The possible tax landscape for businesses in the future

N&K CPAs • August 11, 2024

Get ready: The upcoming presidential and congressional elections may significantly alter the tax landscape for businesses in the United States. The reason has to do with a tax law that’s scheduled to expire in about 17 months and how politicians in Washington would like to handle it.


How we got here

The Tax Cuts and Jobs Act (TCJA), which generally took effect in 2018, made extensive changes to small business taxes. Many of its provisions are set to expire on December 31, 2025.


As we get closer to the law sunsetting, you may be concerned about the future federal tax bill of your business. The impact isn’t clear because the Democrats and Republicans have different views about how to approach the various provisions in the TCJA.


Corporate and pass-through business rates

The TCJA cut the maximum corporate tax rate from 35% to 21%. It also lowered rates for individual taxpayers involved in noncorporate pass-through entities, including S corporations and partnerships, as well as from sole proprietorships. The highest rate today is 37%, down from 39.6% before the TCJA became effective.


But while the individual rate cuts expire in 2025, the law made the corporate tax cut “permanent.” (In other words, there’s no scheduled expiration date. However, tax legislation could still raise or lower the corporate tax rate.)


In addition to lowering rates, the TCJA affects tax law in many other ways. For small business owners, one of the most significant changes is the potential expiration of the Section 199A qualified business income (QBI) deduction. This is the write-off for up to 20% of QBI from noncorporate entities.


Another of the expiring TCJA business provisions is the gradual phaseout of first-year bonus depreciation. Under the TCJA,100% bonus depreciation was available for qualified new and used property that was placed in service in calendar year 2022. It was reduced to 80% in 2023, 60% in 2024, 40% in 2025, 20% in 2026 and 0% in 2027.


Potential Outcomes

The outcome of the presidential election in three months, as well as the balance of power in Congress, will determine the TCJA’s future. Here are four potential outcomes:


All of the TCJA provisions scheduled to expire will actually expire at the end of 2025.


All of the TCJA provisions scheduled to expire will be extended past 2025 (or made permanent).


Some TCJA provisions will be allowed to expire, while others will be extended (or made permanent).


Some or all of the temporary TCJA provisions will expire — and new laws will be enacted that provide different tax breaks and/or different tax rates.


How your tax bill will be affected in 2026 will partially depend on which one of these outcomes actually happens and whether your tax bill went down or up when the TCJA became effective years ago. That was based on a number of factors including your business income, your filing status, where you live (the SALT limitation negatively affects taxpayers in certain states), and whether you have children or other dependents.


Your tax situation will also be affected by who wins the presidential election and who controls Congress because Democrats and Republicans have competing visions about how to proceed. Keep in mind that tax proposals can become law only if tax legislation passes both houses of Congress and is signed by the President (or there are enough votes in Congress to override a presidential veto).


Look to the future


As the TCJA provisions get closer to expiring, and the election gets settled, it’s important to know what might change and what tax-wise moves you can make if the law does change. We can answer any questions you have and you can count on us to keep you informed about the latest news.


