What’s the meaning of that estate planning term?

Even if you aren’t currently preparing to sell your business, you might want to think strategically about your eventual buyer. Sophisticated buyers won’t only look at your financials, they’ll also evaluate how your company fits into their long-term business plan. One way to strengthen current profitability and future exit options is with a strategic alliance. Current and long-term objectives Strategic alliances are structured in several ways, including joint ventures, revenue-sharing arrangements and co-development agreements. In some relationships, the two companies simply agree to work together on a particular project. Others involve long-term agreements, with the end game being a merger. Alliances can have set expiration dates or be renewed at intervals after they pass performance reviews. Among the many reasons companies pursue alliances are to leverage core assets, expand sales capacities and reduce operating costs. Your company doesn’t have to enter into a strategic alliance to make it easier to sell one day. It may, after all, be performing well on its own. Instead, look at a potential strategic alliance as a near-term growth and expense-cutting mechanism with long-term benefits. If you agree to an alliance, focus on financial and operational objectives, including achieving economies of scale. For example, by combining orders for everything from raw materials to office supplies, both partners may qualify for supplier discounts and reduce overhead costs. What about jointly purchasing capital equipment or upgrading both companies’ IT networks? Or you may want to find a partner to improve transportation logistics by consolidating warehouses. Another idea: Sharing intellectual property, such as customized software. Keys to success Your strategic alliance may require time and effort to get up and running. But if you’ve thoroughly vetted your partner and have a well-structured agreement in place, you’re likely to realize benefits. If you don’t, and the relationship becomes a drain on resources, take immediate action. Some problems can be fixed. For example, it’s easy for alliances to drift from their original purpose. A partnership forged mainly to upgrade an IT system could wind up focusing on improving employee productivity instead — with mixed results. In this case, the partners could refocus and reinforce their alliance objectives. But if problems seem intractable, it’s usually better to terminate the alliance. Profitable arrangements Not only can strategic alliances be mutually profitable, but they can help both partners envision a permanently combined company. Alliances often begin informally or as short-term agreements that eventually lead to mergers when the companies realize their synergistic potential. A successful prior relationship can smooth the merger process. Before joining a strategic alliance, companies typically conduct due diligence on one another. Financial and other conditions can certainly change between the initiation of a strategic alliance and the beginning of merger negotiations. But a well-structured alliance allows partners to keep tabs on each other. If one of the companies experiences leadership challenges or has trouble getting financing, the other is likely to know about it. Such knowledge can speed up the merger transaction process and simplify integration. Exercise in discipline Regardless of whether your business eventually merges with a strategic partner, the discipline of building and managing your relationship can strengthen operations and expand your market reach. It can also enhance financial transparency and position your business more favorably to potential buyers. Contact us for help honing your financial objectives, vetting possible alliance partners and selling your business. © 2026 

Last year, a new income tax deduction for qualified cash tips went into effect under the One Big Beautiful Bill Act (OBBBA). The break is scheduled to expire after 2028. In September 2025, the IRS released proposed regulations to provide guidance for taxpayers. The IRS has now published final regs that largely mirror the proposed regs but also include some important clarifications and additions. What does the deduction cover? Under the OBBBA, individual taxpayers can claim a tax deduction, available to both itemizers and nonitemizers, for up to $25,000 in “qualified tips.” The deduction begins to phase out if your modified adjusted gross income (MAGI) exceeds $150,000, or $300,000 if you’re married filing jointly. The deduction is completely phased out if your MAGI reaches $400,000, or $550,000 if you’re a joint filer. (Married taxpayers filing separately can’t claim the tips deduction.) Important: The $25,000 limit applies per tax return, so joint filers who both receive qualified tips can’t claim two separate deductions. In addition, tips remain subject to federal payroll taxes and, where applicable, state income and payroll taxes. Qualified tips generally refers to tips paid in cash (or an equivalent medium, such as checks or credit and debit cards) to an individual in an occupation that customarily and regularly received tips on or before December 31, 2024. They must be paid voluntarily, without any consequence for nonpayment, in an amount determined by the payor and without negotiation. Tips received in the course of a specified service trade or business are excluded. What’s in the final regs? The