Writing an AI Governance Policy for Your Business

Artificial intelligence (AI) is changing the way businesses operate. Its capacity to gather and process data, as well as to mimic human interactions, offers remarkable potential to streamline operations and boost productivity.

But AI presents considerable challenges and concerns, too. With so many tools available, employees may inadvertently or purposely misuse the technology in ways that are unethical or even illegal. Compounding the problem is that many companies lack a formal AI governance policy.

Few in place

In August 2025, software platform provider Genesys released the results of an independent survey of 4,000 consumers and 1,600 enterprise customer experience and information technology (IT) leaders in more than 10 countries. It found that over a third (35%) of tech-leader respondents said their organizations have “little to no formal [AI] governance policies in place.”

This is a pointed problem, the survey notes, because many businesses are gearing up to deploy agentic AI. This is the latest iteration of the technology that can make decisions autonomously and act independently to achieve specific goals without depending on user commands or predefined inputs. The survey found that while 81% of tech leaders trust agentic AI with sensitive customer data, only 36% of consumers do.

7 steps to consider

Whether or not you’re eyeing agentic AI, its growing popularity is creating a trust-building imperative for today’s businesses. That’s why you should consider writing and implementing an AI governance policy.

Formally defined, an AI governance policy is a written framework that establishes how a company may use AI responsibly, transparently, ethically and legally. It outlines the decision-making processes, accountability measures, ethical standards and legal requirements that must guide the development, purchase and deployment of AI tools.

Creating an AI governance policy should be a collaborative effort involving your company’s leadership team, knowledgeable employees (such as IT staff) and professional advisors (such as a technology consultant and attorney). Here are seven steps your team should consider:

1. Audit usage. Identify where and how your business is using AI. For instance, do you use automated tools in marketing or when screening job applicants, auto-generated financial reports, or customer service chatbots? Inventory everything and note who’s using it, what data it relies on and which decisions it influences.

2. Assign ownership for AI oversight. This may mean appointing a small internal team or naming (or hiring) an AI compliance manager or executive. Your oversight team or compliance leader will be responsible for maintaining the policy, reviewing new tools and handling concerns that arise.

3. Establish core principles. Ground your policy in ethical and legal principles — such as fairness, transparency, accountability, privacy and safety. The policy should reflect your company’s mission, vision and values.

4. Set standards for data and vendor use. Include guidelines on how data used by AI tools is collected, stored and shared. Pay particular attention to intellectual property issues. If you use third-party vendors, define review and approval steps to verify that their systems meet your privacy and compliance standards.

5. Require human oversight. Clearly state that employees must remain in control of AI-assisted work. Human judgment should always be part of the process, including approving AI-generated content and reviewing automated financial reports.

6. Include a mandatory review-and-update clause. Schedule regular reviews — at least annually — to assess whether your policy remains relevant. This is especially important as innovations, such as agentic AI, come online and new regulations emerge.

7. Communicate with and train staff. Incorporate AI governance into onboarding for new employees and follow up with regular training and reminder sessions thereafter. Ask staff members to sign an acknowledgment that they’ve read the policy and perhaps another to confirm they’ve completed the required training. Encourage everyone to ask questions and report potential issues.

Financial impact

Writing an AI governance policy is just one part of preparing your business for the future. Understanding its financial impact is another. Let us help you analyze the costs, tax implications and return on investment of AI tools so you can make informed decisions that balance innovation with sound financial management and robust compliance practices.

Now is a good time to review your business’s expenses for deductibility. Accelerating deductible expenses into this year generally will reduce 2025 taxes and might even provide permanent tax savings. Also consider the impact of the One Big Beautiful Bill Act (OBBBA). It makes permanent or revises some Tax Cuts and Jobs Act (TCJA) provisions that reduced or eliminated certain deductions.

“Ordinary and necessary” business expenses

There’s no master list of deductible business expenses in the Internal Revenue Code (IRC). Although some deductions are expressly authorized or excluded, most are governed by the general rule of IRC Section 162, which permits businesses to deduct their “ordinary and necessary” expenses.

An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is helpful and appropriate for your business. (It doesn’t have to be indispensable.) Even if an expense is ordinary and necessary, it may not be deductible if the IRS considers it lavish or extravagant.

OBBBA and TCJA changes

Here are some types of business expenses whose deductibility is affected by OBBBA or TCJA provisions:

Entertainment. The TCJA eliminated most deductions for entertainment expenses beginning in 2018. However, entertainment expenses for employee parties are still deductible if certain requirements are met. For example, the entire staff must be invited — not just management. The OBBBA didn’t change these rules.

Meals. Both the TCJA and the OBBBA retained the pre-2018 50% deduction for business meals. What about business meals provided in connection with nondeductible entertainment? They’re still 50% deductible, as long as they’re purchased separately from the entertainment or their cost is separately stated on invoices or receipts.

Through 2025, the TCJA also expanded the 50% deduction rule to meals provided via an on-premises cafeteria or otherwise on the employer’s premises for the convenience of the employer. (Previously, such meals were 100% deductible.) The deduction was scheduled to be eliminated after 2025. The OBBBA generally retains this deduction’s 2026 elimination, with some limited exceptions that will qualify for a 100% deduction. But meal expenses generally can be 100% deducted if the meals are sold to employees.

Transportation. Transportation expenses for business travel are still 100% deductible, provided they meet the applicable rules. But the TCJA permanently eliminated most deductions for qualified transportation fringe benefits, such as parking, vanpooling and transit passes. However, those benefits are still tax-free to recipient employees, up to applicable limits. The OBBBA doesn’t change these rules.

Before the TCJA, employees could also exclude from taxable income qualified bicycle commuting reimbursements, and this break was scheduled to return in 2026. However, the OBBBA permanently eliminates it.

Employee business expenses

The TCJA suspended through 2025 employee deductions for unreimbursed employee business expenses — previously treated as miscellaneous itemized deductions. The OBBBA has permanently eliminated this deduction.

Businesses that don’t already have an employee reimbursement plan for these expenses may want to consider implementing one for 2026. As long as the plan meets IRS requirements, reimbursements are deductible by the business and tax-free to employees.

Planning for 2025 and 2026

Understanding exactly what’s deductible and what’s not isn’t easy. We can review your current expenses and help determine whether accelerating expenses into 2025 makes sense for your business. Contact us to discuss year-end tax planning and to start strategizing for 2026.

Inventory is one of the most significant assets on a balance sheet for many businesses. If your business owns inventory, you have some flexibility in how it’s tracked and expensed under U.S. Generally Accepted Accounting Principles (GAAP). The method you use to report inventory can have a dramatic impact on your bottom line, tax obligations and financial ratios. Let’s review the rules and explore your options.

The basics

Inventory varies depending on a business’s operations. Retailers may have merchandise available for sale, while manufacturers and contractors may have materials, work in progress and finished goods.

Under Accounting Standards Codification Topic 330, you must generally record inventory when it’s received and the title (or the risks and rewards of ownership) transfers to your company. Then, it moves to cost of goods sold when the product ships and the title (or the risks and rewards of ownership) transfers to the customer.

4 key methods

While inventory is in your possession, you can apply different accounting methods that will affect its value on your company’s balance sheet. When inventory is sold, your reporting method also impacts the costs of goods sold reported on your income statement. Four common methods for reporting inventory under GAAP are:

1. First-in, first-out (FIFO). Under this method, the first items entered into inventory are the first ones presumed sold. In an inflationary environment, units purchased earlier are generally less expensive than items purchased later. As a result, applying the FIFO method will generally cause a company to report lower expenses for items sold, leaving higher-cost items on the balance sheet. In short, this method enhances pretax profits and balance sheet values, but it can have adverse tax consequences (because you report higher taxable income).