© 2024

September 23, 2025
Among its numerous tax provisions, the One Big Beautiful Bill Act (OBBBA) reinstated immediate deductions for research and experimental (R&E) expenditures under Internal Revenue Code Section 174, beginning in 2025. The IRS has recently issued transitional guidance (Revenue Procedure 2025-28) on how this change will be implemented. The guidance addresses several critical issues. Here’s what businesses of all sizes need to know. The reinstatement R&E expenditures generally refer to research and development costs in the experimental or laboratory sense. They include costs related to activities intended to discover information that would eliminate uncertainty about the development or improvement of a product. Since 2022, the Tax Cuts and Jobs Act (TCJA) has required businesses to amortize domestic R&E costs over five years, with foreign costs amortized over 15 years. The OBBBA permanently reinstates the pre-TCJA treatment of domestic R&E costs, allowing their deduction for expenses incurred or paid in tax years beginning after 2024. The OBBBA also permits small businesses that satisfy a gross receipts test to claim the R&E deduction retroactively to 2022. (For 2025, average annual gross receipts for the previous three years must be $31 million or less.) And any business that incurred domestic R&E expenses in 2022 through 2024 may elect to accelerate the remaining deductions for those expenditures over either a one- or two-year period. The immediate deduction of qualified R&E expenses isn’t mandatory. Depending on a variety of factors, in some situations, claiming it may not be advisable. Taxpayers generally can instead elect to capitalize and amortize such expenses paid in a tax year after 2024 over at least 60 months. The election must be made by the due date, with extensions, of the original tax return for the first tax year to which the election applies. For 2025, a taxpayer that makes an accounting method change to capitalize and amortize R&E expenses will be deemed to have made the election. Retroactive deductions for small businesses As noted, eligible small businesses can elect to treat the changes to Sec. 174 as if they took effect for tax years beginning after 2021, rather than after 2024. How to do this depends in part on whether the taxpayer has already filed a 2024 tax return. If the taxpayer filed a 2024 return before August 28, 2025, an automatic extension to supersede that return to include the new guidance is available. However, the taxpayer must file that replacement return by the extended deadline (typically September 15 or October 15). Alternatively, the taxpayer can file an amended 2024 return, following one of the two options discussed below. If the taxpayer didn’t file a 2024 return by August 28, the taxpayer can file by the applicable extended deadline and either: Elect to expense eligible R&E expenses under the new guidance, which would also require filing amended returns for 2022 and 2023, or Do an automatic method of accounting change and a “true-up” adjustment on the 2024 return for the 2022 and 2023 R&E expenses.  Elections must be made by the earlier of July 6, 2026, or the applicable deadline for filing a claim for a credit or refund for the tax year (generally, three years from filing the return). Accelerated deductions for all businesses Businesses with unamortized domestic R&E expenses under the TCJA can elect to fully recover those remaining expenses on their 2025 income tax returns or over their 2025 and 2026 returns. Notably, the IRS guidance states that taxpayers “may elect to amortize any remaining unamortized amount” of such expenses. This language suggests that the deduction will be considered an amortization expense. This is significant in light of changes the OBBBA made to the business interest expense deduction. The business interest deduction generally is limited to 30% of the taxpayer’s adjusted taxable income (ATI). (Taxpayers that meet the same annual gross receipts test discussed earlier are exempt from the limitation.) Under the OBBBA, beginning in 2025, ATI for purposes of the interest deduction is calculated without deductions for depreciation, amortization or depletion. So amortization deductions are “added back,” potentially increasing the ATI and the allowable business interest deduction. If R&E expenses aren’t treated as an amortization deduction, they could reduce the allowable business interest deduction. The interplay with the research credit The Sec. 41 research tax credit is also available for certain research-related expenses, and you can’t claim both the credit and the deduction for the same expense. A tax deduction reduces the amount of income that’s taxed, while a tax credit reduces the actual tax you owe dollar-for-dollar, providing much more tax savings than a deduction of an equal amount. But the types of expenses that qualify for the credit are narrower than those that qualify for the deduction. The OBBBA changes a TCJA provision so that the amount deducted or charged to a capital account for research expenses is reduced by the full amount of the research credit, as opposed to being subject to a more complex calculation that had been in effect under the TCJA. The amount that’s capitalized is reduced by the amount of the credit claimed. For example, suppose the allowed credit is $20,000. The capitalized amount for the year would be reduced by $20,000. The OBBBA continues, however, to allow taxpayers to elect to take a reduced research credit, rather than reducing their R&E deduction. The OBBBA also allows certain small businesses (generally determined by the gross receipts test mentioned above) to make late elections to reduce their research credit — or to revoke prior elections to reduce the credit. The late elections generally are available for tax years for which the original return was filed before September 15, 2025, and must be made by the earlier of July 6, 2026, or the deadline for filing a claim for a credit or refund for the tax year, on an amended return or an administrative adjustment request (AAR). Reduced uncertainty The IRS guidance also provides automatic IRS consent to applications to change accounting methods for domestic R&E expenses under the TCJA, the OBBBA, the small business retroactive method and the recovery of unamortized method — reducing uncertainty. We can help address any questions you have about the tax treatment of R&E expenses. © 2025
