Do You Need to File an FBAR?
Many U.S. citizens living outside the United States are surprised to learn that filing a tax return may not be their only reporting obligation. In addition to your federal income tax return, you may also need to file something called an FBAR.
You must file an FBAR if the combined total of your foreign financial accounts exceeded $10,000 at any time during the year.
What Is an FBAR?
FBAR stands for Foreign Bank Account Report. The official name is FinCEN Form 114, and it is filed electronically with the U.S. Treasury — not with your tax return.
It does not matter if:
• The balance only exceeded $10,000 for one day
• The funds were already taxed in another country
• You owe no U.S. income tax
If the threshold is met, the reporting requirement applies.
What Accounts Count?
Foreign financial accounts may include:
• Foreign checking and savings accounts
• Foreign investment or brokerage accounts
• Some foreign retirement accounts
• Joint accounts
• Accounts where you have signature authority
If the account is located outside the United States, it may be reportable.
Important: It’s $10,000 Combined
The $10,000 threshold applies to the total of all foreign accounts combined, not per account. If your combined balance exceeds $10,000 at any point during the year, an FBAR is generally required.
Is an FBAR a Tax?
No. The FBAR does not calculate tax and does not create tax by itself. It is strictly an informational reporting requirement. Many expats owe little or no U.S. income tax because of the Foreign Earned Income Exclusion or Foreign Tax Credit — but the reporting obligation may still exist.
What If You Didn’t Know?
Many expats miss FBAR filings simply because they were unaware of the rule. If the failure to file was non-willful, there are compliance options available to correct past years without penalties.
The Bottom Line
If you are a U.S. citizen or green card holder living abroad, it is important to determine whether FBAR reporting applies to you. If you are a U.S. taxpayer living abroad and are unsure whether you should be filing FBARs — or whether you may need to correct past filings — I invite you to contact me directly for a free initial consultation to review your situation and discuss your options.
This article is for general informational purposes only and does not constitute tax advice. FBAR requirements depend on individual facts and circumstances
Who Is Affected?
A person may be subject to exit tax if they become a covered expatriate, generally by meeting one of these conditions:
• Net worth of $2 million or more
• Average U.S. income tax liability above an indexed threshold over the past five years
• Failure to certify five years of full U.S. tax compliance
That last point surprises many people: simply being behind on filings can create problems when expatriating.
It’s important to understand that the risk isn’t limited only to people formally renouncing citizenship.
Americans living abroad who fall behind on their U.S. tax filings can also run into serious problems, since failure to stay compliant can cause someone to be treated as a “covered expatriate” if they later decide to expatriate.
U.S. Exit Tax: Key Considerations Before Giving Up U.S. Status
Some Americans living overseas eventually consider giving up U.S. citizenship or long-term green card status permanently. What many people don’t realize is that doing so can trigger the U.S. exit tax, one of the most complex areas of international tax law.
What Is the Exit Tax?
Under Internal Revenue Code Section 877A, certain individuals who expatriate are treated as if they sold all their worldwide assets the day before expatriation, even though no sale actually occurs. Any gain above an annual exclusion amount becomes taxable, often resulting in a significant one-time tax bill.
Final Thought
Expatriation is not just an immigration decision — it can be a major tax event. Planning ahead and maintaining tax compliance can make a significant difference in outcomes.
If you are living abroad or considering giving up U.S. citizenship or long-term residency, understanding the exit tax rules before making a move is essential.
This article is for informational purposes only and does not constitute tax advice. Every situation is unique. If you are considering expatriation or want to understand how exit tax rules could affect you, contact us at GurelCPA for personalized guidance. We offer a free consultation to help you plan your next steps with confidence.
Do Americans Living Abroad Still Pay U.S. Self-Employment Tax?
Many Americans working overseas assume that moving abroad eliminates all U.S. tax obligations.
For self-employed individuals, however, one major tax often remains: U.S. self-employment tax.
What Is Self-Employment Tax?
Self-employment tax funds Social Security and Medicare. For U.S. self-employed workers, this tax is typically 15.3% of net earnings, regardless of where you live. (W-2 employees typically pay half and employers pay half: 7.65% each.)
The Common Misunderstanding
Many expats use the Foreign Earned Income Exclusion (FEIE) to reduce or eliminate income tax.
But: FEIE reduces income tax. FEIE does NOT eliminate self-employment tax. So even when income tax is zero, self-employment tax may still apply.
How Social Security Taxes Work Across Borders
If you are self-employed in another country, you may also be required to pay into that country’s social security or national insurance system.
To prevent workers from being taxed twice for social security, the United States has Totalization Agreements with many countries. These agreements generally ensure that a worker pays into only one country’s system rather than both.
Which country applies depends on where the work is performed and local registration requirements, and proper documentation is often required to claim exemption from U.S. self-employment tax.
Who Is Affected Most?
Common situations include:
- Independent contractors abroad
- Consultants working remotely
- Digital nomads
- Freelancers
- Expats running businesses overseas
- Single-member LLC owners abroad
Final Thought
Living abroad does not automatically remove U.S. Social Security and Medicare obligations for self-employed Americans. Understanding this early helps avoid unexpected tax bills.
This article is for informational purposes only and does not constitute tax advice. Cross-border self-employment tax issues vary widely based on country and individual circumstances. If you operate a business or work independently while living abroad, contact us at GurelCPA.com for personalized guidance.
IRS Streamlined Foreign Offshore Procedures:
A Penalty-Free Path for U.S. Expats
Many U.S. citizens living abroad are surprised to learn that they are still required to file U.S. tax returns and report certain foreign accounts — even if they owe little or no U.S. tax. They don’t realize the rule is that US citizens must report on their worldwide income and bank accounts.
If you are behind on U.S. filings, the IRS Streamlined Foreign Offshore Procedures (SFOP) may allow you to catch up without penalties, as long as your noncompliance was non-willful.
What Are the Streamlined Foreign Offshore Procedures?
The SFOP is an IRS program that allows eligible U.S. taxpayers living outside the United States to become compliant by:
• Filing overdue tax returns
• Reporting previously unreported foreign income
• Submitting required international disclosure forms
When done correctly, no IRS penalties are assessed under the foreign streamlined program. And, most filers are able to use provisions such as the Foreign Earned Income Exclusion or Foreign Tax Credit to reduce or eliminate U.S. tax owed.
Who Qualifies?
SFOP is designed for U.S. taxpayers who:
• Lived outside the U.S. during the required filing years
• Failed to file U.S. returns or international forms
• Did not willfully avoid U.S. tax obligations
This applies to both temporary and long-term residents abroad.
What Must Be Filed?
To complete SFOP, taxpayers generally submit:
• Three years of U.S. income tax returns
• Six years of foreign account reports (FBARs)
• A certification explaining why the failure to file was non-willful
Are There Penalties?
For taxpayers qualifying under the foreign streamlined procedures:
• No late-filing penalties
• No FBAR penalties
• No accuracy-related penalties
Only actual tax due (if any) and interest must be paid.
Why Professional Review Matters
Streamlined filings are reviewed by the Internal Revenue Service (IRS), and mistakes can create problems. Incomplete disclosures, missing forms, or weak non-willfulness statements can lead to audits or penalties.
If you are a U.S. taxpayer living abroad and want to understand your options, I invite you to contact me directly. I offer a free initial consultation to review your situation and discuss next steps.
This article is for general informational purposes only and does not constitute tax advice. Every tax situation is different, and eligibility for the Streamlined Foreign Offshore Procedures depends on specific facts and circumstances.
The Cost of Under-Describing Program Accomplishments
The program accomplishments section is one of the few places where a nonprofit can clearly describe, at length, in its own words:
• What it actually did during the year
• Who benefited from that work
• How resources were used
• Why the work mattered
When that section is underdeveloped, the organization loses:
• Visibility on public nonprofit platforms
• Credibility with donors and grantors
• Control over its public narrative
The work still happened — but the public record doesn’t reflect it.
A Small Change Can Create Outsized Impact
Improving program accomplishment descriptions isn’t about marketing language or exaggeration. It’s about accurately and clearly describing real work in the most trusted document a nonprofit files.
For many organizations, modest improvements to this section can significantly improve how the organization is understood by the public.
Optimizing Your Form 990/990-EZ
Many nonprofit organizations file Form 990-EZ or Form 990 every year and assume the job is finished once the return is accepted by the IRS. From a compliance standpoint, that’s true.
But has your organization optimized this chance to tell the world about your accomplishments? Review last year’s filing and see what you think.
A review of public Form 990 filings on platforms like GuideStar and the IRS website shows a common issue: the program accomplishments section is missing, minimal, or dramatically underdeveloped, even for organizations doing meaningful work.
Filing the Form Isn’t the Same as Using It Well
Form 990 filings are public documents. For donors, grantors, journalists, and prospective board members, they are often the first source of information about an organization.
Yet many filings include:
• Blank or one-sentence program descriptions
• Generic language that could apply to any nonprofit
• No clear explanation of impact or scale
• Little connection between spending and mission
When this happens, the organization loses one of its most credible opportunities to explain its work.
This Lost Value Is Already Public Information
Past Form 990 filings are part of the public record. Anyone researching the organization can see how programs were described and whether accomplishments appear thoughtful, intentional, and complete.
A Quick Review Can Be Eye-Opening
If you’d like a second set of eyes on your organization’s past filing before preparing the next one, I offer a free consultation to discuss whether your Form 990 is fully reflecting the value your organization delivers.
This article is provided for general informational purposes only and should not be considered tax advice. Each organization’s circumstances are unique.
Proactively Filing Form 990-EZ: Yes, It Will Add Value
Small nonprofits with annual revenue under $50,000 are permitted to file Form 990-N, the IRS e-Postcard. Filing the postcard keeps the organization compliant.
Some organizations, however, choose to proactively and voluntarily file Form 990-EZ, even when it is not required as a way to add value through credibility, clarity, and strategic transparency.
Proactive Filing Is a Strategic Choice
Proactive, voluntary filing of Form 990-EZ places meaningful information into the public record — mission, programs, financial summaries, and governance details — in a format donors, grantors, and nonprofit evaluators already use and trust. For organizations looking toward future growth, grant opportunities, or broader community support, this level of transparency can strengthen public confidence and credibility.
Using the Filing Intentionally
The program accomplishments section, in particular, offers nonprofits a meaningful opportunity to describe:
• What was achieved during the year
• Who benefited from the organization’s work
• How resources were used
• Why the work matters
When this section is thoughtfully prepared, it helps ensure the organization’s public record reflects its actual impact.
Where an Experienced CPA Adds Value
Form 990-EZ is more than a tax filing. It is one of the most visible public documents a nonprofit produces each year.
An experienced CPA approaches the return not only as a compliance requirement, but as an opportunity to help the organization communicate clearly and accurately with the public.
Value is added when the filing:
• Clearly explains program accomplishments and services provided
• Aligns financial reporting with mission and impact
• Reflects thoughtful governance and operational structure
• Anticipates how donors, grantors, and evaluators will read the return
• Avoids technical errors or omissions that can undermine credibility
The goal is not simply to submit a correct return, but to submit a return that communicates effectively. The return becomes more than compliance — it becomes part of the organization’s public story.
Let’s Talk Before You File
If your organization qualifies to file Form 990-N, the question isn’t simply whether Form 990-EZ is optional — it’s whether proactively filing Form 990-EZ supports your organization’s mission and long-term goals.
If you’d like to explore whether proactively filing and experienced preparation could add value for your organization, I invite you to reach out. I offer a free consultation to discuss how Form 990-EZ can be used thoughtfully and strategically.
This article is provided for general informational purposes only and should not be considered tax advice. Each organization’s circumstances are unique.
