How inflation will affect your 2024 and 2025 tax bills

The 2026 tax year is almost over, but you still have time to implement year-end tax planning strategies to reduce your business’s federal income tax liability. Let’s look at a few moves you may be able to make before New Year’s Day to trim your tax bill. 1. Invest in capital assets If you acquire and place in service eligible new or used assets in 2026, you can benefit from the 100% first-year bonus depreciation deduction. Eligible assets include new and used machinery, equipment, certain vehicles, off-the-shelf computer software, and qualified improvement property (QIP). Generally, bonus depreciation is automatically applied to your purchases of eligible assets placed in service during the tax year. You can elect out (which sometimes can be beneficial), but only for an entire asset class, such as all five-year assets or all seven-year assets. You can use bonus depreciation to create a net loss that you generally can carry forward to future tax years. Another depreciation-related tax break is the Section 179 expensing election. For 2026, you can deduct up to $2.56 million of the cost of purchasing eligible new or used assets, such as equipment, furniture, off-the-shelf computer software and QIP. The deduction begins to phase out dollar-for-dollar when qualifying purchases exceed $4.09 million. It’s limited to the taxable income from your business activity, so you can’t use it to create a net loss. But you can carry forward unused amounts or apply bonus depreciation to the excess. Also, Sec. 179 expensing isn’t automatic, and it can be applied on an asset-by-asset basis — or even to only part of an asset’s cost. This flexibility can be a planning advantage over bonus depreciation. Consider factors such as cash flow, revenue projections, financing terms and the impact on other tax breaks before buying a pricey capital asset. The related deduction may prove more valuable later. 2. Take advantage of the deduction for QPP If you’re a manufacturer and you have new construction nearing completion, finishing it before the new year could provide a 2026 deduction. Your business may qualify for a temporary depreciation deduction for the construction of qualified production property (QPP) placed in service after July 4, 2025, and before January 1, 2031. This break lets eligible businesses claim a deduction equal to 100% of the QPP’s adjusted basis in the tax year it’s placed in service. Unlike bonus depreciation, the QPP deduction requires an election. Among other requirements, QPP generally must be nonresidential real property located in the United States and used as an integral part of a “qualified production activity.” This means that manufacturing, production or refining activities must take place within the physical space of the property. Portions used for offices, administrative services, lodging, parking, sales, research, software development, engineering or storage of finished products generally are ineligible. Additional requirements apply, including restrictions on construction dates and property use. 3. Identify research expenses The Sec. 174 deduction for research and experimental (R&E) expenses and the Sec. 41 research credit (often called the “research and development” credit) aren’t limited to businesses traditionally associated with cutting-edge experimentation and innovation. So it could pay off to investigate whether you’ve incurred qualified expenses. Keep in mind that the definition of qualified expenses is generally broader under the R&E deduction than under the research credit. Under the R&E deduction, qualified expenses include costs related to activities intended to discover information that would eliminate uncertainty about the development or improvement of a product. You can deduct such domestic expenses in the tax year they’re incurred or paid — regardless of whether the associated project has been completed — or amortize them over at least five years. Foreign qualified expenses must be amortized over 15 years. Your deduction expenses also might qualify for the research credit, but you can’t claim both for the same expense. Generally, if you claim the credit, you must reduce your deduction by the credit amount. Or you may be able to make a Sec. 280C election, which generally will reduce the credit by the maximum corporate tax rate (21%) and let you take the full deduction. Modeling can help you determine the optimal choice. 4. Maximize your QBI deduction The Sec. 199A qualified business income (QBI) deduction allows owners of sole proprietorships and pass-through entities (including partnerships, S corporations and most limited liability companies) to deduct up to 20% of their QBI. QBI is generally 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 amount of the allowable 199A deduction is subject to wage and investment limitations at higher income levels, so project your taxable income now to determine whether they might apply. The One Big Beautiful Bill Act (OBBBA) expanded the phase-in ranges for those limits beginning in 2026, meaning some taxpayers will qualify for larger deductions. For 2026, the limits generally kick in when taxable income is within the range of $201,750 to $276,750 ($403,500 to $553,500 for married couples filing jointly). If your taxable income falls in the range, the limits will partially reduce your 199A deduction to the greater of: 50% of W-2 wages paid to employees, or 25% of W-2 wages plus 2.5% of the unadjusted basis immediately after acquisition of qualified business property (for example, machinery, equipment, buildings and other depreciable property). When taxable income exceeds the top of the range, the deduction is fully reduced to the greater of the above. Another limit that’s phased in based on the income threshold is the 199A deduction being unavailable for income from a “specified service trade or business.” Examples include businesses that involve investment-type services and most professional practices (other than engineering and architecture). If your projections suggest you’re close to the lower end of the phase-in range, consider measures to reduce your taxable income. You can, for example, maximize retirement plan contributions. Cash-basis businesses can defer income into 2027 and accelerate expenses into 2026. If the limits are unavoidable, you may be able to boost your deduction by, for instance, increasing wages or purchasing qualified business property before year end. Keep in mind that such maneuvers can have additional consequences, such as higher payroll taxes. 