September 23, 2025
For many taxpayers, receiving a letter from the IRS can feel intimidating. The envelope arrives with the IRS seal, and immediately, worry sets in: Did I make a mistake? Am I in trouble? The truth is, IRS notices aren’t uncommon, and most of them can be resolved fairly easily once you understand what they mean. This article walks through the most common types of IRS notices, explains why taxpayers receive them, and provides guidance on how to respond. Why the IRS sends notices The IRS communicates primarily by mail — not phone or email. Notices are typically sent for reasons such as: Clarifying information on a tax return, Notifying you of a balance due, Confirming changes made to your return, Requesting additional documentation, and Alerting you to a possible error. Each notice is numbered in the upper right-hand corner (for example, CP2000 or Notice CP12). That code is your key to understanding the purpose of the letter. In all cases, contact us if you have questions about how to proceed. Five common notices and what they mean 1. CP2000, proposed changes to your tax return. This notice is issued when the IRS finds a mismatch between the information you reported and what third parties (like employers or banks) reported. For example, if your W-2 shows more wages than what you entered, the IRS will propose a correction. How to respond: Review the notice carefully. If the IRS is correct, you can agree and pay any additional tax owed. If you disagree, you have the right to dispute it by providing supporting documentation. 2. CP12, refund adjustment. If the IRS corrects a math error or other mistake on your return, you may receive this notice. Sometimes, it will result in a smaller or larger refund than you expected. How to respond: If you agree with the correction, no action is needed. If not, you can request a reversal by contacting the IRS within 60 days of the date of the notice. 3. CP14, balance due. This is the most common notice. It informs a taxpayer that he or she owes additional tax. It will list the amount due, including penalties and interest. How to respond: Don’t ignore it. Pay the balance in full, set up a payment plan or contact the IRS if you believe the notice is incorrect. 4. Letter 4883C, identity verification. When the IRS suspects identity theft, it sends this letter asking you to verify your identity before processing your return. How to respond: Follow the instructions immediately — usually by calling the IRS or verifying online. Delaying could stall your refund. 5. CP49, refund applied to a debt. A taxpayer will receive this notice if he or she was expecting a refund, but instead had it applied to past-due federal taxes or other debts (like child support or student loans). How to respond: The notice will explain how the refund was applied. If you disagree, you may need to contact the agency that received the payment, not the IRS. Steps to take In addition to the response steps listed above, here are six more tips: Don’t panic. Notices are often routine and resolvable. Read carefully. The notice will explain the issue, next steps and deadlines. Check the notice number. This will help you look up details online or discuss the matter with us. Verify accuracy. Compare the notice to your tax return and records. Respond promptly. Many notices have deadlines for disputing or appealing. Avoid scams. The IRS will never email, text or call demanding payment. Legitimate notices always come by mail. Ways we can help Interpreting an IRS notice may be tricky, especially if it involves complex calculations or disputed information. We can review the notice for accuracy and explain what it means in plain language. In addition, we can communicate with the IRS on your behalf, help you gather documentation, file corrections and guide you through payment plans or appeals if needed. With professional guidance, most IRS issues can be resolved without stress or confusion. © 2025 
September 22, 2025
Running a successful business requires more than delivering great products or services. Behind the scenes, meticulous recordkeeping plays a crucial role in financial health, compliance and tax savings. Good records can mean the difference between successfully defending a deduction and losing valuable tax breaks. A recent U.S. Tax Court decision underscores just how important this is. Why it matters The IRS requires all businesses — no matter how small — to maintain records that accurately reflect income, expenses, assets and liabilities. Without these records, it’s nearly impossible to: Substantiate tax deductions and credits, Track cash flow and profitability, Prepare accurate financial statements, Monitor the progress of your business, Support decisions for financing, and Demonstrate compliance during an IRS audit. In short, strong recordkeeping protects your business, both for operational and tax law purposes. Taxpayer loses deductions due to insufficient records In one case, a union power‐line worker also had business interests in a storm response partnership, a salon and a rental property. He claimed significant losses and business expenses on his return for the year in question. Among his claimed deductions were partnership losses and expenses for tools, clothing and travel. In Tax Court Memo 2025-12, the court disallowed substantial deductions because the taxpayer couldn’t properly substantiate them. Some invoices or receipts were missing or didn’t tie clearly to the business purpose. For example, with vehicle or travel expenses, the court noted the lack of contemporaneous logs and details that distinguished business vs. personal use. For partnership losses, the taxpayer needed to show his basis in the partnership, but couldn’t provide clear documentation of all his capital contributions. In addition to denying many of the taxpayer’s deductions, the court upheld an accuracy‐related penalty. This is an extra charge (typically 20% of the underpayment) that can be assessed when a taxpayer makes substantial mistakes on a tax return. This case isn’t unique. Year after year, businesses lose valuable deductions for the same reason: poor recordkeeping. Six key practices to protect tax breaks To avoid costly mistakes, businesses should implement a recordkeeping system that’s both practical and compliant. Here are six best practices to consider: 1. Separate business and personal finances. Open a dedicated business checking account and credit card. Mixing personal and business expenses is one of the fastest ways to create confusion — and attract IRS scrutiny. 