What Form 990-EZ Requires
Form 990-EZ requires organizations to list their three largest program accomplishments based on dollars spent during the year.
For each of those programs, the organization must provide a narrative description explaining:
- The nature of the program or services provided
- Who is served
- The scale or scope of the activity
- How the program advances the organization’s mission
The form provides meaningful space for these descriptions. While organizations do not choose which programs appear based on preference, they do have discretion in how programs are described and how closely related activities are grouped, when appropriate.
This Is a Place to Let Your Organization’s Light Shine
The program accomplishments section of Form 990-EZ is not marketing copy, but it is one of the clearest places a nonprofit can explain its work in its own words.
These descriptions are part of a federal information return filed under penalty of perjury. That gives them a level of credibility that traditional marketing materials do not carry.
For donors and grantmakers reviewing information on platforms like GuideStar or Charity Navigator, this section often becomes the most trusted explanation of what an organization actually does. It signals that the organization:
- Understands its mission and programs
- Can clearly articulate how resources are used
- Tracks program activity and spending
- Takes transparency and compliance seriously
For many small nonprofits, this may be the most complete and authoritative public description of their work available anywhere.
This article is provided for general informational purposes only and should not be considered tax advice. Each taxpayer’s situation is unique.
Your Three Best Stories: Use Form 990-EZ to Shape Donor Perception
Make full use of Form 990-EZ: Section III: Program Accomplishments by Going Beyond Compliance
Small nonprofits usually tell their story through websites, newsletters, grant applications, and community outreach. All of those channels matter.
What’s less obvious is that many donors, grantmakers, and nonprofit evaluators begin their research elsewhere — on public nonprofit information platforms such as GuideStar (Candid), Charity Navigator, and ProPublica’s Nonprofit Explorer.
These sites pull directly from IRS filings.
When an organization files only Form 990-N, there is very little information for these platforms to display. When an organization files Form 990-EZ, however, those same platforms often show mission statements, program descriptions, and summary financial information — all sourced from the return itself.
For many stakeholders, this is the first place they encounter a nonprofit.
Using a Required Section Intentionally
Even when Form 990-EZ is filed voluntarily, the program accomplishments section allows nonprofits to explain their work:
- In their own words
- In a structured, respected format
- In a place where stakeholders are already looking
When approached thoughtfully, it transforms required disclosure into an opportunity for clarity and trust-building.
Why This Matters Especially for Small Nonprofits
Larger organizations typically have development staff and marketing budgets. Smaller nonprofits often do not.
For organizations under $50,000 in annual revenue, Form 990-EZ may be one of the only places where a complete, standardized description of their programs appears publicly.
Want to Talk It Through?
If you’re involved with a small nonprofit and would like to discuss whether filing Form 990-EZ — and preparing strong program accomplishment descriptions — makes sense for your organization, I invite you to reach out.
I offer a free consultation to discuss your organization’s situation and how Form 990-EZ can be used effectively and appropriately.
From Compliance to Optimization: Why Small Nonprofits Should Rethink the 990-N Postcard
This article is written for people who care about small nonprofit organizations — executive directors, board members, volunteers, donors, and other stakeholders who want to see nonprofits thrive, not merely survive.
Many small nonprofits operate with limited resources and annual revenue under $50,000. Under IRS rules, those organizations may satisfy their federal filing requirement by submitting Form 990-N, commonly known as the e-Postcard.
From a compliance standpoint, that filing is enough. From a strategic standpoint, it may not be.
Compliance Is the Minimum Standard
Form 990-N is intentionally simple. It confirms that an organization still exists and remains eligible for tax-exempt status. Beyond that, it provides almost no information to the public.
There is no mission statement, no description of programs, no financial context, and no explanation of how donations are used. For prospective donors, grantors, partners, and even potential board members, the 990-N offers little insight into the organization behind the filing.
A Strategic Question Worth Asking
Filing Form 990-N keeps a nonprofit compliant. Filing Form 990-EZ helps the public understand the nonprofit.
For small organizations thinking about credibility, donor confidence, or future growth, the question isn’t whether Form 990-EZ is required — it’s whether it supports the organization’s mission and long-term goals.
Moving From Compliance to Optimization
I’m suggesting you look beyond minimum requirements and ask how required processes can be used more intentionally. This is the shift from compliance to optimization.
Form 990-EZ allows even very small nonprofits to place meaningful, standardized information into the public record, including:
- The organization’s mission and purpose
- Summary financial information
- How funds are being used to support programs
- Governance and operational structure
- Ongoing compliance with 501(c)(3) requirements
Instead of simply checking a box for the IRS, the organization creates a transparent snapshot of who they are and how they operate — in a format donors and grantors recognize and trust.
A Brief Word on Storytelling
One of the most significant differences between Form 990-N and Form 990-EZ is that the EZ requires narrative descriptions of an organization’s primary activities.
Rather than filing a postcard, organizations can have the opportunity to explain what they do, who they serve, and why their work matters. It’s a chance to let your light shine!
Take advantage of how the program accomplishments section of Form 990-EZ can function as a powerful storytelling and communication tool.
Next Steps
If you’re involved with a small nonprofit and would like to explore whether moving from compliance to optimization makes sense for your organization, I invite you to reach out directly. I’m happy to offer a free consultation to discuss your organization’s situation and help you think through the strategic use of Form 990-EZ.
This article is provided for general informational purposes only and should not be considered tax advice. Each taxpayer’s situation is unique.
No Tax on Social Security: Really? What’s Real and What’s Hype?
You may have seen headlines claiming there is now “No Tax on Social Security.” Sorry, but the IRS formula for taxing Social Security benefits has not changed. However, other recent tax changes may reduce overall taxes for some retirees, which can make it feel like Social Security is no longer being taxed.
The Key Point: Social Security Tax Rules Did Not Change
Social Security benefits are taxed under a formula that has existed for decades. Benefits become taxable depending on a taxpayer’s combined income, which includes Adjusted Gross Income, Nontaxable interest, and One-half of Social Security benefits.
If combined income exceeds certain thresholds, up to 85% of benefits can become taxable income. Those thresholds have not changed, and the formula itself remains in place today.
So Why Are People Hearing “No Tax on Social Security”?
Recent tax legislation included provisions that provide additional tax relief in the form of the new $6,000 extra senior deductionthat will often reduce overall taxable income.
When total taxable income goes down, the amount of Social Security benefits taxed by the formula goes down, meaning that less of a taxpayer’s Social Security will be taxed.
So, no: there is still tax on Social Security benefits. But, yes, less of your social security benefits may be taxed.
Who Will Actually See a Difference?
Many retirees already pay little or no federal income tax on their Social Security benefits. Those who rely primarily on Social Security and have only modest additional income often fall below the taxation thresholds already. For these households, recent tax changes may not significantly alter their situation because they already owed little or no tax.
The biggest impact is often felt by retirees whose income is just high enough to make part of their benefits taxable. For this middle-income group, tax relief provisions may lower overall taxable income enough to reduce their total tax bill, sometimes significantly.
Higher-income retirees, whose overall income remains well above taxation thresholds, will generally continue to see much of their Social Security benefits treated as taxable income, with limited impact from recent changes.
The Reality Behind the Headlines
The phrase “No Tax on Social Security” oversimplifies what actually happened.
In practice: Social Security taxation rules remain unchanged.
This article is provided for general informational purposes only and should not be considered tax advice. Each taxpayer’s situation is unique. Not all states automatically follow federal tax law changes, so state taxation may still apply. Contact me for a free consultation regarding your specific circumstances.
No Tax on Overtime: Really? What’s Real and What’s Hype?
A change affecting hourly workers and employers is arriving with the same recent federal tax legislation that introduced the tip deduction.
Often described in headlines as “No Tax on Overtime,” the rule begins with the 2025 tax year returns filed in early 2026 and provides a new federal income tax benefit for qualifying overtime pay.
Here’s what the rule actually means and how it works.
What is the “No Tax on Overtime" Rule?
Despite the headline wording, overtime pay is not completely tax-free. Instead, the law creates a new federal income tax deduction for qualifying overtime wages.
Under the new rule, eligible workers may deduct a portion of qualifying overtime pay from federal taxable income, subject to limits set in future IRS guidance. Overtime wages must still be reported and remain subject to Social Security and Medicare payroll taxes.
But note. It’s only the additional ‘half’ of the ‘time and a half’ that is not taxed for income tax: the base overtime hours are still taxed as before.
Who Qualifies?
The deduction applies to employees who receive overtime compensation under federal or state overtime laws, typically meaning pay at time-and-a-half or higher rates for hours worked beyond standard thresholds.
Employees most likely to benefit include workers in manufacturing and production, healthcare and emergency services, construction and skilled trades, retail, logistics, hospitality, and service industries.
Workers who are salaried and exempt from overtime rules generally do not receive overtime pay and therefore would not benefit from the deduction.
Reporting Requirements Still Matter
Overtime wages must still be properly reported on Form W-2, and payroll withholding will continue during the year as usual.
The benefit is realized when filing the tax return, not automatically in each paycheck. Employees should expect withholding to continue normally unless future IRS guidance changes employer payroll handling.
Like many tax benefits, eligibility is reduced or phased out at higher income levels. The deduction begins to phase out once Modified Adjusted Gross Income exceeds thresholds similar to those applied to the tip deduction, with final implementation details expected in IRS regulations.
Workers with moderate incomes are most likely to benefit fully from the change.
What This Means for Workers
For employees who regularly work overtime, the rule could lower federal income tax liability and increase effective take-home pay over the course of the year. However, payroll taxes still apply, and benefits will vary depending on income level and total earnings.
What Employers Should Know
Employers are not exempt from payroll tax obligations and must continue to properly calculate and report overtime wages. Accurate payroll reporting will remain essential to ensure employees can claim the deduction correctly on their tax returns.
Payroll systems may require updates once final IRS implementation rules are released.
Planning Ahead
Employees who regularly earn overtime may want to review withholding levels and overall tax planning beginning in 2025 to avoid over- or under-withholding.
This article is provided for general informational purposes only and should not be considered tax advice. Each taxpayer’s situation is unique. Not all states automatically follow federal tax law changes, so state taxation may still apply. Contact me for a free consultation regarding your specific circumstances.
No Tax on Tips: Really? What’s Real and What’s Hype?
The tax situation for tipped workers just changed. As part of tax legislation signed into law in 2025, a new provision commonly described as “No Tax on Tips” takes effect beginning with the 2025 tax year returns filed in early 2026. This article explains what the rule means, who qualifies, and how it affects both employees and employers.
What Is “No Tax on Tips”?
Despite the name, tips are not completely tax-free. Instead, the rule creates a new federal income tax deduction for qualifying tip income. Under the new provision, workers may deduct up to $25,000 of qualified tip income from federal taxable income each year. Tips must still be reported and remain subject to Social Security and Medicare payroll taxes.
Who Can Claim the Tip Deduction?
Occupation
The deduction applies to workers in occupations that customarily and regularly receive tips, including restaurant staff, bartenders, delivery drivers, personal service workers, and similar service occupations as defined in future IRS guidance.
Reported Tip Income
The deduction applies only to tips that are properly reported for tax purposes. This includes tips reported through Forms W-2, 1099-NEC, 1099-MISC, or 1099-K, as well as tips reported directly by employees on Form 4137. Both cash tips and electronic or credit-card tips qualify so long as they are voluntary payments from customers and properly reported. Non-cash tips, such as tickets or gift items, remain taxable but do not qualify for the deduction.
Income Limits
The deduction begins to phase out for taxpayers whose Modified Adjusted Gross Income exceeds $150,000 for single filers or $300,000 for married couples filing jointly, with the allowable deduction gradually reduced above those levels.
How the Deduction Works
The deduction is an above-the-line deduction, meaning it can be claimed whether or not the taxpayer itemizes deductions.
