Payroll taxes can be a significant headache for many small—to medium-sized business owners. Without proper education, entrepreneurs can find themselves in trouble with the IRS and state tax agencies. Fortunately, if you’ve been struggling with payroll taxes, you’re in the right place.

This guide will help you understand and manage payroll taxes effectively to ensure legal compliance. The temptation to cut corners, especially in employment taxes, can be a pitfall with severe consequences.

Here, we will examine employment tax evasion schemes, educating SMB owners like you about the importance of proper payroll management and the risks associated with attempting to avoid payroll taxes, intentionally or unintentionally.

The High Stakes of Payroll Tax Compliance

Employment taxes are a fundamental obligation for businesses. On the federal level, Social Security and Medicare taxes from employees’ paychecks and the employer’s contribution to these taxes are categorized as “payroll taxes.”

Failure to pay not only undermines a business’s financial integrity but also places it squarely in the crosshairs of the IRS. As former IRS Commissioner Mark W. Everson stated, “Failure to pay employment taxes is stealing from the business’s employees.” This stark reminder underscores the gravity of payroll tax compliance.

Common Pitfalls in Payroll Tax Management

Several strategies employed by businesses to evade payroll taxes have been identified, each carrying its own set of risks and potential for legal repercussions:

1. Pyramiding: This scheme involves withholding taxes from employees but intentionally failing to remit them to the IRS. Businesses caught in this cycle often file for bankruptcy to evade creditors, only to re-emerge under a new name and repeat the process.

1. Misclassifying Workers: Incorrectly classifying employees as independent contractors to avoid payroll taxes is a common tactic. However, the IRS applies strict criteria for classification, focusing on the degree of control a business has over the worker. Misclassification can lead to significant penalties and back taxes.

1. Paying Employees in Cash: While not illegal, paying employees without proper documentation and tax withholding is a red flag for tax evasion. This method makes it challenging for the IRS to ascertain the accuracy of payroll tax submissions.

1. Filing False Payroll Tax Returns or Failing to File: Underreporting wages or not filing payroll tax returns are direct forms of evasion that attract severe penalties and scrutiny from the IRS.

The Consequences of Non-Compliance

The repercussions of evading payroll taxes can extend beyond fines and penalties. Business owners can face criminal charges, sometimes leading to imprisonment for those found guilty. Beyond the legal consequences, the reputational damage to a company can be irreparable, leading to a loss of trust among employees, customers, and the broader business community.

A Call to Action for SMB Owners

The message for SMB owners is clear—the risks associated with avoiding payroll taxes far outweigh any perceived short-term gains. Compliance is not optional but a fundamental aspect of responsible business ownership. Investing in the services of knowledgeable outsourced payroll professionals or robust internal software systems can help businesses remain compliant. Moreover, staying informed about the legal requirements and maintaining transparent financial practices will safeguard your business against the pitfalls of tax evasion.

How We Can Help

Our firm specializes in supporting SMBs in navigating the complexities of payroll management and tax compliance. With our expertise, you can ensure that your business meets its legal obligations and fosters a culture of integrity and transparency. Let us help you build a solid foundation for your business’s financial health and reputation.

Take the Next Step

Understanding and correctly managing payroll taxes is a critical component of business success. By avoiding the common pitfalls and embracing compliance, SMB owners can ensure their business thrives in a competitive and legally compliant environment.

As the parents, ensuring the financial security of our children is paramount. One effective tool for this is a custodial account, a financial mechanism designed to hold and protect assets for minors until they reach adulthood. In this article, we will explore what custodial accounts are, how to set them up, and why they’re a crucial part of planning for your child’s financial future.

What is a Custodial Account?

A custodial account is a financial account established by an adult on behalf of a minor. There are two main types: the Uniform Transfers to Minors Act (UTMA) account and the Uniform Gifts to Minors Act (UGMA) account. These accounts can hold investments like stocks, bonds, mutual funds, and, in the case of UTMA accounts, non-financial assets like real estate and patents.

Setting Up a Custodial Account

Setting up a custodial account is straightforward:

1. Choose a Financial Institution: Start by selecting a bank or brokerage that offers custodial accounts.
2. Decide on the Type of Account: Choose between UGMA and UTMA based on the type of assets you plan to transfer.
3. Provide Necessary Information: You’ll need identification for both you and your minor, such as Social Security numbers and birth certificates.
4. Transfer Assets: Once the account is open, you can transfer assets into it. These can be cash, stocks, bonds, or, for UTMA accounts, other types of property.

The Time Value of Money

The earlier you start, the better. Thanks to the power of compound interest, even small amounts saved today can grow significantly over time. For example, investing $100 monthly with an average annual return of 7% will grow to over $50,000 in 18 years. This can provide a substantial financial foundation for your child’s future.