2. Last-in, first-out method (LIFO). Here, the last items entered are the first presumed sold. In an inflationary environment, units purchased later are generally more expensive than items purchased earlier. As a result, applying the LIFO method will generally cause a company to report higher expenses for items sold, leaving lower-cost items on the balance sheet. In short, this method may defer tax obligations, but its effects on pretax profits and balance sheet values may raise a red flag to lenders and investors.

Under the LIFO conformity rule, if you use this method for tax purposes, you must also use it for financial reporting. It’s also important to note that the tax benefits of using this method may diminish if the company reduces its inventory levels. When that happens, the company may start expensing older, less expensive cost layers.

3. Weighted-average cost. Some companies use this method to smooth cost fluctuations associated with LIFO and FIFO. It assigns a weighted-average cost to all units available for sale during a period, producing a consistent per-unit cost. It’s common not only for commodities but also for manufacturers, distributors and retailers that handle large volumes of similar or interchangeable products.

4. Specific identification. When a company’s inventory is one of a kind, such as artwork, luxury automobiles or custom homes, it may be appropriate to use the specific identification method. Here, each item is reported at historic cost, and that amount is generally carried on the books until the specific item is sold. However, a write-off may be required if an item’s market value falls below its carrying value. And once inventory has been written down, GAAP prohibits reversal of the adjustment.

Under GAAP, inventory is valued at the lower of 1) cost, or 2) net realizable value or market value, depending on the method you choose.

Choosing a method for your business

Each inventory reporting method has pros and cons. Factors to consider include the type of inventory you carry, cost volatility, industry accounting conventions, and the sophistication of your bookkeeping personnel and software.

Also evaluate how each method will affect your financial ratios. Lenders and investors often monitor performance based on profitability, liquidity and asset management ratios. For instance, if you’re comparing LIFO to FIFO, the latter will boost your pretax profits and make your balance sheet appear stronger — but you’ll lose out on the tax benefits, which could strain your cash flow. The weighted-average cost method might smooth out your profitability, but it might not be appropriate for the types of products you sell. The specific identification method may provide the most accurate insight into a company’s profitability, but it’s reserved primarily for easily identifiable inventory.

Whatever inventory accounting method you select must be applied consistently and disclosed in your financial statements. A change in method is treated as a change in accounting principle under GAAP, requiring justification, disclosure and, if material, retrospective application.

We can help

Choosing the optimal inventory accounting method affects more than bookkeeping — it influences tax obligations, cash flow and stakeholders’ perception of your business. Contact us for help evaluating your options strategically and ensuring your methods are clearly disclosed.

Job postings aren’t as simple as they used to be. Before the advent and all-consuming influence of the internet, most “want ads” (as they were popularly known) appeared in newspapers or trade publications. They were generally short and followed a certain format.

Most job seekers are now online and have, shall we say, considerable expectations. Today’s job postings must find the right balance between hard data and enticing language to attract attention and drive engagement. One recent survey provides some interesting insights about the current state of affairs.

The dreaded “icks”

Are your job postings inadvertently turning off candidates? That’s the premise of a March 2025 study by U.K.-based consultants StandOut CV. The firm surveyed 1,092 adults in October 2024 to discover what job applicants find “most off-putting when applying for a role.” Although living and working across the pond, the survey’s participants served up some interesting food for thought in their answers.

For example, 65.5% of the study’s respondents ranked employers offering only the minimum annual leave allowance as the top “ick” in job listings. Of course, U.S. employers aren’t federally required to provide paid time off (PTO), though the Family and Medical Leave Act does mandate up to 12 weeks of unpaid leave for qualifying reasons. Nonetheless, the message is clear: Workers want to see generous PTO policies and respect for work-life balance in postings.

The second biggest ick reported by the study, with 64.6% of respondents chiming in, is employers requiring or heavily encouraging applicants to engage with social media content from the organization or its employees. This suggests that, even when a job is on the line, candidates don’t want to be forced to socialize — even digitally.

The third biggest ick cited is something most U.S. employers are familiar with by now: pay transparency. That is, 63.8% of respondents were disappointed when a job listing contained no salary information. Bear in mind that many states now have pay transparency laws on the books. So, be sure staff members who are creating job postings know the rules in your location, as well as what’s become standard in your industry.

Best practices

How can you create effective job postings that won’t give candidates the dreaded icks? Here are some best practices to consider:

Focus on clarity. Start postings with a concise, engaging summary of the role and why it matters to your organization. Avoid jargon or vague terms like “rock star” or “hustle.” Instead, use plain language that describes job responsibilities, measurable expectations, and how the position contributes to your mission and vision.

Appeal to what they value. Highlight what candidates care about most: compensation, benefits, flexibility and culture. As mentioned, today’s job seekers value pay transparency, so provide at least a salary range for the position. Also, clearly describe your organization’s PTO policy and fringe benefits, such as its health insurance and retirement plan. To both attract applicants and build trust, be transparent about everything you offer.

Be authentic. Find a voice that appropriately represents your distinctive employer brand. But keep it professional and inclusive. Define your organization’s values without slipping into buzzwords or clichés. Consider including quotes or brief testimonials from current employees to give job postings a human touch.

Make it easy. Link job postings to a straightforward and intuitive application process. Provide clear instructions, minimize unnecessary steps and enable mobile-friendly online submissions. Frustrating digital hurdles can discourage strong candidates before they even hit “submit.”

Put your best foot forward

It’s easy to make mistakes when creating job postings in today’s competitive hiring market. Take the time to craft yours with care, including just enough information and highlighting your organization’s distinctive traits. We can help you align your hiring approach with your financial goals and strategic objectives.

The IRS recently issued its 2026 cost-of-living adjustments for more than 60 tax provisions. The One Big Beautiful Bill Act (OBBBA) makes permanent or amends many provisions of the Tax Cuts and Jobs Act (TCJA). It also makes permanent most TCJA changes to various deductions and makes new changes to some deductions. OBBBA-affected changes have been noted throughout.

As you implement 2025 year-end tax planning strategies, be sure to take these 2026 numbers into account.

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 $475–$950, depending on filing status, but the top of the 35% bracket will increase by $8,550–$17,100, depending on filing status.

2026 ordinary-income tax brackets
Tax rate	Single	Head of household	Married filing jointly or surviving spouse	Married filing separately
10%	$0 – $12,400	$0 – $17,700	$0 – $24,800	$0 – $12,400
12%	$12,401 – $50,400	$17,701 – $67,450	$24,801 – $100,800	$12,401 – $50,400
22%	$50,401 – $105,700	$67,451 – $105,700	$100,801 – $211,400	$50,401 – $105,700
24%	$105,701 – $201,775	$105,701 – $201,750	$211,401 – $403,550	$105,701 – $201,775
32%	$201,776 – $256,225	$201,751 – $256,200	$403,551 – $512,450	$201,776 – $256,225
35%	$256,226 – $640,600	$256,201 – $640,600	$512,451 – $768,700	$256,226 – $384,350
37%	Over $640,600	Over $640,600	Over $768,700	Over $384,350

Note that the OBBBA makes the rates and brackets permanent. The income tax brackets will continue to be annually indexed for inflation.

Standard deduction

The OBBBA makes permanent and slightly increases the TCJA’s nearly doubled standard deduction for each filing status. The amounts will continue to be annually adjusted for inflation.

In 2026, the standard deduction will be $32,200 for married couples filing jointly, $24,150 for heads of households, and $16,100 for singles and married couples filing separately.

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.

