September 2025 Newsletter

As September arrives and summer winds down, it’s an ideal checkpoint to review year-to-date results and fine-tune your financial strategy for the fall push. Staying organized and current on emerging tax and business developments is essential to keep the rest of the year on track. Our team is here to help you prioritize next steps and finish strong.

This month we’ll break down the new OBBBA overtime deduction, explain how the return of 100% bonus depreciation can benefit businesses plus new expensing for qualified production property, how to make the most of education savings and 529 plans, and outline how to handle an IRS notice without losing sleep, all to help you finish summer strong and stride into fall with confidence.

And remember, our services extend to your colleagues, family, and friends. Should they require assistance, we’re just a phone call away. We remain committed to identifying every opportunity to ensure our client’s prosperity. Your kind reviews and referrals are invaluable to us.

 Understanding the New Deduction for Overtime Under the OBBBA: A Comprehensive Guide

Article Highlights:

  • Defining Deductible Overtime: Beyond the Surface
  • Maximum Deduction and Income-Based Limitations
  • Modified Adjusted Gross Income
  • Effective Date and Temporary Application
  • Married Filing Joint Stipulation and SSN Requirement
  • Impact on Withholding and Other Considerations
  • Navigating the Temporary Overtime Deduction

The recent passage of the One Big Beautiful Bill Act (OBBBA) marks a significant shift in the tax landscape, bringing with it a range of changes aimed at easing the financial burden on American workers. Among these changes, the introduction of a new deduction for overtime pay is of particular interest. This article will explore what constitutes deductible overtime under the OBBBA, the specifics of the deduction, its limitations, and why it’s crucial for taxpayers to understand these newfound regulations.

Defining Deductible Overtime: Beyond the Surface

The OBBBA introduces an above-the-line deduction for overtime premium pay, which might not be as straightforward as it appears or what a worker envisioned when first hearing about it. The deduction applies specifically to “qualified overtime compensation,” defined as the portion of overtime pay that exceeds the regular rate of pay under the Fair Labor Standards Act of 1938. This means that not all overtime compensation is deductible; only the premium portion is eligible. This subtle distinction is crucial for taxpayers and tax preparers to consider when calculating potential deductions.

For example, if a worker has a standard pay rate of $40 per hour and earns overtime pay at a rate of $55 per hour, the deductible portion is the $15 premium for each overtime hour worked, not the entire $55. Understanding what portion of overtime counts toward this deduction can significantly influence the overall tax savings for a worker.

Maximum Deduction and Income-Based Limitations

The OBBBA sets limits on the deduction amount taxpayers can claim in a year. The maximum allowable deduction is capped at $12,500 for individual filers and $25,000 for those filing a joint return. However, these benefits are further subject to modifications depending on the taxpayer’s Modified Adjusted Gross Income (MAGI).

MAGI is a critical concept in determining eligibility for this deduction. It is calculated by taking the adjusted gross income (AGI) and adding back certain deductions and exclusions, such as those related to foreign earned income. The MAGI-based limitation reduces the deduction by $100 for every $1,000 that a taxpayer’s MAGI exceed $150,000 for single filers or $300,000 for joint filers. Therefore, taxpayers with higher incomes might find their potential deductions diminished or eliminated, emphasizing the importance of accurately calculating MAGI to fully capture eligible tax benefits.

Effective Date and Temporary Application

This deduction is not a permanent addition to the tax code. It applies to taxable years starting in 2025 and is set to sunset after 2028. This temporary nature requires taxpayers and preparers to be aware of both the starting point for when this financial relief becomes available and its conclusion. Timely adjustments in financial planning and tax strategies can ensure maximum benefits are captured during this window.

Married Filing Joint Stipulation and SSN Requirement

To claim the deduction for qualified overtime compensation, a married individual must file jointly with their spouse. This stipulation necessitates that married couples coordinate their tax strategies to take full advantage of this deduction. Moreover, taxpayers must provide their Social Security Number (SSN) on the tax return to qualify. Failure to include the SSN is treated as a mathematical or clerical error, potentially leading to an adjustment of the return.

Impact on Withholding and Other Considerations

Withholding adjustments are an important consideration for both employers and employees following the implementation of this deduction. Starting in 2025, the Secretary of the Treasury will modify withholding procedures to accommodate the new deduction, which could impact payroll processes. Employers need to stay informed about these changes to ensure compliance and help employees understand their revised withholdings.

It is essential to note that this deduction reduces only income tax, not contributions to the Federal Insurance Contributions Act (FICA) taxes, which fund Social Security and Medicare. Therefore, while the deduction can ease income tax burdens, it doesn’t affect the withholding or payment of FICA taxes, which is an important distinction when considering overall tax liability.

Conclusion: Navigating the Temporary Overtime Deduction

The overtime deduction introduced by the OBBBA represents a substantial opportunity for tax savings, particularly for those who frequently earn overtime. However, understanding the nuances—such as what constitutes qualified overtime, the effects of MAGI, and procedural requirements like joint filing and SSN inclusion—is imperative. As this deduction is available only through 2028, tax preparers and taxpayers must act quickly to incorporate it into their strategies and optimize their tax outcomes during its period of effectiveness.

While this deduction provides temporary relief, its impact has the potential to be significant. Individuals should prepare to adapt their financial planning and payroll operations to maximize this benefit, all while staying vigilant of its temporary nature to avoid unforeseen adjustments when it phases out after 2028.

 Tax Break for Businesses: 100% Bonus Depreciation is Back Plus New Expensing of Qualified Production Property

Article Highlights:

  • Historical Context
  • Tax Benefits of Bonus Depreciation
  • Qualification Criteria for Bonus Depreciation
  • Qualified Improvement and Property Issues
  • Revoking Bonus Depreciation and AMT Implications
  • Business Automobiles and Other Depreciation Rules
  • Issues Addressed by the Recent Reinstatement
  • Qualified Production Property

The reinstatement of bonus depreciation is a critical component of recent U.S. tax legislation aimed at fostering economic growth. The 2017 Tax Cuts and Jobs Act (TCJA) had already put significant emphasis on bonus depreciation, but its permanent reinstatement under the “One Big Beautiful Bill Act” at 100% further emphasizes its importance, especially after considering the economic ramifications of the pandemic. This article explores the tax benefits, historical context, applicability, and specific rules surrounding bonus depreciation, ultimately outlining the recent changes in its reinstatement.

  • Historical Context: Originally Enacted to Stimulate the Economy – Bonus depreciation was first introduced as part of the Job Creation and Worker Assistance Act in 2002, allowing businesses to immediately deduct a substantial amount of the cost of qualifying property, rather than having to recover the cost as depreciation over a number of years. Initially, the deduction was set at 30% but was later increased to 50% and eventually to 100% during specific economic downturns.The TCJA significantly altered bonus depreciation by allowing a 100% first-year deduction for qualified property, which was a substantial incentive for businesses. This provision was aimed at encouraging capital procurement and economic growth. However, the TCJA also included a sunset provision that began phasing out the bonus depreciation rate starting in 2023, and by 2027 no bonus depreciation would have been allowed.
  • Tax Benefits of Bonus Depreciation – Bonus depreciation allows businesses to fully deduct the cost of assets in the year they are placed into service, providing immediate tax relief and encouraging investment. This benefit enhances a company’s cash flow by reducing taxable income, making it a powerful incentive for purchasing new assets.
    However, utilizing bonus depreciation effectively requires careful planning. For example, the Section 199A deduction is based on qualified business income (QBI), and writing off large capital purchases can reduce an entity’s profit, consequently decreasing the Sec 199A deduction. Conversely, reducing taxable income might help avoid certain phase-outs and limitations associated with 199A.
  • Qualification Criteria for Bonus Depreciation – Qualifying property generally includes tangible property with a recovery period of 20 years or less, computer software, water utility property, and qualified improvements and productions. Recovery periods are set by the IRS. For example, most business vehicles have a recovery period of 5 years, while it is 7 years for most office equipment. No bonus depreciation is allowed for real property since the recovery period is either 27.5 or 39 years, depending on how the real property is used.The TCJA expanded the scope of eligible property to include both new and used qualifying property, enhancing the attractiveness of investing in second-hand equipment. Public utility properties and dealer properties related to vehicles are specifically excluded, adding a layer of complexity.
  • Qualified Improvement and Property Issues – Qualified improvement property initially experienced legislative challenges. The intent under the TCJA was to combine properties such as leasehold, restaurant, and retail improvements into a category eligible for bonus depreciation under a 15-year MACRS recovery period. However, an oversight initially excluded these properties, later corrected by the CARES Act.
  • Revoking Bonus Depreciation and AMT Implications – Typically, opting out of bonus depreciation can only be revoked with IRS consent unless made on a timely filed return, allowing revocation within six months on an amended return. One noteworthy benefit is that property with claimed bonus depreciation is exempt from alternative minimum tax (AMT) adjustments, aligning AMT depreciation relief with regular tax purposes.
  • Business Automobiles and Other Depreciation Rules – Special rules and deduction limitations apply to business automobiles categorized as “luxury autos.” The depreciation limit is augmented by $8,000 in years when bonus depreciation is permitted, as established by the TCJA. It is not addressed in OBBBA so it is assumed the extra amount will continue.Related party rules, and the application of Section 179, which requires pre-bonus depreciation adjustments, add further complexity. (Section 179 provides another way to write off purchase of some business property without having to depreciate the asset’s cost, but the deduction will need to be recaptured if business use drops to 50% or less in a year after the year placed in service.)
  • Issues Addressed by the Recent Legislation – The OBBBA reinstatement extends the 100% deduction for qualified property purchased and placed in service after January 19, 2025. OBBBA has made bonus depreciation permanent. For qualifying property placed in service between January 1, 2025, and January 19, 2025, the bonus depreciation remains at 40%.This continuity provides businesses with long-term planning capabilities and aligns investments with broader economic policies intended to spur growth.
  • Qualified Production Property – The “One Big Beautiful Bill Act” also introduced a provision to promote manufacturing in the U.S. Under pre-OBBBA law, taxpayers were generally required to deduct (depreciate) the cost of business-related nonresidential real property over a 39-year period. And bonus depreciation was generally limited to tangible personal property, not real estate.Effective for property placed in service after July 4, 2025, OBBBA generally, allows taxpayers to immediately deduct 100% of the cost of certain new factories, certain improvements to existing factories, and certain other structures. Specifically, this provision allows taxpayers to deduct 100% of the adjusted basis of qualified production property in the year such property is placed in service.Qualified Production Property refers to specific portions of nonresidential real property that meet a set of criteria:

