Healthy savings: How tax-smart HSAs can benefit your small business and employees

If you’re claiming deductions for business meals or vehicle expenses, expect the IRS to closely review them. In some cases, taxpayers have incomplete documentation or try to create records months (or years) later. In doing so, they fail to meet the strict substantiation requirements set forth under tax law. Tax auditors are adept at rooting out inconsistencies, omissions and errors in taxpayers’ records, as illustrated by one recent U.S. Tax Court case. (T.C. Memo. 2024-82) Facts of the case The taxpayer operated a software installation, training and consulting business. She claimed substantial deductions for several tax years. The IRS disallowed many of the deductions and the U.S. Tax Court agreed. Here’s a rundown of some of the disallowed expenses and the reasons why they couldn’t be deducted: Meals and entertainment. The business owner deducted nearly $9,000 for meal expenses in one tax year and testified the amount was for “working lunches” with the “person she worked for and the developer.” As documentation, she submitted bank statements. The court noted that “bank statements alone do not substantiate the ‘business purpose of the expense’ or the ‘business relationship’ between petitioner and the individuals with whom she dined.” It added: “The cost of eating lunch during the workday is not — without more — a deductible business expense.” Supplies. The taxpayer deducted more than $17,000 for supplies purchased during two tax years. She testified that these included “desks, monitors, office equipment, paper, printers, [and] anything that was pertinent to the business itself.” To substantiate her reported expenses, the taxpayer submitted receipts from office supply stores. However, the receipts were dated later than the tax years in question, and they covered (among other things) purchases of soda dispensers and gift cards. The court noted that “some of these purchases appear personal” and all were made after she terminated her consulting business. Home office expenses. Over two years, the taxpayer deducted $21,393 for the business use of a home office. But the court ruled that she “failed to prove that the ‘focal point’ of her software consulting business was her home.” At trial, she testified that she was required to be on site at a client’s office much of the time. In addition, she didn’t supply evidence to establish how much time she worked from home or what (if any) portion of her residence was used exclusively for business purposes. Other expenses the court disallowed included attorney’s fees, utilities, hotel stays and vehicle expenses. In all cases, the taxpayer didn’t substantiate with adequate records or sufficient evidence that the expenses were related to her business. Best practices This case exemplifies why it’s critical to maintain meticulous records to support business expense deductions. Here’s a list of DOs and DON’Ts to help meet the strict IRS and tax law substantiation requirements for these items: DO keep detailed, accurate records. For example, for each business meal, record the amount, date, place, business purpose, and the business relationship of any person you dine with. If you have employees whom you reimburse for meals, travel and vehicle expenses, make sure they’re complying with all the rules. DON’T reconstruct expense logs at year end or wait until you receive a notice from the IRS. Take a moment to record the details in a log or diary or on a receipt at the time of an event or soon after. Require employees to submit weekly or monthly expense reports. DO respect the fine line between personal and business expenses. Be careful about combining business and pleasure. Your business checking account and credit cards shouldn’t be used for personal expenses. DON’T be surprised if the IRS asks you to prove your deductions. Vehicle, travel, meal and home office expenses are attention magnets. Be prepared for a challenge. Stand up to scrutiny With organization and our guidance, your tax records can stand up to IRS inspection. There may be other ways to substantiate your deductions. In addition, there may be a way to estimate certain deductions (called “the Cohan rule”), if your records are lost due to a fire, theft, flood or other disaster. © 2025 