For example, if a worker earns $20,000 in wages and $30,000 in tips, they may deduct up to $25,000 of tip income, reducing taxable income significantly.
Self-employed workers receiving tips may also qualify, although the deduction cannot exceed net income from the trade or business.
Payroll Taxes Still Apply
The deduction reduces federal income tax but does not eliminate Social Security or Medicare taxes on tips.
What This Means for Service Workers and Employers
For tipped workers, the rule can reduce federal income tax liability and increase take-home pay. For employers, accurate payroll reporting and tip tracking become even more important to help employees benefit from the change.
This article is provided for general informational purposes only and should not be considered tax advice. Each taxpayer’s situation is unique. Not all states automatically follow federal tax law changes, so state taxation may still apply. Contact me for a free consultation regarding your specific circumstances.
Who Commonly Needs Estimated Payments?
Estimated payments are often required for people with income such as:
• Self-employment or freelance work
• Business or rental income
• Investment or capital gains income
• Retirement withdrawals without enough withholding
• Side income in addition to regular employment
Understanding Safe Harbor Rules
The IRS provides safe harbor rules that allow taxpayers to avoid penalties if enough tax is paid during the year through withholding or estimated payments. Even if additional tax is owed at filing, meeting one of these thresholds usually prevents penalties
In general, penalties are avoided if payments equal at least:
• 90% of the current year’s total tax, or
• 100% of last year’s total tax
Estimated Tax Payments: How to Avoid Underpayment Penalties
Many taxpayers assume they can simply pay their tax bill when they file their return in April. However, the IRS expects taxes to be paid throughout the year as income is earned. When too little tax is paid during the year, an underpayment penalty can apply — even if the full balance is paid at filing time.
2026 Estimated Tax Payment Periods and Due Dates
Estimated taxes are paid in four installments during the year as income is earned. The payment periods do not follow equal calendar quarters, so it is important to understand how the IRS divides the year.
For the 2026 tax year, estimated payments are due on:
• April 15, 2026 — covering income earned January 1 through March 31, 2026
• June 15, 2026 — covering income earned April 1 through May 31, 2026
• September 15, 2026 — covering income earned June 1 through August 31, 2026
• January 15, 2027 — covering income earned September 1 through December 31, 2026
Withholding Can Help Too
Estimated payments aren’t the only solution. Increasing paycheck withholding can often fix the issue and is sometimes easier than making quarterly payments. Withholding is treated as if paid evenly throughout the year, even when adjustments happen later in the year.
Missing or underpaying any installment can result in penalties, even if the total tax is paid when filing the return. Reviewing income periodically during the year helps ensure payments stay on track.
This article is for general informational purposes only and should not be considered tax advice. Please reach out for a free consultation to discuss your individual tax situation.
Are You Happy With Your CPA?
That is the Question I Ask Prospective Clients
If the Answer is Yes:
That’s something to value. A strong CPA relationship is built on trust, communication, and long-term understanding — and if you’ve found that, you’re fortunate to have a true trusted advisor.
If the Answer is No:
Then it’s probably worth a conversation. Feeling unheard, rushed, or misunderstood financially is often a sign that a better professional fit may exist.
And for some people, the honest answer is:
“I don’t have a CPA.”
Where CPA Services Truly Add Value
There are specific situations where professional guidance can create real financial value and prevent costly mistakes — especially when complexity increases.
This commonly includes small business ownership (entity structure, expense classification, tax strategy, cash flow planning, estimated taxes, and compliance obligations) and rental properties or real estate (depreciation strategy, passive activity rules, loss limitations, capital gains planning, and long-term tax structuring)
When You May Not Need a CPA
Not everyone needs a CPA.
If your financial life is simple — for example, if all of your income comes from W-2 wages, investment accounts, and basic sources of income — there are reliable, user-friendly tax software platforms that many people can use successfully on their own.
A core principle of my practice has always been empowerment: helping people understand their finances and supporting them in doing for themselves what they feel comfortable doing.
A Different Kind of CPA Relationship
My approach to accounting isn’t transactional — it’s relational. It’s about understanding your life, your business, and your goals — not just preparing returns.
If you’re happy with your CPA, that’s something to value.
If you’re not, we should talk.
If you don’t have one — and your financial life is becoming more complex — it may be time to explore whether having a trusted advisor could make a meaningful difference.
What to Do If You Don’t Receive Your W-2
Each January, employers are required to send employees a Form W-2, which reports wages earned and taxes withheld during the prior year. Employers must furnish W-2s by January 31 of the year following the tax year. Most taxpayers receive their W-2s without issue, but delays and missing forms do happen, especially if you changed jobs, moved, or worked for multiple employers.
If you haven’t received your W-2 by early February, here’s what to do.
Step 1: Contact Your Employer
Your first step should always be to contact your employer or former employer directly.
Ask whether the W-2 was issued, whether it was mailed or made available electronically, and whether the employer has your correct mailing address or email.
In many cases, the issue is simply an outdated address or a payroll processing delay.
Step 2: Check Your Payroll or HR Portal
Many employers deliver W-2s electronically through payroll platforms such as ADP, Paychex, or Workday.
If you had online access during employment, log in to your payroll or HR portal and look for a section labeled Tax Documents or Year-End Forms.
Download and save a copy for your records.
Step 3: Contact the IRS (If Necessary)
If you are unable to obtain your W-2 after contacting your employer, the IRS can assist. You may contact the IRS after February 15. Be prepared to provide your identifying information, your employer’s contact details, dates of employment, and an estimate of wages and withholding based on your records. The IRS may contact your employer on your behalf and advise you on next steps.
What If the W-2 Is Wrong When You Receive It?
If you receive a W-2 that contains errors, such as incorrect wages, withholding amounts, or Social Security number, request a corrected W-2 (Form W-2c) from your employer. Do not file your tax return until the corrected form is issued.
Filing Without a W-2 (Form 4852) — and Why You Should Be Careful
If all reasonable efforts fail, you may be able to file your tax return using Form 4852, Substitute for Form W-2. This form allows you to report wages and withholding based on your own records, such as final pay stubs or bank deposit information.
This option should be used only as a last resort. Filing with estimated or reconstructed numbers increases the likelihood of IRS notices, refund delays, and the need to file an amended return later.
Important Disclaimer
This article is intended for general informational purposes only and should not be considered tax, legal, or accounting advice. Tax situations vary widely based on individual facts and circumstances. Please schedule a free consultation regarding your specific situation before taking action.
When a 1099 Is Not Required:
- Personal, household, or family payments
- Payments to corporations (with exceptions)
- Payments for goods (not services)
- Credit card/third-party processor payments
- Payments under $600
Who Is Required to Issue Form 1099?
Form 1099 is one of the most misunderstood tax forms in the U.S. tax system. Many people know that businesses must issue 1099s to independent contractors and service providers; but fewer people understand when individuals are required to issue them, and when they are not.
The General Rule: Form 1099 is required when payments are made for services in the course of a trade or business.
This means the obligation to issue a 1099 is based on business activity, not just whether a person owns a business entity. If you are paying someone as part of a business or income-producing activity, a 1099 requirement may apply — regardless of whether you are a corporation, LLC, partnership, sole proprietor, or individual taxpayer.
Who Is Required to Issue Form 1099?
Businesses must generally issue a Form 1099 when they:
- Pay $600 or more in a calendar year
- To a non-employee
- Using cash, check, ACH, Zelle, Venmo, Cash App, or similar methods
The article is meant for informational purposes only. Please contact me directly to discuss how this applies to your individual tax situation.
When Does an Individual Have to Issue a 1099?
Individuals must issue 1099s when acting in a business or income-producing capacity, such as rental property owners and individuals operating side businesses or self-employment activities.
Foreign Earned Income Exclusion vs. Foreign Tax Credit
For U.S. taxpayers living or working outside the United States, foreign income does not mean freedom from U.S. taxes. The U.S. tax system taxes citizens and resident aliens on worldwide income, regardless of where they live. Fortunately, the Internal Revenue Code provides two powerful tools to reduce or eliminate double taxation:
• The Foreign Earned Income Exclusion (FEIE)
• The Foreign Tax Credit (FTC)
While both are designed to prevent double taxation, they operate in fundamentally different ways — and choosing the wrong one can cost taxpayers thousands of dollars in unnecessary tax over time. Understanding the distinction between these two strategies is essential for proper international tax planning.
What Is the Foreign Earned Income Exclusion (FEIE)?
The Foreign Earned Income Exclusion allows qualifying taxpayers to exclude a portion of their foreign earned income from U.S. taxation entirely.
Key features of the FEIE include:
• Applies only to earned income (wages, salary, self-employment income)
• Does not apply to passive income (interest, dividends, rental income, capital gains)
• Requires meeting either a Bona fide residence test, or a Physical presence test
• Must be affirmatively elected by filing Form 2555
• The exclusion amount is indexed annually for inflation
If a taxpayer qualifies, they may exclude foreign earned income from U.S. taxable income, reducing federal income tax and potentially self-employment tax exposure (subject to totalization agreements and treaty rules where applicable).
When the FEIE Is Often More Advantageous
The FEIE is typically beneficial when:
• The taxpayer lives in a low-tax or no-tax country
• Foreign taxes paid are minimal or zero
• Income is primarily earned income
• The taxpayer wants to reduce adjusted gross income (AGI) for purposes such as: student loan repayment calculations, ACA subsidy calculations, Child Tax Credit thresholds, or phase-outs of deductions and credits
What Is the Foreign Tax Credit (FTC)?
The Foreign Tax Credit provides a dollar-for-dollar credit against U.S. tax for income taxes paid to a foreign country.
Key features of the FTC include:
• Applies to both earned income and passive income
• Claimed using Form 1116
• Credit is limited to the portion of U.S. tax attributable to foreign income
• Excess credits can often be carried forward for up to 10 years
• Works best when foreign tax rates are equal to or higher than U.S. tax rates
Rather than excluding income, the FTC allows the income to remain taxable in the U.S. but offsets U.S. tax liability with foreign taxes already paid.
When the Foreign Tax Credit Is Often More Advantageous
The FTC is typically beneficial when:
• The taxpayer lives in a high-tax country
• Foreign tax rates exceed U.S. tax rates
• The taxpayer has passive income (investments, dividends, rental income)
• Long-term tax efficiency is a priority
• Retirement planning is a consideration
• Medicare tax and Social Security tax planning matter
In many high-tax jurisdictions, the FTC produces superior long-term outcomes compared to the FEIE.
Final Thoughts
The Foreign Earned Income Exclusion and the Foreign Tax Credit are both powerful tools, but they serve different strategic purposes. The correct choice depends on long-term planning goals, not just short-term tax savings.
The article is intended for informational purposes only. Professional guidance is essential when making international tax planning decisions.
Roth Conversions
How and Why to Convert Retirement Accounts to a Roth IRA
Roth conversions have become an increasingly popular tax-planning strategy for individuals who want more control over their future tax burden. While converting retirement funds to a Roth IRA can create a tax bill today, the long-term benefits can be significant when done correctly.
WHAT IS A ROTH CONVERSION?
A Roth conversion occurs when you move funds from a pre-tax retirement account into a Roth IRA. Common accounts that can be converted include:
• Traditional IRAs
• Rollover IRAs
• SEP IRAs
• SIMPLE IRAs (after meeting holding requirements)
• Pre-tax portions of employer plans such as 401(k)s or 403(b)s (often after a rollover)
When you convert, the amount transferred is generally taxable as ordinary income in the year of the conversion. Once the funds are inside the Roth IRA, however, they can grow tax-free, and qualified withdrawals are not subject to federal income tax.
WHY CONSIDER A ROTH CONVERSION?
