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In one year’s time, the U.S. inflation rate dropped by more than half, from 8.2 percent in September 2022 to 3.7 percent in September of 2023.  

If there is a downside to lower inflation, it’s a lower cost of living adjustment (COLA). This year, the inflation rate plummeted from 6.4 percent in January to the current 3.7 percent. While food prices, both grocery and dining out, continue to increase. Between February 2020 and September 2023, grocery store prices rose 25%. That was slightly above the 23% increase in menu prices during the same period. But a number of consumer goods prices had decreased by midsummer, such as: 

• Gasoline (-26.5%) 
• Airline fares (-18.9%) 
• Car and truck rentals (-12.4%) 
• Major appliances (-10.7%) 
• Televisions (-9.9%) 

The Problem with Inflation Data 

Inflation data can be misleading for a number of reasons. First, while inflation statistics are quoted annually, these are compounded figures. The annual inflation figures for the past three years are as follows: 

• January 2022: 5.9% 
• January 2023: 8.7% 
• January 2024: 3.2% 

If you add each year’s annual inflation, it comes to 17.8 percent; however, compounded prices rose by 18.8 percent over the three-year period. Now, imagine the compounding effect of inflation over many more years. 

Second, when you hear that there is a decrease in inflation, it is not that prices are lowering; instead, it’s that prices are increasing but at a slower rate. For prices to drop, we would need actual deflation and not just lower inflation. 

Finally, you need to remember that whether it is from a Social Security COLA increase or a raise at your job, an increase in income equal to inflation does not keep up with the actual cost of inflation. This is because of taxes. If you get a raise equal to inflation, you take home that amount less taxes, so your wages or Social Security is really not keeping up with inflation. 

Take all three of these factors together and that’s why inflation feels much worse at the grocery store than it appears on paper. 

Social Security Benefits 

The fluctuating inflation rate doesn’t just impact the prices of consumer goods, it also affects income. Specifically, Social Security benefits are adjusted each year based on changes in the cost of living.  

More than 71 million Americans currently receive Social Security and Supplemental Security Income (SSI) benefits. One in four households of people age 65 and older depend on their Social Security check for at least 90 percent of their family income. Therefore, it is very important that COLA adjustments keep up with inflation. 

Given that the inflation rate fluctuated between 7.1 percent and 9.1 percent last year, Social Security benefits increased by 8.7 percent in 2023. However, since inflation has dropped significantly in 2023, Social Security benefits will increase by only 3.2 percent in 2024. 

To find out how much individual Social Security paychecks will increase, beneficiaries can check the Message Center of their my Social Security account. In early December, recipients will receive notification of their increased payment by mail. 

How the Increase is Determined 

Be aware that if there is no year-to-year increase in inflation, there is no cost-of-living adjustment for Social Security income. While inflation rates vary, it is pretty uncommon not to have some sort of increase.  

Effective January 2024, the average monthly Social Security benefit for a retired worker is $1,907; for a married couple the combined average is $3,033. The maximum amount of earnings subject to the Social Security tax is scheduled to increase from $160,200 in 2023 to $168,600 in 2024. 

Health Savings Accounts 

Starting in 2024, the annual contribution limit for an HSA linked to a high-deductible healthcare plan will be $4,150 for individual coverage; $8,300 for a family plan. 

2025: Catch-up Contribution 

Starting in 2025, people ages 60 to 63 will be able to significantly increase catch-up contributions to certain employer-sponsored retirement plans. The limit will increase to $10,000 – or 50 percent more than the regular catch-up amount – whichever is greater. 

2026: Catch-up Contribution Twist 

Starting in 2026, catch-up contributions made by people earning more than $145,000 will have to be contributed to an after-tax Roth account. Note that the Roth account requirement applies only to workers whose wages are subject to FICA taxes, so it does not apply to partners, the self-employed or state and local government employees. 

As of this writing, the IRS has not yet released changes to contribution limits for qualified retirement plans in 2024. 

Next year, something called Peak 65 is happening. This moniker refers to the fact that more Americans will reach the traditional retirement age of 65 in the same year than at any time in history. Crazy, right? However, many of these people don’t feel like they’ve saved enough to live comfortably after they retire. Here are some ways to maximize your savings and cut costs so you can be prepared and retire with less financial worry. 

Use a retirement calculator. This is key. You’ll be able to see if what you have in retirement so far will be enough to actually live on. Here’s the tool. Once you know where you are, you’ll be able to determine your financial goals. 

Catch up on retirement savings. If you’re over age 50, you can make something called “catch-up contributions.” You can increase your 401(k) salary deferrals by up to $30,000 and up to $7,500 in your IRA. Look into this ASAP. The more you contribute, the more you’ll close the gap between what you have and what you’ll need. 