For many people, creating an estate plan falls into the category of important but not urgent. As a result, it can get postponed indefinitely. If you find yourself in this situation, understanding the reasons behind this procrastination can help you recognize and overcome the barriers that are preventing you from taking the first steps toward creating an estate plan. Multiple reasons for procrastination A primary reason people delay estate planning is emotional discomfort. Thinking about your death or a disability or becoming incapacitated is unpleasant. Simply put, it can be difficult to confront your mortality or make difficult decisions about who should inherit your assets or serve as guardian of your minor children. Another reason for delay is that estate planning can seem daunting, especially when people assume it involves complicated legal jargon, multiple professionals and a mountain of paperwork. For those with blended families, business interests or complex financial situations, the process may feel even more overwhelming. Without clear guidance, many people don’t know where to start, so they don’t start at all. There’s also the mistaken belief that estate planning is only necessary for the wealthy or elderly. Younger individuals or those with modest assets may think they don’t need a plan yet. Additionally, procrastination bias — the tendency to prioritize immediate concerns over future needs — often pushes estate planning to the bottom of the to-do list. Reasons to motivate yourself Not having an estate plan in place, especially the basics of a will and health care directives, can have dire tax consequences in the event of an unexpected death or incapacitation. Without a will, your assets will be divided according to state law, regardless of your wishes. This can cause family disputes and lead to legal actions. It can also result in tax liabilities that could have been easily avoided. There are a few relatively simple documents that can comprise an estate plan. For example, a living will can spell out instructions for end-of-life decisions. A power of attorney can appoint someone to handle your affairs if you’re incapacitated. And a living trust can be used to transfer assets without going through probate. The bottom line Procrastinating on estate planning carries real risks — not just for you, but also for your loved ones. Without a proper plan, state laws will determine how your assets will be distributed, often in ways that may not align with your wishes. Contact us for help taking the first steps toward forming your estate plan. © 2025 

Agility is key in today’s economy, where uncertainty reigns and businesses must be ready for anything. Highly skilled employees play a huge role in your ability to run an agile company. One way to put them on optimal footing is cross-training. Multiple advantages Simply defined, cross-training is teaching employees to understand and perform responsibilities and tasks outside the scope of their primary job duties. It has many advantages, including: Reducing the impact of absences. The potential reasons for any employee missing work are seemingly countless. A staff member may become sick or disabled, have a baby, take a vacation, get called to active military duty, receive a jury summons, retire, suddenly resign or be terminated. Having someone else on staff ready to jump in and handle key duties can keep your company operating relatively smoothly. Boosting productivity. If the workload in one area of the business temporarily becomes especially heavy, you can shift staff to ease the situation. Let’s say that, pleasantly enough, your company sees a sudden upswing in sales. Cross-training could enable you to move someone in marketing to accounting to help review invoices. Gaining fresh perspectives. Putting a new set of eyes on any business process or procedure never hurts. Employees who fill in for colleagues on a short-term basis may catch something wrong or develop an idea that improves operations. Going back to our previous example, say that the marketing staff member temporarily working in accounting notices that your company’s invoices look outdated and contain confusing wording. As a result, you ask for that person’s input and undertake a wider initiative to redesign your invoices. Ultimately, collections improve because customers can more easily read their bills. Strengthening internal controls. Cross-training is also an essential internal control. This is particularly true in your accounting department but may apply to information technology, production and other areas as well. Ensuring one person’s job is periodically performed by someone else can prevent fraud. In fact, when coupled with mandatory vacations, cross-training is a major deterrent because potential fraudsters know that co-workers will be doing their jobs and could catch their crimes. Career development When “selling” cross-training to your staff, emphasize how it’s good for them, too. Learning new things broadens employees’ skill sets and experience levels. Help them understand this by explaining whether each staff member’s cross-training is “vertical” or “horizontal.” If the task learned is vertical, it requires more responsibility or skill than that employee’s normal duties. Thus, vertical cross-training encourages employees to feel more valuable to the business. (And you know what? They are!) If the task calls for the same level of responsibility or skill as an employee’s routine duties, it’s considered horizontal. This type of cross-training widens employees’ understanding of their departments or the company. Plus, horizontal