5. Assess the impact of the “excess” business loss limitation Noncorporate taxpayers generally can use business losses to offset income from other sources, such as salary, self-employment income, interest, dividends and capital gains, but only up to an inflation-adjusted limit. Losses exceeding this limit generally can’t be deducted in the current year. Instead, they’re treated as net operating loss (NOL) carryforwards to subsequent tax years, generally subject to the 80% taxable income limitation on NOL deductions. The OBBBA made this “excess” business loss limitation permanent. For 2026, the limit drops to $256,000, or $512,000 for joint filers, down from $313,000 and $626,000, respectively, for 2025. As a result, taxpayers generating substantial business losses from bonus depreciation, currently deductible research expenses or other deductions may be unable to claim the full tax benefits of those losses in 2026. If your projected 2026 business losses are approaching or exceeding the limit, consider whether accelerating business income or deferring certain deductions could help maximize your current-year tax benefits. These strategies should be evaluated carefully because shifting income or deductions between tax years can affect future NOL deductions and overall tax liability. Take a proactive approach Year-end planning is important for any business looking to minimize income tax liability and strengthen its financial position. Implementing the right strategies can help you make the most of available deductions and credits — and avoid missed tax-saving opportunities. Need help? We can evaluate the implications of these and other potentially tax-cutting tactics. © 2026 

If your business’s renewed employer-sponsored health insurance plan starts at the beginning of the calendar year, you’re probably negotiating next year’s rates now or will be soon. The stakes are high and rising: Preliminary survey results from Marsh (whose Mercer business advises employers on health benefits) project that employers’ health benefit costs per employee will increase an average of 8.2% in 2027. The renewal period is an opportunity for your business to determine what employees value, where expenses are growing and how you can balance cost vs. coverage. Start with people Before changing plan benefits, review enrollment and employee feedback. Are workers using the plans you offer? Do they understand their choices? You may be looking for ways to cut costs, but a lower-premium plan may be a poor fit if its deductible, prescription coverage or provider network makes care less affordable for employees. Ask your benefits consultant for spending pattern and plan use data (that omits employees’ medical conditions). These reports can help you spot opportunities to improve plan design and communication. For example, employees may not use lower-cost care options because they aren’t aware of them. Be sure you compare the cost of plans you’re considering to what employees will pay, including premiums and likely out-of-pocket expenses. Putting numbers in context Your consultant or insurance broker can explain increases proposed by insurers and compare competing options on the same basis for the following: Provider networks, Deductibles, Prescription formularies, Administrative fees, and Any changes in covered services. A lower quote may come with trade-offs that matter to your workforce. For instance, high-deductible health plans paired with Health Savings Accounts can appeal to some workers, but you shouldn’t assume everyone will embrace that option. Give pharmacy coverage particular attention. Prescription drug benefits are among the fastest-growing expense categories. Ask what drives your costs, how rebates and fees are handled, and whether other contract arrangements offer better value. If your health plan is self-funded, an independent review of claims payments and pharmacy contract terms may uncover errors or charges that warrant your follow-up. A benefits advisor can help determine whether potential savings justify the review’s cost. For any plan, request a clear explanation of proposed wellness or care-navigation programs, including how employees would use them and how you’d measure results. Financial impact The cheapest plan isn’t necessarily the best choice for your business and its workers. Changes that raise employees’ costs may affect their ability to get care and how they view your benefits package. That, in turn, can affect hiring and retention. Before signing renewal papers, model several options using your expected enrollment, employer contributions and cash flow. Also, contact us. We can help you compare the financial impact of renewal proposals, test different cost-sharing approaches and insert the plan you choose into next year’s budget. If possible, get in touch before insurance negotiations begin so you can use our analysis in your decision. © 2026 

Dissolving a marriage involves numerous financial and nonfinancial decisions, and tax considerations can easily fall by the wayside. But decisions made before your divorce is finalized can affect your current-year income tax liability and your tax situation in future years. Let’s look at some of the most critical tax issues to consider as you work through a separation or divorce in 2026. Income tax returns Your marital status for income tax filing purposes generally is determined as of the last day of the tax year. If by December 31 you’re divorced or legally separated under applicable state law, you generally are treated as unmarried for that year and will file as single or, if you have one or more qualifying children or dependents and otherwise meet the requirements, as head of household. Otherwise, you generally are treated as married and must decide whether to file jointly or separately. If you have children, you’ll need to determine who’ll claim them on your tax returns in order to potentially claim related tax breaks besides just head-of-household status. Which parent claims a child can affect eligibility for certain tax benefits (based on factors such as the parent’s income level), and special rules apply when parents are separated or when custody is shared. If you and your former spouse don’t agree on who’ll claim a child, federal tie-breaker rules may apply. As year end approaches, consider how the timing of a final divorce decree or legal separation and decisions related to children could affect your 2026 filing status and tax liability. Also review whether your withholding is still appropriate. Support payments For alimony under separation or divorce agreements executed after December 31, 2018, there’s no deduction for the former spouse making the payments. And the payments aren’t included in the gross income of the