    o The property must be used by the taxpayer as an integral part of a qualified production activity.

    o It must be placed in service within the United States or any possession of the United States.

    o The original use of the property must commence with the taxpayer.

    o Construction of the property must begin after January 19, 2025, and before January 1, 2029.

    o The property must be designated by the taxpayer in an election on the taxpayer’s tax return. The IRS will issue instructions on how to make this election.

    o The property must be placed in service before January 1, 2031.

    o Any portion of a property that is used for offices, administrative services, lodging, parking, sales activities, research activities, software engineering activities, or certain other functions is ineligible for this benefit

  • Production Machinery: Even though manufacturing machinery that does not qualify as qualified production property is not expensed under this provision, it will generally qualify for 100% bonus depreciation that is reinstated by OBBBA.
  • Qualified Production Activity: Generally, a “Qualified Production Activity” is defined as follows:1. Activities Involved: It refers to the manufacturing, production (limited to agricultural and chemical production), or refining of a qualified product. These activities should result in a substantial transformation of the property comprising the product.2. Qualified Product: A qualified product refers to any tangible personal property that is not a food or beverage prepared in the same building as a retail establishment in which such property is sold.

    In summary, for an activity to qualify under this section, it must involve significant production or transformation processes, excluding certain types of agricultural and chemical productions.

    Recapture rules apply in certain cases where, during the 10-year period after qualified production property is placed in service, the use of the property changes. When the property is sold, to the extent of the bonus depreciation taken, any gain will be ordinary income rather than capital gain,

The reinstatement of bonus depreciation is a vital tool for economic rejuvenation, providing businesses with immediate tax incentives to make capital investments. While it offers substantial benefits, understanding the complexities and planning strategically around QBI deductions, AMT implications, and specific qualifications is essential. Amid legislative nuances and phased-out provisions, bonus depreciation remains a keystone in strategic business planning for enduring economic development. The addition of the qualified production property provides a huge incentive for building production facilities in the U.S. While thought of as a deduction for big business, it can also apply to small manufacturing facilities.

If you are in business and have questions about how the Bonus Depreciation can benefit your business, please contact this office.

 

 Last Chance: The One Big Beautiful Bill Countdown on Key Energy Tax Credits

Article Highlights:

  • One Big Beautiful Bill Act
  • Home Solar Energy Credits
  • Home Energy Efficient Improvements Credit
  • Credits for Electric Vehicles (EV)
    o New EVs
    o Previously Owned EVs
  • The Urgency to Act
  • Call to Action

In recent years, as the conversation about climate change has intensified, the federal government sought to encourage homeowners and consumers towards sustainable energy solutions by providing tax credits for various green initiatives. The installation of solar panels, upgrading to energy-efficient home systems, and purchasing electric vehicles (both new and used) have all been incentivized. However, a sweeping legislative change known colloquially as the “One Big Beautiful Bill” Act significantly alters the landscape of these tax credits, accelerating their expiration and thus requiring consumers to mobilize and act quickly if they wish to take advantage of the related tax benefits.

Home Solar Energy Credits – The Residential Clean Energy Credit has been a linchpin in encouraging homeowners to invest in solar electric properties. Prior to the new legislation, this credit offered a significant financial incentive, allowing a 30% deduction from federal taxes of the cost of installing solar systems. This applied to installations of qualified solar electric property, solar water heating property, geothermal heat pumps, and wind energy systems.

Under previous regulations, expenditures made for property placed in service through December 31, 2032, were eligible for the credit. However, the “One Big Beautiful Bill” mandates a new, aggressive sunset date: December 31, 2025. This means that homeowners must have their systems installed and functional by this deadline to benefit. It’s crucial for homeowners to not only install the solar energy property, but also ensure a building inspector’s sign-off before the curtains fall on this credit.

Home Energy Efficient Improvements Credit – The Energy Efficient Home Improvement Credit was offered to taxpayers improving their residence with qualified energy efficiency improvements. Homeowners could claim 30%, up to $1,200 annually, of the cost associated with improvements such as high-efficiency HVAC systems, upgraded insulation, exterior doors, and energy-efficient windows and skylights.

This credit was originally available for qualifying property placed in service by December 31, 2032. However, the new legislative act changes this, imposing a new expiration date of December 31, 2025. This fast-approaching deadline means homeowners looking to capitalize on this tax incentive need to act quickly. Notably, efficiency improvements often require final approval from local building inspectors, further underscoring the necessity for immediate action.

Credits for Electric Vehicles (EV)

  1. The New EV Credit: The Clean Vehicle Credit, designed to encourage the purchase of new clean vehicles, has similarly seen shifts. This federal incentive provided a credit of up to $7,500 for each new EV placed in service, contingent on meeting critical mineral and battery component requirements. The aim was to motivate domestic manufacturing and the development of reliable, sustainable supply chains.The maximum cost of the vehicle (manufacturer’s suggested retail price (MSRP)) cannot be more than $80,000for vans, pickups and SUVs, and $55,000 for others. In addition, the vehicle must be assembled in the U.S.While prior law allowed eligibility for purchases through 2032, the act now terminates this benefit for vehicles acquired post-September 30, 2025. This acceleration demands that consumers fast-track their buying decisions to avail themselves of the credit.
  2. The Previously Owned EV Credit: Similarly, the Previously Owned Clean Vehicles Credit encouraged purchases of used electric vehicles. This credit offered the lesser of $4,000 or 30% of the vehicle’s sale price, with restrictions on qualifying vehicles, as well as income caps for purchasers to be eligible, limits on sale prices not exceeding $25,000, and requirements mandating that sellers must be registered dealers.Initially set to cease in 2032, the new legislation advances this credit’s expiration to September 30, 2025. Prospective buyers must act swiftly and strategically, especially as vehicle inventories adjust in response to the regulatory shift.

The Urgency to Act – This comprehensive shift in energy-focused tax credits, facilitated by the “One Big Beautiful Bill,” communicates a clear message to consumers and homeowners: act now or risk missing out on financial incentives encouraging the adoption of sustainable technologies.

Consumers venturing into energy improvements and environmentally friendly vehicles must rev up their planning, procurement, and installation timelines. The reduction of these tax credits, once aimed at easing the burden of going green, indicates a notable policy shift that contradicts previous trends in government-backed incentives for sustainable practices.

Call to Action – For those contemplating renewable energy investments or the addition of clean vehicles to their household, the message is urgent yet clear—complete your installations and purchases promptly. Ensure all necessary inspections and paperwork are finalized well in advance of the adjusted deadlines.

As these federal tax credits prepare for their impending departure, the chance to capitalize on them shrinks by the day. The “One Big Beautiful Bill” has set the stage for a contentious legislative landscape in environmental initiatives, stressing the necessity for decisive action to close the book on this chapter of incentivized green energy transitions.

If you have questions related to qualifications and deadlines for the credits, contact this office.

 The 2025 Guide to Small Business Tax Deductions You Can’t Afford to Miss

When it comes to running a successful small business, every dollar counts. Yet every year, many owners miss out on valuable tax deductions — and with them, the chance to strengthen their cash flow and reinvest in growth.

In 2025, smarter tax planning isn’t optional. It’s a financial strategy that can give your business a real edge. Here are deductions every small business should be reviewing this year.

Key Deductions to Review

Home Office Expenses
If you use part of your home exclusively for business, you may qualify to deduct a portion of your housing costs — from rent or mortgage to utilities and internet.

100% Bonus Depreciation
Purchases like computers, office furniture, and equipment may qualify for full upfront deductions instead of being depreciated over time, putting cash back in your business now.

Health Insurance Premiums
Self-employed owners may be able to deduct premiums for themselves and their family reducing both personal and business expenses.