final regs address several critical areas, including: Eligible occupations. The proposed regs identified 68 eligible occupations in eight categories. The final regs expand the list to 71 occupations (adding visual artists, floral designers and gas pump attendants) and tweaked some of the categories, ending up with: Beverage and Food Service, Entertainment and Events, Hospitality and Guest Services, Home Services, Personal Services, Personal Appearance and Wellness, Recreation and Instruction, and Transportation and Delivery. The final regs also expanded some of the proposed regs’ categories and clarified others. For example, they added “app/platform-based delivery person” to the illustrative list for the “Goods Delivery People” occupation in the “Transportation and Delivery” category. The final regs also include two new examples dealing with payments to digital content creators. If customers’ payments give them access to the content, the payments are treated as compensation for services provided. But if customers make voluntary payments after gaining access to the content, the payments are tips. Digital assets. The final regs state that digital assets aren’t considered cash tips — for now. Thus, they’re currently not eligible for the tips deduction. But the IRS has indicated it will consider the treatment of stablecoins in connection with the implementation of the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act and any future legislation that modifies the characterization of digital assets. Voluntariness. Under the proposed regs, service charges, automatic gratuities and any other mandatory amounts automatically added to a customer’s bill by the vendor or establishment generally weren’t considered voluntary, even if the amounts were subsequently distributed to employees. To be voluntary, the customer must be expressly provided an option to disregard or modify amounts added to a bill. The final regs retain this approach. However, they modify the language to make clear that a tip is voluntary if the customer has the option to reduce the tip amount to zero. So tips made on POS systems with a tip slider that goes to zero or an option for the customer to select “other” and enter zero are voluntary. Note: Payments in excess of mandatory amounts are voluntary. Managers/supervisors. Under the final regs, tips received by a manager or supervisor via a voluntary or mandatory tip-sharing arrangement, such as a tip pool, aren’t considered qualified tips. But tips received directly by supervisors or managers for services they provided in the course of duties performed in an eligible occupation (for example, performing the duties of wait staff while the restaurant is crowded) are qualified tips if all other requirements are satisfied. Anti-abuse rules. To prevent the reclassification of income as qualified tips, under the proposed regs, a payment wasn’t a qualified tip if the recipient had an ownership interest in or was employed by the payor of the tip. The final regs relax this standard somewhat. Under the final regs, an amount isn’t a qualified tip if, based on all relevant facts and circumstances, the amount is a recharacterization of wages or payment for goods or services for the purpose of claiming the deduction. Facts and circumstances that might indicate that wages, payment for services or other income have been recharacterized as tips in order to claim the deduction include when: The invoiced charge for services is less than the payment from the payor shown on a related receipt, and the amount of the cash tip reported on the receipt approximates the difference between the invoiced charge and the payment amount on the receipt, and A significant shift in historical tipping or payment practices between the payor and the tip recipient occurs. Moreover, the final regs establish an irrebuttable presumption that a “tip” reflects a recharacterization of wages, payment for services or other income when the employer is the payor of a cash tip received by the employee. The presumption also is triggered if the tip recipient has a direct ownership interest in the tip payor. Questions? If you receive tips for work you perform, check the list of occupations eligible for the deduction and plan accordingly. If you have any questions about this tax break, contact us. We can help you determine if the tips you receive qualify for the deduction. © 2026 

Large stock market gains in recent years, coupled with some significant volatility in 2026, have left many investors with portfolios that are out of balance with their desired asset allocation. If you haven’t rebalanced recently, it may be time to do so. But you also must consider the tax implications. Careful planning can minimize the tax cost of rebalancing. What does rebalancing mean? When you built your investment portfolio, you took several factors into account, such as your performance goals, risk tolerance and age, to arrive at an allocation across asset classes (such as money market funds, stocks and bonds) and subcategories (such as small-cap vs. mid-cap vs. large-cap U.S stocks and U.S. Treasury vs. municipal bonds). When one asset class (or subcategory) outperforms, it will become a larger portion of your portfolio than your original asset allocation. This situation can potentially increase your risk and cause your portfolio to no longer align with your goals. To keep your asset allocation in alignment, monitor your portfolio