2026 long-term capital gains brackets*
Tax rate	Single	Head of household	Married filing jointly or surviving spouse	Married filing separately
0%	$0 – $49,450	$0 – $66,200	$0 – $98,900	$0 – $49,450
15%	$49,451 – $545,500	$66,201 – $579,600	$98,901 – $613,700	$49,451 – $306,850
20%	Over $545,500	Over $579,600	Over $613,700	Over $306,850
* Higher rates apply to certain types of assets.

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 2026, the threshold for the 28% bracket will increase by $5,400 for all filing statuses except married filing separately, which will increase by half that amount.

2026 AMT brackets
Tax rate	Single	Head of household	Married filing jointly or surviving spouse	Married filing separately
26%	$0 – $244,500	$0 – $244,500	$0 – $244,500	$0 – $122,250
28%	Over $244,500	Over $244,500	Over $244,500	Over $122,250

The AMT exemption amounts were significantly increased under the TCJA. The OBBBA makes the higher exemptions permanent, continuing to index them for inflation. The exemption amounts in 2026 will be $90,100 for singles and heads of households, and $140,200 for joint filers, increasing by $2,000 and $3,200, respectively, over 2025 amounts.

The AMT exemption phases out over certain income ranges. It’s completely phased out if AMT income exceeds the top of the applicable range.

Under the OBBBA, the income thresholds for the phaseout revert to their 2018 levels for 2026 (i.e., removing the inflation adjustments that had been made for 2019–2025) and then will be annually adjusted for inflation again in subsequent years. Also, the OBBBA phases out the exemption twice as quickly beginning in 2026.

So, the exemption phaseout ranges in 2026 will be $500,000–$680,200 for singles and $1,000,000–$1,280,400 for joint filers. These are significantly lower than the 2025 ranges of $626,350–$978,750 and $1,252,700–$1,800,700, respectively.

Amounts for married couples filing separately are half of those for joint filers.

Child-related breaks

Certain child-related breaks are annually adjusted for inflation but don’t necessarily go up every year. In addition, 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.

Here are the 2026 figures for two important child-related breaks:

The Child Tax Credit. The OBBBA makes permanent the TCJA’s $2,000 per qualifying child credit amount, plus it increases it to $2,200 for 2025. The OBBBA also adjusts the credit annually for inflation starting in 2026. However, because inflation is relatively low and the dollar amount of the credit is relatively small, the credit will remain at $2,200 for 2026. The OBBBA also makes permanent the annual inflation adjustment to the limit on the refundable portion of the credit, but, again, there’s no increase for 2026. The refundable portion will remain at $1,700.

Beware that the Child Tax Credit phases out for higher-income taxpayers, and the phaseout thresholds aren’t inflation-indexed. Under the OBBBA, they’re permanently $200,000 for singles and heads of households, and $400,000 for married couples filing jointly.

The adoption credit. The MAGI phaseout range for eligible taxpayers adopting a child will increase in 2026 — by $5,890. It will be $265,080–$305,080 for joint, head of household and single filers. The maximum credit will increase by $390, to $17,670 in 2026. Under the OBBBA, a portion of the credit is refundable, and that portion is annually indexed. For 2026, the refundable portion is $5,120 (up from $5,000 for 2025).

Gift and estate taxes

The unified gift and estate tax exemption and the generation-skipping transfer (GST) tax exemption had been scheduled to return to an inflation-adjusted $5 million in 2026. But the OBBBA permanently increases both exemption amounts to $15 million for 2026 and annually indexes the amount for inflation after that.

The annual gift tax exclusion in 2026 remains the same as the 2025 amount: $19,000 per giver per recipient.

2026 cost-of-living adjustments and tax planning

With many of the 2026 cost-of-living adjustment amounts trending higher, you may have an opportunity to realize some tax relief next year. However, beware that some taxpayers might be at greater AMT risk because of the reductions to the exemption phaseout ranges. If you have questions on the best tax-saving strategies to implement based on the 2026 numbers, please contact us.

A do-it-yourself (DIY) estate plan may seem appealing to those who feel confident managing their own affairs and want to save money. With the abundance of online templates and legal software, it’s easier than ever to draft a will, establish powers of attorney or create a trust without professional help. However, there are significant drawbacks to consider.

Online tools vs. professional guidance

Estate planning is a legal matter, and small mistakes can result in major unintended consequences. Errors in wording, missing signatures or failure to meet state-specific requirements can render documents invalid or lead to disputes among heirs.

DIY tools often provide limited customization, which can be problematic for blended families, business owners or those with special needs beneficiaries. Additionally, these online platforms can’t provide personalized advice or foresee complex tax implications the way experienced estate planning attorneys and tax professionals can.

Although online tools can help you create individual documents — the good ones can even help you comply with applicable laws, such as ensuring the right number of witnesses to your will — they can’t help you create an estate plan. Putting together a plan means determining your objectives and coordinating a collection of carefully drafted documents designed to achieve those objectives. And in most cases, that requires professional guidance.

For example, let’s suppose Anna’s estate consists of a home valued at $1 million and an investment account with a $1 million balance. She uses a DIY tool to create a will that leaves the home to her son and the investment account to her daughter. On the surface, this seems like a fair arrangement. But suppose that by the time Anna dies, she’s sold the home and invested the proceeds in her investment account. Unless she amended her will, she’ll have inadvertently disinherited her son.

An experienced estate planning advisor would have anticipated such contingencies and ensured that Anna’s plan treated both children fairly, regardless of the specific assets in her estate.
DIY tools also fall short when a decision demands a professional’s experience rather than mere technical expertise. Online tools make it easy to name a guardian for your minor children, for example, but they can’t help you evaluate the many characteristics and factors that go into selecting the best candidate.

Don’t try this at home

Ultimately, while a DIY estate plan may be better than having no plan at all, it carries considerable risks. Professional guidance ensures your wishes are properly documented and legally sound, reducing the likelihood of costly mistakes or family conflicts. For most people, consulting a qualified estate planning advisor, including an attorney and a CPA who understands estate tax law, is a worthwhile investment in protecting one’s legacy and loved ones’ peace of mind.

The Michigan Unemployment Insurance Agency (UIA) is transitioning its services for employers from the current Michigan Web Account Manager (MiWAM) system to a new platform called MiUI, launching on December 15, 2025.

This transition is part of a modernization effort to create a more efficient and secure system for employers, third-party administrators (TPAs), and claimants. In preparation for the transition, some MIWAM capabilities used by employers and TPAs will be reduced and/or discontinued. The process begins in November, starting with e-Registration being temporarily unavailable.

Key details of the transition

Phased rollout: Certain MiWAM functions, such as eRegistration and business transfers, are being phased out between November 7 and December 5, 2025, in preparation for the launch.
Launch date: MiUI officially launches on December 15, 2025. Employers and TPAs will use MiUI to file quarterly wage and tax reports, upload wage files, and more.
Transition period: After December 15, employers and TPAs will temporarily need to use both the MiUI system for tax functions and the MiWAM system for benefits functions until the summer of 2026, when all functions will be in MiUI.
Access: MiUI will be accessed through a MiLogin for Business account, a single sign-on solution used by the State of Michigan.

What should employers do to prepare?

If you already have a MiLogin account, you do not need to create a new one for MiUI. To log in or create your account, visit the MiLogin for Business website. Additional information about MiLogin for Business and adding MiUI to your account can be found in the Step-by-Step Guide posted on MiUI University.

Employers and TPAs are advised to ensure their MiWAM accounts are active, review contact information, and confirm authorized user permissions before the transition is complete.