2. Maintain contemporaneous records. Document expenses when they occur, not months later. For example, keep mileage logs for business driving and note the purpose of each trip. 3. Use accounting software. Modern accounting platforms (like QuickBooks® or industry-specific tools) streamline recordkeeping. They allow you to categorize expenses, generate reports and integrate with bank accounts to minimize errors. 4. Keep source documents. For example, retain purchase and sale invoices, receipts, bank statements, canceled checks, and credit card bills. Scanning or photographing receipts ensures they won’t fade or get lost. Also, keep copies of Forms 1099-MISC and 1099-NEC. There are also specific employment tax records you must keep. 5. Retain records for the right amount of time. Generally, the IRS recommends keeping records for at least three years. That’s the amount of time that the tax agency can audit a tax return. However, some records (such as payroll tax or property records) should be kept longer. The length of time can be extended to six years if the income is underreported by more than 25%. And if no return is filed or fraud is involved, the IRS can conduct an audit for an indefinite amount of time. 6. Establish internal controls. For businesses with employees, internal checks help ensure the accuracy and integrity of records. Examples of these controls include requiring dual signatures for large expenses and segregating duties so that different employees handle authorization, custody of assets and recordkeeping. Reliable records are vital The lesson from the Tax Court case described above is clear: Without reliable records, even legitimate deductions can vanish. Don’t let poor documentation cost your business money. We can help your business: Set up a recordkeeping system tailored to your business, Learn which expenses are deductible (and how to document them), Review its books to catch issues before the IRS does, and Manage any IRS challenges to tax deductions. Contact us to discuss how we can help you establish sound recordkeeping practices and safeguard valuable tax breaks. © 2025
September 18, 2025
Is one of your top estate planning goals to provide your family with financial security at the lowest tax cost? Strategies to consider include making gifts during your lifetime or bequests at death, or creating trusts and naming your loved ones as beneficiaries. You could also make an intrafamily loan. This type of loan — where one family member lends money to another — can be an effective way to transfer wealth, provide financial support or assist with major purchases, such as a first home or a business startup. However, this strategy isn’t without drawbacks. Why choose one? A key benefit is flexibility. Families can often offer better loan terms than banks, such as lower interest rates, more forgiving repayment schedules and fewer fees. Intrafamily loans also keep money within the family rather than paying interest to outside lenders, which can help preserve family wealth. In addition, when properly structured, these loans can serve as a tax-efficient way to transfer money while still requiring accountability from the borrower. From a tax perspective, intrafamily loans allow you to transfer wealth tax-free. Here’s how it works: When you make a loan to a family member, charge interest at the applicable federal rate (AFR). (Charging no interest or interest below the AFR can lead to unwelcome tax surprises.) To the extent that the borrower earns returns on the funds in excess of the interest payments on the loan (by investing them in a business opportunity, for example), the borrower pockets those earnings free of gift and estate tax. Note that an intrafamily loan doesn’t enable the lender to avoid gift and estate tax on the loan principal itself. The outstanding balance is included in the lender’s taxable estate, even if the lender dies before the loan is paid off. In that case, either the borrower will be obligated to repay the loan to the estate, or, if the loan terms call for it to be forgiven on the lender’s death, that forgiveness will be treated as a taxable transfer. Will the IRS treat it as a gift or loan? To enjoy the benefits of an intrafamily loan, it’s critical to treat the transaction as a legitimate loan. Otherwise, the IRS may determine that it’s a disguised gift, which can trigger negative tax consequences (assuming you’re subject to gift and estate taxes). Generally, the IRS presumes intrafamily transactions are gifts. So, to ensure that a loan is treated as a loan, you must take steps to demonstrate that you and the borrower have a bona fide creditor-debtor relationship. To decide whether a transfer of funds is a loan or a gift, the IRS and courts consider the “Miller” factors. A transfer is more likely to be treated as a loan if: There was a promissory note or other evidence of indebtedness, Interest was charged, There was security or collateral, There was a fixed maturity date, A demand for repayment was made, Actual repayment was made, The transferee had the ability to repay, The parties maintained records treating the transaction as a loan, and The parties treated the transaction as a loan for federal tax purposes. These factors aren’t exclusive. Additionally, the courts generally consider an actual expectation of repayment and intent to enforce the debt as crucial to determining whether a transfer constitutes a loan. What are the drawbacks? Although an intrafamily loan can be a helpful tool, families should carefully weigh the financial and emotional risks before proceeding. A significant risk is personal — mixing money with family relationships can create tension. If a borrower struggles to repay, the lender may feel taken advantage of, while the borrower may feel pressure or resentment. If you’re considering making intrafamily loans, it’s important to observe the formalities associated with bona fide loans to ensure the desired tax treatment. Contact us for additional details. © 2025 
