5 ways businesses can assess health care benefits spending

Under current federal income tax rules, so-called personal interest expense generally can’t be deducted. One big exception is qualified residence interest or home mortgage interest, which can be deducted, subject to some limitations, if you itemize deductions on your tax return. The One Big Beautiful Bill Act (OBBBA) adds another exception for eligible car loan interest. In tax law language, the new deduction is called qualified passenger vehicle loan interest. Are you eligible? Here are the rules. “No tax” isn’t an accurate description If you could deduct all your car loan interest, you’d be paying it with pre-tax dollars rather than with post-tax dollars — meaning after you paid your federal income tax bill. The new deduction has been called “no tax on car loan interest,” but that’s not really accurate. Here’s a more precise explanation. The OBBBA allows eligible individuals — including those who don’t itemize — a temporary new deduction for some or all of the interest paid on some loans. The loans must be taken out to purchase a qualifying passenger vehicle. Specifically, for 2025 through 2028, up to $10,000 of car loan interest can potentially be deducted each year. The loan must be taken out after 2024 and must be a first lien secured by the vehicle, which is used for personal purposes. Leased vehicles don’t qualify. So far, this may sound good, but not all buyers will qualify for the new deduction because of the limitations and restrictions summarized below. Income-based phaseout rule The deduction is phased out starting at $100,000 of modified adjusted gross income (MAGI) or $200,000 for married joint-filing couples. If your MAGI is above the applicable threshold, the amount that you can deduct (subject to the $10,000 limit) is reduced by $200 for each $1,000 of excess MAGI. So, for an unmarried individual, the deduction is completely phased out when MAGI reaches $150,000. For married joint filers, the deduction is completely phased out when MAGI reaches $250,000. Qualifying vehicles To qualify for the new deduction, the vehicle must be a car, minivan, van, SUV, pickup truck or motorcycle with a gross vehicle weight rating under 14,000 pounds. It must be manufactured primarily for use on public streets, roads and highways, and it must be new (meaning the original use begins with you). The “final assembly” of the vehicle must occur in the United States. You must report the vehicle identification number (VIN) on your tax return. Vehicles assembled in America have a special number in the VIN to signify that. Meeting the requirements In the law, the definition of final assembly is convoluted. The law states: “Final assembly means the process by which a manufacturer produces a vehicle at, or through the use of, a plant, factory, or other place from which the vehicle is delivered to a dealer with all component parts necessary for the mechanical operation of the vehicle included with the vehicle, whether or not the component parts are permanently installed in or on the vehicle.” Another requirement is that your car loan lender must file an information return with the IRS that shows the amount of interest paid during the year on your qualified car loan. Refinanced loans If an original qualified car loan is refinanced, the new loan will be a qualified loan as long as: 1) the new loan is secured by a first lien on the eligible vehicle and 2) the initial balance of the new loan doesn’t exceed the ending balance of the original loan. Ineligible loans Interest on the following types of loans doesn’t qualify for the new deduction: Loans to finance fleet sales, Loans to buy a vehicle not used for personal purposes, Loans to buy a vehicle with a salvage title or a vehicle intended to be used for scrap or parts, Loans from certain related parties, and Any lease financing. Conclusion According to various reports, most American car buyers rely on loans to finance their purchases. So, the ability to deduct car loan interest is something that many taxpayers would be happy about. That said, many buyers won’t qualify for the new deduction. It’s off limits for high-income purchasers, used vehicle buyers and those who buy foreign imports. Contact us with any questions. © 2025 

One of the most critical decisions entrepreneurs make when starting or restructuring a business is choosing the right entity type. This choice directly impacts how the business is taxed, the level of administrative complexity and regulatory compliance obligations. While legal liability considerations also matter, we will focus on tax implications. For liability advice, consult a legal professional. Whether launching a new venture or reassessing your current structure, understanding how each entity is taxed can help you make strategic and compliant decisions. Here’s a brief overview of five entities. 