To learn more, refer to these resources:

MiUI Employer Checklist
A schedule that lists key dates when functions will cease to be available
MiUI University – a library of resource guides, FAQs, videos, infographics, and blogs

To stay up to date with information about the MiUI implementation, sign up for the UIA’s free Michigan Employer Advisor newsletter, MiUI Minute.

Small businesses often rely on a few trusted employees to be the first people customers encounter — not to mention, the primary ones to collect payments and sensitive data. For example, the front desk is usually the nerve center for dental offices, fitness studios, small hotels and retail boutiques. Although front desk employees can build loyalty by offering customers and clients a smile and immediate service, ethically challenged workers may use these positions to steal. Here’s how these ploys work and ways to prevent them.

Common schemes

Payments, scheduling and customer interactions often happen at the front desk. Minor lapses in oversight, combined with workers bent on committing fraud, can lead to financial losses. Common fraud schemes include:

Cash skimming. This involves underreporting sales and pocketing the difference. Warning signs include mismatched totals or excessive no-sales.

Refund and void abuse. Here, an employee might process false credit card refunds to friends and family members — or even themselves.

Fake discounts or free services. Crooked employees might extend markdowns or complimentary services to people they know. Customer visits without corresponding sales transactions may signal fraud.

Appointment manipulation. This applies to “ghost” appointments or false cancellations that enable perpetrators to hide missing payments or pocket deposits. Appointment activity with no corresponding increase in foot traffic may indicate appointment book manipulation.

Such schemes can flourish when a business places excessive trust in employees, lacks automated point-of-sale and scheduling systems, or fails to segregate tasks involving money and recordkeeping. Frequent cash transactions and reliance on paper (vs. digital) records generally make it easier to perpetrate fraud. Also risky: scant owner or management oversight and infrequent account reconciliation.

Simple prevention methods

Fortunately, effective internal controls don’t require expensive software or new staff, simply a few consistent and well-thought-out habits. For example, you should require supervisor approval for all refunds, voids and manual discounts. That said, don’t ignore the possibility that a supervisor might be colluding with a front desk employee. Unusual increases in the number of refunds, voids and discounts should be investigated.

You might also set transaction limits for the number and amounts associated with specific employee logins. And, when one employee accepts customer payments, another employee should reconcile end-of-day totals. If you don’t have the staffing to segregate these duties every day, doing so on a part-time, random basis can still help reduce fraud risk.

In addition, use technology you already own or invest in inexpensive upgrades. For example, consider producing daily automated reports from point-of-sales and scheduling systems. Or you could place security cameras near your front desk to let employees know that management is watching. Finally, enabling activity alerts on bank and merchant accounts allows you to view questionable transactions in real time.

Controls protect everyone

To help ensure your fraud prevention measures are accepted, explain to employees that internal controls are designed to protect both them and customers from fraudulent activity. Then reinforce your policies through short, periodic staff meetings where you recognize employees who catch errors or deceptive customers.

If you suspect a fraud scheme involving your frontline employees — or anyone in your business — contact us for help. We can also help assess your company’s anti-fraud controls, identify vulnerabilities and suggest cost-effective ways to safeguard your assets and bottom line.

Yeo & Yeo’s Smart Medical Practice Toolkit is your go-to resource for navigating the financial, operational, and regulatory complexities of healthcare. This collection includes brief, high-impact webinars, downloadable tools, and practical guidance—all built around the real challenges physicians and practice managers face.

Each resource draws on Yeo & Yeo’s decades of experience in the healthcare industry to provide actionable insights you can apply right away. Our team of credentialed healthcare advisors is dedicated to helping your practice thrive.

Learn the essentials of payroll onboarding for new employees in Michigan. In this webinar, we cover the required federal and state forms, documentation rules, new hire reporting, and compliance with Michigan’s Earned Sick Time Act. Perfect for practices that want to streamline onboarding, reduce errors, and stay compliant from day one.

Watch Now

Yeo & Yeo is pleased to announce that Eric Sowatsky, CPA, CGMA, NSSA, PFS, has been elected to the Stevens Center for Family Business (SCFB) Executive Council as a sponsor firm representative. This appointment recognizes his experience as a business advisor and underscores his commitment to advancing the success of family-owned companies.

The Stevens Center for Family Business, part of Saginaw Valley State University’s College of Business & Management, supports family enterprises across the Great Lakes Bay Region by offering education, peer groups, networking, and access to national and local professionals. Yeo & Yeo was proud to be among the founding supporters of the Stevens Center for Family Business, joining other Saginaw-area businesses in creating a lasting resource for family-owned companies.

“Family businesses are at the heart of our communities, and I have always been inspired by the passion and dedication it takes to keep them thriving across generations,” said Sowatsky. “I look forward to contributing my accounting and wealth management perspectives to the Stevens Center for Family Business Executive Council, and supporting the members as they grow, protect, and transition their businesses.”

At Yeo & Yeo, Sowatsky focuses on strategic tax planning for businesses and individuals. Over the past two decades, he has developed specialized expertise in the agribusiness industry, frequently speaking on the WSGW Radio Farm Show and actively participating in several statewide agribusiness associations. In addition to his accounting expertise, Sowatsky is a Personal Financial Specialist (PFS), a designation that combines CPA experience with comprehensive financial planning. He is passionate about helping family business owners develop succession plans that support smooth transitions to the next generation.

Sowatsky’s experience in advising family-owned companies gives him a valuable perspective to bring to the Stevens Center for Family Business. His ability to help business owners balance tax strategies, financial planning, and succession goals positions him to contribute meaningfully to the Council’s mission of helping family businesses thrive.

Your estate planning goals likely revolve around your family, including both current and future generations. But don’t forget to take yourself into consideration. What if you become incapacitated and are unable to make financial decisions? A crucial component to include in your estate plan is a financial power of attorney (POA).

What’s a financial POA?

Without a POA, if you become incapacitated because of an accident or illness, your loved ones won’t be able to manage your finances without going through the lengthy and expensive process of petitioning the court for guardianship or conservatorship. Executing a financial POA, also known as a POA for property, protects your family from having to go through this process and helps ensure financial decisions and tasks won’t fall through the cracks.

This document appoints a trusted representative (often called an “agent”) to make financial decisions on your behalf. It authorizes your agent to manage your investments, pay your bills, file tax returns and otherwise handle your finances, within the limits you set.

Differences between springing and durable POAs

One important decision you’ll need to make is whether your POA should be “springing” — effective when certain conditions are met — or nonspringing (also known as “durable”), which is effective immediately.

A springing POA activates under certain conditions, typically when you become incapacitated and can no longer act for yourself. In most cases, to act on your behalf, your agent must present a financial institution or other third party with the POA as well as a written certification from a licensed physician stating that you’re unable to manage your financial affairs.

While a springing POA lets you retain full control over your finances while you’re able, a durable POA offers some distinct advantages:

It takes effect immediately, allowing your agent to act on your behalf for your convenience, not just when you’re incapacitated.
If you do become incapacitated, it allows your agent to act quickly on your behalf to handle urgent financial matters without the need for a physician to certify that you’ve become incapacitated. With a springing POA, the physician certification requirement can lead to delays, disputes or even litigation at a time when quick, decisive action is critical.
It may also be advantageous for elderly individuals who are mentally capable of handling their affairs but prefer to have assistance.

Durable POAs have one potential disadvantage that must be considered: You might be uncomfortable with a POA that takes effect immediately because you’re concerned that your agent may be tempted to abuse his or her authority. However, if you can’t fully trust someone with an immediate POA, it’s even riskier to rely on that person when you’re incapacitated and unable to protect yourself.

