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.

Meet Brynn Beichner, our dedicated Administrative Concierge who became an integral part of Ross Buehler Falk in 2024. With a strong emphasis on organization and an acute attention to detail, Brynn plays a pivotal role in ensuring the seamless functioning of our office. Her responsibilities encompass a wide range of tasks, including managing schedules, coordinating meetings, and handling client inquiries with professionalism and efficiency.

Beyond her professional endeavors, Brynn finds fulfillment in the serene ambiance and tight-knit community of Lancaster County, where she has made her home alongside her husband, three children, and a delightful assortment of pets. Here, amidst the rolling hills and rustic landscapes, Brynn cultivates a haven of warmth and joy, where cherished moments with loved ones are cherished.

Yet, Brynn’s aspirations extend beyond the boundaries of her home and workplace. Driven by an insatiable thirst for knowledge and a deep-seated curiosity about the world, she harbors dreams of mastering new languages and immersing herself in the rich tapestry of diverse cultures that adorn our globe. It is this boundless spirit of exploration and discovery that propels Brynn forward, infusing her journey with excitement and anticipation for the adventures that lie ahead.

As we look toward the future, we are grateful to count Brynn Beichner among our ranks, knowing that her contributions will continue to shape and enrich our shared journey toward success and fulfillment.

Meet Justin Kennedy, the Administrative Concierge at Ross Buehler Falk since 2023. Responsible for managing client accounts, handling documentation, and overseeing office organization, Justin’s professional commitment ensures the seamless operation of the Lititz Office.

A graduate of John Jay College of Criminal Justice with a B.S. in Criminal Justice Management, Justin’s diverse interests were evident when he served as the arts editor for the school paper during his college years.

Residing in Lancaster, Pennsylvania, Justin finds peace in the tranquil atmosphere. Hailing from a family of retired postmen, he values humility and a love for travel, reflecting the same qualities in his personal life.

Beyond his professional role, Justin’s fun facts add depth to his character. His top priority, if granted more time, is spending it with loved ones. An enthusiast of the magical world, he dreams of visiting Hogwarts, while his aspiration to master welding showcases his creative side.

Intellectually curious, Justin wishes to delve deeper into the realm of law. His unique skill shines in card games, as he effortlessly claimed victory in a regional Magic The Gathering tournament, marking his proudest accomplishment.

From climbing trees in his youth to trying unusual culinary experiences like dolphin, Justin embodies curiosity and boldness. His favorite scent, roses, hints at a romantic side, and a desire for a telepathic superpower reveals an inclination towards deeper connections.

In both professional tasks and personal pursuits, Justin Kennedy brings a vibrant and well-rounded personality to the Ross Buehler Falk team, leaving a lasting impression on colleagues and clients alike.

In the digital age, online security is among the most critical factors for any business. As more and more people are living their lives online, security has become a priority for those giving up sensitive information – including financial data – via the World Wide Web. Cyber threats are evolving with alarming sophistication, making it crucial for businesses to bolster their defenses against potential cyber-attacks. This comprehensive guide delves into the multifaceted approach required to safeguard your business and reassure your clients, emphasizing the importance of cyber security, phishing awareness, and network security.

The Bedrock of Business Security: Understanding Cyber Threats

The foundation of any business cyber security strategy is understanding – the more you educate yourself about modern cyber threats, the easier it will be for you to safeguard your business against them. Cyber-attacks can range from data breaches and ransomware to sophisticated phishing schemes to deceive employees into divulging sensitive information. Recognizing these threats is the first step toward developing effective defenses. It is not just about installing antivirus software. It is about creating a culture of security awareness throughout the organization.

Phishing: The Deceptive Lure in Cyber Waters

Phishing attacks, in particular, have become a common and effective tactic cybercriminals use. These attacks often involve sending fraudulent emails or messages that mimic legitimate sources to trick individuals into providing confidential data. Educating your team on how to recognize and respond to phishing attempts is crucial. Regular training sessions and simulated phishing exercises can significantly enhance your organization’s resilience against these deceptive attacks.

The High Stakes of CEO Impersonation Fraud

CEO fraud, also known as executive impersonation, represents a particularly insidious form of cybercrime that preys on the hierarchical structures within businesses.

A recent case of CEO fraud used deepfake AI and falsified, artificial intelligence-generated audio to con a U.K.-based energy company out of USD$243,000.

In sophisticated frauds like this, the criminal crafts an email, mirroring the tone, style, and signature of a high-ranking executive such as the CEO, COO, CFO, or Head of HR. The fraudulent communication is directed towards employees lower down the chain of command, often with urgent requests for wire transfers or sensitive information.

As noted, criminals who run these frauds can create even more convincing output thanks to the rise of AI technology.