Put together a sample budget. According to the U.S. Bureau of Labor Statistics, a household run by someone aged 65+ spends on average $4,345 a month, which is about $52,141 a year. Given this fact, it makes sense to take a look at your budget to see where you can cut back. Do you have numerous streaming services or magazine subscriptions? Can you use public transportation instead of driving? Must you buy name brands at the grocery store or would generic suffice? Review several months of expenses and ask yourself these types of questions. You might be surprised at what you discover and how you can save. 

Utilize your Health Savings Account (HSA). This is a great tool to help you prep for health care costs when you retire. Once you enroll in Medicare at 65, you can still use your HSA investments, even if you no longer qualify to contribute. But you can get started on this early. Once you’re 55, you can contribute an extra $1,000 to your HSA each year on top of the maximum amount you’re using to catch up. 

Consider part-time work. Having some supplemental income is a great idea when you retire. You’ll not only keep busy, which for some is critical, but also generate extra cash. You might even start a small business. What is it that you’ve always wanted to do? What are you passionate about? These questions are worth exploring.  

Move to a less expensive city. There are some states that are simply less costly. And when you’re downsizing, which lots of people do when they retire, it makes a difference in your quality of life. For instance, Montana doesn’t have any sales tax and state taxes are 33 percent less than the U.S. average. Here are a few others to consider. 

These are just a few of the things you can do to prepare for one of the most important seasons of your life. No matter when or how you decide to retire, in the long run, it pays to start thinking about it before these years are even on the horizon. 

Sources 

https://www.bankerslife.com/insights/personal-finance/7-saving-strategies-for-a-secure-retirement/ 

As an employer or an employee one intricacy of tax laws and regulations that often goes unnoticed is the concept of Accountable Plans. These plans, when implemented correctly, can provide significant tax benefits for both employers and employees. 

Under the Tax Cuts and Jobs Act (TCJA) signed into law by President Trump in 2017, the rules for deducting employee business expenses changed significantly. Prior to the TCJA, employees could potentially deduct unreimbursed business expenses as miscellaneous itemized deductions on their personal income tax returns. 

However, for tax years 2018 through 2025, the TCJA suspended the ability for employees to deduct unreimbursed business expenses as an itemized deduction. This includes expenses such as local business transportation and away-from-home travel expenses. 

An accountable plan provides a way around the TCJA deduction restrictions. Accountable plans are reimbursement or allowance arrangements that meet the criteria set by the IRS. These plans allow employers to reimburse employees for business-related expenses without the reimbursement being considered taxable income. There are benefits for both employer and employee: 

• From an Employer’s Perspective – The benefits for employers are twofold. First, reimbursements under an Accountable Plan are not subject to payroll taxes. This means employers can save on their share of FICA (Social Security and Medicare) taxes, which can add up to substantial savings. Second, these reimbursements are deductible as business expenses, further reducing the company’s taxable income. 
• From an Employee’s Perspective – For employees, reimbursements under an Accountable Plan are not considered taxable income. This means they do not have to report these reimbursements on their income tax returns. There’s also no FICA tax withholding for the reimbursement received by the employee. As a result there’s significant tax savings for employees, especially those who frequently incur business-related expenses. 

However, to qualify for these benefits, the plan must meet three criteria set by the IRS: 

1. Business Connection: The expenses must be incurred while performing services as an employee. 
2. Substantiation: Employees must provide their employers with documentary evidence of these expenses within a reasonable time. 
3. Returning Excess Amounts: If an allowance exceeds the substantiated expenses, the excess must be returned within a reasonable time. 

Accountable Plans can be a win-win for both employers and employees. They provide a way for employers to reimburse employees for business-related expenses without increasing their tax liability. At the same time, employees can receive these reimbursements tax-free, leading to significant tax savings. 

However, setting up and maintaining an Accountable Plan requires an understanding of IRS regulations. It’s crucial to ensure that the plan meets all IRS criteria to avoid potential tax penalties. Here’s a very basic example of what an accountable plan might look like: 

Please note that this is a basic example and may not cover all the necessary specifics appropriate for your business. It is highly recommended additional detail such as the following be added: 

• Date the plan becomes effective. 
• Type of expenses reimbursable under the plan. 
• Extent to which supervisory approval of expenses is required. 
• Cost limits applicable to the different types of expenses. 
• Overall periodic limits on periodic reimbursable expenses. 
• Time limits for submitting expense requests. 
• The procedures for submitting requests. 
• Required documentation by type of expense. 
• How and when excess reimbursements must be returned. 
• If applicable, a list of preferred suppliers. 

If you have more questions about Accountable Plans or need a consultation to customize your plan, please contact this office.   

Data breaches have been on the rise as cybercriminals keep coming up with new ways to steal user-sensitive information. Just in the second quarter of 2023, 110.8 million user accounts were breached. Of these accounts, 49.8 million were from the United States, accounting for 45 percent of the global figure. However, amid the rising threats, a revolutionary concept known as decentralized identity systems has created a solution to reduce data breach cases.  