former spouse receiving them. (The rules are generally different for alimony under agreements executed before 2019.) No matter when a separation or divorce agreement is executed, child support payments aren’t deductible by the paying spouse or taxable to the recipient spouse. If you’re negotiating support payments before year end, make sure to factor in how the payments will be treated for federal tax purposes and the impact on your overall tax situation. Your home In general, a taxpayer who sells a principal residence (main home) may be able to exclude up to $250,000 of gain if the applicable ownership and use requirements are met. Generally, this means owning and using the home as a principal residence for at least two of the previous five years. A married couple filing jointly may be able to exclude up to $500,000 of gain if they meet additional requirements for the joint exclusion. If a couple separates or divorces and one spouse continues to live in the home and the other moves out, special rules may allow the spouse who moved out to count certain periods when the home was used as a principal residence by the other spouse under a separation or divorce agreement for purposes of the use test. The wording of the separation or divorce agreement can therefore be important when deciding whether to sell your home before year end, have one spouse retain it or transfer ownership as part of the divorce. A transfer of the home between you and your spouse as part of a divorce generally won’t be treated as a taxable sale. If the applicable ownership and use tests aren’t met when the home is later sold, however, all or part of the gain may be taxable. A reduced exclusion may be available in certain circumstances, including some sales resulting from unforeseen circumstances. Retirement benefits Retirement benefits are often part of a divorce property settlement. A qualified domestic relations order (QDRO) can give one spouse rights to benefits under the other spouse’s employer-sponsored qualified retirement plan, such as a 401(k). Generally, the spouse who receives retirement plan benefits under a QDRO is taxed on those benefits rather than the spouse who earned them. But when taking withdrawals under the QDRO, the recipient spouse generally is exempt from the 10% early withdrawal penalty that usually applies to retirement plan distributions taken before age 59½. If you’re the receiving spouse and not yet subject to required minimum distributions (RMDs), which generally means you’re under age 73, you may have a few options (with varying tax consequences): Take a lump-sum distribution of the full amount — this may produce a significant income spike in the year received that might push you into a higher tax bracket, trigger (or increase the impact of) various tax-break phaseouts or produce other negative tax consequences, Arrange to receive regular payments, thereby spreading out the taxes over multiple years and avoiding some of the possible negative tax consequences of a lump-sum payment, Roll over the assets into your own retirement plan or IRA — if the rollover requirements are met, you’ll owe no current tax for the year of the rollover but RMDs generally will apply when you reach age 73 or 75, depending on your year of birth, or Leave the money where it is and wait until later to start taking distributions — again, RMDs generally will apply when you reach age 73 or 75. Before finalizing the divorce agreement, consider the tax consequences of dividing retirement assets, including the timing and tax treatment of distributions. (Keep in mind that many of the tax consequences will be different if the retirement benefits are in a Roth account, where qualified distributions are tax-free.) Business interests Business interests require particular attention before a divorce settlement is finalized. For example, a transfer of S corporation stock can affect suspended losses and other tax attributes. Suspended losses generally carry over for the shareholder, but losses that remain suspended when the shareholder disposes of all of the stock generally are lost. With partnership interests, the partner’s tax basis, share of partnership liabilities and other tax attributes merit a close look. A transfer can affect the tax consequences for both the transferring and receiving spouse, so address these issues before completing the transaction. Review the tax impact From a tax perspective, separation and divorce can affect much more than your filing status. Before year end, review your withholding, estimated tax payments, ownership of major assets and any property or retirement accounts being transferred as part of the settlement. You’ll also want to revisit your estate plan and beneficiary designations when the divorce is finalized. We can help you evaluate the tax consequences of your separation or divorce so you can make informed decisions before year end. © 2026 

For most small business owners, strong revenue growth is something to celebrate. But a profitable year can also significantly increase your income tax liability. If your business is on track for a banner year, now is the time to evaluate tax-reduction strategies. Here’s some guidance for sole proprietors and owners of pass-through entities (such as partnerships, S corporations and most limited liability companies). Start with a year-end tax projection Many owners focus on revenue growth without estimating the resulting tax impact. A year-end projection can help identify potential tax obligations while there’s still time to respond. Your projection should address factors such as: Year-to-date revenue and expenses, Expected results for the remainder of the year, Significant asset purchases, Owner compensation and distributions, and Other sources of income reported on the owner’s tax return. Business growth can also create new compliance responsibilities, including state and local tax filing requirements. Evaluate how operational changes, such as adding employees or expanding into new markets, may affect your 2026 tax situation. Prepare for higher estimated tax payments Next, evaluate whether estimated tax payments you’ve made throughout the year will be sufficient. Your fourth payment for the 2026 tax year is due on January 15, 2027. You may need to increase this payment to potentially avoid (or minimize) underpayment penalties. However, increasing your final payment won’t necessarily eliminate penalties for earlier underpayments. Special rules may provide relief if your income increased significantly late in the year. Even if you make enough estimated tax payments for 2026 to avoid penalties, you may still owe tax when you file your return. Waiting