September 17, 2025
The more things change, the more they stay the same. This age-old saying applies to many things, and one of them is fraud perpetrated against businesses by their employees. In fact, occupational fraud cost organizations about 5% of their revenue on average last year, according to the Association of Certified Fraud Examiners’ Occupational Fraud 2024: A Report to the Nations. Let’s review its three basic categories. Misappropriating assets The first category is asset misappropriation. It comprises theft or misuse of any business asset, but related schemes often involve cash. These types of scams are the most common type of occupational fraud, though they’re typically less costly than crimes committed under the other two categories. One classic example is the “ghost” employee ploy, where a staff member with payroll access channels funds to a nonexistent worker. Naturally, those funds end up in the real employee’s pocket. There are plenty of others. Asset misappropriation has long involved check tampering, whereby an employee steals, forges or alters company checks to reap ill-gotten financial rewards. Now that midsize and larger businesses rely more on electronic transactions, these companies are relatively less susceptible to check schemes. However, many small companies are still at risk. If you run a cash-intensive business, be on the lookout for dishonest workers skimming funds before they’re recorded. And if your company maintains inventory or supplies, safeguard these carefully to avoid theft. Engaging in corrupt activities The second category of occupational fraud is corruption. Dishonest employees in positions of influence may commit crimes for personal gain and the company’s loss. These types of schemes are rarely simple and may go on for months — or even years — without anyone noticing. For instance, a corrupt staffer may work with a vendor rep to inflate prices on the vendor’s goods and services. The two then split the difference when the business pays the bill. Collusion like this can hurt your company’s financial performance and business reputation. Leadership teams that fail to prevent such schemes risk losing the confidence and support of lenders and investors. Don’t ignore the possibility of kickback schemes either. Here, a person of influence in the company uses a vendor or other provider, not because they’re the best choice, but because the employee involved gets a personal benefit. Examples might include cash, a valuable gift or free services. Falsifying financial statements The third category is financial statement fraud. In these schemes, perpetrators falsify financial statements to either hide poor performance or commit outright theft. On the upside, this category is generally the least prevalent of the three. The downside? It’s often the costliest — with such crimes costing companies many hundreds of thousands of dollars on average. One example to watch out for is inflated revenue. A manager, perhaps angling for a promotion or fearful of termination, records sales that never actually occurred to make the business appear more profitable. On a similar tack, a dishonest employee may hide or delay recording legitimate expenses or debts to make financial results look stronger. Fraudulent manipulation of financial statements can be particularly dangerous. These crimes are often sophisticated, hard to detect and damaging to a company’s reputation at the highest levels. Common thread As you can see, occupational fraud can take many forms. But the common thread is the financial and reputational damage to affected businesses. And the threat level is often higher for smaller companies because they may have fewer resources to fight back. Let us help you spot vulnerabilities in your operations, strengthen internal controls, and devise tailored fraud prevention and detection strategies. © 2025 
September 16, 2025
Are you age 50 or older? You’ve earned the right to supercharge your retirement savings with extra “catch-up” contributions to your tax-favored retirement account(s). And these contributions are more valuable than you may think. IRA contribution amounts For 2025, eligible taxpayers can make contributions to a traditional or Roth IRA of up to the lesser of $7,000 or 100% of earned income. They can also make extra catch-up contributions of up to $1,000 annually to a traditional or Roth IRA. If you’ll be 50 or older as of December 31, 2025, you can make a catch-up contribution for the 2025 tax year by April 15, 2026. Extra deductible contributions to a traditional IRA create tax savings, but your deduction may be limited if you (or your spouse) are covered by a retirement plan at work and your income exceeds a certain amount. Extra contributions to Roth IRAs don’t generate any upfront tax savings, but you can take federal-income-tax-free qualified withdrawals after age 59½. There are also income limits on Roth contributions. Higher-income individuals can make extra nondeductible traditional IRA contributions and benefit from the tax-deferred earnings advantage. Employer plan contribution amounts For 2025, you can contribute up to $23,500 to an employer 401(k), 403(b) or 457 retirement plan. If you’re 50 or older and your plan allows it, you can contribute up to an additional $7,500 in 2025. Check with your human resources department to see how to sign up for extra contributions. Contributions are subtracted from your taxable wages, so you effectively get a federal income tax deduction. You can use the tax savings to help pay for part of your extra catch-up contribution, or you can set the tax savings aside in a taxable