cross-training builds camaraderie and is often a welcome change of pace. Risks to consider Although generally a good business practice, cross-training has some risks you should consider. First, not everyone is a prime candidate for it. If possible, pick employees who show an interest in working outside their stated roles and are open to change. Important: You may want to require cross-training as an internal control for some positions. This is usually a good idea for jobs involving financial management, sensitive data or high-value customers. Second, be cognizant of employees’ workloads and stress levels. Relying too much on cross-training can lead to burnout and lower morale. Also, decide whether and how cross-training should affect compensation. Some companies use incentives or profit sharing to build buy-in. Slowly and carefully If your business has yet to try cross-training, starting slowly is typically best. Discuss the concept with your leadership team and identify which positions are well suited for it. Then design a formal strategy for picking the employees involved, carrying out the training and monitoring the results. We can help you identify all the costs associated with developing and managing staff performance. © 2025 

If you’re age 65 or older and enrolled in basic Medicare insurance, you may need to pay additional premiums to receive more comprehensive coverage. These extra premiums can be expensive, particularly for married couples, since both spouses incur the costs. However, there may be a silver lining: You could be eligible for a tax deduction for the premiums you pay. Deducting medical expenses: What counts? For purposes of claiming an itemized deduction for medical expenses on your tax return, you can combine premiums for Medicare health insurance with other eligible medical expenses. These include amounts for “Medigap” insurance and Medicare Advantage plans. Some people buy Medigap policies because Medicare Parts A and B don’t cover all their health care expenses. Coverage gaps include co-payments, coinsurance, deductibles and other costs. Medigap is private supplemental insurance that’s intended to cover some or all gaps. Is itemizing required? Qualifying for a medical expense deduction can be difficult for many people for several reasons. For 2025, you can deduct medical expenses only if you itemize deductions on Schedule A of Form 1040 and only to the extent that total qualifying expenses exceed 7.5% of adjusted gross income. In recent years, many people haven’t been itemizing because their itemized deductions are less than their standard deductions. For 2025, the standard deduction amounts are $15,000 for single filers, $30,000 for married couples filing jointly and $22,500 for heads of household. (Under The One, Big, Beautiful Bill being considered by Congress, these amounts would increase. If the bill is enacted, the standard deduction will increase for 2025 through 2028 by an additional $1,000 for singles, $2,000 for married joint filers and $1,500 for heads of households.) Note: Self-employed people and shareholder-employees of S corporations don’t need to itemize to get tax savings. They can generally claim an above-the-line deduction for their health insurance premiums, including Medicare premiums. What other expenses qualify? In addition to Medicare premiums, you can deduct various medical expenses, including those for dental treatments, doctor visits, ambulance services, dentures, eye exams, eyeglasses and contacts, hearing aids, hospital visits, lab tests, qualified long-term care services, prescription medicines and others. There are also many other items that Medicare doesn’t cover that can be deducted for tax purposes if you qualify. And itemizers can deduct transportation expenses to get to and from medical appointments. If you go by car, you can deduct a flat 21 cents-per-mile rate in 2025, or you can keep track of your actual out-of-pocket expenses for gas, oil, maintenance and repairs. Claim all eligible expenses Contact us if you have any questions about whether you’re able to claim medical expense deductions on your tax return. We’ll help ensure you claim all the tax breaks you’re entitled to. © 2025 

The treatment of research and experimental (R&E) expenses is a high-stakes topic for U.S. businesses, especially small to midsize companies focused on innovation. As the tax code currently stands, the deductibility of these expenses is limited, leading to financial strain for companies that used to be able to expense them immediately. But proposed legislation dubbed The One, Big, Beautiful Bill could drastically change that. Here’s what you need to know. R&E expenses must currently be capitalized Before 2022, under Section 174 of the Internal Revenue Code, taxpayers could deduct R&E expenses in the year they were incurred. This treatment encouraged investment in innovation, as companies could realize a current tax benefit for eligible