In light of the advantages of durable POAs and the potential delays caused by springing POAs, consider granting a durable POA to someone you trust completely, such as your spouse or one of your children. If you’d like added security, you could ask your attorney or another trusted advisor to hold the durable POA and deliver it to the designated agent only when you instruct them to do so or you become incapacitated.

Revisit and update your POAs

A critical estate planning companion to a financial POA is a health care POA (also known as a health care proxy). It gives a trusted person the power to make health care decisions for you. To ensure that your financial and health care wishes are carried out, consider preparing and signing both types of POA as soon as possible.

Also, don’t forget to let your family know how to gain access to the POAs in case of an emergency. Finally, financial institutions and health care providers may be reluctant to honor a POA that was executed years or decades earlier. So, it’s a good idea to sign new POAs periodically. Contact us with any questions regarding POAs.

Launching a new business brings tough decisions. And that holds true whether you’re a fledgling entrepreneur starting your first company or an experienced businessperson expanding into a second or third enterprise.

Among the most important calls you’ll need to make is how to structure the start-up for tax purposes. For many business owners, electing S corporation status is a savvy move. But it’s not right for everyone. Here are some important points to consider before you decide.

What’s it all about?

An S corporation is a tax election available only to certain U.S. companies. To make the election, you’ll need to file IRS Form 2553, “Election by a Small Business Corporation,” typically within 75 days of forming the business or the start of the tax year to which you want the election to apply.

If you elect S corporation status, the IRS will treat your start-up as a “pass-through” entity. This means the business generally won’t pay federal income taxes. Instead, profits and losses will pass through to your individual tax return and those of other shareholders.

As a result, you’ll avoid the “double taxation” faced by shareholders of C corporations — whereby the company pays taxes on the business’s income and then shareholders pay tax on any dividends received. In addition, S corporation shareholders may be eligible for the Section 199A qualified business income deduction for pass-through entity owners. It was recently made permanent under the One Big Beautiful Bill Act.

Which businesses qualify?

IRS rules limit which companies can elect S corporation status. To qualify, your start-up must:

Be an eligible domestic corporation or limited liability company (LLC),
Have no more than 100 shareholders who must be U.S. citizens or residents (certain trusts and estates may also be eligible), and
Offer only one class of stock.

Insurance companies, financial institutions using the reserve method of accounting and domestic international sales corporations are generally ineligible.

Why do it?

As mentioned above, the main advantage of electing S corporation vs. C corporation status is avoiding double taxation. But there are other reasons to do it.

For example, many start-ups incur losses in their first few years. S corporation status allows owners to offset other income with those losses, a tax benefit that’s unavailable to C corporation shareholders.

S corporations also have advantages over other types of pass-through entities. Generally, all trade or business income that flows through to sole proprietors and partners in partnerships is subject to self-employment taxes — even if the income isn’t actually distributed to the owners. S corporations can divide their income into shareholder-employee salaries and distributions. The salary portion is subject to payroll taxes, but distributions aren’t. So, by drawing a smaller salary (but one that’s reasonable in the eyes of the IRS) and taking the remainder as distributions, S corporation shareholder-employees can reduce their overall tax burden.

Liability protection is another advantage S corporations have over sole proprietorships and partnerships. S corporation status shields shareholders’ personal assets from business debts and legal claims, provided applicable rules are followed. Operating as an S corporation can also make your new business appear more credible to lenders, investors and customers because of its formalized, protective framework.

What are the drawbacks?

Electing to be treated as an S corporation has its drawbacks. Your start-up will have to follow strict IRS rules, which include keeping up with filing requirements and maintaining accurate financial records. Failure to comply could lead to back taxes, interest and penalties. It could even mean losing your S corporation status in a worst-case scenario.

Indeed, S corporations tend to incur higher administrative expenses than other pass-through entities. You’ll need to file corporate tax returns and meet state-level requirements. The extra complexity may outweigh the tax advantages — especially for newly launched companies with little to no profits.

Finally, it bears repeating: Although the salary/distributions income-splitting strategy mentioned above is advantageous, it can draw IRS scrutiny. Paying shareholder-employees an unreasonably low salary to avoid payroll taxes could trigger an audit with negative consequences.

Who can help?

Congratulations and best wishes on your forthcoming start-up! Electing S corporation status may be the right way to go. However, you’ll need to assess a wide variety of factors, including projected profits, the number of shareholders and your comfort level with the administrative requirements.

Before you do anything, contact us. We can help you evaluate whether operating as an S corporation aligns with your strategic and financial goals. If it does, we’d be happy to assist you with the filing process and compliance going forward.

The One Big Beautiful Bill Act (OBBBA), signed into law July 4, 2025, extends or enhances many tax breaks for businesses. But the legislation terminates several business-related clean energy tax incentives earlier than scheduled. For example, the Qualified Commercial Clean Vehicle Credit (Section 45W) had been scheduled to expire after 2032. Under the OBBBA, it’s available only for vehicles that were acquired on or before September 30, 2025. For other clean energy breaks, businesses can still take advantage of them if they act soon.

Deduction for energy-efficient building improvements

The Section 179D deduction allows owners of new or existing commercial buildings to immediately deduct the cost of certain energy-efficient improvements rather than depreciate them over the 39-year period that typically applies. The OBBBA terminates the Sec. 179D deduction for property beginning construction after June 30, 2026.

Besides commercial building owners, eligible taxpayers include:

Tenants and real estate investment trusts (REITs) that make qualifying improvements, and
Certain designers — such as architects and engineers — of government-owned buildings and buildings owned by nonprofit organizations, religious organizations, tribal organizations, and nonprofit schools or universities.

The Sec. 179D deduction is available for new construction as well as additions to or renovations of commercial buildings of any size. (Multifamily residential rental buildings that are at least four stories above grade also qualify.) Eligible improvements include depreciable property installed as part of a building’s interior lighting system, HVAC and hot water systems, or the building envelope.

To be eligible, an improvement must be part of a plan designed to reduce annual energy and power costs by at least 25% relative to applicable industry standards, as certified by an independent contractor or licensed engineer. The base deduction is calculated using a sliding scale, ranging from 50 cents per square foot for improvements that achieve 25% energy savings to $1 per square foot for improvements that achieve 50% energy savings.

Projects that meet specific prevailing wage and apprenticeship requirements are eligible for bonus deductions. Such deductions range from $2.50 per square foot for improvements that achieve 25% energy savings to $5 per square foot for improvements that achieve 50% energy savings.

Other clean energy tax breaks for businesses

Here are some additional clean energy breaks affected by the OBBBA:

Alternative Fuel Vehicle Refueling Property Credit (Section 30C). The OBBBA eliminates the credit for property placed in service after June 30, 2026. (The credit had been scheduled to sunset after 2032.) Property that stores or dispenses clean-burning fuel or recharges electric vehicles is eligible. The credit is worth up to $100,000 per item (each charging port, fuel dispenser or storage property).

Clean Electricity Investment Credit (Section 48E) and Clean Electricity Production Credit (Section 45Y). The OBBBA eliminates these tax credits for wind and solar facilities placed in service after 2027, unless construction begins on or before July 4, 2026. Wind and solar projects begun after that date must be put in service by the end of 2027.

Advanced Manufacturing Production Credit (Section 45X). Under the OBBBA, wind energy components won’t qualify for the credit after 2027. The legislation also modifies the credit in other ways. For example, it adds “metallurgical coal” suitable for the production of steel to the list of critical minerals. And, for critical materials other than metallurgical coal, the credit will now phase out from 2031 through 2033. The credit for metallurgical coal expires after 2029.