1. Sole proprietorship: Simple with full responsibility A sole proprietorship is the easiest structure to set up. It’s owned and operated by one person and requires minimal administrative effort. Here are the main features: Taxation. Income and losses are reported on the owner’s personal tax return on Schedule C of Form 1040. Income is subject to 15.3% federal self-employment tax, and the business itself isn’t taxed separately. The owner may also qualify for a Qualified Business Income (QBI) deduction, potentially reducing the effective tax rate. Compliance. Aside from obtaining necessary licenses or a business name registration, there’s little required paperwork. However, the owner is personally liable for all business debts and legal obligations. 2. S Corporation: Pass-through entity with payroll considerations An S corp is a tax designation offering pass-through taxation benefits while imposing stricter rules. Here are the highlights: Taxation. S corps don’t pay income tax at the entity level. Instead, profits or losses are passed through to shareholders via Schedule K-1 and reported on individual returns. A key tax benefit is that shareholders who are employees receive a salary (subject to payroll tax), while additional profit distributions aren’t subject to self-employment tax. However, the salary must be reasonable. The business is eligible for QBI deductions. Compliance. To qualify, S corps must have 100 or fewer shareholders, all U.S. citizens or residents, and only one class of stock. They must file Form 2553, issue annual Schedule K-1s and follow corporate formalities like shareholder meetings and recordkeeping. An informational return (Form 1120-S) is also required. 3. Partnership: Collaborative ownership with pass-through taxation A partnership involves two or more individuals jointly operating a business. Common types include general partnerships, limited partnerships, and limited liability partnerships (LLPs). Here’s what makes it unique: Taxation. Partnerships are pass-through entities. The business files Form 1065 (an informational return), and income or loss is distributed to partners on Schedule K-1. Partners report this on their personal returns. General partners must pay self-employment tax, while limited partners usually don’t. The business is eligible for QBI deductions. Compliance. Partnerships require a detailed partnership agreement, coordinated recordkeeping and clear profit-sharing arrangements. While more complex than a sole proprietorship, partnerships offer flexibility for growing businesses. 4. Limited liability company: Flexible and customizable An LLC merges elements of corporations and partnerships, offering owners — called members — both operational flexibility and liability protection. Taxation. By default, a single-member LLC is taxed like a sole proprietorship, and a multimember LLC like a partnership. However, LLCs may elect to be taxed as a C or S corp by filing Form 8832 or Form 2553. This gives owners control over their tax strategies. LLCs that don’t elect C corp status are eligible for QBI deductions. Compliance. LLCs require articles of organization and often must have an operating agreement. Though not as complex as corporations, they still generally face state-specific compliance requirements and annual filings. 5. C Corporation: Double taxation with scalability A C corp is a distinct legal entity offering the most liability protection and growth potential through stock issuance. Here are its features: Taxation. C corps face double taxation — the business pays taxes on earnings (currently at a 21% federal rate), and shareholders pay taxes again on dividends. However, C corps can offer deductible benefits (for example, health insurance, retirement plans) and retain earnings without immediately distributing profits. C corps aren’t eligible for QBI deductions. Compliance: These entities require the most administrative upkeep, including bylaws, annual meetings, board minutes, and extensive state and federal reporting. C corps are ideal for companies seeking venture capital or IPOs. After hiring employees Regardless of entity type, adding employees increases compliance requirements. Businesses must obtain an Employer Identification Number (EIN) and withhold federal and state payroll taxes. Employers also take on added responsibilities related to benefits, tax deposits, and employment law compliance. What’s right for you? There’s no universal answer to which entity is best. The right choice depends on your growth goals, ownership structure and financial needs. Tax optimization is a critical factor. For example, an LLC electing S corp status may help minimize self-employment taxes if set up properly. Contact us. We can coordinate with your attorney to ensure your structure supports both your tax strategies and business goals. © 2025 