until tax season to address your tax liability can create cash flow challenges. Be sure to set aside funds for both your January 15 estimated tax payment and the amount you expect to owe when you file next year. However, strong profits don’t automatically translate into strong cash flow. If your growing business is short on cash, you might need to balance certain year-end moves — such as paying year-end bonuses, distributing cash to owners, and investing in new vehicles and equipment — with impending tax obligations and ongoing operating costs. Make tax-smart moves before year end Once you’ve assessed your current tax and cash flow position, you’re ready to explore strategies to reduce your 2026 tax bill. Common examples include: Deferring taxable income. Some businesses may have flexibility in when they recognize taxable income and deduct certain expenses, depending on their accounting method. The traditional approach is to accelerate deductible expenditures into the current year and defer taxable income into next year. In general, this will reduce your 2026 tax obligation. However, if you expect strong performance to continue next year, you could be in an even higher tax bracket for 2027. In that case, you might take the opposite approach by timing revenue and expenses to accelerate taxable income into this year. That way, more of your business income will be taxed at this year’s lower rate instead of at next year’s higher rate. Taking advantage of the QBI deduction. You may be eligible for a deduction of up to 20% of your qualified business income (QBI). This deduction is subject to a limit of 20% of taxable income. Additional limits may apply if taxable income for the year exceeds the applicable threshold. These limitations are phased in and are especially important to consider in a big revenue year. For 2026, the income-based limits begin when taxable income exceeds $201,750 (double that amount for married couples filing jointly). Starting in 2026, the phase-in ranges have been expanded, allowing larger QBI deductions than in previous years for some taxpayers. The limits are fully phased in when taxable income exceeds $276,750 (double that amount for joint filers). Taxpayers who are affected by these limitations may be able to salvage some or all of the QBI deduction (or be subject to a smaller deduction phaseout) by deferring income or accelerating deductions to keep income under the dollar thresholds. You may also be able to increase the deduction by increasing W-2 wages before year end. The rules are complex, so consult us before acting. Leveraging first-year depreciation write-offs. If your business is planning to purchase equipment, machinery, vehicles, computers or other qualifying assets, you may be able to write off most or all of the purchase price on your 2026 return. But the asset must be placed in service by December 31, 2026, to provide a 2026 deduction. Qualified improvement property and many other assets with recovery periods of 20 years or less may qualify for 100% bonus depreciation and Section 179 expensing. The latter is subject to an annual limit ($2.56 million for 2026) that begins to phase out when eligible purchases for the year exceed the phaseout threshold ($4.09 million for 2026). Immediately deducting qualifying costs can significantly reduce your 2026 tax bill, but tax savings alone shouldn’t drive purchasing decisions. You should also consider your operational needs and available cash flow. If revenue growth continues to accelerate and pushes you into a higher tax bracket in the future, you may save more tax in the long run by deferring purchasing assets (or placing them in service) or by following normal depreciation schedules that spread deductions over multiple years. Contributing to retirement accounts. If your business offers a qualified retirement plan, you may be able to increase deductible contributions to reduce current-year taxable income. In addition to potentially lowering taxes, retirement plan contributions can help support long-term financial goals. If your business doesn’t currently sponsor a retirement plan, consider establishing one in time to make deductible 2026 contributions. You can adopt and fund some types of tax-favored qualified employee retirement plans as late as the federal income tax return due date (including any extension) for the adoption year. Turn growth into a tax-planning opportunity A successful year can create both opportunities and tax challenges. By proactively reviewing your tax position, you may be able to identify strategies that reduce uncertainty, improve cash flow management and support your long-term business goals. However, tax-planning moves require careful coordination. For example, you might inadvertently reduce your allowable QBI deduction if you claim significant first-year depreciation deductions or make sizable deductible retirement plan contributions. Contact us to discuss these and other tax-smart moves for the 2026 tax year. We can help you avoid tax-filing surprises and develop a plan tailored to your situation. © 2026 

Getting children on the road to a financially secure future can be a challenge. To help, the One Big Beautiful Bill Act (OBBBA) created Section 530A accounts (also known as “Trump Accounts”), a new type of tax-advantaged savings vehicle for eligible children. Not only can parents and grandparents contribute, but so can businesses as an employee benefit. The IRS and U.S. Treasury Department have been rolling out guidance on the nuances of these accounts, including regulations proposed in August for employer contribution programs and temporary regs released at the end of September that introduce automatic enrollment of eligible children. Auto accounts Under the September temporary regs, on October 1, 2026, the Treasury Dept. automatically established “auto accounts” for eligible children who didn’t already have a 530A account. (The regs also call for additional auto accounts to be established periodically.) Earlier regs didn’t provide this broad automatic enrollment and have been withdrawn and replaced by these new temporary regs. An auto account can receive a $1,000 government-funded deposit available to U.S. citizen children born from January 1, 2025, through December 31, 2028 — but only if a parent, guardian or other eligible individual makes the required election. Auto accounts can also receive certain “qualified general contributions” by donors (more information below). To accept other types of contributions, including employer, parent or other family contributions, the auto account must first be claimed by a parent, guardian or other eligible individual. The