Marketing and Advertising
Investments in your website, digital advertising, and marketing campaigns not only grow your business — they’re also fully deductible.

Retirement Contributions
Contributions to a SEP IRA, SIMPLE IRA, or 401(k) help secure your financial future while lowering taxable income today.

The Cost of Missing Out

Every deduction you capture strengthens your bottom line. Every deduction you miss is money lost — money that could have funded payroll, new technology, or expansion.

Bonus: Planning Ahead for 2025

Strong tax planning isn’t just about this year — it’s about preparing your business for continued success. As we look forward, here are some areas to keep on your radar:

  • R&D Expensing Under the OBBBA
    New legislation now allows eligible businesses to immediately expense qualifying U.S.-based research and development costs. For some, it may even be possible to amend prior returns and reclaim refunds — a direct boost to cash flow.
  • Bonus Depreciation is Back under OBBBA
    The One Big Beautiful Bill Act permanently restored 100% bonus after January 19, 2025 for qualified property. A significant benefit for businesses of all sizes.
  • Capital Investments
    Timing your purchases of equipment, software, or technology strategically can maximize deductions and improve efficiency.Hiring and Payroll Credits
    If you plan to expand your team, look into available credits and incentives designed to offset the cost of new hires and training.

  • Succession and Exit Planning
    Even if retirement or transition isn’t right around the corner, early planning helps maximize the value of your business and reduce risk for the future.Digital Strategy and Client Acquisition
  • In today’s AI search environment, a modern online presence is no longer optional. It’s directly tied to revenue growth and competitiveness.

Let’s Maximize Your Deductions — and Your Growth

Tax planning should do more than meet deadlines. It should strengthen your cash flow, fuel your growth, and prepare you for the opportunities ahead.

Schedule a 2025 planning session with our team and let’s make sure your business is ready to thrive.

 Unravelling Education Savings: Mastering 529 Plans to Maximize Tax Benefits

Article Highlights:

  • Tax-Advantaged Savings Plans
  • Who Can Contribute?
  • Maximum Contribution Without Gift Tax
  • The 5-Year Advance Contribution Rule
  • Additional Contributions During the 5-Year Period
  • State Limitation on Sec 529 Contributions
  • Paying Tuition Directly and Avoiding Gift Tax Issues
  • Qualified Uses of 529 Plan Funds
    o Tuition and fees
    o Books, supplies, and equipment
    o Special needs services
    o Room and board
    o K-12 Education
    o Apprenticeships and Additional Education Expenses
  •  Taxation and Penalties on Non-Qualified Distributions
  • Rollover Options
    o Rollover to an ABLE Account
    o IRA Rollover for Unused Funds

Section 529 plans are tax-advantaged savings plans designed to encourage saving for future education costs. They are legally known as “qualified tuition plans” and are sponsored by states, state agencies, or educational institutions. With rising education expenses, these plans offer a valuable option for families to invest in the future of a child’s education. Let’s delve into the specifics of who can contribute, the contribution limits, and the various uses of these funds, including recent updates under the “One Big Beautiful Bill” Act (OBBBA).

Who Can Contribute? A 529 plan can be funded by anyone—parents, grandparents, relatives, or friends. There is no restriction on who can make contributions, or what the contributor’s income is, as long as the total contributions for the beneficiary do not exceed the plan’s limits. This flexibility makes 529 plans a popular gift option for birthdays, holidays, or special occasions.

Maximum Contribution Without Gift Tax: Contributions to a 529 plan are considered gifts under the federal tax code. As of 2025, individuals can contribute up to the annual gift tax exclusion limit of $19,000 per beneficiary without triggering the requirement to file a gift tax return. This amount is adjusted annually for inflation, allowing for potential increases in future years. For example, a married couple could contribute a total of $38,000 to their grandchild’s 529 plan in 2025, provided they hadn’t made other gifts to the grandchild that reduced the available gift tax exclusion.

The 5-Year Advance Contribution Rule: One of the unique features of 529 plans is the ability to “superfund” an account by front-loading contributions. This rule allows individuals to contribute up to five times the annual gift tax exclusion amount in a single year without incurring gift taxes, provided they do not make additional gifts to the same beneficiary over the subsequent four years. For 2025, this means contributing a lump sum of up to $95,000. Superfunding a 529 plan while the intended beneficiary is young will allow the funds to grow tax free for a longer time.

Additional Contributions During the 5-Year Period: If the annual gift tax exclusion limit increases during the five-year period after a lump-sum contribution has been made, it is possible to make an additional contribution up to the new limit without incurring gift taxes. For instance, if the limit increases due to inflation adjustments, contributors can take advantage of the increased exclusion amount.

State Limitation on Sec 529 Contributions: The maximum contribution limit for Section 529 plans can vary significantly by state, as each state sets its own limit based on its estimates of the future costs of education. However, the typical range for maximum account balances across most states is from $235,000 to over $550,000 per beneficiary. It’s crucial to check the specific limit for the state plan you are interested in, as these caps are intended to cover qualified education expenses and are periodically adjusted to account for rising education costs. Also, of note: individuals are not limited to plans from their home state.

Paying Tuition Directly and Avoiding Gift Tax Issues: Grandparents often play a pivotal role in supporting a child’s educational journey, and many might contemplate utilizing their personal investment strategies to fund a family member’s education, believing they can achieve better returns than a 529 plan offers. However, for those who prioritize giving substantial financial support without impacting gift tax implications, it’s important to understand the benefits of direct tuition payments. The gift tax rules provide a strategic advantage by not considering the direct payment of tuition to an educational institution as a taxable gift. This allows grandparents to pay tuition bills directly without incurring gift tax consequences, enabling them to simultaneously maintain their investment portfolios while contributing significantly to a grandchild’s education in a tax-efficient manner. This approach not only aids in reducing estate value but also maximizes support for education without impinging upon annual gift tax exclusion limits.

Qualified Uses of 529 Plan Funds: 529 plan funds can be used for a vast range of educational expenses. These include:

  • Tuition and fees for college, university, or eligible postsecondary institutions.
  • Books, supplies, and equipment required for courses.
  • Computers, peripheral equipment and internet access.
  • Special needs services for a beneficiary with special needs, necessary for enrollment or attendance.
  • Room and board for students enrolled at least half-time.
  • K-12 Education: The OBBBA has expanded the use of 529 plans to cover more K-12 education expenses, permitting tax-free distributions of up to $20,000 annually per beneficiary for tuition and related expenses at public, private, or religious schools, starting January 1, 2026. From 2018 through 2025 only tuition of up to $10,000 per year was allowed as a tax-free distribution for K-12 expense. Among the newly eligible expenses are books or other instructional materials, online educational materials, tuition for tutoring or educational classes outside of the home, fees for achievement tests and advanced placement tests, and fees related to enrolling in colleges and universities.
  • Apprenticeships and Additional Education Expenses: New provisions under the OBBBA and other recent legislation have expanded the types of qualified expenses to include costs associated with registered apprenticeship programs and “qualified postsecondary credentialing expenses.”

Taxation and Penalties on Non-Qualified Distributions: While 529 plans offer tax-free growth and withdrawals for qualified expenses, distributions not used for qualified education expenses are subject to income tax and a 10% penalty on the earnings portion. The contributions, which were made with after-tax dollars (i.e., they weren’t tax deductible), are not taxable, but the appreciation of those contributions is.

The IRS does offer exemptions from the 10% penalty in certain situations, such as if the beneficiary receives a scholarship. In these scenarios, the penalty is waived, although the earnings would still be subject to income tax.

Rollover Options:

  • Rollover to an ABLE Account – Under the ABLE Act, funds in a 529 plan can be rolled over into an Achieving a Better Life Experience (ABLE) account for the same beneficiary or a qualifying family member without incurring income taxes or penalties. This option allows for flexibility if the original beneficiary needs support for disability-related expenses rather than educational costs.
  • IRA Rollover for Unused Funds – The SECURE Act 2.0 introduced a provision allowing up to $35,000 in leftover 529 plan funds to be rolled over into a Roth IRA for the designated beneficiary. This provides a way to utilize any excess funds that were originally earmarked for education by rolling the excess amount into a tax-advantaged retirement account. However, eligibility for a Roth IRA and contribution limits remain applicable, and the $35,000 rollover limit is a lifetime limit.

In conclusion, Section 529 plans offer a multifaceted and flexible approach to saving for education. They provide tax advantages while allowing contributors to offer significant support for a beneficiary’s educational journey. With recent legislative updates, such as those under the OBBBA, the scope and utility of 529 plans have expanded, encompassing a wider array of educational uses and offering additional financial planning options through rollovers to ABLE accounts and IRAs. As education costs continue to rise, these plans remain an essential tool for families planning for the future.

Consulting with a tax professional can provide invaluable assistance in providing personalized advice tailored to individual circumstances, helping to optimize educational savings strategies and ensure compliance with gift tax rules. If you’re considering a strategy involving 529 plans, reaching out to this office is a prudent step to ensure your plan aligns with current tax laws and best practices.