regularly and rebalance it as needed. Rebalancing involves selling some investments in classes that have become overweighted, usually appreciated stocks and mutual fund shares. You then reinvest the proceeds in other asset classes to help achieve your desired allocation. But the gain you recognize from selling appreciated investments will be currently taxable — unless the investments are held in tax-advantaged retirement accounts, such as 401(k)s and IRAs. Taxable brokerage accounts When you file your tax return, your recognized capital gains for the year are netted against your recognized capital losses. If your gains in your taxable accounts exceed your losses, you have a net capital gain. If a net capital gain is from investments held for more than a year, it will be taxed at the federal long-term gains rate. Most individuals will pay 15%, but, depending on your income, the rate could be 0% or 20%. Also depending on your income, you may owe the 3.8% net investment income tax (NIIT) on all or part of your net long-term gain. Depending on your state, you might owe state income tax, too. If you have a net capital gain from investments held for one year or less, it will be taxed at the short-term gains rate. This is your ordinary federal income tax rate, which may be as high as 37%. You may also owe the NIIT on all or part of your net short-term gain. And, again, you might owe state income tax. If losses in your taxable accounts for the year exceed your gains, you have a net capital loss. You can deduct the loss against up to $3,000 of ordinary income ($1,500 if you’re married and file separately). Any remaining net capital loss is carried over to next year. Tax-advantaged retirement accounts If you sell assets held in a tax-advantaged retirement account, the resulting gains and losses affect your account balance. But they have no tax impact until you start taking withdrawals. If it’s a non-Roth account, the taxable portion of withdrawals (generally any amount attributable to appreciation or to contributions that were pretax or deductible) will be taxed at your ordinary federal income tax rate. Depending on your state, you may also owe state income tax. If it’s a Roth account, qualified withdrawals will generally be income-tax-free for federal purposes. This includes withdrawals attributable to appreciation. Tax-smart strategies If you have both taxable and tax-advantaged accounts, consider them together when rebalancing your portfolio. For example, let’s say your overall portfolio across brokerage and retirement accounts has become overweighted in large-cap U.S. stocks. You can save taxes for the current year if you sell some of this appreciated stock from a retirement account because the gain won’t be taxed. Sometimes selling appreciated assets in a taxable brokerage account will be necessary to achieve rebalancing goals. In this case, look to see if there are also assets in that account (or another taxable account) that you can sell at a loss. The recognized loss can offset some or all of your capital gains on the appreciated assets you sell. Remember that selling assets at a loss in your tax-advantaged retirement account won’t provide a current-year tax loss. If you need to sell appreciated assets in a brokerage account and you won’t be able to recognize enough losses to offset your gains, try to sell assets you’ve held more than one year. That way, the gain will be taxed at your lower long-term gains rate. Rebalancing involves not only selling assets in classes that have become overweighted but also using the proceeds to buy assets in classes that have become underweighted. As you invest in new assets, consider which assets make more sense to hold in taxable vs. tax-advantaged accounts. It generally makes sense to hold the investments you think will generate the highest long-term returns in a Roth account, because you can eventually take the resulting income and gains out free of federal income taxes. And if you do a lot of short-term trading that would generate high-taxed short-term gains in a taxable brokerage firm account, it makes sense to do the trading in a tax-advantaged retirement account. Look beyond current tax consequences Despite the significant impact taxes can have, don’t make investment decisions — including those related to rebalancing your portfolio — based primarily on current-year tax consequences. You should also consider investment goals, time horizon, risk tolerance, investment-specific factors, fees and the long-term tax consequences. If you have questions or would like more information about investment portfolio rebalancing, contact us. © 2026 