Uncertain Future of Social Security

Reliance on Social Security is becoming increasingly uncertain. With forecasts showing potential fund depletions by the 2030s, it’s wise to consider alternate long-term financial security strategies for your children.

Benefits of Custodial Accounts

– Financial Responsibility: They offer a practical way to teach children about financial management and investing.

– Flexibility: While the money must be used for the child’s benefit, there are few restrictions on what it can cover, potentially including educational expenses, a first car, or a home down payment.

– Tax Advantages: Although the child’s tax rate can apply to investment earnings, the first $1,100 of unearned income typically is tax-free, and the next $1,100 is taxed at the child’s rate, which is usually lower than that of the adult.

Transition to Adulthood

Once the child reaches the age of majority (usually 18 or 21, depending on the state), control of the account transfers from the custodian to the beneficiary. This transition can provide them with a significant financial boost as they enter adulthood, whether for educational expenses, starting a business, or providing a down payment on a home.

Establishing a custodial account for your children is a powerful way to secure their financial future and teach them about managing money. Early planning can relieve financial pressures later on as a parent and give your child a head start toward a prosperous financial future. For further details on setting up a custodial account, consider consulting with this office to choose the best options for your family’s needs.

Custodial accounts are not just financial tools but stepping stones towards financial independence and responsibility for the next generation. Take the first step today and secure a brighter future for your children.

If you’ve been hearing about changes in retirement plans and need to understand what’s going on, this blog is here to help. Let’s break down the latest news on Required Minimum Distributions (RMDs) from the IRS and explain it in simple terms.

What’s an RMD?

An RMD is a Required Minimum Distribution. When you reach a certain age, you must start withdrawing a minimum amount from your retirement accounts like Individual Retirement Accounts (IRAs), 401(k)s, and other similar plans. The reason for this rule is to make sure people don’t keep their retirement savings indefinitely, avoiding taxes.

What Changed?

The IRS has extended some transition relief regarding RMDs. This means they’re giving more time and flexibility to people affected by recent changes in RMD rules, specifically those introduced by the SECURE 2.0 Act of 2022.

Here’s what you need to know:

The SECURE 2.0 Act changed the “required beginning date” (the age when you must start taking RMDs) for many retirement plans.

Previously, if you turned 72 in 2024, you’d have to start taking RMDs by April 1, 2025. However, the new rule delays the required beginning date by one year. Now, if you turn 72 in 2024, your required beginning date is April 1, 2026.

This extension provides additional transition relief to plan administrators, payors, plan participants, IRA owners, and beneficiaries who were affected by these changes.

Final regulations related to these RMDs will not apply until 2025, giving everyone more time to adjust to the new rules.

Why Is This Important?

If you have a retirement plan, these changes could impact when you need to start taking distributions. It’s especially significant if you’re nearing the age when RMDs would typically begin. This extension gives you more time to plan your withdrawals, allowing you to potentially defer paying taxes on those distributions for an additional year.

What Should You Do?

If you have an IRA or another retirement plan, it’s a good idea to check with your plan administrator or financial advisor to understand how these changes affect you. They can help you navigate the new rules and ensure you’re taking the right steps to comply with the extended RMD transition relief.

Please contact us at www.rbfco.com if you have any questions on how these changes may impact your taxes.

As the season changes and springtime approaches, it’s not just your home that could use a good cleaning. Your financial records, especially in QuickBooks, could benefit from a little spring cleaning too. With tax season in full swing and the start of a new fiscal year for many businesses, now is the perfect time to tidy up your QuickBooks account. Here are some QuickBooks spring cleaning tips to help you freshen your finances:

1. Review and reconcile accounts: Start by reviewing your accounts and reconciling them to ensure that your records match your bank and credit card statements. Look for any discrepancies or errors that need to be corrected.
2. Clean up your chart of accounts: Take some time to review your chart of accounts and clean up any accounts that are no longer needed or relevant. This can help streamline your financial reporting and make it easier to track your income and expenses.

1. Archive old transactions: Consider archiving old transactions to keep your QuickBooks file size manageable. This can help improve performance and make it easier to navigate your data.
2. Update vendor and customer information: Review and update vendor and customer information to ensure that it is accurate and current. This can help prevent any communication or payment issues in the future.
3. Reclassify transactions: Go through your transactions and reclassify any that may have been categorized incorrectly. This way, your financial reports will be accurate and reliable when you need them to make business decisions.
4. Set up reminders and notifications: Take advantage of QuickBooks’ reminder and notification features to stay on top of important deadlines and tasks. This can help prevent any last-minute scrambling and ensure that you stay organized throughout the year.
5. Back up your data: Don’t forget to back up your QuickBooks data regularly to protect against data loss or corruption. Consider using cloud storage like Apple’s iCloud or Google Drive – or an external hard drive – for added security.
6. Evaluate and optimize workflows: Take some time to evaluate your current workflows and identify any areas that could be optimized or improved. This can help streamline your processes and make your accounting tasks more efficient.
7. Attend training or seek professional help: If you’re feeling overwhelmed or unsure about how to clean up your QuickBooks account, consider attending a training session or seeking help from a professional. QuickBooks offers a variety of resources and support options to help you get the most out of your small business accounting software.
8. Plan for the future: Finally, use this opportunity to plan for the future and set financial goals for the coming months. Whether it’s saving for a major purchase or preparing for tax season next year, having a clear plan in place can help set you up for success.