Tax-Free Growth and Withdrawals
One of the biggest advantages of a Roth IRA is that qualified distributions are tax-free. Unlike traditional retirement accounts, Roth IRAs are funded with after-tax dollars, meaning future earnings and withdrawals (once requirements are met) are not taxed.
No Required Minimum Distributions (RMDs)
Traditional IRAs and most employer retirement plans require required minimum distributions beginning at a specified age. Roth IRAs do not require RMDs during the owner’s lifetime, allowing funds to continue growing tax-free.
Estate and Legacy Planning Benefits
Roth IRAs can be powerful estate-planning tools. Beneficiaries receive distributions tax-free, subject to distribution timing rules, and heirs are not burdened with large taxable distributions in high-earning years.
Taking Advantage of Lower-Income Years
Roth conversions are often most effective during years when taxable income is temporarily lower, such as early retirement, job transitions, or years with unusually high deductions.
FINAL THOUGHTS
Roth conversions offer a valuable opportunity to reposition retirement savings for tax-free growth and greater flexibility. When executed with careful planning, they can reduce lifetime taxes and improve retirement outcomes. But Roth conversions are not right for everyone. Consider current and future tax rates, cash available to pay the tax, Medicare premiums, Social Security taxation, and interaction with other credits or deductions. Once completed, a Roth conversion cannot be reversed.
This article is for informational purposes only and does not constitute tax advice. Please contact me for a free consultation if you have questions about your individual tax situation.
WHAT ARE DIGITAL ASSETS?
For tax purposes, the IRS uses the term digital assets to describe property that exists in digital form and uses cryptographic technology. Common examples include cryptocurrency such as Bitcoin or Ethereum, stablecoins, certain non-fungible tokens (NFTs), and other similar digital representations of value. Digital assets are generally treated as property, not currency, for federal tax purposes.
WHEN DIGITAL ASSET ACTIVITY IS TAXABLE
Some actions do not create a taxable event by themselves, including buying digital assets with cash and holding them, transferring digital assets between wallets you own, and holding digital assets without selling or exchanging them.
Digital Assets and Your Tax Return
What the IRS Is Asking and Why It Matters
Digital assets, including cryptocurrency and similar technologies, are now firmly part of the federal tax landscape. Over the past several years, the IRS has expanded its reporting requirements related to digital assets, and taxpayers are now required to directly answer questions about their involvement with them when filing a federal tax return.
THE IRS DIGITAL ASSET QUESTION ON THE TAX RETURN
Every individual federal income tax return now includes a prominently worded question asking whether, at any time during the year, the taxpayer received, sold, exchanged, or otherwise disposed of any digital asset.
This question must be answered yes or no, and it applies even if the taxpayer had only limited activity.
FINAL THOUGHTS
Digital assets are no longer a niche issue in tax compliance. Even casual investors or individuals who received small amounts of cryptocurrency may have reporting obligations. If you receive and 1099-DA from your broker of digital asset exchange, so does the IRS.
This article is for informational purposes only. Please contact me directly to discuss how digital asset activity applies to your individual tax situation.
How Long Should You Keep Tax Records?
One of the most common questions taxpayers ask is how long they need to keep their tax records. While it may be tempting to clean out old files, the IRS has specific record-retention guidelines that can protect you in the event of an audit, amended return, or future tax issue.
WHY KEEPING TAX RECORDS MATTERS
Tax records serve as proof of income, deductions, credits, and other items reported on your return. If the IRS questions a return or requests documentation, having complete records allows you to respond quickly and accurately.
Records are also important for:
• Filing amended returns
• Supporting carryforwards (capital losses, NOLs, credits)
• Establishing basis in property or investments
• Verifying income for loans, financial aid, or retirement planning
GENERAL IRS RECORD RETENTION RULES
The general rule is three years, but the length of time you should keep records depends on the situation. The IRS statute of limitations determines how long returns can be examined or amended.
Keep records for at least 3 years if:
• You filed a complete and accurate return
• You want the ability to file an amended return to claim a refund
Keep records for 6 years if:
• You omitted more than 25% of your gross income. That is how far back the IRS can question your tax return.
SPECIAL RECORD KEEPING SITUATIONS
Property and Investment Records:
Keep records relating to property, stocks, and other investments as long as you own the asset, plus at least 3 years after you sell or dispose of it.
Retirement Accounts:
Keep records showing contributions, rollovers, and conversions. These may be needed decades later when distributions begin.
PAPER VS. DIGITAL RECORDS
The IRS accepts digital copies of documents. Scanning and securely storing records electronically can reduce physical clutter, improve organization, and provide backup protection.
This article is for informational purposes only and does not constitute tax advice. Record-retention needs vary based on individual circumstances. Please contact me for a free consultation if you have questions about your individual tax situation.
Don’t Wait too Long to File for a Tax Refund
When it comes to claiming a refund from the IRS, there’s an important deadline every taxpayer should know: you can lose your refund forever if you wait too long.
The IRS sets a legal deadline for how long a taxpayer can claim a refund or credit. In most cases, the deadline is the latter of:
• Three years from the date you filed your original tax return, or
• Two years from the date you paid the tax.
Since the original due date for a 2022 tax return was April 15, 2023, a taxpayer has until April 15, 2026 to claim a refund.
If you miss this deadline, the IRS generally will not issue a refund, even if you overpaid.
Many taxpayers lose refunds simply because they wait too long to file a return or amend a prior one. Once the statute expires, the refund is permanently forfeited to the U.S. Treasury.
Important Notes
• Filing an original return counts as a refund claim.
• Amended returns must also be filed within the same deadline.
• Certain disaster relief or special circumstances may extend deadlines.
This article is for informational purposes only and does not constitute tax advice. Record-retention needs vary based on individual circumstances. Please contact me for a free consultation if you have questions about your individual tax situation.
Digital Assets and Your Tax Return: What the IRS Is Asking and Why It Matters
Digital assets, including cryptocurrency and similar technologies, are now firmly part of the federal tax landscape. Over the past several years, the IRS has expanded its reporting requirements related to digital assets, and taxpayers are now required to directly answer questions about their involvement with them when filing a federal tax return.
WHAT ARE DIGITAL ASSETS?
For tax purposes, the IRS uses the term digital assets to describe property that exists in digital form and uses cryptographic technology. Common examples include cryptocurrency such as Bitcoin or Ethereum, stablecoins, certain non-fungible tokens (NFTs), and other similar digital representations of value.
Digital assets are generally treated as property, not currency, for federal tax purposes.
THE IRS DIGITAL ASSET QUESTION ON THE TAX RETURN
Every individual federal income tax return now includes a prominently worded question asking whether, at any time during the year, the taxpayer received, sold, exchanged, or otherwise disposed of any digital asset.
This question must be answered yes or no, and it applies even if the taxpayer had only limited activity.
WHEN DIGITAL ASSET ACTIVITY IS TAXABLE
Taxable events generally include selling digital assets for cash, exchanging one digital asset for another, using digital assets to purchase goods or services, and receiving digital assets as payment, compensation, or rewards
WHEN DIGITAL ASSET ACTIVITY IS NOT TAXABLE
Some actions do not create a taxable event by themselves, including buying digital assets with cash and holding them, transferring digital assets between wallets you own, and holding digital assets without selling or exchanging them.
HOW DIGITAL ASSETS ARE TAXED
When a taxable transaction occurs, the tax treatment depends on how the digital asset was acquired and how long it was held. Capital gains or losses may apply when assets are sold or exchanged, while ordinary income may apply when assets are received as payment, mining rewards, or staking income.
FINAL THOUGHTS
Digital assets are no longer a niche issue in tax compliance. Even casual investors or individuals who received small amounts of cryptocurrency may have reporting obligations. If you receive and 1099-DA from your broker of digital asset exchange, so does the IRS.
This article is for informational purposes only. Please contact me directly to discuss how digital asset activity applies to your individual tax situation.
Minimum Wage Increases Take Effect in Several States
As the new year begins, workers in many states are seeing higher paychecks as minimum wage increases take effect across the country. With the federal minimum wage remaining at $7.25 per hour, unchanged since 2009, states and local governments continue to take the lead in raising wages to better reflect rising costs of living.
WHAT’S CHANGING IN 2026
As of January 1, 2026, nearly twenty states have implemented higher minimum wage rates. Many of these increases were approved through voter initiatives or legislation passed in prior years and are adjusted annually for inflation.
Several states now have minimum wages at or above $15 per hour, while others are steadily moving toward that level through scheduled increases.
NOTABLE STATE INCREASES
While rates vary by state and sometimes by city, examples of 2026 changes include:
• States with minimum wages exceeding $15 per hour, including Washington, California, and New York (with higher rates in certain metro areas)
• States such as Arizona, Colorado, Maine, Missouri, and Nebraska continuing phased increases toward higher wage thresholds
• Additional increases in states including Michigan, Minnesota, Vermont, Rhode Island, Connecticut, Ohio, Virginia, and South Dakota
Some states and cities also maintain local minimum wages that exceed state-level requirements, meaning employers must apply the highest applicable rate.
MORE INCREASES LATER IN THE YEAR
A few states have minimum wage increases scheduled later in 2026 rather than January 1. Florida, for example, continues its voter-approved plan to gradually raise the minimum wage to $15 per hour.
WHY THIS MATTERS FOR WORKERS AND EMPLOYERS
For workers, higher minimum wages can help offset inflation and rising living expenses. For employers, especially small businesses, these changes require careful payroll planning, updated systems, and ongoing compliance with both state and local laws.
Employers should:
• Review current wage rates and upcoming scheduled increases
• Confirm whether local minimum wage ordinances apply
• Update payroll systems and labor budgets accordingly
STILL AN UNEVEN LANDSCAPE
Despite these changes, several states continue to follow the federal minimum wage. This creates wide disparities in pay across the country and highlights the importance of understanding the specific rules that apply where employees live and work. Both workers and employers should stay informed about changes that may affect pay, payroll compliance, and budgeting throughout the year.
The article is meant for informational purposes only. Please contact me directly to discuss how this applies to your individual tax situation.
Why You Should Create an IRS Online Account (and How to Do It)
The IRS offers taxpayers a secure online tax account that provides direct access to important tax information. Creating an IRS online account can save time, reduce confusion, and help taxpayers stay ahead of notices, balances, and filing requirements.
For many taxpayers, this tool has become one of the most useful ways to monitor their tax situation year-round — not just during filing season.
WHAT IS AN IRS ONLINE ACCOUNT?
An IRS online account is a secure portal that allows individuals to view and manage certain federal tax information. Once established, the account gives you real-time access to data the IRS has on file for you. This is not a filing system. Instead, it’s an information and account-management tool designed to help taxpayers understand their current standing with the IRS.
KEY BENEFITS OF AN IRS ONLINE ACCOUNT
View Your Tax Records
Taxpayers can access prior-year tax return transcripts, wage and income transcripts (W-2s, 1099s, etc.), and adjusted gross income (AGI) for prior years.
Check Balances and Payments
An IRS online account allows you to view your current balance due, see recent payments and applied credits, and monitor installment agreements.
Review IRS Notices
Many IRS notices now appear in the online account, allowing taxpayers to confirm which tax year is involved and share accurate information with their tax professional.
Make Payments or Set Up Payment Plans
Taxpayers can make secure payments, request or manage installment agreements, and view payment history directly through the account.
HOW TO CREATE AN IRS ONLINE ACCOUNT
Step 1: Visit the IRS Website
Go to IRS.gov and select the option to sign in or create an online account.
Step 2: Verify Your Identity
You will need a valid email address, a photo ID, and a smartphone or computer with a camera for identity verification.
Step 3: Create Login Credentials
Set up a username, password, and multi-factor authentication.