Data Breaches and the Current State of Identity Management 

A data breach happens when unauthorized individuals or entities gain access to sensitive information, often for malicious purposes. These breaches can happen to anyone, from individuals to large corporations, and they come with severe consequences that could include financial losses, reputation damage and identity theft.  

The current identity systems are centralized and have inherent vulnerabilities and limitations. These centralized identity systems involve a central authority, such as a government agency or a corporation, storing and managing individuals’ personal information. This means that if a hacker breaches the central authority’s security, he or she gains access to a vast amount of sensitive data. 

Furthermore, since the centralized systems often collect extensive personal information, the practice raises concerns about data privacy. The entities storing user data predominantly control and monetize it, which has led to discomfort and distrust among users.  

The centralized systems also create a fragmented user experience. This is because different platforms, such as social media, online retailers, news websites, etc., require users to create accounts. Users then must juggle multiple usernames, passwords and data formats, complicating the digital experience. Businesses also incur high costs associated with ensuring secure systems, the latest infrastructure, and compliance.  

How Decentralized Identity Systems Can Help Prevent Data Breaches 

Decentralized identity systems are an alternative to centralized identity management. These systems put individuals in control of their own digital identities. The decentralized identity systems are enabled by technologies such as Web3, a concept based on a trust framework for identity management. Web3 evolution has led to decentralized identifiers, and this allows for secure management of user data and authentication through blockchain wallets. 

Using blockchain technology ensures the security and immutability of identity data. Once information is added to the blockchain, it cannot be altered or deleted without the user’s consent. 

However, they allow users to have control over their identity information. Users choose what data to share and with whom, enhancing privacy and security. There is no need for third parties to verify user identity.  

Since users store data on their devices or a location they choose, it eliminates single points of failure. Instead of a centralized authority, identity data is distributed across a decentralized network of nodes. Additionally, these systems use advanced cryptographic keys, allowing only the user to access their data.  

Decentralized identity systems are already making an impact in various industries, such as healthcare, financial services and government services. The security benefits of decentralized identity include: 

• Enhanced Security 

Decentralized identity systems offer robust security measures. With data stored on a blockchain, it becomes exceedingly difficult for hackers to breach the system. Even if one node is compromised, the decentralized nature of the network ensures that other nodes maintain the integrity of the data. 

• Privacy Control 

Users regain control over their personal information. They decide what data to share and retain the ability to revoke access at any time. This puts an end to excessive data collection by corporations and governments. 

• Reduced Identity Theft and Fraud 

Decentralized identity systems make it incredibly challenging for fraudsters to impersonate individuals or access their data. This significantly reduces the risk of identity theft and related fraudulent activities. 

• New Economic Models
  Decentralized identity models can create new economic models where consumers are awarded when they choose to share their data with service providers.  

While decentralized identity systems offer promising solutions, they are not without challenges. The widespread adoption of decentralized identity systems presents scalability challenges. Another challenge is usability, as complexity can deter individuals and businesses from embracing this technology. The need for a regulatory framework is another challenge, as it is necessary to address factors related to legal and compliance. 

Conclusion 

Decentralized identity systems offer hope in an age where data breaches are a constant threat. These systems can revolutionize how users secure their digital identities by putting control back into individuals’ hands. While challenges exist, the benefits of enhanced security, privacy control and reduced fraud make decentralized identity systems a promising solution in the ongoing battle against data breaches. 

With accounting fraud and financial reporting mistakes creating a lack of confidence, understanding how financial reporting mistakes occur and are detected is an important topic. According to the Association for Federal Enterprise Risk Management and the U.S. Securities and Exchange Commission, the first nine months of 2018 saw 8.8 percent more accounting fraud enforcement action cases versus 2017.  

Controls are procedures implemented to lower the chance of financial reporting issues. While these mechanisms are meant to prevent an overload of problems, they are not always foolproof. Corporations also are required to show that sufficient financial oversight is in place for financial records and assets by the Sarbanes-Oxley Act of 2002. There are two types of controls: preventive and detective. 

As the name implies, preventive controls are devised to avert mistakes before they happen. Methods include on-going training, worker evaluations, and mandating different layers of authorization for transactions.  

Detective methods look at the granular accounting steps. Having internal and external audits performed, and comparing real world activity against what’s been budgeted or forecast are two ways to implement this approach. However, performing account reconciliation where the business’ financial data is compared against third-party documentation can provide near real-time insight into what is actually occurring. This includes analyzing checks and cash the business has collected and documented on their books but that may not be reflected on bank statements. Another factor in the reconciliation process are checks the company has sent out that have not been processed by the business’ vendors, etc.  