By following these QuickBooks spring cleaning tips, you can ensure that your financial records are accurate, up-to-date, and well-organized. Take advantage of the changing season to give your finances a fresh start and set yourself up for a successful rest of the year!

Tax season can be stressful enough without having to worry about falling victim to tax scams. With cybercrime and identity theft becoming increasingly prevalent as more people file their taxes online, it’s wise to be vigilant and aware of potential scams targeting your personal information (and your financial well-being!)

Here are the top 10 ways to spot a tax scam and protect yourself from becoming a victim:

File Early: Beat scammers to the punch by filing your taxes as early as possible. This reduces the window of opportunity for fraudsters to file a false return in your name. Plus, you’ll probably get your tax refund faster!

Sign Up for an IP PIN: The IRS offers an Identity Protection Personal Identification Number (IP PIN) program, providing an extra layer of security by requiring a unique code for tax filing. Consider enrolling to safeguard your tax return every year.

Beware of Unsolicited Contact: The IRS never initiates contact via email, text, or social media to request personal information. Be wary of any communication claiming to be from the IRS and asking for sensitive data. The agency only sends initial correspondence via the United States Postal Service (USPS).

Verify Caller Identity: If you receive a phone call purportedly from the IRS, verify the caller’s identity. The IRS does not ask for credit or debit card numbers over the phone and will never demand payment via gift cards or cryptocurrency. Furthermore, legitimate IRS agents will identify themselves with their employee ID number as a matter of course.

Watch for Spoofed Numbers: Scammers may use spoofing technology to make it appear as though they’re calling from an official IRS number. Don’t be fooled by the caller ID; always exercise caution when sharing personal information over the phone.

Know the Payment Process: The IRS only accepts payments in U.S. dollars and will never insist on unconventional payment methods like gift cards or cryptocurrency. If a payment request seems suspicious, verify it directly with the IRS.

Stay Informed: Educate yourself about common tax scams and stay updated on the latest tactics used by fraudsters. Awareness is key to avoiding falling victim to fraudulent schemes. Popular scams can change from one tax season to the next, so do your research annually.

Trust Your Instincts: If something feels off or too good to be true, it probably is. Trust your instincts and err on the side of caution when dealing with unfamiliar or suspicious requests for personal information.

Seek Professional Advice: If you’re unsure about the legitimacy of a communication or suspect you may be targeted by a tax scam, seek advice from reputable sources such as the Identity Theft Resource Center or the Federal Trade Commission.

Report Suspected Scams: If you believe you’ve been targeted by a tax scam or have fallen victim to identity theft, report it immediately to the appropriate authorities. Prompt reporting can help mitigate the impact of fraud and aid in recovery efforts.

Protecting Yourself Further

Speaking to NBC News, Colleen Tressler, a senior project manager at the FTC’s Division of Consumer and Business Education, shared the importance of taking swift action if you suspect you’ve been targeted by a tax scam. Tressler said, “It’s much easier to stop tax ID theft before it happens than to recover from it.”

Utilize resources like identitytheft.gov to report incidents of identity theft and access guidance on protecting yourself from various types of fraud. Remember, staying informed and proactive is key to safeguarding your financial well-being during tax season and beyond.

Tax season doesn’t have to be synonymous with anxiety and uncertainty. By staying informed, vigilant, and proactive, you can spot potential tax scams and protect yourself from falling victim to identity theft and financial fraud. Remember, just like with your physical health, prevention is always better than cure when it comes to safeguarding your personal information and financial welfare.

Stay safe and secure this tax season – and every tax season!

About 3 out of 4 American taxpayers receive a refund each year when they file their income tax returns, but there are those who for one reason or another end up owing. Of those who owe Uncle Sam, many don’t have the means to pay what they owe by the return due date (usually in April).

NOTE: If you live in a federally declared disaster area the due date may have been automatically extended. The extension will apply if you reside in the disaster area, and you need not be directly affected by the disaster to qualify. Check the IRS website at Tax Disaster Relief Situations for areas that have disaster filing relief extensions. Call this office to confirm you qualify and for information related to state disaster relief due date postponements.

