeping professionals, so you have continuous access to bookkeeping services without worrying about staff absences or departures.

2. Enhanced accuracy

Do-it-yourself bookkeeping can be perilous. Mistakes in recording transactions can have serious consequences, including tax assessments, cash flow problems and loan defaults.

Professional bookkeepers are trained to pay close attention to detail and follow best practices, minimizing the risk of errors. Outsourcing firms work with many companies and are aware of common pitfalls — and how to steer clear of them. They’re also familiar with the latest fraud schemes and can help your business detect anomalies and implement accounting procedures to minimize fraud risks.

3. Expanded access to expertise

The accounting rules and tax regulations continually change. It may be difficult for you or an in-house bookkeeper to stay updated.

With outsourcing, you have experienced professionals at your disposal who specialize in bookkeeping, accounting and tax. This helps ensure you comply with the latest rules, accurately report financial results and minimize taxes. In addition, as you encounter special circumstances, such as a sales tax audit or a merger, you can quickly call on other professionals at the same firm who can help manage the situation. If your provider lacks the necessary in-house expertise, the firm can refer you to another reputable professional to meet your special needs.

4. Improved timeliness

Timely financial data helps you identify problems before they spiral out of control — and opportunities you need to jump on before your competitors do. Outsourcing professionals typically use cloud-based platforms and set up automated processes for routine tasks, like invoicing and expense management. This improves efficiency and gives you access to real-time financial data to make better-informed decisions.

5. Reliable security protocols

Cyberattacks are a serious threat to any business. Stolen data can lead to monetary losses, operational downtime and reputational damage.

Many business owners are understandably cautious about sharing financial data with third parties. Reputable outsourced bookkeeping providers use advanced security measures, encryption and secure software to protect your financial data and client records from hackers. However, not all providers have the same level of security. So, it’s essential to carefully vet outsourcing firms to ensure that your company’s data is adequately protected.

Work smarter, not harder

At any given moment, business owners are being pulled in multiple directions by customers, employees, lenders, investors and other stakeholders. Outsourcing your bookkeeping helps alleviate some of that stress by ensuring your financial records are up-to-date, accurate and secure. Contact us for more information.

The IRS has issued its 2025 inflation adjustment numbers for more than 60 tax provisions in Revenue Procedure 2024-40. Inflation has moderated somewhat this year over last, so many amounts will increase over 2024 but not as much as in the previous year. Take these 2025 numbers into account as you implement 2024 year-end tax planning strategies.

Individual income tax rates

Tax-bracket thresholds increase for each filing status, but because they’re based on percentages, they increase more significantly for the higher brackets. For example, the top of the 10% bracket will increase by $325–$650, depending on filing status, but the top of the 35% bracket will increase by $10,200–$20,400, again depending on filing status.

2025 ordinary-income tax brackets
Tax rate	Single	Head of household	Married filing jointly or surviving spouse	Married filing separately
10%	$0 – $11,925	$0 – $17,000	$0 – $23,850	$0 – $11,925
12%	$11,926 – $48,475	$17,001 – $64,850	$23,851 – $96,950	$11,926 – $48,475
22%	$48,476 – $103,350	$64,851 – $103,350	$96,951 – $206,700	$48,476 – $103,350
24%	$103,351 – $197,300	$103,351 – $197,300	$206,701 – $394,600	$103,351 – $197,300
32%	$197,301 – $250,525	$197,301 – $250,500	$394,601 – $501,050	$197,301 – $250,525
35%	$250,526 – $626,350	$250,501 – $626,350	$501,051 – $751,600	$250,526 – $375,800
37%	Over $626,350	Over $626,350	Over $751,600	Over $375,800

Note that under the TCJA, the rates and brackets are scheduled to return to their pre-TCJA levels (adjusted for inflation) in 2026 if Congress doesn’t extend the current levels or make other changes.