As its name suggests, a living trust (also known as a revocable trust) is in effect while you’re alive. It’s a legal entity into which you title assets to be managed during your lifetime and after your death. As the trust’s grantor, you typically serve as the trustee and retain control over the assets during your lifetime. Thus, you can modify or revoke the trust at any time, allowing for adjustments as circumstances or intentions change. Let’s take a closer look at why you should consider including one in your estate plan. Setting up a living trust To create a living trust, engage an estate planning attorney to draw up the trust agreement. Then, title the assets you want to transfer to the trust. Assets can include real estate, financial accounts, and personal items such as art and jewelry. You’ll also need to appoint a successor trustee, or multiple successor trustees. The trustee can be a family member or a friend, or an entity such as a bank’s trust department. In the event of incapacity, a successor trustee can seamlessly take over management of the trust without the need for court-appointed guardianship or conservatorship, preserving financial stability and decision-making continuity. Avoiding probate A primary advantage of a living trust is its ability to minimize the need for trust assets to be subject to probate. Probate is the process of paying off the debts and distributing the property of a deceased individual. It’s overseen by a court. For some estates, the probate process can drag on. By avoiding it, assets in a living trust can typically be distributed more quickly while still in accordance with your instructions. In addition, probate can be a public process. Living trusts generally can be administered privately. And if you become incapacitated, the trust document can allow another trustee to manage the assets in the living trust even while you’re alive. Knowing the pros and cons Living trusts have both benefits and drawbacks. If you name yourself as trustee, you can maintain control over and continue to use the trust assets while you’re alive. This includes adding or selling trust assets, as well as terminating the trust. However, after your death, the trust typically can’t be changed. At that point, the successor trustee you’ve named will distribute the assets according to your instructions. On the flip side, a living trust can require more work to prepare and maintain than a will. And you’ll probably still need a will for property you don’t want to move into the trust. Often, this includes assets of lesser value, such as personal checking accounts. In addition, if you have minor children, you’ll need to name their guardian(s) in a will. Who can help? Creating a living trust typically requires some upfront effort and legal guidance. Even so, the long-term peace of mind and control it can provide may make it a worthwhile consideration. We can help you determine how a living trust fits within your broader estate planning goals. Contact an estate planning attorney to draft a living trust. © 2025 

Whether signing a vendor agreement, approving a repair estimate or applying for a loan, chances are you’ve signed something digitally in recent months. In 2025, digital documents and e-signatures are no longer just a convenience — they’re fast becoming the standard. Businesses of all types and sizes are embracing digital workflows to improve efficiency, reduce turnaround times and meet customer expectations. If your company is still relying on paper documents and manual signatures, now may be the time to take a fresh look at what you might be missing. Potential advantages For small to midsize businesses, there are generally three reasons to use digital documents with e-signatures. First, of course, it’s faster. When you can review and sign a business document electronically, it can be transmitted instantly and approved much more quickly. And this works both ways: your customers can sign contracts or submit orders for your products or services, and you can sign similar documents with vendors, partners or consultants. What used to take days or even weeks, as delivery services carried out their duties or paper envelopes crisscrossed in the mail, can now occur in a matter of hours. Second, it’s a strong safeguard against disaster, theft and mishandling. Paper is all too easily destroyed, damaged, lost or stolen. That’s not to say digital documents are impervious to thievery, corruption and deletion. However, a trusted provider should be able to outfit you with software that not only allows you to use digital documents with e-signatures, but also keeps those files encrypted and safe. Third, as mentioned, more and more customers want it. In fact, this may be the most important reason to incorporate digital documents and e-signatures into your business. Younger generations have come of age using digitized business services. They expect this functionality and may prefer a company that offers it to one that still requires them to put pen to paper. Valid concerns Many business owners continue to have valid concerns about digital documents and e-signatures. For example, you may worry about how legally binding a digitized contract or other important document may be. However, e-signatures are now widely used and generally considered lawful under two statutes: 1) the Electronic Signatures in Global and National Commerce Act of 2000, a federal law, and 2) the Uniform Electronic Transactions Act, which governs each state unless a comparable law is in place. Indeed, every state has legislation in place legalizing e-signatures. There may be some limited exceptions in certain cases, so check with your attorney for specifics if you decide to transition to using the technology. Another concern you might have is cybersecurity. And there’s no doubt that data breaches are now so common that business