claimant must verify his or her identity and legal authority through an electronic process. The temporary regs also provide a framework for the aforementioned qualified general contributions, under which eligible donors (governments or tax-exempt organizations) can fund accounts for a specified class of children through the Treasury Dept. These contributions generally must be made in equal amounts to the accounts of all eligible children in the designated class. The temporary regs also permit certain contributions of publicly traded stock to qualify. Employer contribution basics Under the OBBBA, employers can annually contribute up to $2,500 per employee (adjusted for inflation after 2027) to the 530A accounts of employees’ dependents (or of employees, if they’re young enough to still be eligible). Contributions generally are excluded from the employee’s federal taxable income. (Social Security, Medicare and federal unemployment taxes generally still apply.) Under the August proposed regs, a qualified contribution program would have to be governed by a separate written plan for the exclusive benefit of its employees and satisfy several additional requirements. The plan would have to specify the: Classes of eligible employees, Rules governing employer contributions, including the amount of contributions and whether contributions may be made via a Sec. 125 cafeteria plan, Procedures for an employee to designate the account to receive contributions, Certification, notice and reporting procedures, Plan year, and Procedures for correcting administrative failures and furnishing notices to employees and trustees when amounts previously designated as employer contributions are subsequently determined not to be excludable. A program that doesn’t adhere to its written plan wouldn’t constitute a 530A account contribution program under the proposed regs. So any contributions would be subject to federal income tax. Notably, the proposed regs define “employee” more narrowly than some had expected. Self-employed individuals — including partners, sole proprietors and 2% S corporation shareholders — wouldn’t be able to participate in such a program under the regs. But these exclusions wouldn’t prevent sole proprietors, partnerships or S corporations from offering a program to their eligible employees. Confirming eligibility Employers can make contributions only to accounts whose beneficiaries are: 1) in their growth period, and 2) employees or employees’ dependents. A beneficiary’s growth period runs from the establishment of the account to December 31 of the calendar year in which the beneficiary reaches age 17. The proposed regs would allow employers to rely on written employee certifications representing: That the beneficiary is the employee or anticipated to be the employee’s dependent for the taxable year the contribution is made, The beneficiary’s date of birth, and That no facts are known to the employee that would make the beneficiary ineligible to receive a contribution. Employers could rely on such a certification unless they have actual knowledge that the certification is incorrect. However, an employer couldn’t rely solely on an employee certification to establish that the recipient account is valid. The employer would have to use a method reasonably designed to verify that the contribution is made to a valid account. Verification could use information from the trustee, payroll processor or another service provider. Fair access Employer contribution programs can’t favor “highly compensated employees” (HCEs) or their dependents. The rules for compliance largely mirror those for dependent care assistance programs. Among other things, programs must satisfy the contributions and benefits, eligibility, and average benefits tests. If a program doesn’t satisfy these tests, HCEs could lose the income exclusion for some or all contributions for federal tax purposes. The August proposed regs recognize that some major employers have indicated that they intend to match the $1,000 government contributions for certain children. They’d permit employers to disregard such matching contributions for purposes of the contributions and benefits test, as well as the average benefits test, if the contributions are made available on the same terms and conditions to all employees who aren’t excluded for nondiscrimination test purposes. This relief wouldn’t eliminate the eligibility test. Additional considerations The August proposed regs address several other areas related to employer contributions, including: Payroll deductions. The proposed regs would allow employees to make pretax contributions through a cafeteria plan to a dependent’s 530A account, but not to their own accounts. A cafeteria plan offering this benefit would have to specifically describe it and allow participants to prospectively change or revoke their salary-reduction elections at least monthly. Any change or revocation would have to take effect before the affected salary becomes currently available. Shared limits. Employer-funded and salary-reduction contributions through a cafeteria plan share the $2,500 limit. These contributions also count toward the account’s general $5,000 annual contribution limit. (The $1,000 pilot program contribution and qualified general contributions don’t count toward the $5,000 limit.) The proposed regs clarify that, if an employee has multiple employers in a year, the total contributions the employee can exclude from income across all employers can’t exceed the applicable annual limit. Employee notices. Under the proposed regs, employers would be required to provide eligible employees notification of the availability and terms of the contribution program. They also would be required to provide a statement showing the amount of contributions made for an employee in the previous calendar year (for example, on Form W-2). Evaluate the benefit The September temporary regs apply to tax years beginning on or after January 1, 2026, and expire on September 30, 2029. The August proposed regs would apply to plan years beginning on or after the date final regulations are published. A hearing on the proposed regs is tentatively scheduled for October 15, 2026. These temporary and proposed regs provide important details for both families and businesses, but more guidance is expected. Parents should understand how an auto account works and what’s required to establish a receiving account before making additional contributions. Businesses considering an employer contribution program should also review the proposed rules and their administrative requirements. Contact us to discuss how the evolving guidance may affect you or your business. © 2026 