If you run your business as a C corporation, you may be eligible for a potentially significant tax break for qualified small business (QSB) stock. This opportunity has existed for years, but recent tax law changes have enhanced it. What’s a QSB corporation? QSB corporations are a special type of C corporation. At the entity level, QSB corporations are generally treated as regular C corporations for legal and federal income tax purposes. So, most of the standard advantages and disadvantages of C corporation status apply equally to QSB corporations, including the 21% flat federal income tax rate on corporate income. However, QSB shareholders can potentially enjoy a significant tax advantage: A special gain exclusion rule can allow them to avoid the federal income tax hit on up to 100% of the gain from selling QSB stock. C corporations that own QSB stock aren’t eligible for the gain exclusion. But sales of QSB stock held by pass-through business entities — such as S corporations, partnerships and, typically, limited liability companies — may be eligible. The break is effectively passed through to individual pass-through entity owners. Which shares qualify as QSB stock? To be eligible for the QSB stock gain exclusion, several requirements must be met, including the following: You must acquire the shares upon original issuance by the corporation or by gift or inheritance. The corporation must be a QSB corporation on the date the stock is issued and for substantially all the time you own the shares. Among other things, this means it must not have assets that exceed $75 million ($50 million if the stock was issued on or before July 4, 2025). The $75 million limit will be indexed for inflation after 2026. The corporation must actively conduct a qualified business. Service businesses and certain other businesses don’t qualify. (Contact us for a complete list of nonqualified businesses.) Timing is also critical. To take advantage of the 100% gain exclusion for sales of QSB stock, you must have acquired the shares after September 27, 2010, and held them for at least five years. How did the OBBBA expand the exclusion? In addition to raising the QSB asset ceiling, the One Big Beautiful Bill Act (OBBBA) enhanced the gain exclusion rules for QSB shares acquired after July 4, 2025. It allows a 50% gain exclusion for QSB stock held for at least three years and a 75% gain exclusion for QSB stock held for at least four years. The 100% gain exclusion still applies to QSB stock held for at least five years. For QSB shares acquired after July 4, 2025, your excludable gain for any year is limited to the greater of: 10 times your aggregate tax basis in the QSB stock that was sold, or $15 million ($7.5 million if you were married but filed separately), reduced by the amount of gain you excluded in prior tax years from sales of QSB stock issued by the same corporation. When the $15 million (or $7.5 million) restriction applies, it’s effectively a lifetime limitation. Next steps The gain exclusion for QSB stock and the flat 21% corporate federal income tax rate are two powerful incentives to operate a business as a QSB corporation. You can potentially convert an existing unincorporated business into a QSB corporation by incorporating it. Contact us to learn more about this tax-saving strategy. We can help you navigate the complex rules and requirements. © 2026 

Donor-advised funds (DAFs) have become increasingly popular among individuals and families who want to simplify their charitable giving while maximizing tax efficiency. According to the 2025 Annual DAF Report produced by the Donor Advised Fund Research Collaborative, in 2024, the total number of DAF accounts reached a record high of 3.56 million. Total assets in DAFs increased 27.5%, with total invested funds reaching $326.5 billion. Here’s how a DAF might fit into your charitable giving strategy and estate plan. DAFs in action A DAF is a charitable investment account that generally requires an initial contribution of at least $5,000. It’s typically managed by a financial institution or an independent sponsoring organization, which charges an administrative fee based on a percentage of the deposit. From a tax perspective, DAFs offer significant benefits. Contributions are generally deductible in the year they’re made (assuming you itemize deductions), even if the funds are distributed to charities in future years. This is particularly valuable in high-income years when you may want to offset income with a sizable charitable deduction but don’t know exactly which charities you’d like to benefit. Additionally, donating appreciated assets, such as publicly traded stock, allows you to avoid the capital gains tax liability you’d incur if you sold the assets. Yet you can still deduct their fair market value. (Be aware that some DAFs only allow contributions of cash or cash equivalents.) Another DAF advantage is administrative simplicity. Unlike private foundations, DAFs don’t require the donor to manage compliance, file separate tax returns or oversee grant administration. The sponsoring organization handles recordkeeping, due diligence and distribution logistics, allowing you to focus on your charitable intent rather than administrative burdens. DAFs can also enhance strategic giving. Funds within a DAF can be invested and potentially grow tax-free, increasing the amount ultimately available for charitable purposes. You can take time to thoughtfully select the charities, involve family members in philanthropic decisions and create a more intentional giving strategy rather than making rushed year-end donations. Estate planning benefits Integrating a DAF into an overall estate plan can amplify its benefits. It can serve as a centralized vehicle for a family’s charitable legacy, helping to align philanthropic goals across generations. You can name successor advisors — such as children or other heirs — who can recommend grants from your DAF after your lifetime, fostering continued family engagement in charitable giving. From an estate tax standpoint, DAFs are also beneficial. Assets contributed to a DAF — whether during your life or at death — are removed from your taxable estate. This can be particularly advantageous for high-net-worth individuals seeking to reduce estate tax exposure while supporting causes they care about.  