owners must expect hacking attempts rather than hope they never happen. As mentioned, a reputable provider of digital document technology should be able to equip your company with the necessary tools to defend itself. But don’t stop there. If you haven’t already, establish a sound, regularly updated cybersecurity strategy that encompasses every aspect of your business — including when and how digital documents and e-signatures are used. Strategic move Implementing this increasingly used technology is a strategic move. As such, it will likely involve costs related to vetting software providers, training your team, and updating internal assets and processes. But it also may be a wise investment in faster transactions, improved security and a better customer experience. Plus, you’ll pay less in express delivery fees. We can help you evaluate the idea, forecast your return on investment, and, if appropriate, build a smooth transition plan that fits your budget and goals. © 2025 

The newly enacted One, Big, Beautiful Bill Act (OBBBA) represents a major move by President Trump and congressional Republicans to roll back a number of clean energy tax incentives originally introduced or expanded under the Inflation Reduction Act (IRA). Below is a summary of the key individual tax credits that will soon be scaled back or eliminated. Clean vehicle tax credits If you’re planning to buy a clean vehicle, consider acting soon to take advantage of expiring tax benefits: New clean vehicle credit. This credit offers up to $7,500 for qualifying new electric and fuel cell vehicles, depending on how the battery components and critical minerals are sourced. Vehicles that meet only one of the sourcing criteria may be eligible for a reduced $3,750 credit. Originally set to expire in 2032, this credit now ends on September 30, 2025. The maximum manufacturer’s suggested retail price is $55,000 for cars and $80,000 for SUVs, trucks and vans. To qualify, your adjusted gross income (AGI) must not exceed $150,000 ($300,000 for married couples filing jointly and $225,000 for heads of households). Used clean vehicle credit. Buyers of eligible used EVs or fuel cell vehicles may claim up to $4,000, or 30% of the purchase price — whichever is lower — if bought from a dealer. This credit also expires on September 30, 2025. The maximum price of the vehicle is $25,000. To be eligible for the credit, your AGI must not exceed $75,000 for single taxpayers ($150,000 for married joint filers and $112,500 for heads of households). Alternative fuel refueling property credit Homeowners who install equipment to recharge EVs or dispense clean fuel may qualify for the alternative fuel vehicle refueling property credit. The IRA had extended and expanded this benefit. For property placed in service at a primary residence after 2023, the credit equals 30% of the installation cost, up to $1,000 per item (charging port, fuel dispenser, or storage property). Equipment must be placed in service by June 30, 2026, instead of the previous end-of-2032 deadline. Home energy tax credits The OBBBA shortens the lifespan of several tax credits available to individual homeowners. Those planning home upgrades may want to act swiftly to make the most of these two opportunities. Energy efficient home improvement credit. This tax break provides a 30% nonrefundable credit for qualified expenses such as energy-efficient doors, windows, skylights, insulation, heat pumps and home energy audits. The maximum credit you can claim this year is $1,200. There are no income restrictions, but credit caps vary by item. In 2025, credit limits include: $250 per exterior door ($500 total), $600 for windows, central A/C, panels, and select equipment, $150 for energy audits, and $2,000 for heat pumps, water heaters, and biomass systems (superseding the usual $1,200 limit). This credit was previously scheduled to end after 2032. The expiration has been moved up to December 31, 2025. Residential clean energy credit. This tax break provides a 30% nonrefundable credit for renewable energy systems like solar, wind, geothermal, and biomass installations. There are no income limits. Under prior law, this credit was set to expire after 2034. The OBBBA makes the new expiration date December 31, 2025. Secure savings now Given the shortened timelines and reduced availability of green tax benefits under the OBBBA, proactive planning is key. If you’re interested, you should make the most of these incentives while they last. Contact us with any questions about your situation. © 2025 