costs. However, beginning in 2022, the Tax Cuts and Jobs Act (TCJA) changed the rules. Under the law, R&E expenses must be capitalized and amortized over five years for domestic activities and 15 years for foreign activities. This means businesses can’t take an immediate deduction for their research spending. The practical impact on businesses Startups, tech firms and manufacturers, in particular, have reported significant tax hikes, even in years when they operated at a loss. The shift from immediate expensing to amortization has created cash flow issues for innovation-heavy firms and complicated tax reporting and long-term forecasting. Lobbying groups, tax professionals and industry associations have been pushing for a reversal of the TCJA’s Sec. 174 provisions since they took effect. What’s in The One, Big, Beautiful Bill? The One, Big, Beautiful Bill is a comprehensive tax and spending package that narrowly passed in the U.S. House in May. It contains a provision that would restore the immediate deductibility of R&E expenses, among other tax measures. Specifically, it would allow taxpayers to immediately deduct domestic R&E expenditures paid or incurred in taxable years beginning after December 31, 2024, and before January 1, 2030. This provision would also make other changes to the deduction. If enacted, the bill would provide a lifeline to many businesses burdened by the amortization requirement — especially those in high-growth, innovation-focused sectors. Legislative outlook and next steps Passage of the current version of The One, Big, Beautiful Bill remains uncertain. The bill is now being debated in the U.S. Senate and senators have indicated they’d like to make changes to some of the provisions. If the bill is revised, it will have to go back to the House for another vote before it can be signed into law by President Trump. However, it offers hope that lawmakers recognize the challenges businesses face and may be willing to act. If enacted, the bill could restore financial flexibility to innovators across the country, encouraging a new wave of research, development and economic growth. Stay tuned, and contact us if you have questions about how these potential changes may affect your business. © 2025 

As a closely held business owner, a substantial amount of your wealth likely is tied to the business. Of course, you want to retain as much of that wealth as possible to pass on to your family after you exit the business. If your business is structured as a corporation, the answer may be an employee stock ownership plan (ESOP). It can enhance tax efficiency, support business succession goals and help preserve wealth for future generations. An ESOP in action An ESOP is a qualified retirement plan that invests primarily in your company’s stock. ESOPs must comply with the same rules and regulations as other qualified plans, and they’re subject to similar contribution limits and other requirements. One requirement that’s unique to ESOPs is the need to have the stock valued annually by an independent appraiser. Also, by definition, ESOPs are available only to corporations. Both C corporations and S corporations are eligible. In a typical ESOP arrangement, the company makes tax-deductible cash contributions to the plan, which uses those funds to acquire some or all of the current owners’ stock. Alternatively, with a “leveraged” ESOP, the plan borrows the money needed to buy the stock and the company makes tax-deductible contributions to cover the loan payments. As with other qualified plans, ESOP participants enjoy tax-deferred earnings. They pay no tax until they receive benefits, in the form of cash or stock, when they retire or leave the company. Participants who receive closely held stock have a “put option” to sell it back to the company at fair market value during a limited time window. ESOP benefits ESOPs offer many benefits for owners, companies and employees alike. Benefits for owners include: Liquidity and diversification. An ESOP creates a market for your stock. By selling some or all of your stock to the plan, you can achieve greater liquidity and diversification, enhancing your financial security and estate planning flexibility. Acquiring a wider variety of nonbusiness assets with the sale proceeds can make it easier to share your wealth with loved ones, especially those who aren’t interested in participating in the business. Tax advantages. If your company is a C corporation and the ESOP acquires at least 30% of its stock, it’s possible to defer capital gains on the sale of your stock by reinvesting the proceeds in qualified replacement securities. You can even avoid capital gains tax permanently by holding the replacement securities for life. Control. Unlike certain other exit strategies, an ESOP allows you to tap your equity in the company without immediately giving up management control. You can continue to act as a corporate officer and, if you serve as the ESOP’s trustee, you’ll retain