 From Side Hustle to Six Figures: Turning Your Small Business Into a Scalable Firm

It started as a side hustle — a few clients, a few late nights, maybe some extra cash to ease the budget. But now the calls are coming in faster. The demand is growing. And you’re starting to wonder: Am I ready to take this full-time?

The leap from side hustle to six figures is exciting — but it’s also a turning point. Done right, it can transform your life. Done wrong, it can drain your energy, your finances, and your confidence.

Here’s how to scale smartly in 2025.

Step 1: Make It Official

 

Registering as an LLC or S-Corp isn’t just about paperwork — it’s about protecting your personal assets and unlocking tax strategies that let you keep more of what you earn. The right structure now saves you from costly headaches later.

Step 2: Build a Financial Foundation

 

Growth demands clarity. That means:

  • A separate business bank account
  • Reliable bookkeeping (no more spreadsheets)
  • A plan for quarterly tax payments
  • Regular financial check-ins

This foundation doesn’t just keep you compliant — it gives you the numbers you need to make smart decisions with confidence.

Step 3: Stop Doing Everything Yourself

 

Every growing business hits a wall where the founder simply can’t do it all.
Whether it’s outsourcing payroll, automating your client intake, or hiring part-time help, letting go of lower-value tasks frees you up to focus on growth.

Step 4: Create a System for Customers — Not Just Leads

 

Six-figure businesses don’t happen by accident. They happen when you have a system:

  • A clear story that speaks to your ideal customer
  • A website designed to convert, not just inform
  • Consistent follow-up to build lasting relationships

The goal isn’t just more leads — it’s the right leads, and the processes to keep them coming back.

Step 5: Invest Back Into Your Dream

 

The smartest business owners use their first surge of income to fuel more growth — marketing, better technology, or professional support. Every reinvested dollar is a step closer to the business (and life) you want.

Your Side Hustle Is Ready — Are You?

 

The difference between a side hustle and a six-figure firm isn’t just time. It’s intention. It’s knowing when to stop treating your work as a “maybe” and start building it as a business.

Let’s Build Your Growth Plan Together

 

If you’re ready to turn your side hustle into a sustainable, six-figure business, we’re here to help. From choosing the right structure to planning your taxes and scaling smartly, we’ll guide you every step of the way.

Schedule a growth consultation today and let’s make 2025 the year your side hustle becomes your future.

 Got an IRS Notice? Here’s How to Handle It Without Losing Sleep

Few things can rattle a business owner faster than seeing “Internal Revenue Service” on an envelope. The instinct is to panic. But the truth? An IRS notice doesn’t automatically mean you’ve done something wrong.

In 2025, notices are more common than ever. Many are generated automatically when systems flag something for review — a missing form, a math discrepancy, or a question about deductions. The real danger isn’t the letter itself — it’s how you handle it.

Why the IRS Sends Notices

 

Notices may arrive for reasons such as:

  • Adjustments to income or deductions reported
  • Questions about tax credits or payments
  • Mismatched data between your return and third-party reporting
  • Requests for additional documentation

The IRS wants clarification — not confrontation. But if the notice is ignored or mishandled, small issues can grow into costly problems.

What Not to Do

  • Don’t ignore it. Penalties and interest grow quickly.
  • Don’t call the IRS unprepared. Miscommunication is common.
  • Don’t guess. A hasty response can make matters worse.

What You Should Do Right Away

 

  1. Open the notice immediately. Understand the issue and the deadline.
  2. Gather supporting documents. Returns, statements, and receipts matter.
  3. Reach out to our office. As experienced advisors, we know how to translate IRS language and respond effectively.

Why Acting Quickly Matters

 

Every missed deadline limits your options — and every day you wait adds stress that pulls you away from running your business. Timely action often means quick resolution, sometimes without even writing a check.

Let’s Handle This Together

 

Your time should be spent growing your business — not losing sleep over an IRS letter. We’ll work with you to respond correctly, protect your bottom line, and put this issue behind you.

Contact us today and let’s resolve your IRS notice so you can get back to what matters most.

 Qualified Small Business Stock (QSBS): A Huge Tax Benefit

Article Highlights:

  • What is Qualified Small Business Stock (QSBS)?
  • What Stock Qualifies as QSBS?
  • The Tax Benefits of QSBS
  • Maximum Exclusions and Updated Legislation under OBBBA
  • Disqualifications and Special Cases
  • Transfers, Passthroughs, and Rollover Opportunities
  • Understanding Tax Rates and Exclusions
  • Alternative Minimum Tax (AMT) and Electivity

Qualified Small Business Stock (QSBS) offers a compelling tax advantage for investors aiming to support small business ventures. Introduced as a part of the Revenue Reconciliation Act of 1993, QSBS enables investors to exclude a considerable portion of their capital gains from taxable income under Section 1202 of the Internal Revenue Code or to elect to roll over the gain into other QSBS. This article explores important facets of QSBS—from its definition to its complex tax treatments.

What is Qualified Small Business Stock (QSBS)? QSBS refers to shares held in a C corporation that qualify for tax benefits outlined in Section 1202. Not every C corporation stock meets the criteria; specific conditions around issuing corporations, holding periods, and more must be satisfied.

What Stock Qualifies as QSBS? To qualify as QSBS, stock must be issued by a domestic C corporation that actively conducts a qualified trade or business. Key qualifications include:

  • Small Business Status: At the time of stock issuance, the corporation’s gross assets must not exceed $50 million ($75 million after July 4, 2025) before and after the issuance.
  • Active Business Requirement: At least 80% of the corporation’s assets must be actively used in the conduct of the qualified trade or business.
  • Qualified Trade or Business: Most service-oriented businesses, such as health, law, and financial services, as well as farming and operating hotels, restaurants or similar businesses, are excluded. The business should engage primarily in qualifying activities.

The Tax Benefits of QSBS: One of the most attractive features of QSBS is the potential to exclude up to 100% of the capital gains from the sale of such stock. Here’s how the exclusions have evolved for stock acquired:

  • Before 2009 amendments: 50% exclusion on capital gains.
  • Post-2009 amendments and before the 2010 Small Business Jobs Act: 75% exclusion.
  • After the 2010 Small Business Jobs Act and before the OBBBA change: 100% exclusion for stock acquired between September 28, 2010, and before July 5, 2025.

Maximum Exclusions and Updated Legislation under OBBBA: The One Big Beautiful Bill Act (OBBBA), effective for stock acquired after July 4, 2025, introduced new exclusions:

  • 50% for three-year holds
  • 75% for four-year holds
  • 100% for five-year holds

For stocks acquired prior to July 5, 2025, the investor’s excludable gain is limited to $10 million or ten times the taxpayer’s adjusted basis in the QSBS, whichever is greater. For stock acquired post-July 4, 2025, the limit increases to $15 million with inflation adjustments in future years.

Disqualifications and Special Cases: Certain conditions render stock ineligible for QSBS benefits:

  • Disqualified Stock: Stock acquired via repurchase from the same corporation within two years.
  • S Corporation Stock: Entity status disqualifies S corporation stock from qualifying unless converted to C corporation status.

Transfers, Passthroughs, and Rollover Opportunities

  • Gift Transfers: QSBS can be transferred as a gift; the recipient inherits the holding period, maintaining potential eligibility for tax benefits.
  • Passthrough Entities: Partnerships and S corporations may hold QSBS, with each partner potentially benefiting from QSBS exclusions, assuming specific conditions are met.
  • Gain Rollover Election under Section 1045: Allows deferral of gains from sale of QSBS held for more than 6 months. When this option is elected, the gain not taxed reduces the basis of the acquired stock. The QSBS gain exclusion can be used later when the replacement stock is sold and after it has been held the required number of years.

Understanding Tax Rates and Exclusions

Not all gains are excludable under Section 1202. Additionally:

  • Non-excludable QSBS gains do not qualify for the 0%, 15%, or 20% capital gains rates, instead subjecting the gains to a maximum tax rate of 28%.

Alternative Minimum Tax (AMT) and Electivity – Exclusions under QSBS were once considered a preference item for AMT, but recent amendments remove its consideration as AMT preference. The treatment under Section 1202 is generally automatic given eligibility is met, without an explicit elective procedure.

QSBS offers significant tax savings and encourages investments in domestic small businesses. By understanding the qualifications, benefits, and limitations, investors can more effectively strategize their portfolios to harness QSBS provisions.

Remaining informed and consulting with this office can ensure compliance and optimization of tax benefits.

 Launching a Bright Financial Future: Tax Benefits for Your Children

Article Highlights

  • Trump Accounts:
    o Introduction
    o Contribution Rules
    o Distribution Guidelines
    o Government Contributions
    o Timing
  • Section 529 Plans: Time-Tested Education Savings
    o What is a 529 Plan?
    o Contributions and Gift Tax Considerations
  • Employing a Child in a Family Business
    o Income Tax Benefits
    o Retirement Account Contributions
  • Additional Strategies

Setting up a child’s financial future can be one of the most impactful gifts parents, grandparents, relatives, and friends can provide. By leveraging various tax-advantaged accounts and strategies, you can not only contribute to a child’s immediate financial needs but also lay a foundation for lifelong financial security. Here’s a comprehensive look at the options available, including the recently introduced Trump Accounts, Section 529 plans, and other beneficial strategies.