Modern families come in many forms. A household may include biological children, adopted children, stepchildren or children of an unmarried partner. Even though family members may view all of these children equally, inheritance laws often do not. That distinction can have significant consequences if your estate plan doesn’t clearly reflect your intentions. Whatever your family makeup, knowing how the law treats different parent-child relationships can help prevent unintended results. Adopted children generally have the same inheritance rights After an adoption is legally completed, an adopted child generally has the same inheritance rights as a biological child of the adoptive parent. This is particularly important when someone dies without a valid will. Under state intestacy laws, adopted children generally inherit from their adoptive parents just as biological children do. Similar treatment typically applies to estate planning documents. For example, if a will or trust leaves assets to a person’s “children,” “grandchildren” or “descendants,” those terms will generally include legally adopted children unless the document provides otherwise. Even so, relying on general terminology may not always be best, particularly in a complicated family. Clearly identifying beneficiaries and periodically reviewing your estate planning documents can reduce uncertainty and the risk of disputes. Stepchildren usually are treated differently A close relationship between stepparent and stepchild doesn’t automatically create inheritance rights. In most cases, a stepchild who hasn’t been legally adopted has no automatic right to inherit from a stepparent under intestacy laws. This can produce an unwelcome surprise. Suppose you’ve helped raise a stepchild for decades and consider that person to be your child. If you die without a will or trust that specifically provides for the stepchild, he or she may receive nothing from your estate. One option is legal adoption. In most states, even an adult child can be adopted, as long as he or she consents. Another option is to specifically name the stepchild as a beneficiary in your will or trust. Depending on your goals, you may also want to review beneficiary designations on retirement accounts, life insurance policies and other assets that pass outside your will. Adopting a stepchild can provide important legal rights and formalize an existing family relationship, but consider inheritance issues before proceeding. Depending on state law and the circumstances of the adoption, a stepparent adoption may affect the child’s legal relationship with the other biological parent. In some situations, that could change the child’s intestate inheritance rights involving that parent and members of that side of the family. Because adoption and inheritance laws vary by state, families should fully understand these consequences before deciding to adopt. Unmarried couples may need additional planning Estate planning can become even more important when unmarried partners are raising a child who’s legally related to only one partner, especially while the child is still a minor. Without an adoption or appropriate planning, the other partner likely will have no automatic parental rights and the child will likely have no inheritance rights from that partner. A so-called “second-parent” adoption may provide a solution. This arrangement may allow an unmarried partner to adopt the other partner’s child without terminating the legal parent’s rights. However, availability and legal consequences vary by jurisdiction. When adoption isn’t available or desired, other estate planning documents may help address some concerns. For example, the legal parent may be able to name the partner to serve as the child’s legal guardian if the parent dies. Keep in mind that a parent’s guardian nomination isn’t necessarily binding on a court. The ultimate decision generally will be based on applicable state law and the child’s best interests. Make your intentions unmistakable Blended and nontraditional families shouldn’t assume inheritance and other laws will produce the results they expect. Your estate plan should clearly identify the people you want to protect and explain how you want to distribute your assets. If your family includes adopted children, stepchildren or a long-term partner’s children, contact us. We can review your estate planning documents to ensure they reflect both your family relationships and your intentions. © 2026 

If you decide to hire new employees, adjust prices or expand operations, you shouldn’t rely on financial information that might be months out of date. And this may be the case if your business generates only one set of financial statements annually. Interim financial reports can provide a fresher picture of operational performance and strategic direction. Used consistently, such reports can help you spot emerging problems and potential opportunities. Your reporting routine Interim reporting covers periods shorter than one fiscal year, such as a month or quarter. The appropriate frequency depends on your business’s size, complexity, seasonal patterns and financing requirements. Rapid growth or cash flow problems may warrant more frequent updates than if your operations are steady and predictable. To produce an interim report, start with your most recent set of financial statements. Then supplement it with other relevant information, such as inventory turnover rates or profitability by product or service. (We can help you gather what you need and set up an interim report template.) Beyond revenue growth Once you have an interim report, compare the results with your budget and your financial statements from that period of the previous year. Be sure to account for seasonality. A slow quarter may be normal for your business, but disappointing results during your historically busy months should probably ring alarm bells. Revenue doesn’t tell the whole story. Because of higher labor costs, supplier price increases or excessive discounting, sales may rise while profit margins shrink. Understanding the cause can help you decide whether to adjust pricing, renegotiate purchasing terms, change your sales approach or take no action at all. Don’t forget to review your balance sheet and statement of cash flows together. Growing accounts receivable may reflect increased sales, slower collections or both. Excess inventory can tie up cash, while shortages can delay orders. Increasing reliance on a line of credit deserves investigation, especially if you borrow to cover recurring operating shortfalls. Dependable numbers An unexpected result in an interim