the right to vote the trust’s shares on most corporate decisions. The company can benefit because its contributions to the plan are tax deductible. With a leveraged ESOP, the company essentially deducts both interest and principal on the loan. And, of course, both the company and its employees gain from the creation of an attractive employee benefit, one that provides a powerful incentive for employees to stay with the company and contribute to its success. Beware of an ESOP’s cost An ESOP can be a powerful estate planning tool for closely held business owners, but it’s important to consider the costs. In addition to the usual costs associated with setting up and maintaining a qualified plan, there are also annual stock valuation costs. Contact us to learn more about pairing an ESOP with your estate plan. © 2025 

Slow cash flow is one of the leading causes of insomnia for business owners. Even if sales are strong, a lack of liquidity to pay bills and cover payroll can cause more than a few sleepless nights. The good news is that you can rest easier by exercising sound cash flow management. Scrutinize your cycles Broadly speaking, nearly every business — no matter what it does — has two cycles that determine how the dollars flow. These are: 1. The selling cycle. This is how long it takes your business to: Develop a product or service, Market it, and Produce the product or service, close a sale, and collect the revenue. Good accounts receivable processes — from clearly and accurately invoicing to implementing online payment methods for faster access to money — are a major aspect of cash flow management. Less experienced business owners often underestimate the length of the selling cycle. Many a start-up has been launched with a budding entrepreneur believing the company could get its wares to market, close deals and earn revenue quickly. Grim reality usually followed. However, even business owners who’ve been around for a while can miss changes to their selling cycles. Regular customers on whom the company depends may start taking longer to pay, or a key employee might jump ship and be hard to replace. Inefficiencies such as these are often exposed when economic conditions deteriorate. 2. The disbursements cycle. This is how your business manages regular payments to employees, vendors, creditors (including short- and long-term financing) and other parties. As payments go out, cash flow is obviously affected. Track the timing The selling and disbursements cycles aren’t separate functions; they overlap. But if they don’t do so evenly, delayed cash inflows can create a crisis. You want them to match as evenly as possible. Or better yet, you want to convert sales to cash more quickly than you’re paying expenses. How can you keep tabs on it all? First, study your statement of cash flows whenever your company’s financial statements are generated. But do more than that. Regularly create cash flow statements. Despite their similar-sounding name, these reports are run more frequently — usually monthly or quarterly. You can also use financial software to set up a digital dashboard that displays weekly or even daily cash flow metrics. Take control If you see warning signs of an imminent cash crunch, consider these options to better control the potential crisis: Slow down growth. Rapid growth can be both a blessing (you’re selling more) and a curse (you’re spending more on production). Cash shortages often result from a substantial mismatch between the selling and disbursement cycles, which can easily occur during high-growth periods. Out-of-control growth can also impair quality, which, in turn, sours relationships with customers and hurts your company’s reputation in the marketplace. Review expenses. Sometimes, you can lower monthly cash outflows by converting costs from fixed to variable. Fixed expenses include mortgage or lease payments, payroll, and insurance. When an employee quits, consider using an independent contractor to fill the position. Or if a key piece of equipment breaks, explore leasing rather than purchasing. In addition, review your company’s tax planning strategies. A lower tax bill can make a big difference in cash flow. Address asset management. How much money are you making for each dollar that’s invested in working capital, equipment and other assets? By monitoring turnover ratios, you may be able to identify and reduce weaknesses in asset management. For example, an increase in “days outstanding” in accounts receivable might improve with tighter credit policies, early-bird discounts or incentives for employees who handle collections. Essential skills Strong cash flow management skills are essential to running a successful business. We can review your sales and disbursement cycles, improve your financial reporting, and identify ways to manage your company’s cash better. © 2025 