The One, Big Beautiful Bill Act (OBBBA) contains a major overhaul to an outdated IRS requirement. Beginning with payments made in 2026, the new law raises the threshold for information reporting on certain business payments from $600 to $2,000. Beginning in 2027, the threshold amount will be adjusted for inflation. The current requirement: $600 threshold For decades, the IRS has required that businesses file Form 1099-NEC (previously 1099-MISC) for payments made to independent contractors that exceed $600 in a calendar year. This threshold amount has remained unchanged since the 1950s! The same $600 threshold is in place for Forms 1099-MISC, which businesses file for several types of payments, including prizes, rents and payments to attorneys. Certain deadlines must be met. A Form 1099-NEC must be filed with the IRS by January 31 of the year following the year in which a payment was made. A copy must be sent to the recipient by the same January 31 deadline. A Form 1099-MISC must also be provided to a recipient by January 31 of the year following a payment, but unlike Form 1099-NEC, the 1099-MISC deadline for the IRS depends on how it’s submitted. If a business is filing the form on paper, the deadline is February 28. If the form is being submitted electronically, the deadline is March 31. The new rules raise the bar to $2,000 Under the OBBBA, the threshold increases to $2,000, meaning: Fewer 1099s will need to be issued and filed. There will be reduced paperwork and administrative overhead for small businesses. There will be better alignment with inflation and modern economic realities. For example, let’s say your business engaged a freelance graphic designer and pays the individual $650 this year. You’ll need to send a 1099-NEC to the designer for calendar year 2025. But if you hire the same individual in 2026, you won’t be required to send a 1099 to the graphic designer or the IRS in 2027 unless the designer earns more than $2,000. The money is still taxable income Even if an independent contractor doesn’t receive a 1099-NEC because the amount paid was below the threshold amount, the payment(s) are still considered part of the individual’s gross income. The contractor must report all business income received on his or her tax return, unless an exclusion applies. In addition, businesses must continue to maintain accurate records of all payments. There are changes to Form 1099-K, too The OBBBA also reinstates a higher threshold for Forms 1099-K, used by third-party payment processors. The reporting threshold returns to $20,000 and 200 transactions, rolling back the phased-in lower thresholds that had dropped toward $600 by 2026. This rollback undoes changes from the 2021 American Rescue Plan Act and earlier IRS delay plans. Simplicity and relief Raising the threshold will ease the filing burden for millions of businesses, especially small operations that rely on contractors. There will also be less risk that an IRS penalty will be imposed for failing to file a Form 1099 when required. Contact us with any questions about the new rules or your filing requirements. © 2025 

As the federal gift and estate tax exemption increases, the number of families affected by gift and estate tax liability decreases. With the passage of the One, Big, Beautiful Bill Act (OBBBA), wealthy families now have greater certainty that the exemption amount will remain high and continue to increase in the future. The exemption had been scheduled to return to an inflation-adjusted $5 million in 2026. But the OBBBA permanently increases it to $15 million for 2026. The amount will be adjusted annually for inflation. (For 2025, the exemption amount is $13.99 million.) Now, because many estates won’t be subject to estate tax, more planning can be devoted to easing the income tax bite for heirs. Why income taxes matter If you gift an asset to your child or other loved one during your life, your tax basis in the asset carries over to the recipient. If the asset has appreciated significantly in value, the sale of the asset will result in a capital gain. For example, say you bought a piece of real estate 20 years ago for $200,000 and its value has grown to $1 million. If you give the property to your child, who decides to sell it, he or she will be liable for as much as $160,000 in long-term capital gains tax (20% of the $800,000 gain). In contrast, when an asset is transferred at death — that is, via “bequest, devise or inheritance” — the recipient’s basis is “stepped-up” to the asset’s date-of-death fair market value. The recipient can turn around and sell the asset tax-free (apart from any tax on post-death gains). Thus, from purely an income tax perspective, it’s advantageous to hold on to appreciating assets rather than gift them during your life. If you don’t expect that your estate will exceed the gift and estate tax exemption, retaining these assets until death can minimize the impact of income tax on your heirs. However, if your estate is large enough that estate tax liability is a concern, the possibility of income tax savings may be outweighed by the potential estate tax bill. In that case, a better strategy may be to remove assets from your estate — through outright gifts, irrevocable trusts or other vehicles. Doing so will shield future appreciation in their value from the estate tax.  Crunch the numbers To determine the right strategy for you and your family, you need to do some forecasting. By estimating the potential income and estate tax liabilities associated with various options, you can get an idea of whether you should focus your planning efforts on income tax or estate tax. Of course, if there’s little chance your estate will exceed the exemption, it makes sense to adopt strategies that minimize income tax. But for some families, it may be a closer call. Contact us with questions.