Additionally, you can designate a DAF as a beneficiary of retirement accounts, such as IRAs. Because these accounts are typically subject to income tax when an individual beneficiary takes distributions, leaving them to a charitable vehicle, such as a DAF, can be tax-efficient. (But think twice before naming a DAF as the beneficiary of a Roth account, because distributions would generally be tax-free to an individual beneficiary.) Coordination is key It’s important to coordinate a DAF with your other estate planning strategies. For example, ensure that your charitable intentions are clearly documented and aligned with your overall distribution strategy. We can help structure your DAF contributions and beneficiary designations to maximize both tax savings and philanthropic impact. © 2026

Whether it’s a trademark, copyright, patent, trade secret or other piece of IP, its ultimate value to your business depends on you owning it. Without airtight agreements with employees and independent contractors, these workers may claim that the IP they research and develop belongs to them. Some companies learn they don’t actually own IP assets only when they’ve engaged a business valuation professional in preparation for a sale, or when employees leave and take IP with them. To prevent unexpected ownership issues and costly disputes that could create risk and diminish your business’s value, take action now. What the law says Federal copyright law and the laws of most states mandate that employees and independent contractors who invent products, write materials and develop software may be the owners of the IP rights. In fact, in some states, employers may only have a limited license to inventions created by employees, even if they were invented “on the clock” or using company resources. Fortunately, you can help prevent ownership disputes, including litigation. All states permit businesses to require workers to sign copyright, IP and invention assignment agreements, subject to applicable legal limitations. Work with an attorney who specializes in IP to draft a standard agreement based on your state’s laws. It should require the employee or contractor to turn over or legally “assign” IP rights to your business. In addition, it should mandate that the employee or contractor assist your company’s legal counsel in securing and enforcing these rights. It’s also important to apply these agreements consistently and enforce them in practice, because inconsistent use can weaken your position in disputes and merger and acquisition due diligence. Go a step further When you hire workers (or when you require them to sign an agreement), make sure you ask them to identify all pre-existing inventions that are to be excluded from the agreement. For example, they may have patented inventions on their own or created trademarks for previous employers. Then request that they give up claims to any new inventions that are related to your business activities, even if the inventions are developed during their nonworking hours. For example, let’s say your company develops 3D printing software. Your agreement should prohibit your code writers from creating related design tools at home and then selling them to your competitors. If, however, an employee working on her own time and with her own resources develops software that’s unrelated to your business, that IP likely belongs to her. Some states, such as California, prevent employers from claiming such IP or asking employees to sign away their rights to it. Legal and financial advice Ultimately, safeguarding IP isn’t a passive exercise but a deliberate business discipline that requires foresight, structure and legal precision. Although an attorney’s guidance is critical for this purpose, financial advisors also play an important role. We can help you address IP ownership issues before you sell your business or before workers leave your employment. We can also help identify financial and tax considerations of IP. Contact us for more information. © 2026 

Yes, the April 15 tax deadline is now behind us. But there are also deadlines during the rest of the year that are important to be aware of. To help you not miss any, here’s when some key tax-related forms, payments and other actions are due. Keep in mind that this list isn’t all-inclusive. There may be additional deadlines that apply to you. Please review the calendar and let us know if you have any questions about the deadlines or would like assistance in meeting them. June 15 File a 2025 individual income tax return (Form 1040 or Form 1040-SR) or file for a four-month extension (Form 4868) if you live outside the United States and Puerto Rico or you serve in the military outside those two locations. Pay any tax, interest and penalties due. Pay the second installment of 2026 estimated taxes (Form 1040-ES) if not paying income tax through withholding or not paying sufficient income tax through withholding. September 15 Pay the third installment of 2026 estimated taxes (Form 1040-ES) if not paying income tax through withholding or not paying sufficient income tax through withholding. September 30 If you’re the trustee of a trust or the executor of an estate, file an income tax return for the 2025 calendar year (Form 1041) if an automatic five-and-a-half-month extension was filed. Pay any tax, interest and penalties due. October 15 File a 2025 individual