retirement savings account to further increase your retirement wealth. Examples of how catch-up contributions grow How much can you accumulate? To see how powerful catch-up contributions can be, let’s run a few scenarios. Example 1: Let’s say you’re age 50 and you contribute an extra $1,000 catch-up contribution to your IRA this year and then do the same for the following 15 years. Here’s how much extra you could have in your IRA by age 65 (rounded to the nearest $1,000): 4% annual return: $22,000 8% annual return: $30,000 Keep in mind that making larger deductible contributions to a traditional IRA can also lower your tax bill. Making additional contributions to a Roth IRA won’t, but they’ll allow you to take more tax-free withdrawals later in life. Example 2: Assume you’ll turn age 50 next year. You contribute an extra $7,500 to your company plan in 2026. Then, you do the same for the next 15 years. Here’s how much more you could have in your 401(k), 403(b), or 457 plan account (rounded to the nearest $1,000): 4% annual return: $164,000 8% annual return: $227,000 Again, making larger contributions can also lower your tax bill. Example 3: Finally, let’s say you’ll turn age 50 next year and you’re eligible to contribute an extra $1,000 to your IRA for 2026, plus you make an extra $7,500 contribution to your company plan. Then, you do the same for the next 15 years. Here’s how much extra you could have in the two accounts combined (rounded to the nearest $1,000): 4% annual return: $186,000 8% annual return: $258,000 The amounts add up quickly As you can see, catch-up contributions are one of the simplest ways to boost your retirement wealth. If your spouse is eligible too, the impact can be even greater. Contact us if you have questions or want to see how this strategy fits into your retirement savings plan. © 2025 
September 15, 2025
Does your business receive large amounts of cash or cash equivalents? If so, you’re generally required to report these transactions to the IRS — and not just on your tax return. Here are some answers to questions you may have. What are the requirements? Although many cash transactions are legitimate, the IRS explains that the information reported on Form 8300 “can help stop those who evade taxes, profit from the drug trade, engage in terrorist financing and conduct other criminal activities. The government can often trace money from these illegal activities through the payments reported on Form 8300 and other cash reporting forms.” Each person who, in the course of operating a trade or business, receives more than $10,000 in cash in one transaction (or two or more related transactions), must file Form 8300. Who is a “person”? It can be an individual, company, corporation, partnership, association, trust or estate. What are considered “related transactions”? Any transactions between the same payer and recipient conducted in a 24-hour period. Transactions can also be considered related even if they occur over a period of more than 24 hours if the recipient knows, or has reason to know, that each transaction is one of a series of connected transactions. In order to complete Form 8300, you’ll need personal information about the person making the cash payment, including a Social Security or taxpayer identification number. The IRS reminds businesses that they can “batch file” their reports, which is especially helpful to those required to file many forms. Note: Under a rule that went into effect on January 1, 2024, businesses must now file Forms 8300 electronically if they’re otherwise required to e-file certain other information returns electronically, such as W-2s and 1099s. You also must e-file if you’re required to file at least 10 information returns other than Form 8300 during a calendar year. What’s the definition of cash and cash equivalents? For Form 8300 reporting purposes, cash includes U.S. currency and coins, as well as foreign money. It may also include cash equivalents such as cashier’s checks (sometimes called bank checks), bank drafts, traveler’s checks and money orders. Money orders and cashier’s checks under $10,000, when used in combination with other forms of cash for a single transaction that exceeds $10,000, are defined as cash for Form 8300 reporting purposes. What about digital assets such as cryptocurrency? Despite a 2021 law that would treat certain digital asset receipts like “cash,” the IRS announced in 2024 that you don’t have to report digital asset receipts on Form 8300 until regulations are issued. IRS Announcement 2024-4 remains the latest official word. Note: Under a separate reporting requirement, banks and other financial institutions report cash purchases of cashier’s checks, treasurer’s checks and/or bank checks, bank drafts, traveler’s checks and money orders with a face value of more than $10,000 by filing currency transaction reports. What type of penalties can be imposed for noncompliance? If a business doesn’t file Forms 8300 on time, there can be a civil penalty of $310 for each missed form, up to an annual cap. The penalties are higher if the IRS finds the failure to file is intentional, and there can be criminal penalties as well. In one recent case, an Arizona car dealer failed to file the required number of Forms 8300. While the dealer did file 116 forms for the year in question, the IRS determined that the business should have filed an additional 266 forms. The tax agency assessed penalties of $118,140. The dealer argued that it had reasonable cause for not filing all the forms because the software it was using wasn’t functioning properly. However, the U.S. Tax Court ruled that the dealer wasn’t using the software correctly and didn’t take steps to foster compliance. (TC Memo 2025-38) Stay on top of the requirements Compliance with Form 8300 requirements can help your business avoid steep penalties and trouble with the IRS. Recordkeeping is critical. You should keep a copy of each Form 8300 for five years from the date you file it, according to the IRS. “Confirmation receipts don’t meet the recordkeeping requirement,” the tax agency adds. Contact us with any questions or for assistance. © 2025 