Standard deduction

The TCJA nearly doubled the standard deduction, indexed annually for inflation, through 2025. In 2025, the standard deduction will be $30,000 for married couples filing jointly, $22,500 for heads of households, and $15,000 for singles and married couples filing separately.

After 2025, the standard deduction amounts are scheduled to drop back to the amounts under pre-TCJA law unless Congress extends the current rules or revises them. Also worth noting is that the personal exemption that was suspended by the TCJA is scheduled to return in 2026. Of course, Congress could extend the suspension.

Long-term capital gains rate

The long-term gains rate applies to realized gains on investments held for more than 12 months. For most types of assets, the rate is 0%, 15% or 20%, depending on your income. While the 0% rate applies to most income that would be taxed at 12% or less based on the taxpayer’s ordinary-income rate, the top long-term gains rate of 20% kicks in before the top ordinary-income rate does.

2025 long-term capital gains brackets*
Tax rate	Single	Head of household	Married filing jointly or surviving spouse	Married filing separately
0%	$0 – $48,350	$0 – $64,750	$0 – $96,700	$0 – $48,350
15%	$48,351 – $533,400	$64,751 – $566,700	$96,701 – $600,050	$48,351 – $300,000
20%	Over $533,400	Over $566,700	Over $600,050	Over $300,000
* Higher rates apply to certain types of assets.

As with ordinary income tax rates and brackets, those for long-term capital gains are scheduled to return to their pre-TCJA levels (adjusted for inflation) in 2026 if Congress doesn’t extend the current levels or make other changes.

AMT

The alternative minimum tax (AMT) is a separate tax system that limits some deductions, doesn’t permit others and treats certain income items differently. If your AMT liability exceeds your regular tax liability, you must pay the AMT.

Like the regular tax brackets, the AMT brackets are annually indexed for inflation. In 2025, the threshold for the 28% bracket will increase by $6,500 for all filing statuses except married filing separately, which will increase by half that amount.

2025 AMT brackets
Tax rate	Single	Head of household	Married filing jointly or surviving spouse	Married filing separately
26%	$0 – $239,100	$0 – $239,100	$0 – $239,100	$0 – $119,550
28%	Over $239,100	Over $239,100	Over $239,100	Over $119,550

The AMT exemptions and exemption phaseouts are also indexed. The exemption amounts in 2025 will be $88,100 for singles and $137,000 for joint filers, increasing by $2,400 and $3,700, respectively, over 2024 amounts. The inflation-adjusted phaseout ranges in 2025 will be $626,350–$978,750 for singles and $1,252,700–$1,800,700 for joint filers. Phaseout ranges for married couples filing separately are half of those for joint filers.

The exemptions and phaseouts were significantly increased under the TCJA. Without Congressional action, they’ll drop to their pre-TCJA levels (adjusted for inflation) in 2026.

Education and child-related breaks

The maximum benefits of certain education and child-related breaks will generally remain the same in 2025. But most of these breaks are limited based on a taxpayer’s modified adjusted gross income (MAGI). Taxpayers whose MAGIs are within an applicable phaseout range are eligible for a partial break — and breaks are eliminated for those whose MAGIs exceed the top of the range.

The MAGI phaseout ranges will generally remain the same or increase modestly in 2025, depending on the break. For example:

The American Opportunity credit. For tax years beginning after December 31, 2020, the MAGI amount used by joint filers to determine the reduction in the American Opportunity credit isn’t adjusted for inflation. The credit is phased out for taxpayers with MAGIs in excess of $80,000 ($160,000 for joint returns). The maximum credit per eligible student is $2,500.

The Lifetime Learning credit. For tax years beginning after December 31, 2020, the MAGI amount used by joint filers to determine the reduction in the Lifetime Learning credit isn’t adjusted for inflation. The credit is phased out for taxpayers with MAGIs in excess of $80,000 ($160,000 for joint returns). The maximum credit is $2,000 per tax return.