Generally, tax due occurs when a wage earner has under-withheld on his or her payroll or a self-employed individual fails to make adequate estimated tax payments during the year. In some cases, a transaction may have occurred during the year that created a large capital gain, and the taxpayer didn’t adjust their withholding or estimated payments to cover the extra tax, resulting in a large tax bill at filing time. This can be a huge problem for those who are unable to pay their liability.

It is generally in your best interest to make other arrangements to obtain the funds for paying your 2023 taxes rather than be subjected to the government’s penalties and interest for payments made after April 15, 2024. Here are a few options to consider.

• Family Loan – Obtaining a loan from a relative or friend may be the best bet because this type of loan is generally the least costly in terms of interest.
• Home Equity Loans and HELOCs – Use the equity in your home—that is, the difference between your home’s value and your mortgage balance—as collateral. As the loans are secured against the equity value of your home, home equity loans offer extremely competitive interest rates—usually close to those of first mortgages. Compared with unsecured borrowing sources, such as credit cards, you’ll be paying less in financing fees for the same loan amount. Unfortunately, obtaining these loans takes time, so if you anticipate that you’ll need funds from such a loan to pay your taxes that are due in April, you should get the application process started right away.
• Credit Card – Another option is to pay by credit card with one of the service providers that work with the IRS. However, since the IRS will not pay a credit card discount fee (the fee charged by the credit card company), you will have to pay the fees due and pay the higher credit card interest rates.
• Short-Term Payment Plan – If you can fully pay the tax owed within 180 days and owe less than $100,000 including tax, penalties, and interest, you can apply for a short-term payment plan online at the IRS website. You won’t be charged a set-up fee but will still have to pay penalties and interest until the balance owed is fully paid. Set-up fees will be charged if you apply for a payment plan by phone, mail, or in person instead of online.
• IRS Installment Agreement – If you owe the IRS $50,000 or less, you may qualify for a streamlined installment agreement where you can make monthly payments for up to six years. You will still be subject to the late payment penalty, but it will be reduced by half. Interest will also be charged at the current rate, which recently has been 7% or 8% annually. There is a user fee to set up the payment plan. However, the IRS generally waives the fee for low-income taxpayers who agree to make electronic debit payments. In making the agreement, you’ll need to agree to keep all future years’ tax obligations current. If you do not make payments on time or you have an outstanding past due amount in a future year, you will be in default of the agreement and the IRS has the option of taking enforcement actions to collect the entire amount owed. If you seek an installment agreement exceeding $50,000 you will need to validate your financial condition and need for an installment agreement by providing the IRS with a Collection Information Statement (financial statements). You may also pay down your balance due to $50,000 or less to take advantage of the streamlined option.
• Tap a Retirement Account – This is possibly the worst option for obtaining funds to pay your taxes because you are jeopardizing your retirement lifestyle and the distributions are generally taxable at your highest tax bracket, which adds more taxes to your existing problem. In addition, if you are under age 59½, the withdrawal is also subject to a 10% early withdrawal penalty that compounds the problem even further.

Filing Extensions – Don’t mistake the ability to apply for an extension of time to file your tax return as also being an extension to pay any tax liability. It is not and does not grant you an extension of time to pay. The penalties and interest on the amount due will continue to apply as of the original due date of the return.

Enforced Collections – If the taxes cannot be paid timely, and the IRS is not notified why the taxes cannot be paid, the law requires that enforcement action be taken, which could include the following:

• Issuing a Notice of Levy on salary and other income, bank accounts, or property (IRS can legally seize property to satisfy the tax debt).
• Assessing a Trust Fund Recovery Penalty for certain unpaid employment taxes.
• Issuing a Summons to you or third parties to secure information to prepare unfiled tax returns or determine your ability to pay.

Note: To collect delinquent tax debts, certain federal payments (vendor, OPM, SSA, federal salary, and federal employee travel) disbursed by the Department of the Treasury, Bureau of Fiscal Service (BFS)) may be subject to a levy through the Federal Payment Levy Program (FPLP).

Fresh Start Initiative – The IRS also has what is called the “Fresh Start” initiative to offer more flexible terms in its existing Offer-in-Compromise program which, under certain circumstances allows taxpayers to settle their tax debt for reduced amounts. This enables financially distressed taxpayers to clear up their tax problems faster than in the past. While resolving tax problems might previously have taken four or five years, taxpayers may now be able to resolve their problems in as little as two years.

If you have questions about the payment options or an offer-in-compromise, please call this office for assistance. Don’t just ignore your tax liability because that is the worst thing you can do.

Unlike employees, who have income, Social Security, and Medicare taxes withheld from their wages, self-employed individuals must prepay their taxes by making periodic estimated tax payments. These are referred to as estimated tax payments because the self-employed individual must estimate his or her net earnings for the year and pay taxes per IRS schedule according to that estimate. Failure to do so will result in interest penalties.