WHEN AN IRS ONLINE ACCOUNT IS ESPECIALLY HELPFUL
This tool is particularly helpful if you owe taxes, receive IRS notices, need prior-year transcripts quickly, want to confirm payments, or work with a tax professional.
FINAL THOUGHTS
Creating an IRS online account is one of the simplest steps taxpayers can take to stay informed and organized. If you need help reviewing information from your IRS account or responding to IRS correspondence, a tax professional can help determine next steps.
The article is meant for informational purposes only. Please contact me directly to discuss how this applies to your individual tax situation.
New $6,000 Senior Deduction Offers Major Tax Relief for Older Americans
A significant change in federal tax law is set to benefit many Americans age 65 and older beginning with the 2025 tax year (filed in 2026). A new federal deduction of up to $6,000 is now available to qualifying seniors, potentially reducing taxable income and overall tax liability.
WHAT IS THE $6,000 SENIOR DEDUCTION?
Eligible taxpayers age 65 or older may claim an additional federal deduction of up to $6,000 on their income tax return. This deduction is available in addition to the standard deduction or itemized deductions.
WHO QUALIFIES?
• Taxpayers who are age 65 or older by the end of the tax year
• Married couples may qualify for up to $12,000 if both spouses are age 65 or older
• Must have a valid Social Security number
• Subject to income phase‑out limits
INCOME PHASE‑OUTS
The deduction begins to phase out based on modified adjusted gross income (MAGI):
• Single filers: phase‑out begins at $75,000
• Married filing jointly: phase‑out begins at $150,000
Higher‑income taxpayers may see a reduced or eliminated benefit.
WHY THIS MATTERS
This deduction may significantly lower taxable income for seniors and, in some cases, reduce the amount of Social Security benefits subject to tax. It may also help retirees stay in a lower tax bracket. Please contact me for a free consultation to review your individual tax situation to determine how best to take advantage of this deduction
The article is meant for informational purposes only. Please contact me directly to discuss how this applies to your individual tax situation.
Capital Gains Taxes: What’s Taxable and What Taxpayers Should Know
Capital gains taxes affect many common transactions, from selling investments to disposing of real estate. While the rules can feel complex, understanding the basics can help taxpayers avoid surprises and make more informed financial decisions.
WHAT IS A CAPITAL GAIN?
A capital gain generally occurs when you sell an asset for more than itscost. Assets that may produce capital gains include stocks, bonds, mutual funds, real estate, cryptocurrency, and collectibles such as art or precious metals.
The taxable gain is typically the difference between what you receive from the sale and your basis, which is usually what you paid for the asset, adjusted for certain costs or improvements.
WHEN CAPITAL GAINS ARE TAXED
Capital gains are taxed when they are realized, meaning when an asset is sold or exchanged. Simply holding an asset that increases in value does not create a taxable event.
SHORT-TERM VS. LONG-TERM CAPITAL GAINS
The length of time you hold an asset before selling it is critical.
Short-term capital gains apply to assets held for one year or less and are taxed at ordinary income tax rates. Long-term capital gains apply to assets held for more than one year and are generally taxed at lower, preferential rates.
HOW CAPITAL GAINS ARE CALCULATED
To calculate a capital gain, taxpayers generally subtract their basis from the sale proceeds. Basis may include more than just the original purchase price. Certain improvements, transaction costs, or selling expenses may increase basis and reduce the taxable gain.
COMMON CAPITAL GAINS EXCLUSIONS AND REDUCTIONS
Some gains may be reduced or excluded from tax. Taxpayers may exclude up to $250,000 of gain ($500,000 for married couples filing jointly) on the sale of a qualifying primary residence, subject to ownership and use requirements.
Capital losses may offset capital gains, and excess losses may be carried forward to future years, subject to annual limits. Losses on personal-use property are generally not deductible.
WHY CAPITAL GAINS PLANNING MATTERS
Capital gains can affect more than just the tax on a single transaction. Large gains may push income into higher tax brackets, trigger additional taxes, or impact state income tax obligations. Capital gains taxes are a common but often misunderstood part of the tax system. While the basic concepts are straightforward, the details can vary significantly depending on the type of asset and individual circumstances.
“Tax-Free” Doesn’t Always Mean Untaxed
Tax headlines often use phrases like “no tax” or “tax-free,” but the reality is usually more nuanced. Many types of income are still taxable — even if deductions or exclusions reduce the final tax bill.
SOCIAL SECURITY
Up to 85% of Social Security benefits may be taxable depending on income. The rules are based on a formula that considers other sources of income.
CAPITAL GAINS
Home sale exclusions, capital loss offsets, and carryforwards can reduce tax, but capital gains are not automatically tax-free. Note: the 2026 capital gains rate is 0% for amounts up to $49,450 single/$98,800 married filing jointly.
OVERTIME PAY AND TIPS
Recent law changes allow deductions for certain overtime pay and reported tips, but the income is still taxable and subject to payroll taxes.
ANNUITIES
Annuities are tax-deferred, not tax-free. Withdrawals may be partially or fully taxable depending on how the annuity was funded.
FINAL THOUGHTS
When something sounds “tax-free,” it’s worth consulting a tax professional to closely at the rules. Understanding how income is taxed helps avoid confusion and improves planning.
Income the IRS Doesn’t Tax: What Truly Counts as Nontaxable Income
When people talk about income and taxes, it’s important to distinguish between nontaxable income and tax deductions. These concepts are often confused, and misunderstanding the difference can lead to unrealistic expectations at tax time.
Nontaxable income is income that the IRS does not consider taxable under federal law. It is excluded from gross income and generally does not need to be reported on your federal tax return. Tax deductions, on the other hand, reduce taxable income but do not change the nature of the income itself.
FINANCIAL GIFTS
For 2025, the annual federal gift tax exclusion is $19,000 per recipient. Gifts within this limit are not taxable to the recipient and do not require gift tax reporting by the giver.
INHERITANCES
Inheritances are not taxable income at the federal level. However, income generated after the inheritance, such as interest or dividends, may be taxable.
LIFE INSURANCE PROCEEDS
Life insurance death benefits paid to beneficiaries are generally income-tax free, though interest earned on retained proceeds may be taxable.
ROTH ACCOUNTS
Qualified distributions from Roth accounts are tax-free when age and holding-period rules are met. Roth conversions, however, are taxable.
EMPLOYER-PROVIDED BENEFITS
Employer-paid health insurance, certain life insurance coverage, and employer HSA contributions are generally excluded from taxable income.
FINAL THOUGHTS
Many types of income are excluded from federal taxation, but most come with specific rules and conditions. Reviewing the details with a tax professional before assuming income is tax-free can help avoid surprises.
The article is meant for informational purposes only. Please contact me directly to discuss how this applies to your individual tax situation.
IRS Penalty Abatement: Yes, It’s Often Possible — But You Have to Ask
Receiving a notice from the IRS that includes penalties can be unsettling. Many taxpayers assume penalties are automatic, non-negotiable, and must simply be paid. In practice, that’s often not the case.
In my experience as a CPA, the IRS is frequently more forgiving than people expect, particularly when a taxpayer has a reasonable explanation and a history of compliance. The most important thing to understand is this: penalty relief is rarely automatic — you must ask for it, and you must ask the right way.
WHAT IS AN IRS PENALTY ABATEMENT?
A penalty abatement is a formal request asking the IRS to reduce or remove penalties assessed on a tax return or tax account. Penalty relief may be available for many common situations, including:
• Failure to file a return on time
• Failure to pay tax by the due date
• Underpayment of estimated taxes
• Accuracy-related penalties
• Late payroll tax deposits
Interest is generally not removed unless the related penalty is abated, but eliminating penalties alone can significantly reduce the total amount owed.
WHY THE IRS IS OFTEN WILLING TO GRANT PENALTY RELIEF
The IRS’s primary objective is voluntary compliance, not punishment. Penalties are intended to encourage timely and accurate filing—not to penalize taxpayers who made an honest mistake and corrected it.
In practice, the IRS often grants abatements when:
• The taxpayer has a history of filing and paying on time
• The issue resulted from circumstances beyond the taxpayer’s control
• The taxpayer acted in good faith
• The problem was corrected once it was identified
COMMON GROUNDS FOR PENALTY ABATEMENT
Reasonable Cause
This is the most common basis for relief. The IRS looks at whether the taxpayer exercised “ordinary business care and prudence.”
Examples may include:
• Serious illness or death in the family
• Natural disasters or fires
• Records destroyed or unavailable
• Reliance on incorrect professional advice
• Mail, banking, or payment processing disruptions
PENALTY ABATEMENT IS A STRUCTURED IRS PROCESS
Penalty abatement requests are governed by specific IRS standards and administrative guidelines. Knowing which standard applies—and how to clearly present the facts—often makes the difference between approval and denial. This is not a negotiation or an appeal to sympathy. It is a formal request that must be framed correctly, supported by facts, and submitted through the appropriate channels.
HOW A CPA CAN HELP
As a CPA, I assist clients by:
• Reviewing IRS notices for accuracy and scope
• Identifying which penalties are eligible for abatement
• Determining the strongest basis for relief
• Preparing and submitting formal abatement requests
• Communicating directly with the IRS on the client’s behalf
• Monitoring responses and following up when needed
In many cases, penalties can be reduced or eliminated entirely—even when taxpayers initially believed they had no options.
A FINAL WORD OF ENCOURAGEMENT
IRS penalties can feel intimidating, but they are often not the end of the story. The IRS does not automatically offer penalty relief, and many taxpayers overpay simply because they never ask.
If you’ve received an IRS notice that includes penalties, it’s worth reviewing your situation before paying more than necessary. With proper guidance and a well-supported request, penalty abatement is often achievable.
The article is meant for informational purposes only. Please contact me directly to discuss how this applies to your individual tax situation.
Reporting Life Changes to the IRS and Social Security Administration: What to Update and When
Major life changes don’t just affect your personal life — they can also affect your tax records. Changes such as a new name, a new address, or a change in filing status should be reported properly to avoid delays, notices, or processing problems later.
Fortunately, most updates are straightforward once you know which agency to notify and when.
WHY REPORTING CHANGES MATTERS
The IRS and the Social Security Administration (SSA) rely on accurate information to:
• Match tax returns to Social Security records
• Process refunds correctly
• Send notices to the correct address
• Apply credits and benefits properly
Mismatched or outdated information can lead to delayed refunds, rejected returns, or unnecessary IRS correspondence.
NAME CHANGES: MARRIAGE, DIVORCE, OR LEGAL NAME CHANGE
If your name has changed due to marriage, divorce, or a legal name change, the first and most important step is updating your record with the SSA — not the IRS.
Social Security Administration Comes First
The IRS matches the name and Social Security number on your tax return against SSA records. If they don’t match, your return may be delayed or rejected.
You should report a name change to the SSA by submitting:
• Form SS-5, Application for a Social Security Card
• Supporting documentation such as a marriage certificate, divorce decree, or court order
Once the SSA updates your record, the IRS will automatically receive the updated information.
ADDRESS CHANGES: WHEN TO FILE IRS FORM 8822
If you move and want the IRS to update your address before your next tax return is filed, you should submit IRS Form 8822, Change of Address.
This is especially important if:
• You expect IRS correspondence
• You are in an installment agreement or under review
• You recently filed a return and may receive notices or a refund
OTHER COMMON CHANGES TO REPORT
Change in Marital Status
Marriage or divorce can affect filing status, eligibility for credits, and withholding. Filing status is updated when you file your next return, but withholding or estimated taxes may need earlier review.
Dependents
Births, adoptions, or changes in dependent status are generally reported on the next tax return. No separate IRS notification is usually required.
Business Address or Responsible Party Changes
Businesses should notify the IRS promptly if there is a change in business address or responsible party to avoid missed notices or compliance issues.