income tax return (Form 1040 or Form 1040-SR) if an automatic six-month extension was filed (or if an automatic four-month extension was filed by a taxpayer living outside the United States and Puerto Rico or serving in the military outside those two locations). Pay any tax, interest and penalties due. Make contributions for 2025 to certain retirement plans or establish a SEP for 2025 if an automatic six-month extension was filed. File a 2025 gift tax return (Form 709) if an automatic six-month extension was filed. Pay any tax, interest and penalties due. December 31 Make 2026 contributions to certain employer-sponsored retirement plans. Make 2026 annual exclusion gifts (up to $19,000 per recipient). Incur various expenses that potentially can be claimed as itemized deductions on your 2026 tax return. Examples include charitable donations, medical expenses and property tax payments. © 2026 

The passive activity loss (PAL) rules may limit your ability to deduct losses from a business structured as a limited liability partnership (LLP) or limited liability company (LLC). Depending on how your ownership interest is treated under these rules, you may have more or less flexibility to claim losses in the current year. Here’s a closer look. The basics Under the PAL rules, you generally can use passive activity losses only to offset income from other passive activities. (Keep in mind that other limitations, such as basis and at-risk rules, may apply before the PAL rules.) There are two types of passive activities: 1) trade or business activities in which you don’t materially participate during the year, and 2) rental activities, even if you do materially participate (unless you qualify as a real estate professional under the PAL rules). Disallowed losses may be carried forward to future years and deducted from passive income or recovered when the passive business interest is sold. If you’re an LLP or LLC owner, you can avoid passive treatment by materially participating in the business’s activities. This allows you to use LLP or LLC losses to offset nonpassive income, such as wages, interest, dividends and capital gains. 7 factors Material participation in this context means participation on a “regular, continuous and substantial” basis. Unless you’re treated as a limited partner, you’re deemed to materially participate in a business activity during the year by meeting one of the following seven criteria: You participate in the activity more than 500 hours during the year. Your participation constitutes substantially all the participation for the year by anyone, including nonowners. You participate more than 100 hours and as much or more than any other person. The activity is a “significant participation activity” — that is, you participate more than 100 hours — but you participate less than one or more other people yet your participation in all your significant participation activities for the year totals more than 500 hours. You materially participated in the activity for any five of the preceding 10 tax years. The activity is a personal service activity in which you materially participated in any three previous tax years. Regardless of the number of hours, based on all the facts and circumstances, you participate in the activity on a regular, continuous and substantial basis. Limited partners face more restrictive rules; they can establish material participation only by satisfying criterion 1, 5 or 6. Supporting your deductions If you’re an LLC or LLP owner, it’s important to track the time you spend on business activities. In addition, if your spouse also participates in an activity, you can combine your hours to meet the material participation standards. Contact us for additional guidance on documenting your hours, applying the material participation test and maximizing business loss deductions. © 2026 

With the April 15 tax filing deadline in the rearview mirror, you’re likely to turn your attention to other things. But before you do, it’s in your best interest to tie up a few tax-related loose ends. IRS statute of limitations Generally, the IRS’s statute of limitations for auditing a tax return is three years from the return’s due date or the filing date, whichever is later. However, some tax issues are still subject to scrutiny after three years. For example, if the IRS suspects that income has been understated by 25% or more, the statute of limitations for an audit extends to six years. If no return was filed or fraud is suspected, there’s no limit on when the IRS can launch an inquiry. It’s a good idea to keep copies of your tax returns indefinitely as proof of filing. Supporting records generally should be kept until the three-year statute of limitations expires. These documents may also be helpful if you need to amend a return. So, which records can you throw away now? Based on the three-year rule, in late April 2026, you’ll generally be able to discard most records associated with your 2022 return if you filed it by the April 2023 due date. Extended 2022 returns could still be vulnerable to audit until October 2026. But if you want extra protection, keep supporting records for six years. What records should you retain? Documentation supporting your income, deductions and credits that you generally should retain following the three-year rule may include: Various series 1099 forms, such as Form 1099-NEC, “Nonemployee Compensation,” Form 1099-MISC, “Miscellaneous