The self-employed are not the only ones who are subject to estimated tax payment requirements; anyone who has income on which no income tax has been withheld, and even those whose taxes are not sufficiently withheld, should be making estimated tax payments. Thus, if you have income from stock sales, property sales, investments, taxable alimony, partnerships, S-corporations, inherited pension plans, or other sources that are not subject to withholding, you may also be required to pay either estimated taxes or an underpayment penalty. Others subject to making estimated payments are individuals who must pay special taxes such as the 3.8% tax on net investment income or the employment tax on household employees.

Although these payments are often termed “quarterly” estimates, the periods they cover do not usually coincide with a calendar quarter.

An underestimate penalty does not apply if the tax due on a return (after withholding and refundable credits) is less than $1,000; this is the “de minimis amount due” exception. When the tax due is $1,000 or more, underpayment penalties are assessed.

These underpayment penalties are determined per the periods as shown in the above table, so an underpayment in an earlier period cannot be made up for in a later period; however, an overpayment in an earlier period is applied to the following period.

The amount of an estimated payment is determined by estimating one-fourth of the taxpayer’s tax for the entire year; the projected tax is paid in four installments. When the income is seasonal, sporadic, or the result of a windfall, the IRS provides a special form, and the underpayment penalty is based on actual income for the period.

For individuals who do not want to take the time to estimate their tax for the current year but who still want to avoid the underpayment penalty, Uncle Sam also provides safe-harbor estimates. However, even these can be tricky. Generally, a taxpayer can avoid an underpayment penalty if his or her withholding and estimated payments are equal to or greater than

• 90% of the current year’s tax liability or
• 100% of the prior year’s tax liability.

However, these safe harbors do not apply if the prior year’s adjusted gross income is over $150,000, in which case, the safe harbors are.

• 90% of the current year’s tax liability or
• 110% of the prior year’s tax liability.

Sometimes, individuals who have withholding on some (but not all) of their sources of income will increase that withholding to compensate for the additional income sources that have no withholding. Although this may work, withholding adjustments are not as precise as the per-period payments and should be used with caution.

This office can assist you in estimating payments, adjusting withholding, and setting up safe-harbor payments. Please call for assistance.

For many business owners, the future is uncertain. Would you like to ensure the long-term success of your enterprise, reducing stress and providing peace of mind? That’s where succession planning comes in.

Every successful business gets to that point thanks to careful planning and strategic foresight. While most business owners focus on maximizing present success, it’s equally crucial to consider the future. Here, we look at the details of proper succession planning, exploring its significance, key benefits, and actionable strategies to ensure your business continues to thrive even after you’ve handed over the reins.

Understanding the Essence of Succession Planning

Succession planning is not about preparing for contingencies. It’s much more than that—it’s a proactive strategy that ensures a seamless transition within an organization’s leadership and critical positions. From identifying potential successors to nurturing their growth, this process is most effective when initiated years in advance. This allows for mentorship between outgoing and incoming leaders, allowing businesses to navigate transitions with grace and confidence.

The Benefits of Succession Planning

While many businesspeople believe succession planning is primarily about risk mitigation, this isn’t necessarily the case.  Retaining talent instills confidence in stockholders, and fostering a sense of continuity within the company are all important components of effective succession planning. By identifying and building up future leaders for years before they take control, businesses can inspire loyalty among both employees and investors.

Common Business Succession Planning Strategies

From buy/sell agreements to recapitalization, various strategies can be used during succession planning. By implementing tailored approaches that align with their goals and values, businesses can navigate succession with clarity and purpose.

It is often worthwhile to bring in a succession consultant to determine the best strategies for your business. These professionals will consider a variety of factors as they help you and your team prepare for the future.

Succession Planning and Family-Owned Businesses

In the case of family-owned businesses, Score statistics paint a sobering picture: only thirty percent (30%) survive into the second generation, twelve percent (12%) survive into the third, and forty-seven percent (47%) of family business owners expecting to retire in five years DO NOT have a successor.

This is problematic, not only for the family themselves, but for customers who may have come to rely on these family businesses for services like plumbing, appliance repair, or grocery shopping. If you own a family-run business, now is the time to beat the statistics and make sure your venture survives.

Types of Succession Plans

Succession planning for businesses can take various forms, tailored to meet the specific needs and circumstances of each organization.

Here are some common types of succession plans – again, a succession planning expert can assist you with your strategy:

1. Internal Succession Plan:

– Involves identifying and grooming potential successors from within the organization.

– Current employees are trained, mentored, and prepared to take on key leadership roles.

– Provides continuity and stability by retaining institutional knowledge and preserving company culture.

– Typically involves promoting employees to higher positions or transitioning ownership to family members.