Trump Accounts: A New Tax-Advantaged Tool

  • Introduction to Trump Accounts – Trump Accounts, established by recent tax reforms, are a novel type of tax-deferred investment vehicle created to encourage savings for children. These accounts can be opened by parents or guardians for children under 18 who are U.S. citizens and have a Social Security number. Contributions can come from various sources, including parents, relatives, employers, non-profit entities, and in some cases the federal government. They are essentially a type of individual retirement account (IRA) but without the requirement that the child have earned income.
  • Contribution Rules – Annual contributions to Trump Accounts are capped at $5,000 (will be automatically adjusted for inflation). Interestingly, contributions from tax-exempt entities, like foundations, do not count towards this limit, provided they benefit a qualified group of children. It’s important to note that no contributions can be made by anyone once the child reaches age 18. Contributions to Trump Accounts are not tax deductible.
  • Distribution Guidelines – Generally, distributions from a Trump account cannot be made until the account holder turns 18. However, it’s worth noting that withdrawals of earnings, but not the original contributions, before the age of 59½ are subject to ordinary income tax and a 10% early distribution penalty unless they qualify for any of many exceptions afforded to IRAs.
  • Government Contributions: To generate interest in the Trump Accounts Congress created a pilot program wherein the federal government contributes $1,000 into the account of every eligible newborn child. This contribution is for U.S. citizens born between January 1, 2025, and December 31, 2028. The contribution is treated as if the child made a $1,000 payment against their income tax, with the amount getting credited back to their Trump Account. This automatic initiative is designed to kick-start savings and investment for the child’s future, encouraging early financial planning and helping families build a foundation for long-term financial growth. Additionally, if the account is not opened by the time the first tax return is filed where the child is claimed as a qualifying child dependent, the Secretary of the Treasury will establish the account on the child’s behalf, ensuring that no eligible child misses out on this benefit.
  • Timing — It is anticipated that parents (and others) will be able to make the first contributions to Trump Accounts in mid-year 2026. Watch for more details as the government works out the logistics of these new accounts, such as how to establish a Trump Account, over the next few months.

Section 529 Plans: Time-Tested Education Savings

  • What is a 529 Plan? A Section 529 plan is a tax-advantaged savings account specifically designed to save for education expenses. It provides a platform to accumulate funds that grow tax-deferred and can be withdrawn tax-free when used for qualified education expenses.
  • Contributions and Gift Tax Considerations:

    Who can contribute? Parents, grandparents, and even family friends can contribute to a 529 plan on behalf of a child. There are no income restrictions on who can open or contribute to these plans.o Annual Contribution Limits: To avoid gift tax implications, contributions should remain within the annual gift tax exclusion limits, $19,000 per beneficiary (as of 2025) for single filers and $38,000 for married couples.o 5-Year Lumping Strategy: Contributors can front-load the account by making five years’ worth of contributions at once. This strategy allows up to $95,000 (or $190,000 for married couples) per beneficiary without incurring gift taxes, assuming no other gifts are made during the five years.

    Additionally, if the annual gift tax exclusion increases during this five-year period, contributors have the flexibility to make makeup contributions, aligning with the new exclusion limits, and further enhancing the potential investment into the child’s future education savings.

    Uses and Flexibility: Funds from a 529 plan can be used for a variety of education-related expenses, including tuition, fees, books, and even room and board when attending college. Recent law changes have expanded the allowable use of 529 plan funds to include up to $20,000 ($10,000 if paid before July 4, 2025) per year for K-12 tuition and related expenses. Costs of certain apprenticeship programs are also eligible. If the original beneficiary doesn’t need the funds, the account owner can change the beneficiary to another family member.

    Rollover Opportunities: In situations where the funds in a 529 plan exceed educational needs, the Secure Act 2.0 allows rollovers of up to $35,000 from a 529 plan to a Roth IRA for the beneficiary, provided the 529 has been open for at least 15 years. This option ensures that the savings are not wasted and continue to benefit the recipient’s financial health.

Employing a Child in Family Business: The Benefits: Engaging a child in meaningful work within a family business or elsewhere not only instills a strong work ethic but also presents various tax advantages.

  • Income Tax Benefits:o Reasonable Compensation: For employing a child in a parent’s business, the child can earn up to the standard deduction amount tax-free. For 2025, this is $15,750, meaning the child doesn’t have to pay federal income tax on earnings below this threshold.o Business Deductions: The wages paid to children can be deducted as a business expense, which helps reduce the taxable income of the business and potentially lowers overall tax liability. Additionally, if the parent’s business is not incorporated—meaning it operates as a sole proprietorship or a partnership where both partners are the child’s parents—the wages paid to the child are not subject to FICA taxes (Social Security and Medicare taxes) if the child is under the age of 18, providing an added tax advantage by lowering employment tax expenses.
  • Retirement Account ContributionsA child’s earned income opens the door to funding a retirement account early.o Roth IRA: If they have earned income, children can contribute to a Roth IRA, up to the lesser of their earned income or the annual contribution limit ($7,000 for 2025). The contributions grow tax-free, and withdrawals in retirement are also tax-free, providing a significant financial advantage.
    A Roth IRA is often considered an excellent choice for children with minimal taxable income due to several unique features and benefits:§ Tax-Free Growth: Contributions to a Roth IRA are made with after-tax dollars, and the investments grow tax-free. Given that children are likely in the lowest tax bracket, the tax-free growth aspect is highly beneficial over the long term.

    § Tax-Free Withdrawals in Retirement: Qualified withdrawals from a Roth IRA are tax-free, which means that both the contributions and the substantial growth that can occur over decades are not taxed upon withdrawal, maximizing the money available in retirement.

    § Flexibility: Contributions (but not earnings) to a Roth IRA can be withdrawn at any time for any reason without penalty or taxes. This accessibility makes it a flexible option if the child needs the money for unplanned expenses.

    § Maximizing the Power of Compounding: Starting a Roth IRA early gives the investments more time to benefit from compound interest. Even small contributions can grow significantly over a long period, creating a sizable nest egg for retirement.

    § No Required Minimum Distributions (RMDs): Unlike traditional IRAs, Roth IRAs do not require minimum distributions during the account holder’s lifetime. This allows funds to potentially grow untouched or be passed on to heirs.

    § Earning Income Requirement: Opening a Roth IRA for a child requires that the child have earned income. Encouraging children to earn and contribute to their own retirement funds can instill a savings habit and financial responsibility early on.

    These features make the Roth IRA an appealing option to begin a child’s journey toward financial independence and retirement savings, especially when their income is low and the tax impact is minimal.

Additional Strategies: Other Financial Boosts

  • Saving for Retirement Early: Even minors are eligible to have a Roth IRA if they have earned income.
  • Teaching Financial Responsibility: Encouraging savings habits early, whether through structured accounts like a Trump Account and 529 plans or personal savings programs, fosters lifelong financial discipline.
  • Encouraging Entrepreneurial Ventures: If your child shows interest in launching their own small business or providing services, such as tutoring or dog walking, this experience can also lead to early financial growth, teach important money management skills, and generate income that can fund savings or retirement accounts.

Conclusion: The array of financial vehicles available today, from Trump Accounts to 529 plans and beyond, offer a robust toolkit for shaping a child’s financial future. These options not only help in covering educational and immediate expenses but also build a financial framework that supports investment acumen and retirement savings. By taking full advantage of these tools, those eager to support a child’s financial journey can effectively set them on the right foot for a prosperous future. Whether it’s starting a savings account, employing them in a family business, a summer job, or ensuring their education is funded, these strategies cement a legacy of financial security and prudence that will benefit future generations.

If you have questions related to any of these tax benefits, please contact this office.

 A Smarter Way to Read Your Business’s Health: The Balance Sheet Deep Dive

Starting a business is more than revenue and expenses—it’s about knowing what you truly own, what you owe, and what your venture is worth. That’s where a balance sheet comes in: a snapshot that tells the story of your business’s financial condition in a single glance.

Why Every Business Needs a Balance Sheet

  • A Clear Snapshot, Every Time
    A balance sheet lists your assets, liabilities, and equity as of a specific date, showing where your business stands in financial terms. It connects seamlessly with your income and cash flow statements, forming a complete financial picture.
  • From Guesswork to Smart Moves
    Rather than hoping for the best, you’ll see if your cash flow is healthy, if customers are paying on time, or if liabilities are creeping up. A balance sheet helps you catch trouble early and capitalize on strengths.

Assets = Liabilities + Equity: The Core Equation

At the heart of the balance sheet is this simple formula:

Assets = Liabilities + Equity

  • Assets: Anything you own—cash, equipment, inventory.
  • Liabilities: What you owe—loans, unpaid bills.
  • Equity: What’s left for you once liabilities are paid.

Think of it like balancing a scale—everything you own must equal what you owe plus what you’ve earned.

Why Software Beats Spreadsheets

You could track everything manually, but that’s time-consuming and risky. With QuickBooks®, the math happens automatically—your balance sheet stays accurate and always up-to-date, no spreadsheet gymnastics needed.

You can run reports any time and even customize them—filtering by period or type—making review and decision-making smoother than ever.