This sort of scheme hinges on the inherent trust employees place in their leaders and the natural inclination to respond promptly to executive directives. The consequences of falling victim to CEO fraud can be devastating, ranging from significant financial losses to severe reputational damage.

It underscores the critical need for a multi-layered approach to cyber security that includes technical safeguards, such as email authentication protocols and transaction verification processes, as well as a strong organizational culture of security. Training employees to question and verify unusual requests, even when they appear to come from the top, is essential. Establishing clear protocols for financial transactions and sensitive communications can also provide a sturdy barrier against these deceptive tactics. In the battle against CEO fraud, vigilance, skepticism, and a robust verification process are your most powerful weapons.

The Importance of Securing Bank Accounts and Accounting Systems

Business operations can be complex, especially in highly regulated industries like energy and finance.  Bank accounts and accounting systems are the foundation of most companies, pumping vital resources through the organization.

However, just as a heart is vulnerable to ailments, these financial conduits are prime targets for cybercriminals. Securing these accounts and programs is critical, not only for the preservation of financial health but also for maintaining the trust of clients, investors, and stakeholders. A breach in these systems can lead to direct financial loss and compromise sensitive financial data, leading to long-term reputational damage. Securing these financial assets requires a multifaceted approach.

First, robust authentication mechanisms, such as two-factor or multi-factor authentication, should be non-negotiable. These add an extra layer of security, making it significantly harder for unauthorized users to gain access. Additionally, regular monitoring and auditing of financial transactions can help in the early detection of any irregularities or suspicious activities.

Employing encryption for financial data both in transit and at rest further ensures that even if data is intercepted, it remains indecipherable to the attackers.

Finally, educating employees about the signs of phishing and other fraud attempts can act as a critical line of defense. By fortifying bank accounts and accounting systems against cyber threats, businesses can protect their financial lifelines and ensure their operations run smoothly and securely.

The Shield of Network Security

Network security serves as the shield protecting the data traffic flowing in and out of your business. Implementing robust network security measures, such as firewalls, intrusion detection systems, and secure Wi-Fi networks, is essential for all of your company’s systems. Regularly updating these systems ensures they can defend against the latest cyber threats. Remember, a network’s security is only as strong as its weakest link, making continuous monitoring and updating a non-negotiable aspect of your cyber security strategy.

The Fortress of Data Protection

Your company’s data sets you apart from every other business on Earth. Protecting this vital asset requires a comprehensive data protection strategy that includes encryption, secure data storage solutions, and regular backups. Encryption ensures that even if data is intercepted, it remains unreadable to unauthorized users. Meanwhile, secure storage solutions and regular backups safeguard against data loss, ensuring business continuity even in the face of cyber-attacks.

The Vanguard of Cyber Security: Employee Training and Awareness

Employees often represent the first line of defense against cyber threats – they are typically the first to see abnormal activity, whether they work from home or in a traditional office setting. Investing in regular cyber security training and awareness programs can help your staff identify threats earlier, ultimately protecting your business. These programs should cover the basics of cyber security, phishing awareness, and safe online practices. Empowering your employees with this knowledge not only fortifies your business’s defenses but also fosters a culture of security mindfulness. While some may find this information familiar, a refresher is always beneficial.

The Strategy of Regular Cyber Security Assessments

Regular cyber security assessments are akin to routine health check-ups for your business’s digital infrastructure. These assessments help identify vulnerabilities and ensure that all security measures are functioning as intended. Whether conducted internally or by external experts, these evaluations are invaluable for maintaining a strong security posture.

The Alliance of Compliance and Cyber Security

Compliance with industry standards and regulations is not just a legal requirement in many industries, but the cornerstone of effective cyber security. Standards such as GDPR, HIPAA, and PCI DSS provide frameworks that, when adhered to, significantly enhance your cyber security measures. Staying compliant not only protects your business from legal repercussions but also reinforces your commitment to protecting customer data.

Staying Ahead of the Curve

The cyber security landscape is changing more rapidly than ever before, particularly as artificial intelligence becomes increasingly prevalent. With new threats emerging at an unprecedented pace, staying ahead of the curve requires a proactive approach to cyber security. This includes staying informed about the latest cyber security trends, investing in advanced security technologies, and fostering a culture of continuous improvement within your organization.

Implementing Your Cyber Security Strategy

The journey to an effective business cyber security plan is ongoing. It begins with recognizing the importance of cyber security, phishing awareness, and network security, and extends to implementing a comprehensive strategy that encompasses all aspects of digital protection. By taking decisive action today, you can safeguard your business against the cyber threats of tomorrow.