Since detective controls alert companies to errors after the fact, it is important that they are conducted in a timely manner – daily, monthly, quarterly or annually. If there’s a discrepancy between the company’s ending cash balance and the bank’s monthly statement, there might be differing balances. This can be due to the financial institution’s service fees and checks taken into account by the business that aren’t yet reflected on the financial institution’s statement.  However, other cases of discrepancies could point to signs of fraud.   

According to the University of California Los Angeles, there are many ways to split tasks. Doing this is integral to successful mitigation of errors and unauthorized behavior because it deters the likelihood of multiple workers collaborating. Specifically, when it comes to authorizations, reconciliations and responsibility for the assets, it is a high priority for businesses to break tasks up among multiple workers. 

Examples include dividing the duties between opening the mail/preparing a list of checks to review and the individual who deposits the checks. The individual who oversees accounts receivables should be separate from the person who creates a list of checks received. It’s not advisable for a sole employee to initiate, approve, and record a transaction. Similarly, reconciling balances, handling assets, and reviewing reports should not be done by a single employee. A minimum of two individuals should be available to handle any transaction. 

While the most diligent accounting professional has made a mistake from time to time, learning how to identify financial reporting mistakes can reduce the likelihood of even rare mistakes being unknowingly shared with others. 

Sources 

https://www.aferm.org/erm_feed/wrong-numbers-the-risks-of-inaccurate-financial-statements/ 

You can work and still receive Social Security benefits, but how much you receive depends on a number of factors. 

First, if you do plan to continue working after becoming eligible to receive benefits, you might consider delaying filing for benefits for as long as possible. That’s because the earlier you begin drawing benefits, the lower the amount you will receive. In fact, your monthly payout will be permanently reduced from what you’ll receive if you wait until full retirement age (FRA).  

Your FRA depends on the year you were born (note that for people born on Jan. 1 of any year, they should refer to the previous year): 

• Born 1943-1954: full retirement age is 66 
• Born in 1955: 66 plus two months 
• Born in 1956: 66 plus four months 
• Born in 1957: 66 plus six months 
• Born in 1958: 66 plus eight months 
• Born in 1959: 66 plus 10 months 
• Born in 1960 or later: 67 

Benefit Reduction Due to Work 

If you are working and begin drawing benefits before your full retirement age, your payout could be further reduced if you earn more than the prescribed income limit. In 2023, the annual earnings limit is $21,240. In this scenario, Social Security will deduct $1 from your benefits for each $2 in excess of the limit. 

Benefit Reduction in Your FRA Year 

The benefit reduction amount and the earned income limit both change the year you reach FRA. In 2023, the earned income limit is $56,520. In this year only, the reduction is adjusted to $1 for every $3 in excess of $56,520, but only up until the month you reach FRA. After that, there will no longer be a reduction due to work income. 

In the first full month after your FRA, Social Security will begin paying out your total eligible amount (which depends on the age you started drawing benefits) for any whole month after FRA, regardless of how much more you earn that year (and every year thereafter). In other words, from that point on you will receive the full amount you were eligible for at the age you began drawing benefits. 

You might wonder if you will ever receive the money that was held back due to your excess income. The answer is yes. Starting the following January after you turn full retirement age, your Social Security benefit will increase to reflect those previously lost benefits. 

Work Advantages 

If working while drawing Social Security seems like a bad idea, consider that you could benefit from a couple of advantages. First, the automatic benefit reductions that occur while you’re working will help reduce your income tax liability for those years. Second, your work income could increase your permanent Social Security payout if any or all of those years before FRA are among your 35 highest-earning years. As you continue to pay FICA taxes on your work income, the benefit is recalculated every year. This is a way to increase your lifetime benefit if you began drawing Social Security early. 

Work Until Age 70 

The most strategic way to earn the highest possible lifetime benefit from Social Security is to keep working and delay drawing Social Security benefits until age 70. This is because during the years between your official FRA and the month you turn 70, you can earn additional credits that reward you for delaying. This will permanently bump up your payout. 

If You Go Back to Work 

Also be aware that if you’ve already started drawing Social Security benefits but wish you hadn’t, you can cancel your application as long as you do so in the first 12 months. Note that you are required to pay back all of the money you received from Social Security, including any spousal benefit that was based on your earnings record and all Medicare premiums that were deducted from your benefits. However, doing so could reset your benefit to a higher amount when you reapply later – if your subsequent annual income counts among your highest 35 years of earnings. 

If you have already reached your full retirement age (but have not yet turned age 70), you no longer have the option cancel your application. However, you can have your Social Security benefit suspended, which might reduce your tax bill while you continue working. 

The electric vehicle (EV) and hydrogen electric vehicle (HEV) revolution is well underway, with an increasing number of drivers switching to eco-friendly options every day. However, as EVs and HEVs become more common, states are implementing taxes and regulations on charging stations, potentially affecting drivers’ and businesses’ finances.  

In this brief guide, we’ll explore how different states are handling EV and HEV charging taxes, providing valuable insights for both current and future clean vehicle owners.  