Balance Sheets in Action: What to Track

Insight AreaWhat You’ll Learn
LiquidityDo you have enough cash to pay bills?
Debt HealthAre liabilities growing too fast?
Business WorthWhat’s your equity telling you?
Trends Over TimeIs your business growing or slipping?

Balance sheets are powerful tools for spotting trends, planning investments, or just staying on top of your financial game.

We don’t just hand you reports. We help you interpret them, act on them, and plan ahead. With expert guidance from our team, you’ll know exactly where you stand—and where to go next.

Ready for clarity—and confidence?

Book a “Financial Check-In” session with this office today. We’ll help you set up or optimize your balance sheets and use them to drive smart decisions.

 September 2025 Individual Due Dates

2025 Fall and 2026 Tax Planning

Tax Planning Contact this office to schedule a consultation appointment.

September 10 – Report Tips to Employer

If you are an employee who works for tips and received more than $20 in tips during August, you are required to report them to your employer on IRS Form 4070 no later than September 10. Your employer is required to withhold FICA taxes and income tax withholding for these tips from your regular wages. If your regular wages are insufficient to cover the FICA and tax withholding, the employer will report the amount of the uncollected withholding in box 8 of your W-2 for the year. You will be required to pay the uncollected withholding when your return for the year is filed.

September 15 – Estimated Tax Payment Due

The third installment of 2025 individual estimated taxes is due. Our tax system is a “pay-as-you-earn” system. To facilitate that concept, the government has provided several means of assisting taxpayers in meeting the “pay-as-you-earn” requirement. These include:

  • Payroll withholding for employees;
  • Pension withholding for retirees; and
  • Estimated tax payments for self-employed individuals and those with other sources of income not covered by withholding.

When a taxpayer fails to prepay a safe harbor (minimum) amount, they can be subject to the underpayment penalty. This penalty is equal to the federal short-term rate plus 3 percentage points, and the penalty is computed on a quarter-by-quarter basis.

Federal tax law does provide ways to avoid the underpayment penalty. If the underpayment is less than $1,000 (the de minimis amount), no penalty is assessed. In addition, the law provides “safe harbor” prepayments. There are two safe harbors:

  • The first safe harbor is based on the tax owed in the current year. If your payments equal or exceed 90% of what is owed in the current year, you can escape a penalty.
  • The second safe harbor is based on the tax owed in the immediately preceding tax year. This safe harbor is generally 100% of the prior year’s tax liability. However, for taxpayers whose AGI exceeds $150,000 ($75,000 for married taxpayers filing separately), the prior year’s safe harbor is 110%.

Example: Suppose your tax for the year is $10,000 and your prepayments total $5,600. The result is that you owe an additional $4,400 on your tax return. To find out if you owe a penalty, see if you meet the first safe harbor exception. Since 90% of $10,000 is $9,000, your prepayments fell short of the mark. You can’t avoid the penalty under this exception.

However, in the above example, the safe harbor may still apply. Assume your prior year’s tax was $5,000. Since you prepaid $5,600, which is greater than 110% of the prior year’s tax (110% = $5,500), you qualify for this safe harbor and can escape the penalty.

This example underscores the importance of making sure your prepayments are adequate, especially if you have a large increase in income. This is common when there is a large gain from the sale of stocks, sale of property, when large bonuses are paid, when a taxpayer retires, etc. Timely payment of each required estimated tax installment is also a requirement to meet the safe harbor exception to the penalty. If you have questions regarding your safe harbor estimates, please call this office as soon as possible.

CAUTION: Some state de minimis amounts and safe harbor estimate rules are different than those for the Federal estimates. Please call this office for particular state safe harbor rules.

Weekends & Holidays:

If a due date falls on a Saturday, Sunday or legal holiday, the due date is automatically extended until the next business day that is not itself a legal holiday.

Disaster Area Extensions:

Please note that when a geographical area is designated as a disaster area, due dates will be extended. For more information whether an area has been designated a disaster area and the filing extension dates visit the following websites:

FEMA: https://www.fema.gov/disaster/declarations
IRS: https://www.irs.gov/newsroom/tax-relief-in-disaster-situations

 

 September 2025 Business Due Dates

September 15 – S Corporations

File a 2024 calendar year income tax return (Form 1120-S) and pay any tax due. This due date applies only if you requested an automatic 6-month extension. Provide each shareholder with a copy of their Schedule K-1 (Form 1120-S) or a substitute Schedule K-1 and, if applicable, Schedule K-3 (Form 1120-S) or substitute Schedule K-3

September 15 – Corporations 

Deposit the third installment of estimated income tax for 2025 for calendar year corporations.

September 15 – Partnerships

File a 2024 calendar year return (Form 1065). This due date applies only if you were given a 6-month extension. Provide each partner with a copy of their Schedule K-1 (Form 1065) or a substitute Schedule K-1 and, if applicable, Schedule K-3 (Form 1065) or substitute Schedule K-3 (Form 1065).

September 15 – Social Security, Medicare and Withheld Income Tax

If you are an employer and the monthly deposit rules apply, September 15 is the due date for you to make your deposit of Social Security, Medicare, and withheld income tax for August 2025. This is also the due date for the nonpayroll withholding deposit for August 2025 if the monthly deposit rule applies.


Weekends & Holidays:

If a due date falls on a Saturday, Sunday or legal holiday, the due date is automatically extended until the next business day that is not itself a legal holiday.

Disaster Area Extensions:

Please note that when a geographical area is designated as a disaster area, due dates will be extended. For more information whether an area has been designated a disaster area and the filing extension dates visit the following websites:

FEMA: https://www.fema.gov/disaster/declarations
IRS: https://www.irs.gov/newsroom/tax-relief-in-disaster-situations

Read More

August 2025 Newsletter

August marks the close of summer and a prime opportunity to review your year-to-date progress. With the final months of the year approaching, now is the time to fine-tune your financial strategy, address any gaps, and take advantage of current opportunities. Staying organized and informed about the latest tax and business developments will help you keep your plans on track through year-end.

This month, we’re diving into how the “One Big Beautiful Bill Act” (OBBBA) could shape your 2025 taxes, smart inventory tactics to prevent dead stock from cutting into profits, the newest IRS “Dirty Dozen” scams to watch for, and the OBBBA provisions every senior should know. Our goal is to help you wrap up summer strong and enter the fall with clarity and confidence.

See How the “One Big Beautiful Bill” Act Will Impact Your 2025 Taxes and Transform Your Financial Landscape

 

Article Highlights:

  • Standard Deduction Increase
  • Special Temporary Deduction for Seniors
  • Child Tax Credit
  • Qualified Small Business Stock (QSBS) Exemption
  • New Deduction for Tips
  • Overtime Deduction
  • Deduction for Car Loan Interest
  • Adoption Credit
  • 529 Savings Plan Enhancements
  • Bonus Depreciation
  • Qualified Production Property Special Depreciation Allowance
  • Third-Party Network Transaction Reporting (1099-Ks)
  • Termination of Various Environmental Tax Credits
  • Domestic Research Expenditures
  • SALT Deduction Changes

On July 4th, the President signed into law the “One Big Beautiful Bill” Act (OBBBA)—a sweeping piece of legislation introducing multiple tax changes that will affect individuals, families, and businesses starting in 2025. While some provisions extend beyond this year, our focus is on those coming into effect next year, so you can plan ahead.

Several environmental credits are set to end as early as September 30, 2025. If you want to benefit from these before they disappear, timely action will be essential. This summary outlines the key updates so you can evaluate their relevance to your situation and make informed decisions before year-end.

Key Tax Law Changes for 2025

Standard Deduction Increase

  • $15,750 – Single/Married Filing Separately
  • $23,625 – Head of Household
  • $31,500 – Married Filing Jointly
  • Indexed for inflation in future years.

Special Temporary Deduction for Seniors (2025–2028)

  • $6,000 for individuals age 65+ ($12,000 per couple if both qualify).
  • Income limits: MAGI ≤ $75,000 (single) or $150,000 (joint).
  • Available to both itemizers and non-itemizers; does not replace the additional standard deduction for seniors.

Child Tax Credit

  • Increased to $2,200 per child.
  • Phaseouts: $400,000 (joint filers) and $200,000 (others).
  • Both parent(s) and child must have Social Security numbers.

Qualified Small Business Stock (QSBS) Exemption

  • Applies to C Corporations; acquired after July 4, 2025.
  • 50% exclusion after 3 years, 75% after 4 years, 100% after 5 years.
  • Subject to limits—consult our office to determine eligibility.

New Deduction for Tips (Through 2028)

  • Up to $25,000 annually for qualifying tipped occupations.
  • Income phaseouts start at $150,000 (single) or $300,000 (joint).
  • Not available for specified service businesses (e.g., law, accounting, consulting).
  • IRS list of qualifying occupations expected by October 2, 2025.

Overtime Deduction (Through 2028)

  • Excludes certain overtime pay above the regular rate from taxable income.
  • Same phaseouts as tip deduction.
  • Employers will report eligible overtime on Form W-2 or similar.