Act soon

Many of these clean energy breaks are disappearing years earlier than originally scheduled, leaving limited time for businesses to act. If your business has been exploring clean energy investments, now is the time to consider moving forward. We can help you evaluate eligibility, maximize available tax breaks and structure projects to meet applicable requirements before time runs out. Contact us today to discuss what steps you can take to capture tax benefits while they’re available.

As 2025 winds down, business owners and managers are ramping up their planning efforts for the new year. Part of the annual budgeting process is identifying ways to lower expenses and strengthen cash flow. When cutting costs, think beyond the obvious, such as wages, benefits and employee headcount. These cutbacks can make it harder to attract and retain skilled workers in today’s challenging labor market, potentially compromising work quality and productivity. Here are three creative ideas to help boost your company’s bottom line—without sacrificing its top line.

1. Analyze your vendors

Many companies find that just a few suppliers account for most of their spending. Identify your key vendors and consolidate spending with them. Doing so can strengthen your position to negotiate volume discounts. Consolidating your supplier base also helps streamline the administrative work associated with purchasing.

Early payment discounts can be another cost-saving opportunity. Some vendors may offer a discount (typically, 2% to 5%) to customers who pay invoices before they’re due. These discounts can provide significant savings over the long run. But you’ll need to have enough cash on hand to take advantage.

On a related note, how well do you know your suppliers? Consider conducting a supplier audit. This is a formal process for collecting key data points regarding a supplier’s performance. It can help you manage quality control and ensure you’re getting an acceptable return on investment.

2. Cut energy consumption

Going green isn’t just good for the environment. Under the right circumstances, it can save you money, too. For instance, research energy-efficient HVAC and lighting systems, equipment, and vehicles. Naturally, investing in such upgrades will cost money initially. But you may be able to lower energy costs over the long term.

What’s more, you might qualify for tax credits for installing certain items. However, pay attention to when green tax breaks are scheduled to expire. The One Big Beautiful Bill Act, enacted in July, accelerates the expiration of several clean energy tax incentives available under the Inflation Reduction Act.

3. Consider outsourcing

Businesses might try to cut costs by doing everything in-house—from accounting to payroll to HR. However, without adequate staffing and expertise, these companies often suffer losses because of mistakes and mismanagement.

External providers typically have specialized expertise and tools that are costly to replicate internally. For example, many organizations outsource payroll management, which requires an in-depth understanding of evolving labor laws and payroll tax rates. Outsourcing payroll can help reduce errors, save software costs and relieve headaches for your staff. Other services to consider outsourcing include administrative work, billing and collections, IT, and bookkeeping.

Outsourcing is often less expensive than performing these tasks in-house, especially when you factor in employee benefits costs. But you shouldn’t sacrifice quality or convenience. Vet external providers carefully to ensure you’ll receive the expertise, attention to detail and accuracy your situation requires.

Every dollar counts

As you finalize next year’s budget, treat cost control as a strategic exercise—not a blunt cut. Let’s discuss ways to prioritize cost-cutting measures with the biggest payback. We can help you model cash-flow impacts, verify tax treatment and incentives, and evaluate outsourcing options. Contact us to learn more.

Noncompete agreements have long been contentious. Many employers view them as critical safeguards to protecting intellectual property, customer lists, pricing structures and operational processes. Most individuals subject to noncompetes — along with numerous labor advocacy groups — disagree. They largely believe the agreements limit worker mobility, suppress wages and reduce bargaining power.

In April 2024, the long-running debate came to a head when the Federal Trade Commission (FTC) announced a final rule that would have banned the use of most noncompetes when it took effect. But that never happened, and now it won’t. On September 5, 2025, the FTC announced that it was moving to dismiss its lingering appeals to two separate legal challenges to the final rule. Here’s what employers should know about the noncompete ban that never was.

Final rule review

Had the final rule gone into effect, it would have required employers to notify affected employees that existing noncompetes would no longer be enforced as of the rule’s effective date. At that time, employers would also have been prohibited from entering into new agreements.

There was, however, a notable exception. Existing noncompetes for “senior executives” would have remained in force. The final rule defined these as employees who earn more than $151,164 a year and are in “policy-making positions.” This generally would have included:

A business entity’s president,
The chief executive officer or the equivalent,
Any other officer with policy-making authority, or
Any other “natural person” with policy-making authority who’s similar to an officer.

The FTC had expected the effective date to be September 4, 2024, but the ban was delayed because of immediate legal challenges. Most observers didn’t expect the final rule to survive under a new presidential administration. Sure enough, as mentioned, the current FTC filed motions in federal court to dismiss its appeals in September 2025, allowing earlier rulings that vacated the rule to stand.

When the agency announced it was dropping its appeals, FTC Chairman Andrew Ferguson called the final rule “patently illegal” and said it “would never survive judicial review.” However, Ferguson was quick to add that the agency’s decision to drop its appeals doesn’t mean it’s given up on challenging allegedly unlawful noncompetes. He warned that “firms in industries plagued by thickets of noncompete agreements will receive warning letters from me,” and he urged them to consider abandoning those agreements to minimize the risk of an FTC investigation and enforcement actions.

Tips to avoid scrutiny

If your organization has used noncompetes in the past and plans to continue doing so, beware of compliance challenges. Here are some suggested steps to follow:

Review existing agreements. Identify which employees are currently bound by noncompetes and assess whether those restrictions are still necessary or enforceable under applicable state laws. Some states have banned noncompetes altogether; others permit them only above certain pay thresholds.

Narrow the scope. If you intend to continue using noncompetes, limit them to key employees with genuine access to trade secrets or other sensitive data. Keep duration and geography as reasonable as possible.

Consider alternatives. Explore adopting or strengthening confidentiality, nonsolicitation and intellectual-property-protection agreements. These can often achieve similar aims without restricting future employment.

Consult legal counsel before enforcement. Review any contemplated action with an attorney who’s familiar with the current FTC position and state law.

Strengthen retention efforts. Competitive compensation and benefits, advancement opportunities, and a positive workplace culture often do more to retain talent than restrictive legal agreements.

Still in play

Although the FTC’s broad noncompete ban is off the table, scrutiny of these agreements remains very much in play. Take time to review your policies regarding noncompetes, reduce legal exposure, and foster employee loyalty through sound management and employment practices. Our team can help you identify strategies for structuring compensation, benefits and other perks to help attract and retain valued employees.

The One Big Beautiful Bill Act (OBBBA) introduced or updated numerous business-related tax provisions. The changes that are likely to have a major impact on employers and payroll management companies include new information return and payroll tax reporting rules. Let’s take a closer look at what’s new beginning in 2026 — and what businesses need to do in 2025.

Increased reporting thresholds go into effect in 2026

Businesses generally must report payments made during the year that equal or exceed the reporting threshold for rents; salaries; wages; premiums; annuities; compensation; remuneration; emoluments; and other fixed or determinable gains, profits and income. Similarly, recipients of business services generally must report payments they made during the year for services rendered that equal or exceed the statutory threshold. This information is reported on information returns, including Forms W-2, Forms 1099-MISC and Forms 1099-NEC.

Currently, the reporting threshold amount is $600. For payments made after 2025, the OBBBA increases the threshold to $2,000, with inflation adjustments for payments made after 2026.

Reporting qualified tip income and qualified overtime income

Effective for 2025 through 2028, the OBBBA establishes new deductions for employees who receive qualified tip income and qualified overtime income. Because these are deductions as opposed to income exclusions, federal payroll taxes still apply to this income. So do federal income tax withholding rules. Also, tip income and overtime income may still be fully taxable for state and local income tax purposes.