Income,” and Form 1099-G, “Certain Government Payments,” Form 1098, “Mortgage Interest Statement,” Property tax payment documentation, Charitable donation substantiation, Records related to contributions to and withdrawals from Section 529 plans and Health Savings Accounts, and Records related to deductible retirement plan contributions. You’ll also want to hang on to some tax-related records beyond the statute of limitations. For example: Retain Forms W-2, “Wage and Tax Statement,” until you begin receiving Social Security benefits. That may seem long, but if questions arise regarding your work record or earnings for a particular year, you’ll need your W-2 forms as part of the required documentation. Keep records related to investments and real estate for as long as you own the assets, plus at least three years after you sell them and report the sales on your tax return (or six years if you want extra protection). Hang on to records associated with retirement accounts until you’ve depleted the accounts and reported the last withdrawal on your tax return, plus three (or six) years. Retain records that support figures affecting multiple years, such as carryovers of charitable deductions or casualty losses, until they have no effect, plus seven years. Keep records that support deductions for bad debts or worthless securities that could result in refunds for seven years because you have up to seven years to claim them. Other tax-related chores As you can see, keeping tax-related records is critical. So put yourself in a good position for filing your 2026 return next year by carefully tracking expenses potentially eligible for deductions or credits on an ongoing basis. For example, if you’re self-employed and use your personal vehicle for business purposes, maintain a mileage log recording the date, mileage, purpose and destination of each trip. Or if you regularly donate to charity, keep the receipts or written acknowledgments you receive. (Additional substantiation may be required depending on the size and type of donation.) In addition, this is a good time to reassess your current tax withholding to determine if you need to update your Form W-4, “Employee’s Withholding Certificate.” You may want to increase withholding if you owed taxes this year. Conversely, you might want to reduce it if you received a hefty refund. Changes also might be in order if you experience certain major life events, such as marriage, divorce, birth of a child or adoption, this year. If you make estimated tax payments throughout the year, consider reevaluating the amounts you pay. You might want to increase or reduce the payments due to changes in self-employment income, investment income, Social Security benefits and other types of nonwage income. To preempt the risk of a penalty for underpayment of tax, consider paying at least 100% of the tax shown on your 2025 tax return (110% if your 2025 adjusted gross income was over $150,000 — or over $75,000 if you’re married and filed separately) through withholding and/or four equal estimated tax payments. What’s this? A letter from the IRS? After filing your tax return, you may receive a letter in the mail from the IRS. While such letters can be alarming, don’t assume the worst. The letter might simply inform you of a refund adjustment (up or down) based on a math or similar error on your return. If you agree with the change, generally no response is needed. If you disagree, contact the IRS by the date indicated. Or the letter might propose a change to your return based on information reported by third parties, such as employers or financial institutions. In this case, follow the instructions to respond, include any required documentation, and note whether you agree or disagree with the proposed change. Of course, an IRS letter could inform you that your return is being audited. It’s important to remember that being selected for an audit doesn’t always mean there’s a significant error on your return. For example, your return could have been flagged based on a statistical formula that compares similar returns for deviations from “norms.” Further, if selected, you’re most likely going to undergo a correspondence audit. These account for a majority of IRS audits. They’re conducted by mail for a single tax year and involve only a few issues that the IRS anticipates it can resolve by reviewing relevant documents. According to the IRS, most audits involve returns filed within the last two years. If you receive notification of a correspondence audit, you and your tax advisor should closely follow the instructions. You can request additional time if you can’t submit all the documentation requested by the specified deadline. Don’t ignore the letter. Failure to respond can lead to the IRS disallowing some tax breaks you claimed and issuing a Notice of Deficiency (that is, a notice that a tax balance is due). Be proactive Organizing your past and current-year tax records now can facilitate a smoother tax filing next year or a less painful audit of a recent return. Similarly, adjusting your withholding or estimated tax payments can mean more money in your pocket now or no (or smaller) underpayment penalties next April. If you have questions on what files to keep and for how long or how to adjust withholding or estimated tax payments, we can help. And if you receive an IRS letter, contact us as soon as possible. We can advise you on complying with any IRS requests. © 2026