The U.S. House of Representatives passed The One, Big, Beautiful Bill Act on May 22, 2025, introducing possible significant changes to individual tax provisions. While the bill is now being considered by the Senate, it’s important to understand how the proposals could alter key tax breaks. Curious about how the bill might affect you? Here are seven current tax provisions and how they could change under the bill. 1. Standard deduction The Tax Cuts and Jobs Act nearly doubled the standard deduction. For the 2025 tax year, the standard deduction has been adjusted for inflation as follows: $15,000 for single filers, $30,000 for married couples filing jointly, and $22,500 for heads of household. Under current law, the increased standard deduction is set to expire after 2025. The One, Big, Beautiful Bill would make it permanent. Additionally, for tax years 2025 through 2028, it proposes an increase of $1,000 for single filers, $2,000 for married couples filing jointly and $1,500 for heads of households. 2. Child Tax Credit (CTC) Currently, the CTC stands at $2,000 per qualifying child but it’s scheduled to drop to $1,000 after 2025. The bill increases the CTC to $2,500 for 2025 through 2028, after which it would revert to $2,000. In addition, the bill indexes the credit amount for inflation beginning in 2027 and requires the child and the taxpayer claiming the child to have Social Security numbers. 3. State and local tax (SALT) deduction cap Under current law, the SALT deduction cap is set at $10,000 but the cap is scheduled to expire after 2025. The bill would raise this cap to $40,000 for taxpayers earning less than $500,000, starting in 2025. This change would be particularly beneficial for taxpayers in high-tax states, allowing them to deduct a larger portion of their state and local taxes. 4. Tax treatment of tips and overtime pay Currently, tips and overtime pay are considered taxable income. The proposed legislation seeks to exempt all tip income from federal income tax through 2029, provided the income is from occupations that traditionally receive tips. Additionally, it proposes to exempt overtime pay from federal income tax, which could increase take-home pay for hourly workers. These were both campaign promises made by President Trump. He also made a pledge during the campaign to exempt Social Security benefits from taxes. However, that isn’t in the bill. Instead, the bill contains a $4,000 deduction for eligible seniors (age 65 or older) for 2025 through 2028. To qualify, a single taxpayer would have to have modified adjusted gross income (MAGI) under $75,000 ($150,000 for married couples filing jointly). 5. Estate and gift tax exemption As of 2025, the federal estate and gift tax exemption is $13.99 million per individual. The bill proposes to increase this exemption to $15 million per individual ($30 million per married couple) starting in 2026, with adjustments for inflation thereafter. This change would allow individuals to transfer more wealth without incurring federal estate or gift taxes. 6. Auto loan interest Currently, there’s no deduction for auto loan interest. Under the bill, an above-the-line deduction would be created for up to $10,000 of eligible vehicle loan interest paid during the taxable year. The deduction begins to phase out when a single taxpayer’s MAGI exceeds $100,000 ($200,000 for married couples filing jointly). There are a number of rules to meet eligibility, including that the final assembly of the vehicle must occur in the United States. If enacted, the deduction is allowed for tax years 2025 through 2028. 7. Electric vehicles Currently, eligible taxpayers can claim a tax credit of up to $7,500 for a new “clean vehicle.” There’s a separate credit of up to $4,000 for a used clean vehicle. Income and price limits apply as well as requirements for the battery. These credits were scheduled to expire in 2032. The bill would generally end the credits for purchases made after December 31, 2025. Next steps These are only some of the proposals being considered. While The One, Big, Beautiful Bill narrowly passed the House, it faces scrutiny and potential changes in the Senate. Taxpayers should stay informed about these developments, as the proposals could significantly impact individual tax liabilities in the coming years. Contact us with any questions about your situation. © 2025 