The digital age presents both opportunities and challenges for businesses in all industries. While the online world offers unprecedented possibilities for growth and innovation, it also exposes businesses to sophisticated cyber threats. By understanding these threats, prioritizing phishing awareness, and implementing robust network security measures, businesses can protect their digital frontiers. Remember complacency is the enemy. Stay vigilant, stay informed, and most importantly, stay secure.

The U.S. Department of Labor (DOL) announced on Jan. 9, 2024, the issuance of its final rule regarding whether a worker is an employee or an independent contractor under the federal Fair Labor Standards Act (FLSA). The new rule, which becomes effective March 11, 2024, rescinds the 2021 independent contractor rule issued under former President Donald Trump and replaces it with a six-factor test as outlined below. Additional factors may be relevant if they depend on whether the worker is economically dependent on the potential employer for work.

IMPORTANT: The rule does not adopt an “ABC” test and does not impact independent contractor classification under state laws utilizing the “ABC” test, such as California, Massachusetts, New Jersey, and others. The rule only revises the DOL’s guidance on how to analyze who is an employee or independent contractor under the FLSA. 

The DOL believes this new rule will provide greater clarity and consistency for businesses. However, it could potentially lead to an influx of litigation against certain businesses, particularly in the transportation and logistics industries, by attorneys seeking to have independent contractors reclassified as employees and awarded damages for overtime and deductions from pay, even if those workers prefer to be independent contractors.

The following is an overview of relevant factors associated with each of the new six-factor tests:

1. Opportunity for Profit or Loss Depending on Managerial Skill:

• Whether the worker determines or can meaningfully negotiate the charge or pay for the work provided,
• Whether the worker accepts or declines jobs or chooses the order and/or time in which the jobs are performed,
• Whether the worker engages in marketing, advertising, or other efforts to expand their business or secure more work,
• Whether the worker makes decisions to hire others, purchase materials and equipment, and/or rent space,
• If a worker has no opportunity for a profit or loss, then this factor suggests that the worker is an employee.

2. Investment by the Worker and the Employer – This factor considers whether any investments by a worker are capital or entrepreneurial in nature. Costs to a worker of tools and equipment to perform a specific job, costs of workers’ labor, and costs that the potential employer imposes unilaterally on the worker are not evidence of capital or entrepreneurial investment and indicate employee status. Investments that are capital or entrepreneurial in nature and thus indicate independent contractor status generally support an independent business and serve a business-like function, such as increasing the worker’s ability to do different types of or more work, reducing costs, or extending market reach. Additionally, the worker’s investments should be considered on a relative basis to the potential employer’s investments in its overall business. The worker’s investments do not have to be equal to the potential employer’s investments and should not be compared only in terms of the dollar values of investments or the sizes of the worker and the potential employer. Instead, the focus should be on comparing the investments to determine whether the worker is making similar types of investments as the potential employer (even if on a smaller scale) to suggest that the worker is operating independently, which would indicate independent contractor status.
3. Degree of Permanence of the Work Relationship – This factor weighs in favor of the worker being an employee when the work relationship is indefinite in duration, continuous, or exclusive of work for other employers. This factor weighs in favor of the worker being an independent contractor when the work relationship is definite in duration, non-exclusive, project-based, or sporadic based on the worker being in business for themself and marketing their services or labor to multiple entities. This may include regularly occurring fixed periods of work, although the seasonal or temporary nature of work by itself would not necessarily indicate independent contractor classification. Where a lack of permanence is due to operational characteristics that are unique or intrinsic to particular businesses or industries and the workers they employ, this factor is not necessarily indicative of independent contractor status unless the worker is exercising their own independent business initiative.
4. Nature and Degree of Control – This factor considers the potential employer’s control, including reserved control, over the performance of the work and the economic aspects of the working relationship. Facts relevant to the potential employer’s control over the worker include whether the potential employer sets the worker’s schedule, supervises the performance of the work, or explicitly limits the worker’s ability to work for others.
5. Extent to Which the Work Performed Is an Integral Part of the Employer’s Business – This factor considers whether the work performed is an integral part of the potential employer’s business. This factor does not depend on whether any individual worker in particular an integral part of the business is, but rather whether the function they perform is an integral part of the business. This factor weighs in favor of the worker being an employee when the work they perform is critical, necessary, or central to the potential employer’s principal business. This factor weighs in favor of the worker being an independent contractor when the work they perform is not critical, necessary, or central to the potential employer’s principal business.
6. Skill and Initiative – This factor considers whether the worker uses specialized skills to perform the work and whether those skills contribute to business-like initiative. This factor indicates employee status where the worker does not use specialized skills in performing the work or where the worker is dependent on training from the potential employer to perform the work. Where the worker brings specialized skills to the work relationship, this fact is not itself indicative of independent contractor status because both employees and independent contractors may be skilled workers. It is the worker’s use of those specialized skills in connection with business-like initiative that indicates that the worker is an independent contractor.