Delaware: Planning for an EV-Centric Future 

Although Delaware has not passed recent legislation directly related to EV and HEV taxes, the state is taking proactive steps to prepare for an electric vehicle-dominated future. The state has passed a bill requiring newly constructed residential dwellings to include infrastructure for charging electric vehicles. This forward-thinking legislation positions Delaware for the projected surge in clean vehicle sales by the year 2040. 

According to Representative Krista Griffith, co-sponsor of the bill, “Major vehicle manufacturers are pledging to go all-electric, and we need to take the step to ensure that we’ve got the appropriate electrical charging infrastructure in place.”  

Furthermore, The First State offers The Clean Vehicle Rebate Program. This rebate is not a tax credit. is not a tax credit. It is a $2,500 cash rebate for electric vehicles purchased or leased after May 1, 2023. Residents must apply within 90 days of their purchase date. 

Georgia: Excise Tax on EVs and Hydrogen Gas 

Georgia is taking a unique approach to EV and HEV taxation with an excise tax on both electric vehicles and hydrogen gas used for charging. Effective on July 1, 2023, this tax amounts to 26 cents per 11 kilowatt-hours, equivalent to a gallon of conventional gasoline. Additionally, one recent report explains, Georgia requires private entities offering public chargers to meter the total kilowatt-hours dispensed per station.  

The Peach State’s taxation approach has garnered criticism as it primarily affects clean vehicle owners using public charging stations, potentially discouraging electric vehicle purchases. The Associated Press notes that alienating EV and HEV drivers is not in the state’s best interest. Georgia has been a major beneficiary of the nationwide electric vehicle investment boom, with over 40 electric vehicle-related projects getting underway since 2020. These projects are estimated to result in $22.7 billion of investment and 28,400 jobs. 

According to Governor Brian Kemp, “We want to make Georgia the e-mobility capital of the nation.” 

Kentucky: Charging Stations Face New Taxation 

Kentucky, a burgeoning hub for EV battery production, is introducing a new tax that might complicate the state’s charging infrastructure. Starting in January, all publicly available EV chargers, regardless of whether they offer free electricity, will be subject to a usage tax based on the amount of electricity dispensed, with a rate of $0.03 per kilowatt-hour. While the tax aims to capture revenue from out-of-state EV and HV drivers, critics argue that it may discourage the installation of public charging stations. 

According to Lane Boldman, executive director of the Kentucky Conservation Committee, “The biggest concern is that it basically is not going to bring in the revenue that makes it worth the expense, so you’re going to see people stop providing public chargers.” 

This is just the start for the electric vehicle industry in The Bluegrass State. WDRB notes that the Ford Motor Company and its Korean partner, SK On, are constructing two battery factories in Glendale, Kentucky. The $5.8 billion BlueOval SK Battery Park is expected to open in 2025. The factories will employ 5,000 people. 

Additionally, the U.S. Department of Energy awarded two grants totaling nearly $500 million to Ascend Elements, a Kentucky manufacturing company. The grants will go toward production of battery materials and new batteries for electric vehicles.  

Texas: Higher Registration Fees For EV Owners 

In Texas, owning an electric or hydrogen-powered vehicle has become more expensive thanks in large part to a new law signed by Governor Greg Abbott. This legislation imposes a registration fee of up to $400 for electric vehicle owners and an additional $200 for each renewal, with the aim of generating $38 million in new revenue. The measure took effect on September 1, 2023. 

A Kiplinger report points out that proponents argue that it ensures EV drivers contribute to highway expenses. State Senator Robert Nichols (District 3), bill sponsor, said, “With the growing use of EVs, the revenue from the fuel tax is decreasing, which diminishes our ability to fund road improvements for all drivers.” 

However, opponents are worried that the increased Texas EV and HEV registration fee will punish electric vehicle adopters, while still not effectively addressing the state’s problems with road funding. For instance, a Consumer Reports Advocacy article deemed the measure as a “punitive tax on people who choose to go electric.” 

Utah: Cashing In on EV Adoption 

Utah lawmakers have been cashing in on electric vehicle adoption by implementing multiple taxes and fees. All EVs, plug-in hybrid electric vehicle (PHEV), and hybrid electric vehicle (HEV) owners are required to pay an extra annual registration fee on top of the standard fee. According to the Alternative Fuels Data Center, 2023 fees are: 

EV$130.25
PHEV$56.50
HEV$21.75 

In addition, starting January 1, 2024, the retail sale of electricity for EV charging will be subject to a 12.5% tax. The tax may be based on kilowatt hours sold, the cost to charge per hour, or a flat subscription fee – final details are still being determined by state authorities. 

Wyoming: Level 2 Chargers Caught In the Crossfire 

In Wyoming, a recent draft bill initially raised concerns for Level 2 electric vehicle (EV) charging station operators. Now, however, state lawmakers have amended the proposal so that a new tax and annual licensing fee will no longer impact Level 2 chargers. 