A bill in Congress — dubbed The One, Big, Beautiful Bill — could significantly reshape several federal business tax breaks. While the proposed legislation is still under debate, it’s already sparking attention across business communities. Here’s a look at the current rules and proposed changes for five key tax provisions and what they could mean for your business. 1. Bonus depreciation Current rules: Businesses can deduct 40% of the cost of eligible new and used equipment in the year it’s placed in service. (In 2026, this will drop to 20%, eventually phasing out entirely by 2027.) Proposed change: The bill would restore 100% bonus depreciation retroactively for property acquired after January 19, 2025, and extend it through 2029. This would be a major win for businesses looking to invest in equipment, machinery and certain software. Why it matters: A full deduction in the year of purchase would allow for faster depreciation, freeing up cash flow. This could be especially beneficial for capital-intensive industries. 2. Section 179 expensing Current rules: Businesses can “expense” up to $1.25 million of qualified asset purchases in 2025, with a phaseout beginning at $3.13 million. Under Section 179, businesses can deduct the cost of qualifying equipment or software in the year it’s placed in service, rather than depreciating it over several years. Proposed change: The bill would increase the expensing limit to $2.5 million and the phaseout threshold to $4 million for property placed into service after 2024. The amounts would be adjusted annually for inflation. Why it matters: This provision could help smaller businesses deduct more of the cost (or the entire cost) of qualifying purchases without dealing with depreciation schedules. Larger thresholds would mean more flexibility for expanding operations. 3. Qualified business income (QBI) deduction Current rules: Created by the Tax Cuts and Jobs Act (TCJA), the QBI deduction is currently available through 2025 to owners of pass-through entities. These include S corporations, partnerships, limited liability companies, sole proprietors and most self-employed individuals. QBI is defined as the net amount of qualified items of income, gain, deduction and loss that are effectively connected with the conduct of a U.S. business. The deduction generally equals 20% of QBI, not to exceed 20% of taxable income minus net capital gain. But it’s subject to additional limits that can reduce or eliminate the tax benefit. Proposed change: Under the bill, the QBI tax break would be made permanent. Additionally, the deduction amount would increase to 23% for tax years beginning after 2025. Why it matters: The increased deduction rate and permanent extension would lead to substantial tax savings for eligible pass-through entities. If the deduction is made permanent and adjusted for inflation, businesses could engage in more effective long-term tax planning. 4. Research and experimental (R&E) expensing Current rules: Under the TCJA, businesses must capitalize and amortize domestic R&E costs over five years (15 years for foreign research). Proposed change: The bill would reinstate a deduction available to businesses that conduct R&E. Specifically, the deduction would apply to R&E costs incurred after 2024 and before 2030. Providing added flexibility, the bill would allow taxpayers to elect whether to deduct or amortize the expenditures. (The requirement under current law to amortize such expenses would be suspended while the deduction is available.) Why it matters: Many businesses — especially startups and tech firms — depend heavily on research investments. Restoring current expensing could ease tax burdens and encourage innovation. 5. Increase in information reporting amounts Current rules: The annual reporting threshold for payments made by a business for services performed by an independent contractor is generally $600. That means businesses must send a Form 1099-NEC to contractors they pay more than $600 by January 31 of the following year. Proposed change: The bill would generally increase the threshold to $2,000 in payments during the year and adjust it for inflation. This provision would apply to payments made after December 31, 2024. (The bill would also make changes to the rules for Form 1099-K issued by third-party settlement organizations.) Why it matters: This proposal would reduce the administrative burdens on businesses. Fewer 1099-NECs would need to be prepared and filed, especially for small engagements. If the provision is enacted, contractors would receive fewer 1099-NECs. Income below $2,000 annually would still have to be reported to the IRS, so contractors may have to be more diligent in tracking income. More to consider These are just five of the significant changes being proposed. The One, Big, Beautiful Bill also proposes changes to the business interest expense deduction and some employee benefits. It would eliminate federal income tax on eligible tips and overtime — and make many more changes. If enacted, the bill could deliver immediate and long-term tax relief to certain business owners. It narrowly passed in the U.S. House of Representatives and is currently being considered in the Senate. Changes are likely to be made there, at which point the new version would have to be passed again by the House before being sent to President Trump to be signed into law. The current uncertainty means business owners shouldn’t act prematurely. While these changes may sound beneficial, their complexity — and the possibility of retroactive provisions — make professional guidance essential. Contact us to discuss how to proceed in your situation. © 2025