NOTE: The Department of Labor (DOL) and the Internal Revenue Service (IRS) use different criteria for determining whether a worker is an employee or independent contractor, and the criteria serve different purposes.

The DOLs criteria are primarily used for determining eligibility for wage and hourly protections under the Fair Labor Standards Act (FLSA), while the IRS’s 20-factor control test is used for tax purposes.

The death of a loved one is one of life’s most difficult times and a time for reflection and grieving. However, it also triggers unique financial and tax events that must be dealt with by the survivors. For a surviving spouse, this is an especially difficult time and can be devastating if the death was sudden with little or no time to make financial preparations.

This material is divided into several sections dealing with the various aspects of a passing and provides information to help you work through the various financial problems and details that must be attended to with the death of a loved one.

Collecting Paperwork – Gathering the proper paperwork is the first step in settling a decedent’s affairs. These documents will be necessary to file and collect benefits, file taxes, etc. This task is generally the responsibility of the decedent’s surviving spouse or, if unmarried, whoever is responsible for the decedent’s affairs.

Death Certificate – The death certificate will be needed for many financial procedures that will be encountered. Request several copies (ten is recommended in most cases). These are usually available from the funeral director. If not, they will be available from the county health department.

Decedent’s Insurance Policies – These will help you determine the benefits entitled to by the survivors. In addition to looking for life insurance policies, do not overlook veteran’s policies, mortgage insurance policies and death benefits associated with car loans, credit cards, installment accounts, health policies, employer plans and retirement plans.

Surviving Spouse’s Insurance Policies – If the decedent is the beneficiary of the spouse’s policies, the surviving spouse may wish to file change of beneficiary notices with the insurance carrier.

Marriage Certificate – A surviving spouse will sometimes need to provide proof of the marital relationship to apply for certain benefits. If you are unable to find one, a copy can usually be obtained from the county offices of the place where the couple was married.

Birth Certificates – For dependent children birth certificates may also be needed when applying for certain benefits. If copies cannot be found, one can be obtained from the county or state in which a child was born.

Certificate of Discharge from the Military – If your spouse was in the military, you may need his or her certificate of discharge to collect certain benefits. If discharge or separation documents are lost, veterans or the next of kin of deceased veterans may obtain duplicate copies by completing forms found on the Internet at https://www.archives.gov/personnel-records-center/military-personnel and mailing or faxing them to the NPRC. Alternatively, write the National Personnel Records Center, Military Personnel Records, 1 Archives Drive, St. Louis, MO 63138. It is not necessary to request a duplicate copy of a veteran’s discharge or separation papers solely for the purpose of filing a claim for VA benefits. If complete information about the veteran’s service is furnished on the application, the VA will obtain verification of service.

The Deceased’s Will or Trust Documents – The decedent may have had a will or trust. A copy of the will or trust will be required. The decedent’s attorney will have copies of these documents.

Decedent’s IRA and Pension Plans – Compile a list of the decedent’s IRA accounts and retirement plans and determine who the beneficiary or beneficiaries are for each.

Spouse’s IRA and Pension Plans – If the decedent is the beneficiary of the spouse’s IRA or retirement plans, the surviving spouse may wish to file change of beneficiary notices with the plans.

Complete List of All Property – Generally, the assets of all decedents will go through state probate, estate, or trust proceedings and a complete inventory of the decedent’s assets will be needed. The date-of-death value of each of the assets owned by the decedent will need to be determined for the probate or trust administration. For some assets, such as real estate, a professional appraiser may need to be hired to determine the amount. In most cases it is advisable for the surviving spouse, executor and/or trustee to meet with an attorney, as well as their tax and financial advisors, who will guide them through this process.

Frequently, taxpayers maintain their most important documents in a safe deposit box. Where possible, the contents should be removed before the decedent’s passing. Depending upon the jurisdiction, sometimes the boxes are sealed upon the owner’s or joint owner’s death. If the box is sealed, it will require a court order to gain access to the box.

Social Security – The Social Security Administration (SSA) should be notified as soon as possible when a person dies. In most cases, the funeral director will report the person’s death to the SSA. The funeral director must be furnished with the deceased’s Social Security number so that he or she can make the report.

Some of the deceased’s family members may be able to receive Social Security benefits if the deceased person worked long enough under Social Security to qualify for benefits. Contact the SSA as soon as possible to make sure the family receives all the benefits to which they may be entitled. The following is information on the benefits that may be available.