According to Cowboy State Daily, Level 2 chargers are more powerful than standard residential plugs but charge more slowly than Level 3 DC fast chargers, like the well-known Tesla Superchargers. 

Following debate regarding the bill, the state’s Joint Transportation, Highways and Military Affairs Committee agreed that only Level 3 chargers should be subject to new fees. The revised bill proposes that Level 3 station operators will pay a 4-cent tax per kilowatt-hour sold, striking a balance between infrastructure growth and road support. 

Level 2 operators like Patrick Lawson, CEO of Wild West EV, have spoken out to say they are relieved by this move – they believe the taxation and extra fees would have likely put most Level 2 stations out of business. 

As electric vehicles become increasingly popular, state governments will continue to adapt their tax policies to account for a changing world. While taxation may help fund road infrastructure and bridge revenue gaps, it’s essential to strike a balance that encourages EV and HEV adoption and ensures fairness for all drivers. Stay informed about your state’s EV and HEV tax regulations to make the most of your eco-friendly driving experience. 

Starting a business can seem daunting to the prospective entrepreneur. A step-by-step plan to get started can alleviate some of the angst. The cost of getting started is one of the first considerations. These costs can be identified and addressed in a solid business plan. 

Before getting into the details, let’s first define a couple of terms used extensively when discussing start-up and organizational costs: 

• Amortize: Amortization is a method of deducting certain capital costs over a fixed period. It is like the straight-line method of depreciation. 
• Capitalize: When capitalizing a cost or expense, the amount is entered on the business’s balance sheet and full recognition of the expense is delayed, until the business is closed or sold, although for tax purposes some assets can be depreciated (i.e., the cost is recovered over a specified period). 

What Expenses Qualify as Start-up and Organizational Costs – Per IRS Publication 535, “Startup costs include any amounts paid or incurred in connection with creating an active trade or business or investigating the creation or acquisition of an active trade or business. Organizational costs include the costs of creating a corporation or partnership.” 

An expense qualifies as an amortizable start-up cost if: 

1. It would be deductible if the business was already operating in the same field, and 
2. It was paid or incurred before the business began operating. 

Costs incurred to investigate the purchase of an active trade or business are treated as amortizable start-up costs. Costs incurred to attempt to acquire an ongoing business are not considered start-up costs, and so must be capitalized. 

Referring again to IRS Publication 535, an expense qualifies as an amortizable organizational cost if: 

1. It was incurred for the purpose of creating the business structure, 
2. It is chargeable to a capital account, 
3. It would be amortizable over the life of the business if it had a fixed life, 
4. It was incurred by the end of a corporation’s first year of operations or prior to a partnership’s first tax filing date, excluding extensions, and 
5. As to partnerships, it is the type of expense that would be expected to benefit the partnership over its lifetime. 

Tax Treatment of Start-up and Organizational Costs – Start-up and organizational costs generally must be capitalized and will only be recovered when you sell or close your business. Some assets can be depreciated but the rest are capitalized. 

You can, however, choose to amortize eligible start-up and organizational costs over 180 months. The 180-month period begins with the month in which you first operate your business. No election is required to amortize start-up costs. You just take the deduction on your tax return. However, you ARE required to attach a statement to your tax return if you choose NOT to amortize these costs. 

You can also elect to deduct up to $5,000 in eligible business start-up costs and $5,000 of eligible organizational costs in your first year of operations. These figures are reduced for every dollar by which your start-up or organizational costs exceed $50,000. 

Once filed, an election to deduct or capitalize start-up and organizational costs is irrevocable. 

Common Start-up and Organizational Costs – You can’t start a business without incurring some expense. Following are some common examples of business start-up and organizational costs. Remember, they are only considered start-up or organizational costs if they are incurred before you start business operations. Any expense you incur on or after the day you start your business is an operating expense, not a start-up or organizational cost. 

Organizational Costs including Licenses and Permits – Most new business owners create a business structure before operations begin. A corporate structure can limit your personal liability for the risks inherent in running a business. Partnership agreements define how multiple owners will work together if no corporation is created. Sole proprietorships do not require the formation of a separate entity. 

Regardless of business structure, most businesses need to obtain licenses and permits from the jurisdictions in which they will operate. These costs are considered organizational costs if incurred prior to the start of operations. 

Analysis and Surveys – The cost of an analysis or survey of potential markets, products, labor supply, transportation facilities, etc., qualifies as a start-up expense. 

Professional Advisor Fees – Professional advisor fees are organizational costs if they relate to setting up the business. This might include legal and accounting fees as well as appraisals and relevant business forecasts. 

Insurance – Insurance coverage is best established before operations begin so you are covered from Day 1. 