2. External Succession Plan:

– Focuses on bringing in talent from outside the organization to fill key leadership positions.

– Suitable for businesses that lack internal candidates with the necessary skills or experience.

– May involve hiring executives from other companies or recruiting individuals with specific expertise in the industry.

3. Family Succession Plan:

– Designed for family-owned businesses to transfer ownership and management to the next generation.

– Involves identifying family members interested in leading the business and preparing them for leadership roles.

– Addresses issues related to fairness, governance, and estate planning within the family.

4. Emergency Succession Plan:

– Provides a contingency plan for unexpected events such as the sudden incapacitation or death of key executives.

– Ensures that the business can continue operations smoothly during times of crisis.

– Includes clear guidelines for interim leadership, decision-making processes, and communication protocols.

5. Hybrid Succession Plan:

– Combines elements of internal and external succession planning strategies.

– Allows businesses to capitalize on the strengths of both internal talent development and external recruitment.

– Provides flexibility to adapt to changing circumstances and address talent gaps effectively.

6. Leadership Development Program:

– Focuses on identifying and nurturing high-potential employees at all levels of the organization.

– Offers training, mentoring, and career development opportunities to prepare future leaders.

– Cultivates a pipeline of talent to fill key positions over time, ensuring a smooth transition of leadership.

7. Partnership or Co-Ownership Agreement:

– Applicable to businesses with multiple owners or partners who need to plan for ownership transitions.

– Defines the process for buying out or transferring ownership shares among partners.

– Addresses issues such as valuation, buy-sell arrangements, and dispute resolution mechanisms.

Each type of succession plan has its advantages and considerations, and businesses may choose to adopt a combination of approaches based on their unique circumstances and objectives.

The Imperative of Succession Planning: What It Means for You

Succession planning isn’t a luxury—it’s a strategic imperative for every business owner. By investing in proactive planning and talent development, you can safeguard your business’s future, inspire confidence among stakeholders, and preserve your legacy for generations to come.

Succession Planning: A Key to Weathering Economic Downturns

As we shared earlier in this guide, succession planning isn’t just about preparing for leadership changes and risk mitigation—it’s about future-proofing your business against economic uncertainties. By integrating succession planning into your business strategy, you can navigate economic downturns with confidence, ensuring operational continuity and long-term success.

Ready to Secure Your Business’s Future?

Securing your business’s future begins with proactive planning and strategic foresight. Whether you are navigating leadership transitions or preparing for economic downturns, succession planning is the key to long-term success. Ready to take the next step? Consult with our experts today and embark on a journey towards enduring success and prosperity.

Invest in your business’s future—start your succession planning journey today.

There are some unique ways to make charitable contributions that can provide tax advantages to the donor. Before deciding about your charitable giving for the year, you may benefit from this article on ways to contribute that will help you tax-wise.

Normally, deductible charitable contributions are limited by a percentage of your income, more specifically your adjusted gross income (AGI), which is the number on your tax return before your deductions are subtracted. For most charitable contributions the tax deduction limit is 50% of your AGI (increased to 60% for cash contributions made to public charities in 2018 through 2025), but it can drop to 30% or even 20% in certain situations. Additionally, charitable contributions are only allowed if you itemize your deductions, which most people will do only when their standard deduction is less than the total of their overall itemized deductions.

Here are some of the unique ways of charitable giving that provide tax benefits to the donor:

Donate Unused Employee Time Off – As they have done before in the wake of disasters, including Hurricane Katrina, Superstorm Sandy, COVID-19, and Ukrainian relief, the Internal Revenue Service is allowing special contributions for Maui wildfire relief. It permits employees to donate their unused paid vacation, sick leave, and personal leave time to charities that are providing relief to victims of the Maui wildfire that began on August 8, 2023.

It is referred to as leave-based donations and here is how it works: if your employer is participating, you can relinquish any unused and paid vacation time, sick leave, and personal leave for cash payments which your employer will donate to relief charitable organizations. The cash payment will not be treated as wages to you and your employer can deduct the amount donated as a charitable contribution or a business expense.

However, since the income isn’t taxable to you, you will not be allowed to claim the donation as a charitable deduction on your tax return. Even so, excluding income is often worth more as tax savings than a potential tax deduction, especially if you generally claim the standard deduction or you are subject to AGI-based limitations.

This special relief applies to all donations made before January 1, 2025, giving individuals time yet in 2024 to forgo their unused paid vacation, sick, and leave time and have the cash value donated to help those who lost everything, including their homes, livelihood and even family in this devastating disaster.

This is a great opportunity to provide sorely needed help in the aftermath of the wildfire without costing you anything but time. Contact your employer to see if they are participating, and if not, make them aware of the unique opportunity. They benefit by not having to pay payroll taxes on the cash equivalent of the donated time, so it is worth their time to participate. If your employer is unaware of his program refer them to IRS Notice 2023-69 for further details.