• A one-time payment of $255 can be paid to the surviving spouse if he or she was living with the deceased; or, if living apart, was receiving certain Social Security benefits on the deceased’s record. If there is no surviving spouse, the payment is made to a child who is eligible for benefits on the deceased’s record in the month of death.
• Certain family members may be eligible to receive monthly benefits, including:o   A widow or widower aged 60 or older (age 50 or older if disabled).
  o   A surviving spouse at any age who is caring for the deceased’s child under age 16 or disabled.
  o   An unmarried child of the deceased who is:

• Younger than age 18 (or age 18 or 19 if he or she is a full-time student in an elementary or secondary school); or
  § Age 18 or older with a disability that began before age 22.

o   Parents, age 62 or older, who were dependent on the deceased for at least half of their support; and
o   A surviving divorced spouse, under certain circumstances.

If the deceased was receiving Social Security benefits, the benefit received for the month of death, or any later months must be returned. For example, if the person dies in July, the benefit paid in August must be returned. If benefits were paid by direct deposit, contact the bank or other financial institution. Request that any funds received for the month of death or later be returned to the Social Security Administration. If the benefits were paid by check (a rarity these days), do not cash checks received for the month in which the person dies or later. Return the checks to the SSA as soon as possible.

Probate – This is the legal process of settling the estate of a deceased person, specifically resolving all claims, and distributing the deceased person’s remaining property per the decedent’s wishes under a valid will. This process is generally handled by a probate court which protects the wishes of the deceased, confirms the executor (usually named in the will) as the personal representative of the estate, protects the interests of family members who may have claims against the estate, and protects the executor against claims and lawsuits. If there is no will, the court will appoint a personal representative, usually the decedent’s spouse if married at the time of death. In general, the probate process normally entails the following:

• In most cases, the survivors will engage an attorney to handle the probate and petition the court to begin the probate proceedings.
• The cost of probate is generally based on the value of the decedent’s assets and is usually set by law.
• The court will appoint a personal representative.
• Notices in local newspapers will be published informing creditors, heirs, and beneficiaries of the probate proceedings, allowing them ample time to make claims.
• The assets will be appraised.
• The creditors will be paid.
• The remaining assets will be distributed to the heirs and beneficiaries.

Note: Assets held in a living trust are not required to be probated and skip the probate process; this saves the beneficiaries both time and money. Also, assets that are jointly owned by the deceased and someone else are not subject to probate. IRA accounts with a named beneficiary and the proceeds from life insurance policies are also not subject to probate.

Decedent’s Final Tax Return -Upon the death of a taxpayer, a personal representative (e.g., estate executor/executrix) takes charge of the decedent’s property. This person may be named in the decedent’s will or trust document, or appointed by the court if there is no will or trust. When the taxpayer is married, that person is generally the surviving spouse. The duties of the representative include collecting all the decedent’s property, paying creditors, and distributing assets to the heirs, or in some cases selling property that was the decedents. In addition, the representative is responsible for filing various tax returns and seeing that the taxes owed are properly paid. The decedent’s final income tax return is filed on a 1040 series return.

Filing Requirements – The requirements for filing a return for a deceased taxpayer are generally the same as if the taxpayer were still living–based on income level, age and filing status.

Due Date – The due date for a decedent’s final return is the same as for any other individual (generally April 15 of the following year, but extendable to October 15). Note: if either April 15 or October 15 fall on a Saturday, Sunday, or legal holiday the due date is the next business day.

Filing Status – Generally, if the taxpayer was married at the time of death, the decedent will file a joint return with the surviving spouse; otherwise, he or she will file as an unmarried individual. However, a taxpayer who was married at the time of death may not file a joint return with the surviving spouse where (1) the spouse refuses to file jointly, (2) the surviving spouse has remarried, or (3) the executor of the estate does not agree to the joint filing status.

Refunds – If a decedent’s return claims a refund, Form 1310, Statement of Person Claiming Refund Due a Deceased Taxpayer, should be filed. However, Form 1310 is not needed if the person claiming the refund is the surviving spouse of the decedent, filing a joint return with the decedent, or a court-appointed or certified personal representative is filing an original return for the decedent.

Income to Include – Generally, the decedent’s income on the final return only includes income derived up to the date of death. Post-death income is taxable to the decedent’s estate or trust, but the estate or trust will generally pass the taxable income on to the beneficiaries for inclusion in their individual returns if the income has been distributed to the beneficiaries during the same reporting period.