Deduction for Car Loan Interest (Through 2028)

  • Up to $10,000 interest deduction for loans on U.S.-assembled vehicles.
  • Phaseouts begin at $100,000 (single) and $200,000 (joint).
  • VIN must be provided on return.

Adoption Credit (2025–2028)

  • Partially refundable up to $5,000.

529 Savings Plan Enhancements

  • K–12 and homeschool expense limit doubled to $20,000 (from $10,000) for distributions after July 4, 2025.
  • Now includes qualified postsecondary credentialing expenses.

Bonus Depreciation

  • Restored to 100% permanently for qualifying business property acquired after Jan. 19, 2025.

Qualified Production Property Special Depreciation Allowance

  • 100% immediate deduction for certain new or improved factory property.
  • Must begin construction after Jan. 19, 2025, and before Jan. 1, 2029; in service before Jan. 1, 2031.

Third-Party Network Transaction Reporting (1099-K)

  • Reporting threshold returns to $20,000 and more than 200 transactions per year.

Termination of Environmental and Energy Credits

  • Previously Owned Clean Vehicle Credit – Ends Sept. 30, 2025.
  • New Clean Vehicle Credit – Ends Sept. 30, 2025.
  • Commercial Clean Vehicle Credit – Ends Sept. 30, 2025.
  • Alternative Fuel Vehicle Refueling Credit – Ends Sept. 30, 2025.
  • Energy Efficient Home Improvement Credit – Ends Dec. 31, 2025.
  • Solar Energy Credit – Ends Dec. 31, 2025.

Domestic Research Expenditures

  • Immediate deduction allowed for domestic research starting in 2025.

SALT Deduction Changes

  • Cap increases to $40,000 in 2025, with gradual annual increases until 2029, then reverts to $10,000.
  • Phaseout begins at MAGI $500,000; fully reduced back to $10,000 at MAGI $600,000+.

Final Thoughts

We’re committed to helping you make the most of these updates and ensuring your strategy stays on track. If you have questions about how the “One Big Beautiful Bill Act” or other recent developments could affect your personal or business finances, contact us to schedule a consultation.

And remember—our expertise is available to your friends, family, and colleagues as well. Your referrals and kind reviews mean the world to us and help us continue supporting clients in achieving lasting success.

Navigating SALT Deduction Changes and Passthrough Entity Strategies

The SALT Deduction: A Quick Refresher
The State and Local Tax (SALT) deduction lets you deduct state/local income or sales taxes plus property taxes if you itemize. For years, this helped offset double taxation—especially in high-tax states.

Before & After the TCJA

  • Pre-2018: No SALT deduction cap.
  • Post-TCJA (2018–2024): Capped at $10,000 ($5,000 if married filing separately).

The OBBBA Update (Starting 2025)

Beginning in 2025, the SALT cap increases significantly and adjusts annually until 2029, then reverts unless extended.

SALT Deduction Cap & MAGI Limits (2024–2030)

(Half these amounts apply to married couples filing separately.)

Limits for High-Income Taxpayers

The OBBBA phases out the SALT deduction for high earners based on Modified Adjusted Gross Income (MAGI).

  • Phase-out starts when MAGI exceeds the yearly threshold.
  • Deduction is reduced by 30% of income above that level.
  • At the upper MAGI limit, the deduction drops back to $10,000.

Example:

  • 2027: SALT cap = $40,804.
  • MAGI $523,000 → Deduction reduced by $3,885 → New max = $36,919.
  • MAGI $615,000 → Reduced to $10,000.

Passthrough Entity Workarounds (PTET)

Many states offer PTET programs letting S corporations and partnerships pay state tax at the entity level. This allows the business to deduct the tax federally, bypassing the SALT cap for individual owners—who receive a state tax credit in return.

Why This Matters
The OBBBA offers temporary relief for many taxpayers, but high-income earners may see limited benefit. PTET strategies can provide an alternative path to maximize deductions in high-tax states.

Next Steps
If your SALT deduction will be reduced by your income level, contact our office to see if your state’s PTET program could work for you.

Mid-Year Inventory Assessment: Don’t Let Dead Stock Eat Your Margins

Dead inventory is a silent profit killer.
You might not notice it right away, but it’s sitting there—on the shelf, in the warehouse, or in the “we’ll get to it later” pile—quietly draining your cash flow. By the time you realize how much money is tied up in unsold products, it’s often too late to recover the lost opportunity.

Mid-year is the perfect time to act.
This is your chance to take a hard look at your stock, clear out what’s holding you back, and adjust your strategy before the year-end rush.

Why This Matters in 2025

This year has been especially challenging for inventory management:

  • Higher holding costs
  • Tariff and port delay uncertainties
  • Shifts in consumer demand
  • Leftover “just in case” stock from last year

The result? Many businesses are sitting on more inventory than planned—and less liquidity than they need. The good news is that slow-moving stock can be turned around—if you catch it early.

Mid-Year Inventory Assessment Checklist

1. Do a Physical Inventory Count

Don’t rely solely on what the system says—verify what’s actually on your shelves. Discrepancies lead to poor purchasing decisions and distorted forecasts.

2. Run a Sales Velocity Report

Identify what’s selling and what’s been sitting for 90–180 days. If it hasn’t moved in three to six months, it’s not inventory—it’s overhead.

3. Understand the True Cost of Holding Inventory

Slow-moving stock:

  • Ties up cash flow
  • Consumes storage and warehouse space
  • Increases insurance costs
  • Raises theft, damage, and obsolescence risks
  • Delays the introduction of higher-margin products

4. Identify True Dead Stock

Flag anything outdated, expired, or through multiple sales cycles without selling. If it hasn’t sold in six months and isn’t seasonal, it’s time to move it out.

5. Plan Strategic Promotions or Exit Strategies

Options include:

  • Bundling slow movers with popular items
  • Limited flash sales
  • VIP or loyalty-only promotions
  • Repackaging or repositioning products
    If they still don’t move—consider donating, liquidating, or repurposing.

6. Use Data to Forecast Smarter

Learn from what’s not selling. Was demand overestimated? Was it a passing trend? Apply these lessons to Q3/Q4 buying decisions to reduce overstock and improve cash flow.

Bonus: Track your Inventory Turnover Ratio to measure how often inventory is sold and replaced. Low turnover means cash is stuck in products; high turnover means healthier margins.

Final Word: Take Control Before It’s Too Late

Inventory should work for you—not against you. Waiting until December to fix a July problem means missed profits and tighter cash flow.

If you want a second set of eyes on your inventory strategy, we can help. We work with business owners to review stock performance, identify financial opportunities, and build proactive plans that protect margins year-round.

Contact our office today to start your mid-year inventory assessment.

Examining the Impact: How the ‘One Big Beautiful Bill Act’ (OBBBA) Might Apply to You

Article Highlights:

    • Individual Tax Rates
    • Standard Deductions
    • Senior Tax Deduction
    • Child Tax Credit
    • Qualified Business Income (QBI) Deduction & Minimum QBI Deduction
    • Estate and Gift Tax Exemption
    • Alternative Minimum Tax (AMT)
    • Gambling Losses
    • Mortgage Interest
    • No Tax on Tips / Overtime
    • Car Loan Interest
    • Trump Accounts
    • State and Local Tax (SALT) Deduction
    • Casualty Loss Deduction
    • Pease Limitation
    • Adoption Credit
    • Dependent Care Assistance
    • Bonus Depreciation
    • Energy Credit Terminations
    • Scholarship Contribution Credit
  • Charitable Contributions for Non-itemizers

Overview

With many Tax Cuts and Jobs Act (TCJA) provisions set to expire after 2025, the newly signed One Big Beautiful Bill Act (OBBBA) both extends and revises a number of key tax policies. While it continues core TCJA measures like reduced individual rates and business deductions, it also introduces new provisions tailored to today’s economic climate.

On July 4th, President Trump signed OBBBA into law, making changes that impact both the 2025 tax year and subsequent years. This summary focuses on provisions that affect individual taxpayers, families, and small businesses—leaving out big business provisions so you can focus on what’s relevant to your own tax planning.

Note: MAGI (Modified Adjusted Gross Income) is generally the same as AGI for most taxpayers, but it also includes certain foreign and territory-excluded income.

Key Provisions and Updates

Individual Tax Rates

  • TCJA’s reduced rates are extended beyond 2026.
  • Inflation adjustments continue from 2026 onward.
  • The 39.6% bracket remains eliminated, favoring higher earners.

Standard Deductions

  • Higher TCJA standard deductions are made permanent.
  • For 2025: $15,000 (single/MFS), $22,500 (HOH), $30,000 (MFJ).
  • OBBBA applies a new inflation adjustment method for 2025—IRS to announce updated amounts.

Senior Tax Deduction (2025–2028)

  • $6,000 per senior ($12,000 per couple) if MAGI < $75,000 (single) / $150,000 (MFJ).
  • Replaces campaign proposal to remove tax on Social Security.

Child Tax Credit (from 2025)

  • Increases from $2,000 to $2,200 per qualifying child; inflation-adjusted annually.
  • SSN required for both parent(s) and child.
  • Phase-out starts at MAGI $400,000 (MFJ) / $200,000 (others).