Contributions of Appreciated Assets – Although this is not a new strategy, it may be one you aren’t aware of. Taxpayers can donate appreciated long-term capital gain assets to a charity and deduct the fair market value (FMV) of the assets as a charitable deduction. For example, suppose you donate to your church’s building fund a stock that is worth $10,000 but that only costs you $2,000. Your charitable contribution would be $10,000, and you do not have to pay tax on the $8,000 appreciation in the stock. This strategy can also apply to land, homes, rentals, equipment, etc. Determining the FMV for listed stock is easy since the value of the stock can be determined from quoted stock prices on the day of the contribution. For other capital assets, a certified appraisal is generally required. It would be good practice to contact this office before making a gift of appreciated property to make sure that it is appropriate for your tax bracket and that the appraisal is properly performed and documented.

IRA to Charity Contributions – This charitable contribution, termed a qualified charitable distribution (QCD), is limited to taxpayers aged 70½ and older. They can directly transfer up to $100,000 a year from their IRA to a qualified charity. So if you are 70½ or older and make an IRA-to-charity transfer you won’t get a charity deduction, but instead, and even better, you will not have to pay taxes on the distribution, and because your AGI will be lower, you can benefit from other tax provisions that are pegged to AGI, such as the amount of Social Security income that’s taxable and the cost of Medicare B insurance premiums for higher-income taxpayers. As an additional bonus, if you are required to take an annual required minimum distribution from your IRA, the transfer also counts toward your RMD.

Caveat: Beginning in 2020 Congress repealed the age limit for making IRA contributions. This means a taxpayer can make traditional IRA contributions (if they have earned income) and QCDs after reaching age 70½. As a result, Congress included a provision in the tax law requiring a taxpayer who qualifies to make a QCD to reduce the QCD non-taxable portion by any traditional IRA contribution made after reaching 70½ that was deducted, even if they are not in the same year.

Charity Volunteer Deductions – If you do volunteer work for a charity, you cannot claim a charitable contribution deduction for the time you spend performing qualified charitable services. However, you can deduct out-of-pocket expenses you incur in performing those services. Here are some examples:

• Entertaining For Charity – You may deduct the cost of entertaining others on behalf of a charity (e.g., wining and dining potential large contributors), but the cost of your own entertainment (or meal) is not deductible. The meals or entertainment on behalf of a charity may be provided in your home.
  
• Uniforms – The cost of uniforms required to be worn when providing services to a charity is deductible as long as the uniforms have no general utility. The cost of cleaning the uniform also may be deducted. Treat these out-of-pocket expenses as “cash” donations rather than “property” donations.
• Charitable Away-From-Home Travel – Volunteers often pay their own way when they travel away from home overnight in connection with charitable work. If you travel away from home overnight, including to foreign locations, to do charitable work for a qualified organization, you may generally deduct the same types of expenses that may be claimed by a taxpayer who makes a similar trip for business purposes. These out-of-pocket costs are deductible if they are properly substantiated non-lobbying expenses, they are reasonable in amount, and there is no significant element of personal pleasure, recreation, or vacation in the travel. Deductible expenses include your out-of-pocket roundtrip travel cost, taxi fares, and other costs of transportation between the airport or station and the hotel, lodging, and meals.Meals – If you are a volunteer traveling away from home overnight for a charity-related purpose, you may deduct 100% of your meal costs, since charity meals are not subject to the 50% reduction that applies to business meals.

Non-cash Contributions – This is a type of contribution with which you can easily run afoul of the IRS because the contribution deduction is based on the fair market value of the item being contributed, not the item’s original cost, and most used items such as clothing and household goods depreciate substantially.

Do not include items of de minimis value, such as undergarments and socks, in the deductible amount of your contribution, as they are specifically not allowed. It is not uncommon to see taxpayers over-valuate their contributions. That is why the IRS has four levels of verification and documentation requirements for non-cash contributions, with each becoming more stringent as the valuation increases:

Caution: The value of similar items of property that are donated in the same year must be combined when determining what level of documentation is needed. Similar items of property are items of the same generic category or type, such as clothing, household goods, coin collections, paintings, books, jewelry, privately traded stock, land, and buildings.

Deductions of Less Than $250 – You must obtain and keep a receipt from the charitable organization that shows:

1. The name of the charitable organization,
2. The date and location of the charitable contribution, and
3. A reasonably detailed description of the property.

Note: You are not required to have a receipt if it is impractical to get one (for example, if the property was left at a charity’s unattended drop site). This exception only applies if all the non-cash contributions for the year are less than $250.

Deductions of At Least $250 But Not More Than $500 – You must provide the same information as in the previous category and add:

4. Whether or not the qualified organization gave you any goods or services as a result of the contribution (other than certain token items and membership benefits).