Bank Account Changes
Direct deposit information is updated on each tax return and does not carry forward automatically.
FORM 8822 VS. UPDATING YOUR NEXT RETURN
A simple rule of thumb:
• Use Form 8822 when the IRS needs your new address before your next return is filed
• Update your next tax return when the change can wait until filing
FINAL THOUGHTS
Life changes happen — marriage, divorce, moves, new children, and new businesses are all part of that. Keeping your IRS and Social Security records current helps ensure smooth tax processing and fewer surprises. If you’ve experienced a recent change and aren’t sure what needs to be updated, it’s worth reviewing your situation before your next tax filing.
The article is meant for informational purposes only. Please contact me directly to discuss how this applies to your individual tax situation.
Payroll Changes Employees May Notice at the Start of 2026
As a new year begins, many employees notice that their first paycheck of the year looks slightly different. Even without a raise or change in hours, January payroll amounts often shift due to annual updates across the tax system.
These changes are routine and are largely driven by inflation adjustments and statutory limits set by the Internal Revenue Service (IRS) and other agencies.
Why January Paychecks Often Change
Several payroll-related factors reset on January 1 each year, including federal income tax withholding tables, Social Security wage base limits, and contribution limits for retirement and benefit plans. As a result, take-home pay may increase or decrease slightly compared to late-year paychecks.
Social Security Wage Base Updates
Each year, the maximum amount of wages subject to Social Security tax is adjusted for inflation. Employees who earn above this threshold may notice that Social Security withholding restarts in January after having stopped late in the prior year.
For higher-income earners, this reset commonly results in a lower net paycheck early in the year until the annual wage base is reached again.
Retirement and Benefit Contribution Changes
January is also when updated contribution limits take effect for many employer-sponsored plans, including 401(k), 403(b), and 457 retirement plans, Health Savings Accounts (HSAs), and Flexible Spending Accounts (FSAs).
Employees who elected to contribute the maximum amount may see changes in their per-pay-period deductions. In some cases, payroll systems automatically adjust contributions; in others, employees may need to update elections.
Withholding Adjustments and Form W-4
Payroll withholding is based on information provided on Form W-4. While tax brackets and standard deductions may be adjusted for inflation, withholding does not automatically correct for every taxpayer’s situation.
Life changes such as marriage, divorce, additional income, or changes in dependents can all affect whether withholding remains appropriate.
What Employees Should Do Early in the Year
Employees should review their first few pay stubs of the year, confirm retirement and benefit contribution amounts, and revisit withholding elections if circumstances have changed. Small adjustments made early in the year can help prevent under- or over-withholding later.
A Planning Reminder
Payroll changes in January are common and expected, but they can also serve as a useful reminder to review overall tax and financial planning for the year ahead. Addressing questions early allows more flexibility than waiting until filing season.
The article is meant for informational purposes only. Please contact me directly to discuss how this applies to your individual tax situation.
Clean Energy and Electric Vehicle Tax Credits in 2026
Federal tax credits for clean energy improvements and electric vehicles continue to generate interest, but the rules can be complex and subject to change. As 2026 begins, taxpayers considering energy-efficient upgrades or vehicle purchases should understand which credits may still apply and what documentation is required.
Residential Clean Energy Credits
Tax credits may be available for certain qualifying home improvements, such as energy-efficient heating and cooling systems, insulation, and renewable energy installations. Eligibility often depends on the type of improvement, when the property is placed in service, and whether specific efficiency standards are met.
Electric Vehicle Credits
Electric vehicle tax credits can vary significantly based on vehicle eligibility requirements, income limitations, and dealer reporting rules. Not all vehicles qualify, and eligibility can change over time, making advance planning especially important.
Documentation Matters
Clean energy and electric vehicle credits often require detailed records, including receipts, manufacturer certifications, and vehicle documentation. Without proper substantiation, credits may be delayed or disallowed during return processing.
A Cautious Planning Reminder
While tax credits can provide meaningful savings, they should not be the sole factor driving major financial decisions. Reviewing eligibility and timing before making a purchase can help ensure credits are claimed correctly and reduce surprises at filing time.
The article is meant for informational purposes only. Please contact me directly to discuss how this applies to your individual tax situation.
More changes for 2026. Understanding the IRS “Mailbox Rule”
You may have heard recent news about changes to how the U.S. Postal Service applies postmarks. That has raised questions about whether mailing a tax return (or mail-in ballot) by the deadline still protects you if the IRS receives it late. The law itself has not changed, but how mail is processed has, so taxpayers should be more cautious.
The IRS Still Follows the Statutory “Mailbox Rule.” Under federal tax law (Internal Revenue Code §7502), a paper tax return or payment is considered timely filed if:
• It is properly addressed
• Has sufficient postage
• Is mailed through the U.S. Postal Service
• And the USPS postmark date is on or before the filing deadline
If those conditions are met, it is treated as filed on time even if the IRS receives it later. This applies to many IRS filings, extensions, and certain payments.
Why There Is Confusion Now
The Postal Service has implemented operational changes that can sometimes delay when an official postmark is applied. That means something placed in a mailbox late in the day may not receive the same-day postmark like it often did in the past. Because the IRS relies on the postmark date—not when you physically dropped it in a mailbox—a delayed postmark could make something appear late even if you mailed it on time.
Best Practices to Protect Yourself
If you are mailing important tax documents, consider:
• Mailing earlier than the last day when possible
• Using Certified Mail with a receipt
• Asking the post office to hand‑stamp a postmark at the counter
• Using IRS‑approved private delivery services such as FedEx or UPS
• Or simply e‑file when available, which is usually faster and safer
Bottom Line
The IRS still recognizes the “timely mailed = timely filed” rule—but the postmark date controls, and postal processing changes may affect when that postmark appears. If your deadline is important, it’s best not to rely on dropping something in a mailbox at the last minute.
The article is meant for informational purposes only. Please contact me directly to discuss how this applies to your individual tax situation.
IRS Announces 2026 Standard Mileage Rates
The IRS has released the new standard mileage rates that will apply beginning January 1, 2026. These rates determine how much taxpayers can deduct for business, medical, moving (where applicable), and charitable mileage. Below is the IRS announcement in full for your reference:
IRS Notice – IR-2025-128 (Dec. 29, 2025)
IRS sets 2026 business standard mileage rate at 72.5 cents per mile, up 2.5 cents
WASHINGTON — The Internal Revenue Service today announced that the optional standard mileage rate for business use of automobiles will increase by 2.5 cents in 2026, while the mileage rate for vehicles used for medical purposes will decrease by half a cent, reflecting updated cost data and annual inflation adjustments.
Beginning Jan. 1, 2026, the standard mileage rates for the use of a car, van, pickup or panel truck will be:
• 72.5 cents per mile driven for business use, up 2.5 cents from 2025.
• 20.5 cents per mile driven for medical purposes, down a half cent from 2025.
• 20.5 cents per mile driven for moving purposes for certain active-duty members of the Armed Forces (and now certain members of the intelligence community), reduced by a half cent from last year.
• 14 cents per mile driven in service of charitable organizations, equal to the rate in 2025.
The rates apply to fully-electric and hybrid automobiles, as well as gasoline and diesel-powered vehicles.
While the mileage rate for charitable use is set by statute, the mileage rate for business use is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes, meanwhile, is based on only the variable costs from the annual study.
Use of the standard mileage rates is optional. Taxpayers may instead choose to calculate the actual costs of using their vehicle. Taxpayers using the standard mileage rate for a vehicle they own and use for business must choose to use the rate in the first year the automobile is available for business use. Then, in later years, they can choose to use the standard mileage rate or actual expenses.
The article is meant for informational purposes only. Please contact me directly to discuss how this applies to your individual tax situation.
More Year-End Tax Planning Ideas: Investments and Retirement
As we continue looking at meaningful year-end opportunities, there are a few additional areas that may be worth reviewing before the calendar turns: investment gains and losses, required minimum distributions from retirement accounts, and thoughtful family gifting or estate planning. A little attention now can help reduce stress later and may even improve your long-term financial picture.
INVESTMENT GAINS, LOSSES, AND TAX-LOSS HARVESTING
If you have investments in taxable brokerage accounts, year-end is a good time to review how your portfolio has performed during the year. In some situations, selling certain investments at a loss may help offset gains recognized earlier in the year. This is sometimes referred to as tax-loss harvesting.
Key reminders:
• Losses can offset capital gains
• Excess losses may offset some ordinary income
• Remaining losses can carry forward
Always consider overall investment strategy and wash sale rules.
REQUIRED MINIMUM DISTRIBUTIONS AND RETIREMENT REMINDERS
If you’re subject to Required Minimum Distributions (RMDs), most distributions must be taken by December 31 to avoid penalties.
Year-end can also be a good time to:
• Review retirement withdrawals
• Confirm withholding
• Consider Qualified Charitable Distributions when eligible
YEAR-END GIFTING
The final weeks of the year are a natural time for many families to think about financial gifting and long-range planning.
Many people review:
• Annual gifts to family members
• Paying tuition or medical expenses directly where appropriate
• Beneficiary designations
• Whether wills or powers of attorney are current
These aren’t just tax steps — they are about clarity and peace of mind.
Thoughtful year-end planning can lead to reduced surprises and greater financial clarity. If you’d like to discuss investment decisions, retirement withdrawals, or family planning considerations, I’d be glad to help.
The article is meant for informational purposes only. Please contact me directly to discuss how this applies to your individual tax situation.
More Year-End Tax Topics to Consider Before the Calendar Turns
Year-end is a natural time to take a closer look at your financial picture and make sure you’re prepared for both tax filing season and the year ahead. In addition to charitable giving, retirement planning, and business expenses, there are a few other important topics worth considering as December 31 approaches — especially relating to healthcare accounts and upcoming changes in tax law that may affect planning over the next couple of years.
HEALTHCARE ACCOUNTS: DON’T LEAVE MONEY ON THE TABLE
If you participate in an employer-sponsored healthcare account, year-end is the perfect time to review your balances and deadlines.
Flexible Spending Accounts (FSAs)
Many FSAs follow a “use it or lose it” structure. That means if you don’t use your remaining balance by your plan’s deadline, you may lose part — or even all — of the unused funds.
However, employers have options, and your plan may allow:
• A grace period into the early part of next year, or
• A limited carryover of unused funds
Since each plan is different, it’s important to confirm your specific rules. If you still have money available, consider scheduling medical or dental appointments, updating prescriptions, or purchasing qualifying medical supplies before your deadline.
Health Savings Accounts (HSAs)
HSAs work differently and are often extremely valuable from a tax standpoint. Contributions are tax-deductible, growth is tax-free, and withdrawals for qualified medical expenses are tax-free.
While HSA contributions don’t necessarily need to be made by December 31, it’s still a good time to:
• Review contributions so far
• Evaluate tax strategy
• Make sure funding aligns with next year’s needs
LOOKING AHEAD: TAX RULES MAY CHANGE AFTER 2025
Under current law, many provisions from the Tax Cuts and Jobs Act are scheduled to expire after 2025. Unless Congress acts, several rules could change beginning in 2026.
Examples include:
• Standard deduction scheduled to decrease
• Income tax brackets may shift
• Various deductions and credits may revert to prior rules
This isn’t a reason to panic, but it’s an excellent reason to stay informed and consider proactive planning. Awareness leads to better long-term financial decision-making.
PLANNING BRINGS CLARITY — AND PEACE OF MIND
Year-end planning isn’t just about minimizing taxes today. It’s about creating clarity, avoiding surprises, and strengthening your financial future.
If you’d like to review your healthcare accounts, consider long-range planning, or understand how future tax changes might affect you, I’d be happy to help.