Payroll – You may need to hire and train employees before you get started. Eligible training costs can include expenses paid to others who train your new employees. Some employees may help you get your office or store ready for your opening. 

Advertising and Marketing – You need to get the word out before you start operations to launch effectively. Logo design, website design, brochure and business card printing, and signage are examples of pre-opening advertising and marketing costs. 

Travel – Costs of travel and other related expenses in connection with securing distributors, suppliers, and customers for the new business. 

Operating Expenses – You can incur operating expenses (such as utilities and phone service) prior to opening. 

Ineligible Expenses – Interest, taxes, and research and experimental costs do not qualify as start-up costs. 

Other Expenses – Although not included in the definition of “start-up” or “organizational” costs that qualify for the special $5,000 deduction allowance, a new business will also incur other costs before business operations begin which cannot be deducted until the business is operational. Even then, these expenses may not be deductible all at once and generally will have to be depreciated or amortized over several years. These include: 

Improvements – Improvements are often made to an office or other business structure to best serve the needs of the business. These expenses would not be deductible until the business is operational and, depending upon the nature of the business, may be expensed, or depreciated. 

Inventory – Businesses that use inventory will need to obtain sufficient stock to get started. Although a considerable expense prior to the business opening its doors, inventory costs cannot be deducted until the inventory items are sold. 

Equipment – You’ll need some sort of office equipment such as computers, printers, and/or equipment specifically related to your line of work. These expenses would not be deductible until the business is operational and depending upon the nature of the business may be expensed or depreciated. 

Furniture – Desks, chairs, tables…you’ll need furniture to open your business. These must generally be depreciated over several years or may qualify for immediate write-off in the first year of business, depending on several factors. 

Vehicles – You may incur the expense of acquiring a vehicle before your business becomes operational. That expense will not be deductible until the business is operational, and you may have the option of expensing, depreciating or even using the optional mileage deduction for the vehicle. 

Amortizable Expenses – Some expenses that are incurred before a business becomes operational and start-up and organization expenses more than the $5,000 maximum expense amounts allowed can be amortized over a period of 180 months (15 years) starting from the month your business begins operations. 

Summary – It takes an investment to get a business off the ground. A variety of start-up and organizational costs will welcome you before you’re ready to open your doors. From the cost of creating a business entity to the expense of hanging a sign on your storefront, these costs are generally classified as start-up and organizational costs if incurred before the start of business operations. As such, they are generally amortized over 180 months unless the business elects to capitalize all or a part of them or expense up to $5,000 of start-up and $5,000 of organizational expenses in the first year of operations. 

If you are planning to open a business, it may be appropriate to call so the tax aspects and benefits of your start-up and organizational costs can be determined in advance. 

The Continuing Appropriations Act, enacted at the end of 2022, included several provisions that impact retirement plans going forward. Specifically, the legislation enacts SECURE 2.0, an updated version of the Setting Every Community Up for Retirement Enhancement Act of 2019. The following provisions are financial planning considerations that affect individuals. 

Increases Catch-up Contributions 

Beginning in 2024, catch-up contributions to employer retirement plans made by employees who earn more than $145,000 a year (regularly adjusted for inflation) must be classified as after-tax Roth contributions. This is necessary for eligible plans to retain their tax-favored status.  

Starting in 2025, catch-up contributions for participants ages 60 to 63 will increase from $7,500 to $10,000 per year for contributors in most qualified retirement plans. Beginning in 2026, the new catch-up contribution will be indexed to inflation. 

Allows Employer Contributions to Roth 401(k) 

Employers are now able to make post-tax contributions to a Roth option in an employee’s 401(k) plan. Employers also may open a Roth account option in SIMPLE and SEP IRA plans for employees. 

Expands Emergency Distributions from Retirement Accounts 

Starting in 2024, there will be a new exception to the rule for early withdrawals from qualified retirement accounts. Distributions used for unforeseeable events, such as a personal or family emergency, will not be subject to the 10 percent early withdrawal penalty. However, the rule applies to only one distribution per year and only up to $1,000. The plan member has the option to repay the distribution within three years. Absent full repayment, no further emergency withdrawals may occur during those three years. 

The provision also waives the withdrawal penalty on any amount for individuals certified by a physician to have a terminal illness. 

Increases Age for Required Minimum Distributions (RMD) 

Starting in 2023, the age that triggers required minimum distributions (and their requisite income tax liability) from qualified retirement accounts increases from 72 to 73. Starting in 2033, the trigger age raises to 75. The RMD rule apples to 401(k), 403(b) and 457(b) plans). Also, starting in 2024, Roth 401(k) accounts will no longer require RMDs. 

Reduces Excise Tax on Noncompliant RMDs 

If an investor is required to start taking minimum distributions and does not take out the required amount in a single year, he is subject to a tax on the amount not distributed. The tax used to be 50 percent, but starting in 2023 it was reduced to 25 percent. Moreover, if the account owner corrects course and takes the full distribution within a certain window of time, the tax may be further reduced to only 10 percent. 