If the deduction includes more than one contribution of $250 or more, you must have either a separate acknowledgment for each donation or a single acknowledgment that shows the total contribution.

Deductions Over $500 But Not Over $5,000 – You must provide the same acknowledgment and written records that are required for the two previous categories plus:

5. Attach a completed IRS Form 8283 to the income tax return that reports:
6. How the property was obtained (for example, purchase, gift, bequest, inheritance, or exchange),
7. The approximate date the property was obtained or—if created, produced, or manufactured by the taxpayer—the approximate date when the property was substantially completed, and
8. The cost or other basis, and any adjustments to this basis, for property held for less than 12 months and (if available) the cost or other basis for property held for 12 months or more.

Deductions Over $5,000 – These donations require time-sensitive appraisals by a “qualified appraiser” in addition to other documentation (this requirement, however, does not apply to publicly traded securities). When contemplating such a donation, please call this office for further guidance about the documentation and forms that will be needed.

Unfortunately, legitimate charities face competition from fraudsters, so if you are thinking about giving to a charity with which you are not familiar, do your research so that you can avoid swindlers who are trying to take advantage of your generosity. They show up in droves after disasters like hurricanes and firestorms. Here are tips to help make sure that your charitable contributions go to the cause that you support:

• Donate to charities that you know and trust. Be alert for charities that seem to have sprung up overnight in connection with current events.
• Ask if a caller is a paid fundraiser, who he/she works for, and what percentages of your donation go to the charity and to the fundraiser. If you don’t get clear answers—or if you don’t like the answers you get—consider donating to a different organization.
• Don’t give out personal or financial information—such as your credit card or bank account number—unless you know for sure that the charity is reputable.
• Never send cash. You can’t be sure that the organization will receive your donation, and you won’t have a record for tax purposes.
• Never wire money to someone who claims to be from a charity. Scammers often request donations to be wired because wiring money is like sending cash: Once you send it, you can’t get it back.
• If a donation request comes from a charity that claims to help a local community group (for example, police or firefighters), ask members of that group if they have heard of the charity and if it is actually providing financial support.
• Don’t make a contribution if it is solicited in an email claiming to be from the IRS. The IRS does not send emails to individuals and does not ask for donations to organizations related to natural disasters. Scammers use this ploy to extract money from taxpayers who think their contributions will go for hurricane relief or to wildfire victims.
• Check out the charity’s reputation using the Better Business Bureau’s Give.org or Charity Watch.

Remember that if you want to deduct a charitable contribution on your tax return, the donation must be to a legitimate charity. Contributions may only be deducted if they are to religious, charitable, scientific, educational, literary, or other institutions that are incorporated or recognized as organizations by the IRS. Sometimes, these organizations are referred to as 501(c)(3) organizations (after the code section that allows them to be tax-exempt). Gifts to federal, state, or local government, qualifying veterans’ or fraternal organizations, and certain nonprofit cemetery companies also may be deductible. Gifts to other kinds of nonprofits, such as business leagues, social clubs, and homeowner’s associations, as well as gifts to individuals, cannot be deducted.

Be aware that, to claim a charitable contribution, you must also itemize your deductions. If you only marginally itemize your deductions, it may be beneficial for you to group your deductions in a single year and then to skip deductions in the next year.

Please contact this office if you have questions related to the tax benefits associated with charitable giving for your particular tax situation.

We are delighted to introduce Angela Ducker, our esteemed Tax Manager who joined our firm in 2024. With a Bachelor of Arts in Accounting from Stockton University, Angela brings a wealth of knowledge and experience to our team. Her journey in the world of tax and accounting has been marked by significant accomplishments, including earning her CPA credentials.

In her role as Tax Manager, Angela plays a pivotal role in ensuring our clients’ financial matters are handled with precision and expertise. From overseeing tax compliance to providing strategic tax planning advice, Angela’s dedication to her responsibilities is evident in every aspect of her work.

Outside of the office, Angela finds solace and joy in spending quality time with her family. Saturdays are reserved for cherished moments with her retired mother and her three golden retrievers. Whether they’re tackling puzzles together or enjoying a leisurely shopping outing, Angela values these moments of connection and relaxation.

Angela would love to spend her extra time diving into a good book or basking in the sun at the beach. Her adventurous spirit extends to deepen her understanding of topics like the Constitution. Her love for learning extends to her impressive ability to make Baklava—an art she has mastered over the years.

We asked Angela what accomplishment she is most proud of, and without hesitation, she mentioned earning her CPA—a testament to her hard work and dedication. From her humble beginnings as a babysitter to her current role as Tax Manager, Angela’s journey is one of resilience and determination.

We are honored to have Angela Ducker on board and look forward to the continued impact she will make in her role and beyond.