The adoption credit. The MAGI phaseout range for eligible taxpayers adopting a child will increase in 2025 — by $7,040. It will be $259,190–$299,190 for joint, head-of-household and single filers. The maximum credit will increase by $470, to $17,280 in 2025.

Note: Married couples filing separately generally aren’t eligible for these credits.

These are only some of the education and child-related tax breaks that may benefit you. Keep in mind that, if your MAGI is too high for you to qualify for a break for your child’s education, your child might be eligible to claim one on his or her tax return.

Gift and estate taxes

The unified gift and estate tax exemption and the generation-skipping transfer (GST) tax exemption are both adjusted annually for inflation. In 2025, the amount will be $13.99 million (up from $13.61 million in 2024). Beware that the TCJA approximately doubled these exemptions starting in 2018. Both exemptions are scheduled to drop significantly in 2026 if lawmakers don’t extend the higher amount or make other changes.

The annual gift tax exclusion will increase by $1,000, to $19,000 in 2025. (It isn’t part of a TCJA provision that’s scheduled to expire.)

Crunching the numbers

With the 2025 inflation adjustment amounts trending slightly higher than 2024 amounts, it’s important to understand how they might affect your tax and financial situation. Also keep in mind that many amounts could change substantially in 2026 because of expiring TCJA provisions — or new tax legislation, which could even go into effect sooner. We’d be happy to help crunch the numbers and explain the tax-saving strategies that may make the most sense for you in the current environment of tax law uncertainty.

If you hold an interest in a business that’s closely held or family owned, a buy-sell agreement should be a component of your estate plan. The agreement provides for the orderly disposition of each owner’s interest after a “triggering event,” such as death, disability, divorce, termination of employment or withdrawal from the business.

A buy-sell agreement accomplishes this by permitting or requiring the company or the remaining owners to purchase the departing owner’s interest. Often, life insurance is used to fund the buyout. And because circumstances frequently change, reviewing your buy-sell agreement periodically is important to ensure that it continues to meet your needs.

Valuation provision must be current

It’s essential to revisit the agreement’s valuation provision — the mechanism for setting the purchase price for an owner’s interest — to ensure that it reflects the business’s current value. A pressing reason to do this sooner rather than later is because, absent congressional action, the federal gift and estate tax exemption is scheduled to be halved beginning in 2026.

As you review your agreement, pay close attention to the valuation provision. Generally, a valuation provision follows one of three approaches when a triggering event occurs:

Independent appraisal by one or more business valuation professionals,
Formulas, such as book value or a multiple of earnings or revenues as of a specified date, or
Negotiated price.

Independent appraisals almost always produce the most accurate valuations. Formulas tend to become less reliable over time as circumstances change and may lead to over- or underpayments if earnings have fluctuated substantially since the valuation date.

A negotiated price can be a good approach in theory, but expecting owners to reach an agreement under stressful, potentially adversarial conditions is asking a lot. One potential solution is to use a negotiated price but provide for an independent appraisal in the event the parties fail to agree on a price within a specified period.

“Redemption” vs. “cross-purchase” agreement

The type of buy-sell agreement you use can have significant tax and estate planning implications. Generally, the choices are structured either as “redemption” or “cross-purchase” agreements. A redemption agreement permits or requires the company to purchase a departing owner’s interest, while a cross-purchase agreement permits or requires the remaining owners to make the purchase.

A disadvantage of cross-purchase agreements is that they can be cumbersome, especially if there are many owners. For example, if life insurance is used to fund the purchase of a departing owner’s shares, each owner will have to purchase an insurance policy on the lives of each of the other owners. Note that redemption agreements may trigger a variety of unwelcome tax consequences.

A versatile document

A buy-sell agreement can provide several significant benefits, including keeping ownership and control within your family, creating a market for otherwise unmarketable interests, and providing liquidity to pay estate tax and other expenses. In some cases, a buy-sell agreement can even establish the value of an ownership interest for estate tax purposes. We can work with you to design a buy-sell agreement that helps preserve the value of your business for your family.