Tax Attributes – Tax attributes are exemptions, deductions, and carryover items. Where a decedent was married, the attributes must be allocated to the decedent and the surviving spouse based on ownership and state property laws. For example, a married couple has a capital loss carryover of $10,000. Assuming the losses came from jointly owned property, one-half of the capital loss carryover would belong to the decedent and half to the surviving spouse, allowing the surviving spouse to continue to carry over his or her share of the capital loss. The decedent’s share of the carryover can only be used on the final return and any leftover is lost. The following is the treatment of some of the more common tax attributes:

Carryovers – Generally, except as noted below, carryover deductions and credits can be used to the extent normally permitted on the decedent’s final return, but any excess does not carry over to the estate or beneficiaries. The carryovers included in this category are net operating loss (NOL), investment interest deduction, capital loss, business credit, minimum tax credit, passive loss credit, and the charitable contribution deduction.

Medical Expenses – Medical expenses paid before death are claimed on the decedent’s final return as an itemized deduction in the usual manner. Medical expenses not deductible on the final return become liabilities of the estate, and they are deducted on the estate tax return (Form 706) if one is required to be filed. However, expenses that were paid out of estate funds within one year after death can be, at the discretion of the executor, treated as if paid by the decedent and claimed on the decedent’s final return instead. To make the election, file a statement with the decedent’s final return that the expenses are not being claimed on the estate tax return.

Charitable Contributions – As noted previously, charitable contribution carryovers are lost if not used on the final return. The fair market value of property of an individual that is donated to charity after the individual’s death may be claimed as a charitable contribution by the beneficiary who was designated to inherit the property.

Foreign Tax Credit Carryovers – Foreign tax credit carryovers can be used by the taxpayer’s estate or heirs.

Passive Losses – When a passive interest is transferred due to death, the accumulated suspended losses from the activity are deductible on the decedent’s final return. The deduction amount is limited to the excess of the basis of the property in the hands of the transferee (heir) over the decedent’s adjusted basis in the property just before death. In other words, the amount of the passive activity loss that equals the step-up in basis due to the decedent’s death is not allowed as a deduction to anyone in any tax year.

Example: Robert was the sole owner of a residence used as a rental, a passive activity, when he died. In his will, he left the property to his brother Tom. At Robert’s date of death, the value of the rental was $500,000, his adjusted basis was $494,000, and he had unused passive activity losses of $8,000. Since Tom’s inherited basis of the rental, $500,000 (FMV at date of death), is increased by $6,000 over Robert’s adjusted basis of $494,000, the deduction on Robert’s final return for the year of death would be limited to $2,000 ($8,000 – $6,000). If the inherited basis had been $502,000 or more, none of the suspended passive loss would have been deductible ($502,000 – 494,000 = $8,000; $8,000 – $8,000 = $0).

Exemptions – Normally the full value of the decedent’s exemption is claimed on the final return; proration based on the time the taxpayer was alive for the final year is not required. Since 2018, the first year that the Tax Cuts and Jobs Act (TCJA) was effective, personal tax exemption deductions are no longer allowed. However, TCJA expires after 2025 and the exemption deduction may return.

Unrecovered Investment in Pensions – If a retired person dies before recovering the entire basis in a pension or annuity (that started after 1986), the unrecovered portion is allowed as a deduction on the retiree’s final return. However, if the annuity is for the joint lives of a retiree and a designated beneficiary, the deduction would apply to the final return of the last to die.

Funeral Expenses – Are NOT deductible on the decedents or survivor’s income tax returns. If an estate tax return is required to be filed, funeral expenses are an allowed deduction on it.

Other Tax Returns – In addition to the decedent’s final return, there are other returns that may need to be filed, along with taxes paid. All income of the decedent both before death and after death is taxable, unless specifically exempt by law. Since the decedent’s final return only includes income up to the date of death, the income after death, such as income from investments and businesses, is included on a “fiduciary” income tax return (Form 1041 for federal and an equivalent state return). Whether the tax on this income is paid by the estate (or trust) or the beneficiary depends on whether the income is retained by the estate or trust or passed on to the beneficiary during the applicable tax period. It is not unusual for a Form 1041 to have to be filed for more than one tax year (or partial year), as settling an estate or trust often can take over a year.

Estate Tax – For 2024, the Federal estate tax exemption is $13.61 million (up from 12.92 million in 2023) and a top tax rate of 40%. Form 706 must be filed if the decedent’s estate value exceeds the $13.61 million exemption. CAUTION: The federal estate tax exemption was approximately doubled by the TCJA back in 2018 and has been inflation adjusted since. However, TCJA expires after 2025 and without Congressional action the estate tax exemption will be approximately cut in half starting with deaths in 2026, potentially subjecting a larger number of estates to the estate tax.

State laws vary, but an estate which pays a federal estate tax may also be required to file a state estate or death tax form and pay the state death tax. However, most states do not impose an inheritance tax. Consult this office for further information.