The article is meant for informational purposes only. Please contact me directly to discuss how this applies to your individual tax situation.
Year-End Tax Planning: Smart Strategies to Consider Before December 31
As the year winds down, it’s a great time to pause and take stock of your financial picture. A little bit of planning in these final weeks can sometimes make a meaningful difference on your tax bill — and help you start the new year on solid footing. Here are a few important areas to think about as December 31 approaches.
CHARITABLE CONTRIBUTIONS
The end of the year is traditionally when many people think about giving back — and charitable giving can also offer valuable tax benefits.
If you itemize deductions, qualified charitable contributions made by December 31 may reduce your taxable income. Consider:
• Gifts to qualified charities (cash, check, or online)
• Donating appreciated stock instead of cash
• Using a donor-advised fund if you want to “bunch” several years of giving into one tax year
• Making Qualified Charitable Distributions (QCDs) from IRAs if you’re eligible — this can satisfy part or all of your required minimum distribution and may reduce taxable income
Documentation is essential, so be sure you receive proper acknowledgment letters or receipts.
RETIREMENT PLANNING AND DEADLINES
Retirement accounts are another important part of year-end planning. Some deadlines happen by December 31, while others extend into tax season.
• IRA contributions can typically be made up to the tax filing deadline and still count for the prior year.
• 401(k) and similar workplace retirement plan contributions generally must be made by December 31.
• Required Minimum Distributions (RMDs) usually must be taken by year-end to avoid penalties.
• Self‑employed individuals may have additional retirement plan setup or funding deadlines.
YEAR-END PLANNING FOR BUSINESSES
Business owners also benefit from reviewing finances before the calendar closes.
• Purchasing needed equipment or technology before year-end may allow earlier deductions.
• Review income/expenses to see whether accelerating deductions or deferring income makes sense.
• Confirm bookkeeping, payroll, and compliance tasks are on track.
• Prepare for upcoming 1099 filing requirements.
OTHER ITEMS WORTH REVIEWING
Depending on your situation, you may also want to think about:
• Capital gains and tax‑loss harvesting
• Flexible spending accounts deadlines
• Health Savings Account (HSA) contributions
• Estimated tax payments
A LITTLE PLANNING CAN GO A LONG WAY
Every taxpayer’s situation is different, and good year‑end planning isn’t simply about reducing taxes in the moment — it’s about making smart choices that support your larger financial goals. If you’d like to talk through your year‑end options or review your situation, I’d be happy to help.
The article is meant for informational purposes only. Please contact me directly to discuss how this applies to your individual tax situation.
Understanding Common IRS 1099 Forms
Many taxpayers are familiar with Form 1099-NEC, but the IRS 1099 series includes many other forms that report different types of income. If you receive one, the IRS received a copy too, so it’s important to know what it represents.
1099-B – Proceeds from Investments
You’ll receive a 1099-B if you sold stocks, mutual funds, ETFs, cryptocurrency, or other investments. It reports what you sold, when you sold it, how much you received, your cost basis in most cases, and whether the gain or loss is short-term or long-term.
1099-DIV – Dividends
If you earned dividends from stocks or mutual funds, you may receive a 1099-DIV. It reports ordinary dividends, qualified dividends, and sometimes capital gain distributions or foreign taxes paid. Even reinvested dividends are taxable.
1099-INT – Interest Income
Banks and financial institutions issue 1099-INT when you earn interest, such as from savings accounts, CDs, bonds, or brokerage accounts. Most interest is taxable, though some government bond interest may have special rules.
1099-G – Government Payments
This form is commonly issued for unemployment benefits and state tax refunds, along with some other government payments. Whether a state tax refund is taxable depends on whether you itemized deductions the prior year.
1099-R – Retirement Distributions
You’ll receive a 1099-R if you took money from pensions, IRAs, 401(k)s, annuities, or other retirement plans. It shows how much was distributed, how much may be taxable, whether withholding was taken, and whether penalties might apply for early withdrawals.
1099-S – Real Estate Transactions
Form 1099-S is issued when you sell real estate such as a primary home, rental property, land, or other property. Even if some or all of the gain is excluded, the sale still needs to be reported correctly.
1099-MISC – Still in Use
Although nonemployee compensation now appears on 1099-NEC, the 1099-MISC is still used for items such as rent, royalties, prizes, certain legal payments, and other miscellaneous income.
What To Do If You Receive a 1099
Don’t ignore it, because the IRS already has a copy. If you have questions about how any 1099 form affects your taxes, I’d be happy to help.
This article is intended for general informational purposes and does not constitute tax advice. Please contact us to schedule a complimentary consultation and learn how these updates may affect your specific situation.
Understanding Form 1099-NEC: What It Means for You
If you work as an independent contractor, freelancer, gig worker, or provide services as a non-employee, you may receive Form 1099-NEC (Non-Employee Compensation). This form reports the income a business paid you for your services.
Who Receives a 1099-NEC?
Businesses are generally required to issue a 1099-NEC if they paid you $600 or more in a year for services in the course of their business. However, your tax obligation does not depend on whether you receive the form.
Common Misconceptions
“If I don’t get a 1099, I don’t have to report the income.”
Not true. If you earned the income, you are required to report it — even if the payer doesn’t send a form. All of your business income is taxable, whether or not a 1099 was issued for every payment.
Deductions Matter
Most people who receive a 1099-NEC are considered self-employed for tax purposes, which means they are often able to deduct ordinary and necessary business expenses related to earning that income. These may include:
• Supplies and materials
• Mileage and vehicle expenses
• Home office costs
• Professional services and fees
• Other legitimate business expenses
The key takeaway: while the 1099-NEC shows your gross income, many taxpayers are taxed on their net income after allowable deductions.
Bottom Line
A 1099-NEC tells the IRS (and you) how much non-employee income you were paid — but even without a form, you are still responsible for reporting the income you earned. The good news is that legitimate business expenses may help reduce the amount you ultimately pay tax on.
If you have questions about 1099 income, required reporting, or what qualifies as a deductible expense, we’re happy to help.
This article is intended for general informational purposes and does not constitute tax advice. Please contact us to schedule a complimentary consultation and learn how these updates may affect your specific situation.
Venmo, PayPal & 1099‑K: What Taxpayers Need to Know
You may have heard buzz about “Venmo being taxed” or “1099‑K changes,” especially if you’ve sold something online or earned money through gig work. Let’s clear it up in straight, practical terms.
What Is a 1099‑K?
Form 1099‑K is an information tax form used to report payments you receive through payment apps (like Venmo, PayPal, Cash App) or online marketplaces when those payments are for goods or services — not personal transfers between friends and family.
It doesn’t create a new tax, but it alerts the IRS to income you’ve received so you report it correctly.
Current Reporting Threshold
For payments you receive during 2025 (filed in early 2026), a payment app generally must issue a 1099‑K only if:
• You received more than $20,000 in gross payments, AND
• You had more than 200 transactions during the year.
Some platforms or states may still issue a form at lower amounts. But the key takeaway is that the older, higher federal threshold applies again.
You Still Must Report the Income
Even if you don’t receive a 1099‑K, you are still required to report all income you received for goods or services on your tax return. Getting no form does not mean the income isn’t taxable.
This applies to:
• Side gigs
• Online sales
• Freelance work
• Services you are paid for through an app
Personal vs Business Payments
Payments that are purely personal — like splitting meals, or friends paying you back — are not taxable business income. If you ever receive a form that includes personal payments, work with the issuer or your tax professional to correct it.
Quick Tips
• Keep good records of your income and expenses
• Try to separate personal and business transactions in payment apps
• Don’t base your tax decisions only on whether you received a form
• Reach out for help if you are unsure
If you’re unsure how income from payment apps affects your tax return — or you received a 1099‑K and aren’t sure what to do with it — let us help you sort it out before filing season.
This article is intended for general informational purposes and does not constitute tax advice. Please contact us to schedule a complimentary consultation and learn how these updates may affect your specific situation.
The Rules Have Changed for Required Minimum Distributions
Required Minimum Distributions (RMDs) are one of the most consequential tax rules for retirees. Here is a recap of the changes that have happened recently impacting when distributions begin, penalties for missing them, how Roth accounts are handled, and ways RMDs interact with charitable giving and survivor planning.
RMD Age Increases
Previously, most retirees began RMDs at age 72. Under SECURE 2.0, the RMD age increased to 73 beginning in 2023 and will rise again to age 75 in 2033. The change gives retirees more flexibility and tax deferral opportunities, but it also means planning is essential to manage future tax brackets and Medicare premium effects.
Lower RMD Penalties
The penalty for not taking a required distribution used to be one of the highest in the tax code at 50%. SECURE 2.0 reduced the penalty to 25%, and if corrected within two years, it may be reduced to 10%. This provides relief, but it is still important to stay compliant.
Roth 401(k) and Roth Employer Plan RMD Eliminated
A major planning change is that Roth accounts in employer plans such as Roth 401(k)s and Roth 403(b)s are no longer subject to RMDs beginning in 2024. This places them in line with Roth IRAs, which have never required RMDs for the original owner. This strengthens Roth accounts as a long‑term tax‑free retirement planning strategy.
Qualified Charitable Distributions (QCDs)
Qualified Charitable Distributions allow IRA owners age 70½ and older to give directly to a qualified charity and have the distribution count toward their RMD. SECURE 2.0 enhanced QCD rules by indexing the limit for inflation and adding new charitable giving opportunities in specific situations. QCDs remain an excellent way to reduce taxable income while supporting charitable causes.
Annuities and Surviving Spouse Provisions
The rules have also been redefined around annuities within retirement accounts and expanded options for surviving spouses, allowing more flexibility in certain beneficiary planning situations.
Planning Matters More Than Ever
These updates create meaningful opportunities—but also new complexity. Deferring RMDs may reduce taxes now but could create higher taxable distributions later. Roth accounts play an even bigger role in long‑term planning. Charitable strategies may benefit both taxpayers and the organizations they care about. More options…more decisions.
What the 2025–2026 Roth 401(k) Rule Updates Mean for Your Retirement Planning
As retirement planning strategies continue to evolve, changes to Roth 401(k) rules under the SECURE 2.0 Act are driving meaningful tax and planning considerations. If you’re saving for retirement with a Roth 401(k), it’s important to understand what’s changing now and what’s on the horizon.
No More Required Minimum Distributions for Roth 401(k)s
One of the most impactful updates is the removal of required minimum distributions (RMDs) for designated Roth 401(k) accounts. Under prior rules, Roth 401(k)s were treated like traditional 401(k)s when it came to RMDs — meaning account holders had to begin withdrawing funds at age 73 (or later under future age schedules) even though qualified withdrawals are tax-free.
Thanks to the SECURE 2.0 Act, RMDs no longer apply to Roth 401(k)s. This change brings Roth 401(k)s into the same RMD-free treatment previously reserved for Roth IRAs, allowing your money to potentially grow tax-free for longer. For many savers, this means greater flexibility in retirement and the ability to keep assets working for you without being forced to take taxable distributions simply due to age.
Employer Matching Can Now Go Directly Into Your Roth Account
Another important shift affects employer contributions. Traditionally, employer matches tied to Roth 401(k) contributions were deposited into a traditional (pre-tax) 401(k) account. Now, employers generally have the option to deposit matching funds directly into your Roth 401(k).
While this can be beneficial because those contributions grow tax-free and can be withdrawn tax-free in retirement, it does come with a current tax consequence: employer Roth match amounts are treated as taxable income in the year they are made. If your employer adopts this approach in 2025, you can expect that added income to be reflected on your 2025 W-2, which you receive in early 2026.
Some savers may view this as a worthwhile trade-off for future tax-free growth, but it’s important to plan for the potential increase in taxable income today.