For many years, businesses of all shapes and sizes have at least considered sustainability when running their operations. Many people — including customers, investors, employees and job candidates — care about how a company impacts the environment. And reducing energy use, water consumption and waste generally lowers operational costs. However, the current “environment regarding the environment,” has changed. With the passage of the One, Big, Beautiful Bill Act (OBBBA), the federal government has disincentivized businesses from taking certain green measures. So, you may be reevaluating your company’s stance on sustainability. Apparent interest According to one survey, a serious interest in sustainability remains present among many businesses. In February, management consultancy Kearney, in association with climate action media platform We Don’t Have Time, released the results of a survey of more than 500 finance executives from companies in the United States, United Kingdom, United Arab Emirates and India. Of those respondents, 93% said they saw a clear business case for sustainability. Meanwhile, 92% expected to invest more in sustainability this year — with 62% of respondents saying they planned to allocate more than 2.1% of revenue to sustainability in 2025. Now whether and how fully these investments come to fruition this year is hard to say. However, the fact remains that sustainability has been and will likely continue to be a strategically significant factor in many industries. Vanishing tax breaks As mentioned, the OBBBA has thrown a wrench into tax relief related to certain sustainable measures. For example, the Section 179D Energy Efficient Commercial Buildings Deduction has been around since 2006. It got a big boost from the Inflation Reduction Act (IRA) of 2022, which increased the potential size of the deduction and expanded the pool of eligible taxpayers. However, the OBBBA permanently eliminates this tax break for buildings or systems on which construction begins after June 30, 2026. The OBBBA also nixes an incentive for the business use of “clean” vehicles. The Qualified Commercial Clean Vehicle Credit, under Sec. 45W of the tax code, hadn’t been previously scheduled to expire until after 2032. However, it’s now available only for vehicles acquired on or before September 30, 2025. Depending on vehicle weight, the maximum credit is up to $7,500 or $40,000. Has your company installed an electric vehicle charger or another qualified dispenser of or storage facility for clean-burning fuel? If so, you may be able to claim the Alternative Fuel Vehicle Refueling Property Credit under Sec. 30C of the tax code. The IRA had scheduled the credit — which is worth up to $100,000 per item — to sunset after 2032. But under the OBBBA, eligible property must be placed in service on or before June 30, 2026, to qualify. Tailored strategy Where does all this leave your business? Well, naturally, it’s up to you and your leadership team whether you want to address sustainability and, if you decide to do so, precisely how. Typically, when devising or revising a strategy in this area, your company should: Conduct an up-to-date baseline assessment of energy use, water consumption, waste generation and your business’s overall carbon footprint, Set clear goals and metrics based on reliable data and the input of professional advisors, Address the impact of logistics, your supply chain and employee transportation, and Communicate effectively with staff to gather feedback and build buy-in. And don’t necessarily give up on tax incentives. Although some federal tax breaks may be going away in the near future, state and local ones might exist that could benefit your business.  Your call Again, as a business owner, you get to make the call regarding your company’s philosophy and approach to sustainability. If it’s something you intend to prioritize, we can help you review your operations and identify cost-effective and possibly tax-saving ways to make a positive environmental impact.