Qualified Business Income (QBI) Deduction (from 2026)

  • Phase-in thresholds rise to $75,000 (single) / $150,000 (MFJ).
  • Minimum QBI Deduction: $400 (inflation-adjusted) if you have ≥ $1,000 QBI from active businesses you materially participate in.

Estate & Gift Tax Exemption (from 2026)

  • Increases to $15M (single) / $30M (MFJ), inflation-adjusted annually.

Alternative Minimum Tax (AMT) (from 2026)

  • Higher exemptions and phase-out thresholds remain in place.

Gambling Losses (from 2026)

  • Loss deduction remains limited to gambling income, now capped at 90% of actual losses.

Mortgage Interest

    • $750,000 debt cap made permanent ($375,000 MFS).
  • Mortgage insurance premiums again deductible as qualified residence interest.

No Tax on Tips & Overtime (2025–2028)

  • Tips: Deduction up to $25,000 for qualifying occupations (excludes “specified trades or businesses”).
  • Overtime: Deduction limited to pay rate difference; capped at $12,500 (single) / $25,000 (MFJ).
  • Shared Rules: Phase-out starts at MAGI $150,000 (single) / $300,000 (MFJ). Must file jointly if married.

Car Loan Interest (2025–2028)

  • Deduction up to $10,000 for U.S.-assembled passenger vehicles ≤ 14,000 lbs.
  • Phase-out begins at MAGI $100,000 (single) / $200,000 (MFJ).

Trump Accounts (for children born 2025–2028)

  • $1,000 initial deposit from federal government.
  • Annual contributions: $5,000 (parents), $2,500 (employers).
  • Tax-deferred growth; withdrawals taxed as long-term capital gains.

SALT Deduction (2025–2029)

  • Cap starts at $40,000 in 2025, rising slightly to $41,624 by 2029.
  • Reverts to $10,000 in 2030.
  • Phase-out for MAGI ≥ $500,000, bottoming at $10,000.

Casualty Loss Deduction

  • Extended to cover state-declared disasters in addition to federal ones.

Pease Limitation

  • Permanently repealed after 2025.
  • Replaced by a new overall limitation affecting taxpayers in the top bracket.

Adoption Credit (from 2026)

  • $5,000 of the credit is now refundable.

Dependent Care Assistance (from 2026)

  • Limit rises to $7,500 ($3,750 MFS).

Bonus Depreciation (from Jan. 19, 2025)

  • Restores 100% deduction for qualified tangible property.

Energy Credit Terminations (accelerated deadlines)

  • Clean vehicle credits and other energy-related credits end between Sept. 30, 2025 and Dec. 31, 2025 (see original list for details).

Scholarship Contribution Credit (from 2026)

  • Credit up to $1,700 for contributions to qualifying scholarship organizations; 5-year carryforward.

Charitable Contributions for Non-itemizers (from 2026)

  • Up to $1,000 ($2,000 MFJ) in cash donations to qualifying charities.

Why This Matters

The OBBBA introduces significant tax law changes that may affect your 2025 return and beyond. Understanding these provisions now can help you make informed decisions about income timing, deductions, and credits before year-end.

Our office can help you:

  • Assess how these changes affect your situation
  • Identify new opportunities to reduce your tax burden
  • Ensure compliance with updated rules

Contact us today to schedule a tax planning session and prepare for the changes ahead.

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Understanding the New Above-the-Line Tax Deduction for Qualified Tips

Key Highlights:

  • Changes from prior tip reporting rules
  • New above-the-line deduction for qualified tips
  • How the deduction works and its limits
  • Who qualifies—and who doesn’t
  • Expanded FICA tip tax credit for employers

Background: Tip Reporting and Employer Rules

Under prior law, employees receiving $20 or more in tips per month from one employer had to report those tips by the 10th day of the next month. Employers then withheld income and FICA taxes and reported the tips on Form W-2.

For large food and beverage establishments with 10+ employees, employers had to allocate tips so that reported tips equaled at least 8% of gross sales. If reported tips fell short, the employer had to make allocations to cover the difference.

There was also an Employer Social Security Credit—a credit on the employer’s share of Social Security tax paid on tips above certain minimum wage thresholds (Form 8846).

The OBBBA Change: Above-the-Line Deduction for Tips

Starting 2025 through 2028, the “One Big Beautiful Bill Act” offers workers in eligible tip-based jobs an above-the-line deduction of up to $25,000 per tax return (not per person).

This deduction applies whether you itemize or take the standard deduction, and it reduces Adjusted Gross Income (AGI)—which can also improve eligibility for other tax breaks tied to AGI limits.

Important:

  • Tips are still subject to FICA tax.
  • Self-employed workers must still pay self-employment tax on tips.

What Counts as Qualified Tips

To qualify, tips must:

  • Be given voluntarily
  • Have no required minimum or penalty for non-payment
  • Be non-negotiable and determined by the payer
  • Be earned in a trade or business not listed as a “specified service trade or business” under Sec. 199A(d)(2)
  • Meet any other requirements issued in future IRS regulations

Both W-2 employees and independent contractors (1099-K, 1099-NEC) can qualify if the occupation is on the Treasury Department’s approved list (expected October 2025).

Self-Employment Considerations

  • Tips count as gross business income
  • You may deduct up to $25,000 if the business is in a qualifying trade or industry
  • Deduction cannot exceed total business income

When You Can’t Take the Deduction

You cannot claim the deduction if:

  1. You work in a specified service trade or business such as health care, law, accounting, or consulting.
  2. Your AGI exceeds $150,000 ($300,000 joint), triggering a $100 deduction reduction for every $1,000 over the limit.
  3. You’re married but don’t file jointly.
  4. You don’t have a valid, work-eligible Social Security Number.

Expanded FICA Tip Tax Credit for Employers

The law also expands the FICA tip credit—once only for food and beverage businesses—to include beauty services such as hair, nails, esthetics, and spas. This allows these businesses to claim a credit on part of the Social Security taxes paid on tips.

Why This Matters

This above-the-line deduction is one of the most significant tax breaks for tipped workers in years. By lowering AGI, it directly reduces taxable income and may unlock other tax benefits. Employers in newly eligible industries also gain from the expanded FICA tip credit.

Next Step:
If you earn tips or employ tipped workers, plan now for 2025. The rules have complexity—especially around eligibility—so consulting a tax professional is the safest way to maximize your benefit.

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How to Keep Your Business in the Family – Tax Traps and Solutions

You’ve built something real.

A business.
A legacy.
A family-run operation that’s weathered recessions, pandemics, and more sleepless nights than you can count.

Maybe it’s a restaurant. A dental practice. A farm that’s been in the family for generations.
Or maybe it’s a consulting firm you started at your kitchen table with a laptop and a dream.

Now you’re thinking about passing it on—to your daughter, nephew, or niece who just earned an MBA.

But here’s the reality no one tells you:
Running a family business is hard.
Transferring one? Even harder—especially if you don’t plan for the tax traps.

This isn’t just about legal paperwork or naming a successor. It’s about making sure your business survives the transition without collapsing under IRS penalties, valuation disputes, or family conflicts that could have been avoided.

The Hidden Danger of “Just Giving It to the Kids”

You can’t simply hand over your business and call it a day.

If you gift the business, the IRS may treat it as a taxable transfer. Sell it below market value? Same problem.
If the business passes through inheritance, you may face estate taxes, valuation issues, and disputes over what’s “fair.”

The last thing you want is to deal with payroll from probate court.

Common Tax Traps When Transferring a Family Business

1. Capital Gains Shock

Imagine you started your business 20 years ago with $20,000 and it’s now worth $2 million.
If you sell or gift it to your kids now, your original purchase price (basis) goes with it. If they sell it later, they’ll pay capital gains tax on the full difference.

The risk: Gifting might save on estate taxes but could result in a huge capital gains bill for the next generation.

2. S-Corp Ownership Limits

S-Corporations have strict rules on who can be a shareholder—no corporations or partnerships, and only certain trusts qualify.

The risk: Transferring S-Corp shares the wrong way can end S-Corp status and cause costly tax consequences.

3. Gifting Limits and Lifetime Exemption

In 2025, the lifetime gift and estate tax exemption is $13.99 million. In 2026, it will increase to $15 million ($30 million for married couples).

The risk: Exceeding the annual gifting limit without proper documentation reduces your lifetime exemption—sometimes without you realizing it.

4. No Business Valuation

Disagreements over a business’s value can get messy fast—especially if the IRS disagrees with your numbers.

The risk: Gifting or selling ownership without a qualified valuation can lead to disputes and penalties.

5. The Farm and Inheritance Problem

Farms and similar family assets are often land-rich but cash-poor. Without proper planning, heirs may have to sell land just to pay estate taxes.

The risk: Estate taxes can force liquidation of family property when there’s no liquidity to cover the bill.

Final Takeaway

Passing your business to the next generation isn’t just a legal transaction—it’s a strategic process.
Without careful tax planning, the business you spent decades building could face unnecessary taxes, financial strain, or even be lost entirely.

If you’re considering a transfer—whether soon or years from now—consult with a qualified tax professional. The right plan can preserve your legacy, protect your heirs, and ensure the business stays in the family for years to come.

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