Surviving Spouse – Getting one’s financial issues in order after the passing of a spouse can be a difficult and emotional time. Hopefully, you and your deceased spouse had preplanned for this eventuality. If your spouse managed your financial affairs, taking over these affairs and those associated with his or her passing can seem overwhelming. A surviving spouse will need to carefully assess his or her financial situation. If the breadwinner passed away, his or her earned income will probably go away too. If the opposite is the case and there are children, the surviving spouse will need to plan so that he or she can continue working. If the couple was retired, will the retirement income be lost or reduced? Unless you have significant financial resources, these issues need to be addressed rather quickly. However, avoid any immediate long-term decisions; they will probably be emotionally based.

Survivor Benefits – One of the first steps should be assessing what benefits you qualify for and then applying for those benefits.

Insurance – Hopefully, you have a list of policies issued to your spouse. If not, contact those companies that might have a policy on your deceased spouse. Inquire at your insurance agency and look in the safe deposit box. In addition to your life insurance policies, do not overlook the following:

• Veteran’s life insurance coverage
• Installment accounts with life insurance coverage
• Mortgages with life insurance coverage
• Employer group term policies
• Credit card accounts with life insurance coverage
• Car loans with life insurance coverage
• Health insurance policies
• Retirement plans with death benefits.
• Annuities

Note: Be aware of all possible settlement options. Insurers may offer various settlement terms, such as a lump sum payment or annuitized payments (fixed amounts) over a period of years. Carefully consider your circumstances before deciding. A lump sum can help pay off immediate financial needs, but a payment plan can provide long-term income security. Consult with your financial advisor before deciding.

Social Security – As discussed earlier, you may qualify for Social Security benefits or an adjustment in the benefits you already received.

Veteran’s Benefits – If your deceased spouse was a veteran, you may be eligible for one or more of the benefits provided by the U.S. Department of Veterans Affairs. These include assistance with burial, plot, and grave markers. The funeral home may be able to help you apply for these benefits. If your spouse was receiving veteran’s disability benefits, you and your dependent children may also be entitled to continued payments. Contact your area’s VA office for assistance.

Employee Benefits – If your deceased spouse was already retired and receiving pension payments from past employers, you will need to contact those employers to see if the pension will continue to pay the full or a reduced monthly amount, or whether it will cease paying benefits upon your spouse’s passing. Some employer pension plans also provide a small death benefit. Most employer pension plans, at the time of initial retirement, offer a choice for the retirement plan to pay only over the life of the retiree or a reduced amount over the joint lives of the retiree and spouse. Hopefully, you and your spouse chose the latter.

If your deceased spouse was still working at the time of death, there are several things you should check into, such as:

• Does the employer provide survivor benefits?
• Are there 401(k) or similar type retirement savings plans to which you are entitled?
• Are you entitled to accrued vacation and sick leave payments?
• Was the deceased covered under any life insurance policy provided by the employer?
• Was your spouse a member of a union or professional association that might provide death benefits?
• If the death was work-related, are you entitled to worker’s compensation benefits?

Creating a Budget – Depending upon your overall financial situation, it may be appropriate for you to develop a budget based on your new financial circumstances. This is especially important if your income has been reduced. The sooner you have your finances in order, the better. Estimate your income first; include your wages if working, Social Security and retirement benefits, investment income and other sources.

Next, list your expenses. These include housing, food, utilities, taxes, medical care and insurance, entertainment, internet and streaming services fees, clothing, transportation, insurance, school expenses for your children, etc. Be sure to set aside an amount that can be added to reserves for unexpected expenses, such as a broken water heater, car repair, etc. Also, if you are not already retired, be sure to set aside amounts to fund your future retirement as well.

Now compare your income with your expenses. If your expenses exceed your income, you will need to reduce spending. If the income exceeds your expenses, you can save the difference. Be conservative for the first year or so while you fine-tune your budget.

Change Designations – You will want to begin the process of removing your deceased spouse from title to property, credit accounts, vehicle registrations, bank accounts, investment accounts, etc. Also review your beneficiary designations on your own life insurance, IRA accounts and will to ensure who inherits them from you. You may also need or wish to change the executor designation in your own will.

Surviving Spouse Filing Status – Generally, an individual’s filing status is predicated on their marital status at the end of the tax year. However, there are special rules related to the spouse of a deceased taxpayer. In the year of death, a surviving spouse is no longer considered married for tax purposes but can still file jointly with the deceased spouse if the executor of the decedent’s estate agrees. Generally, the surviving spouse will file jointly with the deceased spouse. If not, and if the surviving spouse has not remarried, then he or she would file using the married separate status or as head of household if he or she qualifies. If the surviving spouse has remarried, then he or she would file either married joint with the new spouse or married separate.