The issue for employers and payroll management companies is reporting qualified tip and overtime income amounts so that eligible workers can claim their rightful federal income tax deductions. In August, the IRS announced that for 2025 there will be no OBBBA-related changes to federal information returns for individuals, federal payroll tax returns or federal income tax withholding tables. The 2025 versions of Form W-2, Forms 1099, Form 941, and other payroll-related forms and returns will be unchanged.

Nevertheless, employers and payroll management companies should begin tracking qualified tip and overtime income immediately and implement procedures to retroactively track qualified tip and overtime income amounts that were paid going back to January 1, 2025. The IRS will provide transition relief for 2025 to ease compliance burdens.

Proposed regulations list tip-receiving occupations

In September, the IRS released proposed regs that include a list of tip-receiving occupations eligible for the OBBBA deduction for qualified tip income. Eligible occupations are grouped into eight categories:

Beverage and food services,
Entertainment and events,
Hospitality and guest services,
Home services,
Personal services,
Personal appearance and wellness,
Recreation and instruction, and
Transportation and delivery.

The IRS added three-digit codes to each eligible occupation for information return purposes.

2026 Form W-2 draft version

The IRS has released a draft version of the 2026 Form W-2. It includes changes that support new employer reporting requirements for the employee deductions for qualified tip income and qualified overtime income and for employer contributions to Trump Accounts, which will become available in 2026 under the OBBBA.

Specifically, Box 12 of the draft version adds:

Code TA to report employer contributions to Trump Accounts,
Code TP to report the total amount of an employee’s qualified cash tip income, and
Code TT to report the total amount of an employee’s qualified overtime income.

Box 14b has been added to allow employers to report the occupation of employees who receive qualified tip income.

Stay on top of the latest guidance

The OBBBA makes some significant changes affecting information returns and payroll tax reporting. The IRS will likely continue to issue guidance and regulations. We can help you stay informed on any developments that will affect your business’s reporting requirements.

Navigating the complexities of employee benefit plan audits begins with understanding the foundational legislation that governs them: the Employee Retirement Income Security Act of 1974 (ERISA). Designed to protect participants in employer-sponsored benefit plans, ERISA sets rigorous standards for fiduciary conduct, reporting, and disclosure, including the requirement for independent audits of certain plans.

Why ERISA Matters

ERISA mandates that benefit plans with 100 or more participants must undergo annual audits by a qualified, independent CPA. These audits are not merely a compliance checkbox—they serve as a critical tool for ensuring the integrity of plan financial statements and the reliability of information provided to stakeholders. Audits help verify that plans are operating in accordance with United States Generally Accepted Accounting Principles (GAAP) and Department of Labor (DOL) regulations, and they often uncover opportunities to strengthen internal controls and operational efficiency and correct noncompliance.

Audit Requirements and Qualifications

Auditors performing ERISA plan audits must meet specific qualifications, including independence from the plan and its administrators. Firms must also maintain documentation of continuing professional education (CPE) to ensure auditors are up to date on ERISA standards. For example, Yeo & Yeo requires professionals managing or signing off on ERISA audits to complete at least eight hours of benefit plan-specific CPE within a three-year period.

The Audit Process and Preparation

At Yeo & Yeo, the audit process is structured into four phases: kickoff and inquiries, document requests, participant sample selection, and final testing. The firm uses Suralink, a secure cloud-based portal, to manage document submissions and streamline communication with clients. This system enhances transparency and helps clients stay on track with audit timelines.

Preparing for an audit can be daunting, but the following steps can help ensure the process runs smoothly and successfully. Plan sponsors should:

Review prior year findings and address any unresolved issues.
Organize payroll and plan documents for easy access.
Coordinate early with third-party administrators to ensure timely delivery of audit packages.
Respond promptly to document requests through platforms like Suralink.

Consequences of Noncompliance

Sometimes, noncompliance with ERISA surfaces and the consequences must be dealt with. Failure to comply with ERISA audit requirements can result in significant penalties from the DOL. Moreover, plan administrators may be held personally liable for losses if they fail to meet fiduciary standards. Selecting a qualified auditor (one with a clean peer review report and relevant experience) is essential to mitigating risk and ensuring compliance.

Conclusion

As organizations grow, so do the responsibilities tied to employee benefit plans. Understanding ERISA and its audit implications empowers plan sponsors to meet regulatory requirements, protect participants, and improve financial reporting. For firms like Yeo & Yeo, delivering high-quality audits with a client-first approach ensures that benefit plans remain compliant and well-managed.

Under the Tax Cuts and Jobs Act (TCJA), businesses, including manufacturers, have been required since 2022 to amortize domestic Section 174 research and experimental (R&E) costs over five years, rather than deduct them in the year incurred or paid. Manufacturers have consistently complained that this treatment stifles the development of new processes and products and threatens cash flow — especially for smaller companies. With China offering deductions of up to 200% for eligible research costs, U.S. manufacturers were put at a competitive disadvantage.

The One Big Beautiful Bill Act (OBBBA) changes the R&E expense deduction rules. Here’s what manufacturers need to know.

OBBBA’s Sec. 174 amendments

The OBBBA permanently reinstates the pre-TCJA treatment of domestic R&E costs for tax years beginning after 2024, so manufacturers can deduct them in the tax year they’re incurred or paid. Foreign R&E costs remain subject to 15-year amortization.

Also under the OBBBA, small manufacturers that satisfy a gross receipts test can claim the R&E deduction retroactively to 2022. (For 2025, average annual gross receipts for the previous three years must be $31 million or less.) And any manufacturer, regardless of size, that incurred domestic R&E expenses in 2022 through 2024 may elect to accelerate the remaining deductions for those expenditures over either a one- or two-year period.

The immediate deduction of qualified R&E expenses isn’t mandatory. Depending on a variety of factors, in some situations, claiming it may not be advisable. Manufacturers generally can instead elect to capitalize and amortize such expenses paid in a tax year after 2024 over at least 60 months. The election must be made by the due date, with extensions, of the original tax return for the first tax year to which the election applies. For 2025, a manufacturer that makes an accounting method change to capitalize and amortize R&E expenses will be deemed to have made the election.

R&E expenses may also qualify for the Section 41 research tax credit. But businesses can’t claim both the deduction and the credit for the same expense. If a manufacturer claims the research credit, the R&E deduction generally must be reduced by the amount of the credit. Alternatively, manufacturers can elect to claim a reduced research credit instead.

Retroactive deductions for small manufacturers

As noted, eligible small manufacturers can elect to treat the changes to Sec. 174 as if they took effect for tax years beginning after 2021, rather than after 2024. How to do this depends in part on whether the manufacturer has already filed a 2024 tax return.

If the manufacturer filed a 2024 return before August 28, 2025, an automatic extension to supersede that return to include the new guidance is available. However, the manufacturer must file that replacement return by the extended deadline (typically September 15 or October 15). Alternatively, the manufacturer can file an amended 2024 return, following one of the two options discussed below.

If the manufacturer didn’t file a 2024 return by August 28, the manufacturer can file by the applicable extended deadline and either:

Elect to expense eligible R&E expenses under the new guidance, which would also require filing amended returns for 2022 and 2023, or
Do an automatic method of accounting change and a “true-up” adjustment on the 2024 return for the 2022 and 2023 R&E expenses.

Elections must be made by the earlier of July 6, 2026, or the applicable deadline for filing a claim for a credit or refund for the tax year (generally, three years from filing the return).

Accelerated deductions for all manufacturers

Manufacturers with unamortized domestic R&E expenses under the TCJA can elect to recover those remaining expenses fully on their 2025 income tax returns or over their 2025 and 2026 returns.