September 11, 2025
When it comes to estate planning, one of the more nuanced tools available is a quiet trust (also known as a “silent” trust). Unlike a traditional trust, a quiet trust keeps beneficiaries — often children or young adults — in the dark about its existence or details until they reach a certain age or milestone. Many states permit quiet trusts, but these trusts have both positives and negatives. Depending on the situation, an incentive trust may be a better way to achieve your goals. The pros One of the biggest benefits of using a quiet trust is that it helps preserve ambition and independence. If your heirs know too early about a significant inheritance, they may lose motivation to pursue educational goals or build a career. By keeping the details private, you give them the chance to grow independently. Quiet trusts can also reduce family conflict during your lifetime, especially if distributions are unequal or come with specific conditions. In addition, secrecy offers protection from outside pressures — such as creditors, estranged spouses or opportunistic friends — and allows time for heirs to develop the maturity needed to manage wealth responsibly. The cons Quiet trusts aren’t without drawbacks. Some beneficiaries may feel resentful when they eventually discover that assets were withheld from them. This secrecy can also increase the risk of legal challenges once the trust is revealed. By keeping heirs uninformed, you also may unintentionally deprive them of valuable opportunities. For example, they might forego graduate school because they don’t want to take on student loan debt that could take decades to pay back when, in fact, the trust would eventually allow them to pay off the loan more quickly. (Or current access to the money could allow them to avoid student loan debt altogether.) And because trustees must administer the trust without beneficiary input, their decisions could later be questioned, adding tension at an already difficult time. Another option The idea behind a quiet trust is to avoid disincentives to responsible behavior. But it’s not clear that such a trust will actually accomplish that goal. A different approach is to design a trust that provides incentives for responsible behavior. For example, an incentive trust might condition distributions on behavior you wish to encourage, such as obtaining a college or graduate degree, maintaining gainful employment, or pursuing worthy volunteer activities. Or it could require getting treatment for alcohol or substance abuse and maintaining a sober lifestyle. One drawback to setting specific goals is that it may penalize a beneficiary who chooses a different, but responsible, life choice — a stay-at-home parent, for example. To build some flexibility into the trust, you might establish general principles for distributing trust funds to beneficiaries who behave responsibly but give the trustee broad discretion to apply these principles on a case-by-case basis. Finding the right balance A quiet trust can be a powerful way to encourage independence and protect your heirs, but it requires careful planning. Many families find success in combining secrecy with a gradual disclosure strategy — sharing information at key milestones or leaving behind a written explanation to reduce confusion and conflict. Every family is different, and the decision to use a quiet trust or an incentive trust should be based on your goals, values and relationships. We can help you weigh the pros and cons and structure your plan in a way that best protects your family and your legacy. © 2025 
September 10, 2025
If your business allows employees to perform their jobs under a hybrid work model, it’s not alone. Ever since the pandemic, many companies have sought to strike a balance between permitting some remote work while also requiring staff to come into the office (or another type of facility). Data released this year shows that, by and large, businesses seem to have found a certain equilibrium regarding hybrid work. However, maintaining the right balance for your company will require a careful eye going forward. Schedule control Just this month, Gallup published survey results showing that, as of May 2025, 51% of remote-capable employees in the United States are working under a hybrid model. That’s a slight decrease from 55% in November 2024. Interestingly, during the same period, the percentage of fully remote workers rose 2% — but fully on-site employees also increased by the same percentage. One particularly important issue brought up by the research is how much control a business asserts over its hybrid workers’ schedules. The data showed that the percentage of employees who describe their schedules as “entirely up to me” fell from 37% in 2024 to 34% this year. How do most companies establish hybrid schedules? Gallup found that three main groups typically make the call: Employees themselves, Managers or teams, or Leadership. The second option generally comes out on top, according to Gallup. More specifically, 91% of hybrid workers whose teams established their schedules described their employers’ policies as “fair.” That’s the same rate as employees who determined their own schedules. When leadership mandated schedules, the fairness rate reported by hybrid workers fell to only 73%. Policy enforcement Another recent report on hybrid work models is the 2025 Americas Office Occupier Sentiment Survey by commercial real estate services and investment consultancy CBRE. It polled companies across the United States, Canada and Latin America on topics that included “efforts to align workspaces with hybrid work models while meeting business objectives.” Among the survey’s key findings is an uptick in the enforcement of hybrid work policies. In fact, 85% of responding businesses reported communicating an attendance policy to hybrid workers. What’s more: 69% of respondents measured compliance with their policies (up from 45% in 2024), and 37% of respondents took enforcement actions (up from 17% in 2024). And those enforcement measures seem to be working. The survey found that 72% of respondents achieved their attendance goals in 2025 (up