The federal government has announced a major change that will affect how numerous Americans receive their tax refunds and federal benefit payments. The U.S. Treasury Department, the IRS and the Social Security Administration (SSA) will soon stop issuing paper checks. This transition is designed to increase efficiency, reduce fraud and lower administrative costs — but it also means that taxpayers must prepare for an all-electronic system.  Background information Many taxpayers still receive paper checks for tax refunds. This is also the case with some Social Security benefits and other federal payments. Under an executive order (EO) signed by President Trump, paper checks will no longer be an option, effective September 30, 2025. Direct deposit will become the default (and only) method of payment, unless the government extends the deadline or provides exceptions. In the EO, President Trump cites several reasons for eliminating paper checks. One is to reduce the risk of fraud. “Historically, Department of the Treasury checks are 16 times more likely to be reported lost or stolen, returned undeliverable, or altered than an electronic funds transfer,” the EO states. Taxpayers without bank accounts One significant challenge to making the transition away from paper checks is the “unbanked” population. These are people who don’t have traditional bank accounts. According to the FDIC, millions of Americans remain unbanked for various reasons, including lack of access, mistrust of banks or high fees. The government may solve this challenge by issuing refunds on debit cards or encouraging financial institutions to offer free or low-fee accounts for affected taxpayers. Taxpayers without bank accounts should take steps now to open them to avoid delays in receiving their refunds. Key implications Some people may opt to request paper refund checks when filing their tax returns for reasons other than not having bank accounts. In some cases, they may have security or privacy concerns about providing account information to the IRS. Or perhaps they don’t know where they want to deposit their refunds when their tax returns are being prepared. Here are three ways you may be affected after the federal government completes the transition from paper checks to an all-electronic system: A bank account will be required. Taxpayers must have U.S.-based bank accounts or credit union accounts to receive their refunds. There will be no more delays due to the mail. Direct deposit is faster than mailing paper checks, resulting in reduced wait times. The risk of lost or stolen checks will be eliminated. Electronic transfers will eliminate fraud and identity theft associated with paper checks. Special considerations for U.S. citizens abroad Americans living overseas may encounter problems receiving electronic refunds. The IRS typically requires a U.S. bank account for direct deposit. Foreign accounts generally don’t work with the IRS refund system. To address this issue, the government may offer exceptions or alternative payment methods for individuals outside the United States, but the details are still unclear. Expats should stay informed and plan ahead. The elimination of paper checks could necessitate setting up a U.S.-based bank account or using financial services that provide U.S. banking solutions. Impact on other taxpayers The American Institute of CPAs (AICPA) has provided feedback to the Treasury Department about the change. While the AICPA is generally in favor of eliminating paper checks, it raised some issues about taxpayers who may encounter problems with the change. For example, executors and trustees must fill out forms that currently don’t have a place on them to enter direct deposit information. In addition, the name on an estate checking account won’t match the name on a deceased person’s final tax return. This violates an electronic refund requirement that the name on a tax return must match the name on a bank account into which a refund is to be deposited. For these and other situations, the AICPA has recommended that the government provide exceptions or extensions of the deadline for certain taxpayers. The group would also like the IRS to provide more guidance on how to proceed in specific situations. Social Security beneficiaries The SSA reports that fewer than 1% of beneficiaries currently receive paper checks. If you’re one of them, visit the SSA to change your payment information to include a bank account or enroll in an option to receive your benefits with a Direct Express® prepaid debit card. Bottom line The elimination of paper checks is a significant shift in how federal payments are made. While this move will likely result in faster and more secure transactions, it also means taxpayers need to be prepared well before the September 30 deadline. The IRS and SSA will likely release additional guidance and outreach campaigns in the coming months. If you have questions about how this change will affect filing your tax returns, contact us.