report doesn’t necessarily signal a crisis. But don’t dismiss it as something you can fix at year end. Immediately determine whether the anomaly reflects a business change, an accounting error or an outdated estimate. Keep in mind that consistency matters in interim reports. Record revenue and expenses in the appropriate periods for your business’s accounting method. For accrual-based reports, evaluate applicable expense accruals throughout the year, including bonuses and profit-sharing obligations. Omitting these costs until year end can overstate interim profitability. Inventory records and customer balances also need attention. Reconcile key accounts, investigate inventory discrepancies and assess whether outstanding receivables are collectible. Support any estimates and revise them if circumstances change. Although accounting software can speed report preparation, the quality of its output depends on accurate entries and review. Following through on the findings When you review interim reports, assign practical responses to them — for example, a conclusion, an action or a further investigation. Then use your next interim report to evaluate whether your response was effective. Contact us to set up an interim reporting schedule so you can translate financial results into more informed business decisions. © 2026 

Retirement is far from most teenagers’ minds when they get their first jobs. Most young people are more interested in spending their earnings or saving for a shorter-term goal. But those early earnings create a significant financial opportunity: decades of potential tax-advantaged growth. Even modest contributions to an IRA now can substantially multiply over time. Moreover, a retirement account can help teens get into the habit of saving. Traditional vs. Roth IRAs Working teens can opt for a traditional IRA or a Roth IRA. Both offer the power of tax-advantaged compounding. For example, just $2,000 contributed to an IRA earning 5% annually will grow to nearly $23,000 50 years later. But there are important tax differences between the two types of IRAs: Traditional IRA. Contributions to a traditional IRA will usually be deductible for teens. The deduction may be phased out if a taxpayer’s income exceeds certain amounts and he or she (or his or her spouse) participates in a qualified retirement plan, such as a 401(k). But teenagers generally won’t be affected by these limitations. On the downside, traditional IRA withdrawals are generally taxable. In addition, a penalty applies if funds are withdrawn before age 59½ — unless an exception is available — and a larger penalty applies if required minimum distributions (RMDs) aren’t taken beginning at the age required (75 for today’s teens if future legislation doesn’t increase it). Roth IRA. Roth IRA contributions are never deductible. But withdrawals — including earnings — are tax free as long as the account owner is age 59½ or older and the account has been open at least five years. In addition, contributions can be withdrawn at any time tax- and penalty-free. There also aren’t RMDs for Roth IRAs during the original owner’s lifetime. To contribute to either a traditional or a Roth IRA, a teen must have taxable compensation, such as wages or net earnings from self-employment. For 2026, the annual contribution limit for IRAs is the lesser of taxable compensation or $7,500. This is on a combined basis for both types of IRAs. Typically, a parent or other adult opens a custodial IRA for a minor. The child takes control when he or she reaches the age specified under applicable state law and the account arrangement. Roth IRA advantages Because many working teenagers have little or no taxable income after their standard deduction is applied, a deduction for a traditional IRA contribution often provides little immediate tax benefit. As a result, a Roth IRA can be the more attractive option. Consider Abigail, 16, who started her first part-time job at a local cafe and expects to earn $7,500 in 2026. Her parents want to help her develop a habit of saving. They set up a Roth IRA for her because her account should have many decades to grow and qualified distributions will be tax-free. Abigail’s income is low enough that she likely will owe no federal income tax, so a current deduction for traditional IRA contributions will probably offer little, if any, benefit. Even if she does owe some tax, she’ll be in the lowest bracket (10%). The potential for tax-free qualified distributions in the future is, therefore, more valuable than a deduction for a traditional IRA contribution now. Abigail doesn’t even have to use all of her own earnings to make the contribution. If she wants to contribute only $1,500 of her earnings, her parents, grandparents or others could give her $6,000 so she can contribute the full $7,500 and still have $6,000 available for spending or a shorter-term savings goal. But her family should consider any gift-tax reporting or college financial-aid implications before using this approach. An IRA alternative Section 530A (Trump) accounts provide another tax-advantaged savings opportunity for teens. They’re similar to an IRA, but contributions don’t require the child to have earned income. (The $1,000 federal contribution you probably have heard about is limited to qualifying children born from 2025 through 2028, so today’s teens aren’t eligible.) Even though, like a Roth IRA, contributions aren’t deductible, the portion of distributions attributable to growth will be taxable. Also, depending on how much a working teen earns during the year, he or she may be able to contribute more to a traditional or Roth IRA. Annual contributions to a 530A account are generally limited to $5,000, though some special contributions don’t count toward that limit. 