In the years following the death of a spouse and assuming the surviving spouse has not remarried, he or she would file as follows:

Qualifying Surviving Spouse – If the surviving spouse has a dependent child living at home, the widow or widower can file as a qualifying surviving spouse This favorable filing status is essentially the same as filing a joint return, except that there is no deduction for the deceased spouse’s exemption. (Through 2025, no exemption deduction is allowed anyway.) The widow or widower can use this status for a period of two years if he or she meets the requirements for the filing status.

Head of Household – If the surviving spouse can no longer qualify for the qualified surviving spouse status, and he or she provides over half the household expenses for a qualified child or dependent, he or she may qualify for the Head of Household rates, which are not as beneficial as those for a qualified surviving spouse but are significantly better than filing as a single individual.

Single – If the surviving spouse does not qualify for one of the filing statuses described above, then he or she would be required to file as a single individual for years after the deceased spouse’s death.

Widows and widowers should be aware that the head of household and single filing statuses, result in higher marginal tax rates and reduced standard deductions when compared to the joint status. This could, without proper planning, lead to unpleasant taxes due or a significantly reduced refund when the return is filed.

Other Issues

Decedents E-mail Account – Plan should be discussed in advance. The deceased may or may not want to allow access to their e-mail account after they have passed. If the decedent wants to provide access, they should have left information on how to access the account. In some cases, the deceased may want someone they trust to simply delete the account.

Cell Phone – Similarly what are the decedents wishes regarding their cell phone. Allow access to a trusted friend or relative before the service is terminated. Also, consideration should be made concerning family photos that may be on the phone.

One fundamental financial practice that often gets overlooked, yet holds immense importance, is the separation of personal and business finances. By maintaining distinct bank accounts and credit cards for business transactions, small business owners can streamline bookkeeping processes, ensure accurate expense tracking, and foster clarity in financial management.

Importance of Separating Personal and Business Finances:

The intertwining of personal and business finances can lead to a myriad of complications, from blurred financial visibility to tax compliance issues. By segregating personal and business funds, entrepreneurs create a clear delineation between their personal assets and those belonging to the business. This clear separation simplifies financial record-keeping and also protects personal assets in the event of business-related liabilities or legal disputes.

Clarity in Expense Tracking and Budgeting:

When personal and business finances commingle, tracking expenses and creating accurate budgets become arduous tasks. By maintaining separate accounts, business owners can easily categorize transactions, identify deductible business expenses, and track cash flow with precision. This clarity in expense tracking enables informed decision-making, facilitates accurate financial reporting, and ensures compliance with tax regulations.

Simplifying Bookkeeping Processes:

Effective bookkeeping is essential for maintaining financial health and facilitating business growth. Separating personal and business finances streamlines bookkeeping processes by eliminating the need to sift through mixed transactions. With distinct bank accounts and credit cards for business transactions, entrepreneurs can reconcile accounts efficiently, generate accurate financial statements, and gain valuable insights into their business’s financial performance.

Enhanced Financial Reporting and Analysis:

Accurate financial reporting is crucial for assessing business performance, identifying trends, and making informed strategic decisions. By separating personal and business finances, entrepreneurs can generate comprehensive financial reports that reflect the true financial standing of their business. This transparency fosters stakeholder confidence and empowers business owners to analyze key metrics and pinpoint areas for improvement.

Mitigating Tax Compliance Risks:

Mixing personal and business finances can complicate tax reporting and increase the risk of tax compliance issues. By maintaining separate accounts, entrepreneurs can easily distinguish between personal and business expenses, facilitating the preparation of accurate tax returns. This separation also reduces the likelihood of triggering IRS audits and ensures compliance with tax regulations, ultimately minimizing the risk of penalties and fines.

Protecting Personal Assets:

Incorporating a business provides limited liability protection, shielding personal assets from business-related liabilities. However, this protection can be compromised if personal and business finances are intermingled. By keeping personal and business finances separate, entrepreneurs safeguard their personal assets from potential legal claims or creditors seeking recourse against the business.

Building Credibility and Professionalism:

Maintaining separate bank accounts and credit cards for business transactions signals professionalism and financial discipline. It instills confidence in clients, suppliers, and financial institutions, reinforcing the credibility of the business. Additionally, distinct business finances facilitate accurate financial projections and secure financing opportunities, further bolstering the business’s reputation and growth prospects.

By separating personal and business finances, small business owners can streamline bookkeeping processes, track expenses accurately, and maintain clarity in financial management. This practice not only enhances decision-making and financial reporting but also mitigates tax compliance risks and protects personal assets. As businesses navigate the complexities of financial management, the importance of keeping personal and business finances separate remains a cornerstone of sound financial stewardship.