Allows Emergency Savings Accounts 

Starting in 2024, the legislation permits employers to offer an emergency savings account option within its retirement plan. The following provisions apply: 

• Employee contributions are made with after-tax income 
• There is an annual cap of $2,500 
• Participants may make at least one withdrawal per month 

• Up to four withdrawals per year are not subject to fees 
• Emergency savings may be held in an interest bearing cash-equivalent account  
• Employers may match contributions, but those must be deposited to the participant’s retirement plan investment, not the emergency savings account 
• The emergency account is portable when the participant leaves the employer and can be rolled into a Roth defined contribution plan or IRA 

Permits Employer Match for Student Loan Payments 

Presently – through 2025 – employers may contribute up to $5,250 (tax-free) a year toward worker student loan payments. Starting next year, employers have the option to classify those loan payments as contributions to the company retirement plan, such as a 401(k). This allows workers with student loans the opportunity to pay down that debt with their own income and still receive an employer match toward their retirement plan – so they don’t have to choose one or the other. 

Over the years, millions of individuals have been affected by data breaches, where their sensitive data is accessed by unauthorized cybercriminals or publicly exposed. A data breach can result in huge financial loss if stolen data is used to compromise consumer identity, which also can affect a credit score.  

Unfortunately, there is a great number of people who don’t know what to do if affected by a breach. At the same time, there are those in the know who do nothing.  

What is a Data Breach? 

A data breach is a cyber security incident that exposes sensitive data such as names, contact details, bank details, Social Security numbers, etc.  

Data breaches are the work of criminals who aim to obtain specific data. Criminals do this through various methods, including phishing attacks, malware attacks, targeted attacks, vulnerability exploits, and loss or theft of devices. However, data breaches are also a result of technical or human errors. For example, a misconfiguration error exposed the car location data of 2 million Toyota customers in Japan and overseas for 10 years; and the work of an insider led to Tesla’s massive data breach.  

Unfortunately, data breach cases keep rising. May 2023 alone saw numerous breaches from different organizations, including healthcare organizations, education institutions, the transportation department and even tech giants.  

For companies, the consequences of data breaches are reputation damage, loss of consumer trust, intellectual property theft, financial loss and fines due to failure to conform with data protection legislation. While cybercriminals mainly target organizations, individuals also experience identity theft and financial crimes. This especially happens when stolen data is sold on the dark web or publicly published.  

What action can data-breach victims take? 

Unfortunately, no one is immune from a data breach. However, victims can survive a breach with less disruption. Once a data breach has occurred, the U.S. breach notification law requires businesses or governments to notify those affected immediately after its discovery.  

Although companies are responsible for securing customer data in their possession, customers also have a role to play in securing their data. Essential steps to take include: 

• Being aware of any site claiming to be a data breach check site.
  Such sites could ask for personal information or ask a victim to click a link to verify their details. Hackers also take advantage of a breach and pose as the affected company to lure victims into clicking malicious links, primarily through emails. A user must, therefore, first confirm that a breach happened. This can be in the news or on the affected company’s website.  
• Change passwords for accounts exposed.
  In most cases, affected companies will notify victims of their affected accounts, and their security team will provide instructions on how to stay safe. Such instructions include changing passwords on the breached site or any other account that uses similar login credentials.  
• Set up two-factor or multi-factor authentication (2FA/MFA).
  This extra security measure will require a one-time user code to log in to an account in addition to the login and password.  
• Notify the bank. 

If financial-related data was stolen, such as credit card information, the bank must be notified immediately to freeze the cards. 

• Credit freeze. 

Cybercriminals can use stolen data to open new accounts and take loans. To avoid a ruined credit score, individuals can request a credit freeze from major credit bureaus such as Experian, Equifax and TransUnion.  

• Monitor personal accounts for any unusual transactions.
  Although it depends on the type of data breach and exposed data, victims must look out for unauthorized transactions, including bank account transactions, medical bills, insurance claims and tax refund claims.  
• File a report with the Federal Trade Commission (FTC).
  If criminals have already used personal data, filing an identity theft report will serve as proof to clear one’s name or dispute a fraudulent transaction.  
• Practice cyber hygiene.
  These are practices that help individuals remain safe online. Aside from account security, consumers must use up-to-date software and operating systems, antivirus software, and avoid publishing too much personal information to minimize online footprints that fraudsters can easily access, such as on social media.  

It is worth noting that data breaches are not detected immediately, which means that by the time users get notified, cybercriminals already have had access to the data for some time. And as technology advances, cybercriminals are taking advantage of new technologies such as generative AI for phishing attacks. This means that more data breaches may continue to be witnessed.  

However, users can help prevent future data breaches by using strong passwords, being cautious of phishing scams, and regularly monitoring financial accounts.