from 61% in 2024). Overall, the data indicates that employees averaged 2.9 days a week on-site, which is close to businesses’ reported expectations of 3.2 days on average. Cost considerations Along with determining and refining how you establish workers’ schedules and enforce your policies, you should carefully identify all the costs that accompany hybrid work. For example, even with fewer employees on-site, your business still needs to maintain office space. Some companies are downsizing, while others are redesigning their layouts to accommodate shared desks and collaborative spaces. If you choose these alternatives, be aware of your lease commitments, maintenance and utility expenses, and renovation costs. Supporting a hybrid workforce also requires secure and reliable technology. This typically includes video conferencing tools, cloud-based software, cybersecurity measures, and internet and networking systems. These expenses often extend to both office and home setups. Beware of hidden costs, too. For instance, policy enforcement may cause your business to spend more on compliance-related technology, as well as training for HR staff and supervisors. Clear and constant view The surveys mentioned above, as well as other indicators, show that hybrid work is here to stay. Finding the optimal balance for your business depends on savvy scheduling, judicious policy enforcement, and a clear and constant view of the financial implications. We can help you assess all the expenses involved and align spending with productivity goals to ensure your hybrid model remains sustainable. © 2025 
September 9, 2025
Before the One Big Beautiful Bill Act (OBBBA), tip income and overtime income were fully taxable for federal income tax purposes. The new law changes that. Tip income deduction For 2025–2028, the OBBBA creates a new temporary federal income tax deduction that can offset up to $25,000 of annual qualified tip income. It begins to phase out when modified adjusted gross income (MAGI) is more than $150,000 ($300,000 for married joint filers). The deduction is available if a worker receives qualified tips in an occupation that’s designated by the IRS as one where tips are customary. However, the U.S. Treasury Department recently released a draft list of occupations it proposes to receive the tax break and there are some surprising jobs on the list, including plumbers, electricians, home heating / air conditioning mechanics and installers, digital content creators, and home movers. Employees and self-employed individuals who work in certain trades or businesses are ineligible for the tip deduction. These include health, law, accounting, financial services, investment management and more. Qualified tips can be paid by customers in cash or with credit cards or given to workers through tip-sharing arrangements. The deduction can be claimed whether the worker itemizes or not. Overtime income deduction For 2025–2028, the OBBBA creates another new federal income tax deduction that can offset up to $12,500 of qualified overtime income each year or up to $25,000 for a married joint-filer. It begins to phase out when MAGI is more than $150,000 ($300,000 for married joint filers). The limited overtime deduction can be claimed whether or not workers itemize deductions on their tax returns. Qualified overtime income means overtime compensation paid to a worker as mandated under Section 7 of the Fair Labor Standards Act (FLSA). It requires time-and-a-half overtime pay except for certain exempt workers. If a worker earns time-and-a-half for overtime, only the extra half constitutes qualified overtime income. Qualified overtime income doesn’t include overtime premiums that aren’t required by Section 7 of the FLSA, such as overtime premiums required under state laws or overtime premiums pursuant to contracts such as union-negotiated collective bargaining agreements. Qualified overtime income also doesn’t include any tip income. Payroll tax implications While you may have heard the new tax breaks described as “no tax on tips” and “no tax on overtime,” they’re actually limited, temporary federal income tax deductions as opposed to income exclusions. Therefore, income tax may apply to some of your wages and federal payroll taxes still apply to qualified tip income and qualified overtime income. In addition, applicable federal income tax withholding rules still apply. And tip income and overtime income may still be fully taxable for state and local income tax purposes. The real issue for employers and payroll management firms is reporting qualified tip income and qualified overtime income amounts so eligible workers can claim their rightful federal income tax deductions. Reporting details The tip deduction is allowed to both employees and self-employed individuals. Qualified tip income amounts must be reported on Form W-2, Form 1099-NEC, or another specified information return or statement that’s furnished to both the worker and the IRS. Qualified overtime income amounts must be reported to workers on Form W-2 or another specified information return or statement that’s furnished to both the worker and the IRS. IRS announcement about information returns and withholding tables The IRS recently announced that for tax year 2025, there will be no OBBBA-related changes to federal information returns for individuals, federal payroll tax returns or federal income tax withholding tables. So, Form W-2, Forms 1099, Form 941, and other payroll-related forms and returns won’t be changed. The IRS stated that “these decisions are intended to avoid disruptions during the tax filing season and to give the IRS, business and tax professionals enough time to implement the changes effectively.” Employers and payroll management firms are advised to begin tracking qualified tip income and qualified overtime income immediately and to implement procedures to retroactively track qualified tip and qualified overtime income amounts that were paid before July 4, 2025, when the OBBBA became law. The IRS is expected to provide transition relief for tax year 2025 and update forms for tax year 2026. Contact us with any questions. © 2025