Notably, the IRS guidance states that taxpayers “may elect to amortize any remaining unamortized amount” of such expenses. This language suggests that the deduction will be considered an amortization expense. This is significant in light of changes the OBBBA made to the interest expense deduction for businesses, including manufacturers.

The business interest deduction generally is limited to 30% of the manufacturer’s adjusted taxable income (ATI). (Manufacturers that meet the same annual gross receipts test discussed earlier are exempt from the limitation.)

Under the OBBBA, beginning in 2025, ATI for purposes of the interest deduction is calculated without deductions for depreciation, amortization or depletion. So amortization deductions are “added back,” potentially increasing the ATI and the allowable business interest deduction. If R&E expenses aren’t treated as an amortization deduction, they could reduce the allowable business interest deduction.

Decisions, decisions

The OBBBA’s revisions to Sec. 174 are welcome news but also require manufacturers to make some important decisions about the various election and filing options discussed earlier. Another significant decision is whether to re-shore foreign R&E activities to expedite the deduction of the related expenses. We can help answer any questions you have about the tax treatment of R&E expenses.

For decades, quarterly financial reporting has provided the cornerstone for fair, efficient and well-functioning markets. However, President Trump recently posted on social media that public companies should move to semiannual financial reporting. He believes changing the frequency would lower compliance costs and allow management to focus less on meeting short-term earnings targets and more on building long-term value. But critics say less frequent reporting could result in information gaps and increased market volatility.

While no changes have been made to the U.S. Securities and Exchange Commission’s (SEC’s) filing requirements, Trump’s statement reignites the debate over how often companies should issue their financials. While his post centered on public companies, reporting frequency can also be an important issue for private companies, particularly in today’s uncertain markets.

From Wall Street to Main Street

The SEC requires public companies to file annual reports on Form 10-K and quarterly reports on Form 10-Q on an ongoing basis. The quarterly requirement, in place since 1970, was designed to promote transparency and strengthen investor confidence.
Private companies aren’t required to follow SEC rules, so most issue financial statements only at year end. More frequent reporting is usually discretionary, but it can sometimes be a smart idea.

For example, a large private business might decide to issue quarterly statements if it’s considering a public offering or thinking about merging with a public company. Or a business that’s in violation of its loan covenants or otherwise experiencing financial distress may decide to (or be required to) issue more frequent reports.

Midyear assessment

Financial statements present a company’s financial condition at one point in time. When companies report only year-end results, investors, lenders and other stakeholders are left in the dark until the next year. Sometimes, they may want more frequent “snapshots” of financial performance.

Whether quarterly, semiannual or monthly, interim financial statements can provide advanced notice of financial distress due to the loss of a major customer, significant uncollectible accounts receivable, fraud or other circumstances. They also might confirm that a turnaround plan appears successful or that a start-up has finally achieved profits.

Management can benefit from interim reporting, too. Benchmarking interim reports against the same period from the prior year (or against budgeted figures) can help ensure your company meets its financial goals for the year. If your company is underperforming, it may call for corrective measures to improve cash flow and/or updated financial forecasts.

Quality matters

While interim reporting may provide some insight into a company’s year-to-date performance, it’s important to understand the potential shortcomings of these reports. This can help minimize the risk of year-end surprises.

First, unless an outside accounting firm reviews or audits your interim statements, the amounts reported may not conform to U.S. Generally Accepted Accounting Principles (GAAP). Absent external oversight, they may contain mistakes and unverified balances and exclude adjustments for accounting estimates, missing transactions and footnote disclosures. Moreover, leaders with negative news to report may be tempted to artificially inflate revenue and profits in interim reports.

When reviewing interim reports, outside stakeholders may ask questions to assess the skills of accounting personnel and the adequacy of year-to-date accounting procedures. Some may even inquire about the journal entries external auditors made to adjust last year’s preliminary numbers to the final results. This provides insight into potential adjustments that would be needed to make the interim numbers conform to GAAP. Journal entries often recur annually, so a list of adjusting journal entries can help identify which accounts your controller or CFO has the best handle on.

In addition, interim reporting can sometimes be misleading for seasonal businesses. For example, if your business experiences operating peaks and troughs throughout the year, you can’t multiply quarterly profits by four to reliably predict year-end performance. For seasonal operations, it might make more sense to compare last year’s monthly (or quarterly) results to the current year-to-date numbers.

Digging deeper

If interim statements reveal irregularities, stakeholders might ask your company to hire a CPA firm to conduct agreed-upon procedures. These procedures target high-risk account balances or those previously adjusted by auditors.

Agreed-upon procedures engagements may give your stakeholders greater confidence in your interim results. For instance, agreed-upon procedures reports can help identify sources for any irregularities, evaluate your company’s ability to service debt and address concerns that management could be cooking the books.

Find your reporting rhythm

Currently, public companies must issue financial reports each quarter. However, private companies generally have more discretion over how often they issue reports and the level of assurance provided. What’s appropriate for your situation depends on various factors, including your company’s resources, management’s needs and the expectations of outside stakeholders. Contact us for more information about reporting interim results, evaluating midyear concerns and conducting agreed-upon procedures.

Employers need to consider every angle to attract top talent in today’s challenging skilled labor market. If your organization is open to hiring regionally, nationally or even internationally, offering relocation benefits can demonstrate your commitment to employees’ well-being and enhance their onboarding experience. However, there are financial and tax implications to consider.

Budgeting matters

The purpose of relocation benefits is to ease the financial, logistical and mental-health strain of moving for a new hire. They can range from simple cash payouts to a lavish array of perks most often reserved for top executives.

When choosing which benefits to offer, establish a firm budget. Generally, employers cover moving services and transportation, such as airfare. But you might want to cover other perks, including packing and unpacking services, storage expenses, short-term housing, and spousal employment assistance.

The extent to which you should consider relocation benefits may depend on your industry. Your offerings must legitimately compete with those of rival employers casting their lines into the same hiring pool. Otherwise, you probably won’t gain the hiring edge you’re looking for.

A little tax history

Currently, payments for relocation expenses are deductible for the employer but taxable to the employee, similar to how bonuses are generally treated. But it hasn’t always been this way.

Before the Tax Cuts and Jobs Act (TCJA) of 2017, how moving expenses were reported and taxed depended on the type of plan that an employer used. “Accountable” plans, which followed certain IRS rules, allowed employers to fully deduct payments while employees weren’t subject to taxation, including payroll tax. This made such plans highly favorable from a tax perspective, though they required more administrative effort.

Under a “nonaccountable plan,” pre-TCJA relocation payments were treated similarly to how a bonus would be reported and much like how the payments are now treated. That is, they were taxable compensation subject to both income tax and payroll tax. Employees could, however, deduct moving expenses — which substantially mitigated the tax hit.

The TCJA eliminated the moving expense deduction for all employees other than active-duty military members. This provision had been scheduled to sunset after 2025, which could have brought the tax break back to life next year. However, the One Big Beautiful Bill Act, enacted in July 2025, permanently eliminated the moving expense deduction while adding an exception for “intelligence community members.”

Many employees are unpleasantly surprised to discover that moving expenses paid as a relocation benefit are included in their taxable income. One way to counteract the negative tax consequences, if the budget allows, is to increase the total amount of the relocation payment. Often called a “tax gross-up,” the additional amount above the intended payment covers the employee’s tax liability. Alternatively, you could simply forewarn recipients of the tax consequences and discuss the matter with them.

Strategic tool

Under the right circumstances, relocation benefits can be a strategic tool for recruitment, retention and employee engagement. Just make sure such perks are a win-win for both parties before putting them on the table during a hiring negotiation. We can help you explore their feasibility for your organization.