Catch-Up Contributions Must Be Roth for High Earners Starting in 2026
The SECURE 2.0 Act also changed the rules for catch-up contributions. For 2025, high-income earners (those with wages above $150,000 in the previous year) can still make catch-up contributions on a pre-tax basis. Beginning January 1, 2026, however, catch-up contributions for these high-wage employees must be made on an after-tax (Roth) basis.
This means that beginning with 2026 contributions, higher earners will pay taxes upfront on catch-up amounts, foregoing the immediate tax deduction they might previously have claimed. However, since contributions are Roth, qualified withdrawals in retirement can be tax-free.
Contribution Limits for 2025
For the 2025 tax year, contribution limits to 401(k) plans (including Roth 401(k)s) remain generous:
Under age 50: You can contribute up to $23,500 to your 401(k).
Ages 50–59 and 64+: You can make an additional catch-up contribution, bringing the total to $31,000.
Ages 60–63: Thanks to the “super catch-up” provision, you may contribute up to $34,750 total, combining the standard limit with the higher catch-up allowance.
Remember, you must make contributions by December 31 of the plan year for them to count toward that year’s limits.
What This Means for You
The recent Roth 401(k) rule changes give you more control and flexibility over your retirement savings. Eliminating RMDs lets you hold on to funds longer, potentially extending tax-free growth well into retirement. The option for employer matching to Roth accounts can enhance your tax-free income picture in the future — but it’s important to factor in the tax impact today.
Planning around these changes can help you take full advantage of available benefits and better align your retirement strategy with your long-term financial goals.
This article is intended for general informational purposes and does not constitute tax advice. Please contact us to schedule a complimentary consultation and learn how these updates may affect your specific situation.
Gifts That Don’t Count Toward the Annual Gift Tax Exclusion
Gift Tax Fact One: Gifts do not create a tax liability for the person who receives the gift.
Gift Tax Fact Two: The gift donor MAY be liable for taxes on some gifts, but gifts below the Annual Gift Exclusion Rate (currently $19,000 for 2025 and 2026) do not incur gift tax. And the Annual Gift Tax Exclusion is per person per year.
Gift Tax Fact Three: Certain transfers aren’t treated as taxable gifts at all and don’t reduce your lifetime exemption if structured correctly, even if the gifts are more than the Annual Gift Exclusion Rate per person, such as:
1. Tuition Paid Directly to Schools
Unlimited amounts allowed if paid directly to a qualified school for tuition only. Does not cover books, room, board, fees, or reimbursements. Can be combined with annual exclusion and gift splitting.
2. Medical Expenses Paid Directly
Unlimited qualifying medical expenses paid directly to providers or insurers are excluded. Must meet IRS medical deduction rules. Reimbursements do not qualify.
3. Gifts to a Spouse
Unlimited gifts to a U.S. citizen spouse are tax-free under the unlimited marital deduction. Non‑citizen spouses have a special higher annual limit ($190,000 for 2025).
4. Donations to Qualified Charities
Gifts to IRS-recognized 501(c)(3) organizations are excluded from gift tax and may be income tax deductible if itemized. Gifts to individuals or non-qualified nonprofits do not qualify.
5. Political Contributions
Political contributions to qualified political organizations are exempt from gift tax, though they are not income‑tax deductible.
Please contact me for a free consultation to see how this information applies to your individual tax situation.
Key Takeaways:
• Structure matters — who you pay and how you pay determines tax treatment
• These categories allow powerful planning opportunities
• When structured correctly, they do not count toward the annual gift tax exclusion
Gift Tax: What Happens If You (the Donor) Exceed the Annual Gift Exclusion?
Gifts are not taxable to the recipient, but sometimes gifts are taxable to the donor. A donor can give gifts up to the annual exclusion amount (currently $19,000 per recipient for 2025 and 2026) to as many people as they wish EACH YEAR. But what happens if you give more?
Exceeding the Annual Exclusion Doesn’t Mean You Owe Tax
If you give more than the exclusion to any person in a year, you may need to file IRS Form 709. That does not automatically mean tax is due. Most taxpayers never pay federal gift tax.
How It Works
1. File Form 709 if you gave gifts to any one person over the annual exclusion amount
2. The excess applies against your lifetime exemption
3. No tax is due unless you exceed the lifetime exemption, currently $13.99 million.
Example:
You give $50,000 to your daughter.
$32,000 exceeds the annual exclusion.
You file Form 709 to report the $32,000.
No tax is owed unless you someday exceed your lifetime exemption.
Future Income from Gifts
While gifts are not taxable to the recipient, future income from those gifts (interest, dividends, rent, etc.) is taxable to the recipient.
Key Takeaways:
• Filing Form 709 Gift Tax Return does not necessarily mean tax is owed
• Excess gifts reduce lifetime exemption
• Most people never pay gift tax
Please contact me for a free consultation to see how this information applies to your individual tax situation.
Gifts and Gift Taxes: Do You Owe Tax on Gifts You Receive?
Giving money or property to someone can be a generous way to support family, friends, or charitable causes — but many people worry about taxes. The good news? In the United States, the person who receives a true gift does not owe federal income tax on it, and the federal gift tax rules provide generous exclusions that make gifting easier than many people realize.
The Core Rule: Recipients Don’t Pay Tax on True Gifts
Under federal tax law, a true gift is not taxable income to the recipient. That means if someone gives you cash, property, or another valuable item purely out of generosity, you won’t owe federal income tax on it.
To be considered a true gift, the transfer must be:
• Given out of generosity, affection, or similar motives
• Not compensation for services or work performed
Example:
Your niece gives you $5,000 to help with moving expenses. You don’t owe tax on that money because it was a gift — not payment for a job or service.
Who Handles Gift Taxes?
The person who makes the gift — the donor — could potentially be responsible for paying gift tax, but never the recipient. However, most donors never actually pay gift tax because of:
• The annual gift tax exclusion
• The lifetime gift and estate tax exemption
Annual Gift Tax Exclusion
For 2025, the annual exclusion is $18,000 per recipient. Married couples can split gifts, allowing up to $36,000 per recipient per year. You can give up to the annual exclusion amount to as many people as you wish each year without triggering gift tax liability.
Key Takeaways:
• True gifts are not taxable to the recipient
• Donors may have reporting responsibilities
• The annual exclusion is $18,000 per recipient per donor per year
Foreign Earned Income Exclusion (FEIE) for U.S. Citizens Working Abroad (2025–2026)
U.S. Taxes and Living Abroad
If you are a U.S. citizen or resident alien working outside the United States, you are generally still required to file a U.S. federal income tax return. Unlike most countries, the United States taxes its citizens on worldwide income, regardless of where they live or work.
One important provision that can significantly reduce U.S. income tax for qualifying individuals is the Foreign Earned Income Exclusion (FEIE). Understanding how it works—and whether you qualify—can make a substantial difference in your overall tax picture.
What Is the Foreign Earned Income Exclusion?
The Foreign Earned Income Exclusion allows qualifying taxpayers to exclude a portion of their foreign earned income from U.S. federal income tax. Foreign earned income generally includes wages, salaries, and self-employment income earned for services performed in a foreign country.
The exclusion applies only to earned income. It does not apply to interest, dividends, capital gains, pensions, or other investment-type income.
FEIE Maximum Amounts for 2025 and 2026
The maximum amount of income that can be excluded is adjusted annually for inflation.
• Tax year 2025: Up to $130,000 of qualifying foreign earned income
• Tax year 2026: Up to $132,900 of qualifying foreign earned income
Each qualifying taxpayer may claim their own exclusion. In the case of married couples where both spouses work abroad and meet the requirements, each spouse may qualify for a separate exclusion.
Basic Requirements to Qualify
To claim the FEIE, three primary conditions must generally be met:
1. Foreign Earned Income
You must have earned income from services performed in a foreign country.
2. Tax Home in a Foreign Country
Your tax home must be in a foreign country. The IRS also considers whether your “abode” remains in the United States, which can disqualify you even if you are physically overseas.
3. Meet One of the Two Residency Tests
You must meet either:
• The Bona Fide Residence Test (generally for those who establish long-term residence abroad), or
• The Physical Presence Test (generally at least 330 full days in a foreign country during a 12-month period).
How the FEIE Is Claimed
The FEIE is claimed by filing IRS Form 2555 with your federal income tax return. The exclusion is not automatic—you must affirmatively claim it.
Even if the exclusion eliminates all U.S. income tax, a filing requirement often still exists. Additionally, claiming the FEIE does not remove separate reporting obligations for foreign bank accounts or foreign financial assets.
Foreign Housing Exclusion or Deduction
In addition to the FEIE, some taxpayers may also qualify for a foreign housing exclusion (for employees) or a foreign housing deduction (for self-employed individuals).
Housing expenses above a base amount—subject to limits—may qualify. The base housing amount is tied to the FEIE maximum and increases as the exclusion amount increases.
For 2025, the base housing amount is generally $20,800.
For 2026, the base housing amount is generally $21,264.
Higher limits may apply for certain high-cost foreign cities as designated by the IRS.
FEIE vs. Foreign Tax Credit
The FEIE is not always the best option for every taxpayer. In some situations, particularly in countries with higher income tax rates, the Foreign Tax Credit may provide a better overall result—or the two strategies may be used in coordination.
Choosing the correct approach requires an analysis of income type, foreign tax paid, housing costs, long-term plans, and other factors.
Common Mistakes
Some common issues that create problems for U.S. taxpayers abroad include:
• Assuming living abroad eliminates the U.S. filing requirement
• Miscounting days for the Physical Presence Test
• Confusing earned income with investment income
• Overlooking foreign bank account reporting requirements
• Ignoring potential state tax residency issues
Final Thoughts
The Foreign Earned Income Exclusion can be a powerful tool for U.S. citizens working abroad, but the rules are detailed and fact-specific. Proper planning and correct filing are essential to avoid lost benefits or IRS complications.
Professional guidance can help determine whether you qualify, which test applies, and whether the FEIE, the Foreign Tax Credit, or a combination of strategies is best for your situation.
Trump Accounts for Children: What Families Should Know
You may have heard about “Trump Accounts” for Children in the news recently.
Beginning in 2026, a new type of tax-advantaged investment account for children—commonly referred to as “Trump Accounts”—will become available for U.S. families. These accounts are designed to help children build long-term savings starting early in life.
What Are Trump Accounts?
Trump Accounts are investment accounts established for individuals under age 18. The accounts are intended to encourage long-term savings and investment, with growth occurring on a tax-deferred basis.
For certain eligible children born between January 1, 2025, and December 31, 2028, the federal government will provide a one-time $1,000 seed contribution, provided an election is made by a parent or guardian.
When the Program Begins
Although the law is already in place, contributions to Trump Accounts generally cannot begin until July 4, 2026. Additional IRS guidance and administrative details are expected as implementation approaches.
Who Is Eligible?
• The child must be under age 18
• The child must have a valid Social Security number
• To receive the federal seed contribution, the child must be a U.S. citizen born during the specified eligibility window and the account must be properly elected
Contribution Limits
• Family members or others may contribute up to $5,000 per year per child
• Employers may contribute up to $2,500 per year to an employee’s Trump Account or that of an employee’s dependent
Withdrawals
Withdrawals are generally restricted until the child reaches age 18. At that point, the account is treated similarly to a traditional IRA, with tax consequences depending on the nature of distributions. As with any tax-advantaged account, families should consider how Trump Accounts fit within their broader financial and tax planning strategy.
This information is intended as educational only. Please contact me for a free consultation to discuss your induvial tax situation.
Scam Alert from the IRS
Below is an example of a scam letter that is similar to a letter the IRS actually sends out sometimes. However, you should always contact the IRS directly to avoid this kind of scam.