530A accounts also generally prohibit distributions and restrict investments during the growth period (until the year the child turns age 18). So a traditional or Roth IRA may offer a working teen more flexibility. If a family can afford to contribute to both an IRA and a 530A account for a teen who’s eligible for both, that may be an even more powerful savings opportunity, with potentially a combined contribution of as much as $12,500 for 2026. But because 530A accounts were only recently enacted, IRS and Treasury guidance is still developing. Future guidance could affect the rules. Employing your children If your teen doesn’t currently have earned income but you own a business, consider hiring him or her. Employing your child can provide the earned income needed for an IRA contribution, and you can deduct his or her pay as a business expense. The child should be old enough to handle the assigned responsibilities, perform real work and receive reasonable compensation. An excessive pay rate for routine duties could draw IRS scrutiny. Keep records of the child’s duties, hours and pay. If the business is a sole proprietorship or a partnership in which each partner is a parent of the child, wages paid to a child under age 18 aren’t subject to Social Security and Medicare taxes. Wages paid to a child under age 21 aren’t subject to federal unemployment tax. But the wages are subject to federal income tax withholding regardless of age. If the business is a corporation, or a partnership in which not every partner is a parent of the child, the wages are subject to federal income tax withholding and Social Security, Medicare and federal unemployment taxes regardless of the child’s age. That’s true even if a parent controls the corporation. Put early earnings to work For a working teen, an IRA can provide an early start on decades of tax-advantaged saving. 2026 contributions can be made until April 15, 2027, but the income to support them must be earned by December 31, 2026. Whether a traditional or Roth IRA is better — and how a 530A account might fit in — depends on a variety of factors. We can help you determine what fits your family’s circumstances and put those early earnings to work for the future. © 2026 

IRS audit rates remain relatively low, but that’s little consolation if the IRS selects your return for an examination. Although most taxpayers will never face an audit, business owners often have more complex tax situations that can attract IRS attention. The good news is that with proper preparation, detailed records and professional guidance, you can make the process far less stressful. Am I at risk for an IRS audit? The IRS accepts most returns as filed. However, your return may be selected for examination because of discrepancies identified by IRS systems, unusual reporting patterns, information reported by third parties or, in some cases, random statistical sampling. Business owners should remember that an IRS examination may not be limited to a business tax return. Many small businesses operate as sole proprietorships, partnerships or S corporations (or as limited liability companies taxed as one of those structures). For these entities, business income, deductions and credits flow through to the owners’ individual returns. As a result, IRS questions about business activities may arise during an examination of either a business return or an owner’s individual return. While there’s no guaranteed way to eliminate your audit risk, the best way to manage an audit is to be prepared. Maintain organized records throughout the year, including invoices, receipts, bank statements, payroll records, canceled checks and other documentation supporting items reported on your tax returns. Keeping complete records in a central location, whether physical or electronic, can make responding to IRS inquiries much easier. Which issues does the IRS target? Some returns are more likely to attract IRS scrutiny than others. Common issues that may lead to questions include: Significant inconsistencies between current and prior-year returns, Income reported on a tax return that doesn’t match Forms W-2, 1099 or other information returns received by the IRS, Gross profit margins or expense levels that differ substantially from similar businesses in the same industry, Large or unusual deductions compared to income, Repeated business losses, and Mathematical errors or incomplete information on a return. Certain deductions often receive closer scrutiny because they have strict substantiation requirements. Examples include deductions for vehicles, travel, meals and home offices. Pass-through entities also present special audit risks. For example, the IRS may examine whether S corporation shareholder-employees are receiving reasonable compensation or whether owners have sufficient tax basis to claim losses and deductions. Proper documentation is essential in these areas. How should I respond to an IRS notice? If your return is selected for examination, you’ll generally be notified by mail. The IRS doesn’t initiate audits through email, text messages or social media. Be wary of unsolicited messages claiming to be from the IRS — these are likely scams. Many audits involve a request for documentation supporting specific items reported on a tax return. In some cases, taxpayers may be asked to meet with an IRS representative at a local office. More complex examinations may involve a field audit conducted at the taxpayer’s home, business or representative’s office. However, most examinations are handled through correspondence rather than in-person visits. If you receive an IRS notice, it will explain any discrepancies and give you time to respond. Carefully review the request and gather all documents relevant to the items in question. If records are missing, you’ll have to reconstruct the information using other available documentation. If you’re selected for an audit, call us as soon as possible. By involving us early in the process, our experienced tax professionals can help you: Understand the issues the IRS is examining, Gather and organize the necessary records, Communicate with the IRS on your behalf when appropriate, and Respond to the examination efficiently and effectively. In most situations, the IRS has three years after a return is filed to assess additional tax, though longer periods may apply in certain circumstances. Because examinations often occur well after a return has been filed, you should retain finished returns and any supporting documentation for the appropriate period. As a general rule, you should hold on to tax records for at least six years after they’re due or filed, whichever is later. However, you should keep certain tax-related records longer. For example, keep records related to a bad debt deduction for seven years. And keep copies of your tax returns and other proof of filing indefinitely to document that you filed. (There’s no statute of limitations for the IRS to assess tax if you didn’t file a return or you filed a fraudulent one.) Am I audit ready? Don’t let the possibility of an audit keep you up at night. Most IRS examinations are routine and manageable when taxpayers maintain accurate, detailed records and respond promptly to IRS inquiries. If you receive an IRS notice, we can help you prepare for an examination and represent your interests throughout the audit process. Or if you simply want to strengthen your recordkeeping and tax compliance processes, contact us to assess your audit readiness and identify opportunities for improvement. © 2026