Businesses need to stay on top of their BYOD policies

Does your business receive large amounts of cash or cash equivalents? If so, you’re generally required to report these transactions to the IRS — and not just on your tax return. Here are some answers to questions you may have. What are the requirements? Although many cash transactions are legitimate, the IRS explains that the information reported on Form 8300 “can help stop those who evade taxes, profit from the drug trade, engage in terrorist financing and conduct other criminal activities. The government can often trace money from these illegal activities through the payments reported on Form 8300 and other cash reporting forms.” Each person who, in the course of operating a trade or business, receives more than $10,000 in cash in one transaction (or two or more related transactions), must file Form 8300. Who is a “person”? It can be an individual, company, corporation, partnership, association, trust or estate. What are considered “related transactions”? Any transactions between the same payer and recipient conducted in a 24-hour period. Transactions can also be considered related even if they occur over a period of more than 24 hours if the recipient knows, or has reason to know, that each transaction is one of a series of connected transactions. In order to complete Form 8300, you’ll need personal information about the person making the cash payment, including a Social Security or taxpayer identification number. The IRS reminds businesses that they can “batch file” their reports, which is especially helpful to those required to file many forms. Note: Under a rule that went into effect on January 1, 2024, businesses must now file Forms 8300 electronically if they’re otherwise required to e-file certain other information returns electronically, such as W-2s and 1099s. You also must e-file if you’re required to file at least 10 information returns other than Form 8300 during a calendar year. What’s the definition of cash and cash equivalents? For Form 8300 reporting purposes, cash includes U.S. currency and coins, as well as foreign money. It may also include cash equivalents such as cashier’s checks (sometimes called bank checks), bank drafts, traveler’s checks and money orders. Money orders and cashier’s checks under $10,000, when used in combination with other forms of cash for a single transaction that exceeds $10,000, are defined as cash for Form 8300 reporting purposes. What about digital assets such as cryptocurrency? Despite a 2021 law that would treat certain digital asset receipts like “cash,” the IRS announced in 2024 that you don’t have to report digital asset receipts on Form 8300 until regulations are issued. IRS Announcement 2024-4 remains the latest official word. Note: Under a separate reporting requirement, banks and other financial institutions report cash purchases of cashier’s checks, treasurer’s checks and/or bank checks, bank drafts, traveler’s checks and money orders with a face value of more than $10,000 by filing currency transaction reports. What type of penalties can be imposed for noncompliance? If a business doesn’t file Forms 8300 on time, there can be a civil penalty of $310 for each missed form, up to an annual cap. The penalties are higher if the IRS finds the failure to file is intentional, and there can be criminal penalties as well. In one recent case, an Arizona car dealer failed to file the required number of Forms 8300. While the dealer did file 116 forms for the year in question, the IRS determined that the business should have filed an additional 266 forms. The tax agency assessed penalties of $118,140. The dealer argued that it had reasonable cause for not filing all the forms because the software it was using wasn’t functioning properly. However, the U.S. Tax Court ruled that the dealer wasn’t using the software correctly and didn’t take steps to foster compliance. (TC Memo 2025-38) Stay on top of the requirements Compliance with Form 8300 requirements can help your business avoid steep penalties and trouble with the IRS. Recordkeeping is critical. You should keep a copy of each Form 8300 for five years from the date you file it, according to the IRS. “Confirmation receipts don’t meet the recordkeeping requirement,” the tax agency adds. Contact us with any questions or for assistance. © 2025 

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If your business allows employees to perform their jobs under a hybrid work model, it’s not alone. Ever since the pandemic, many companies have sought to strike a balance between permitting some remote work while also requiring staff to come into the office (or another type of facility). Data released this year shows that, by and large, businesses seem to have found a certain equilibrium regarding hybrid work. However, maintaining the right balance for your company will require a careful eye going forward. Schedule control Just this month, Gallup published survey results showing that, as of May 2025, 51% of remote-capable employees in the United States are working under a hybrid model. That’s a slight decrease from 55% in November 2024. Interestingly, during the same period, the percentage of fully remote workers rose 2% — but fully on-site employees also increased by the same percentage. One particularly important issue brought up by the research is how much control a business asserts over its hybrid workers’ schedules. The data showed that the percentage of employees who describe their schedules as “entirely up to me” fell from 37% in 2024 to 34% this year. How do most companies establish hybrid schedules? Gallup found that three main groups typically make the call: Employees themselves, Managers or teams, or Leadership. The second option generally comes out on top, according to Gallup. More specifically, 91% of hybrid workers whose teams established their schedules described their employers’ policies as “fair.” That’s the same rate as employees who determined their own schedules. When leadership mandated schedules, the fairness rate reported by hybrid workers fell to only 73%. Policy enforcement Another recent report on hybrid work models is the 2025 Americas Office Occupier Sentiment Survey by commercial real estate services and investment consultancy CBRE. It polled companies across the United States, Canada and Latin America on topics that included “efforts to align workspaces with hybrid work models while meeting business objectives.” Among the survey’s key findings is an uptick in the enforcement of hybrid work policies. In fact, 85% of responding businesses reported communicating an attendance policy to hybrid workers. What’s more: 69% of respondents measured compliance with their policies (up from 45% in 2024), and 37% of respondents took enforcement actions (up from 17% in 2024). And those enforcement measures seem to be working. The survey found that 72% of respondents achieved their attendance goals in 2025 (up from 61% in 2024). Overall, the data indicates that employees averaged 2.9 days a week on-site, which is close to businesses’ reported expectations of 3.2 days on average. Cost considerations Along with determining and refining how you establish workers’ schedules and enforce your policies, you should carefully identify all the costs that accompany hybrid work. For example, even with fewer employees on-site, your business still needs to maintain office space. Some companies are downsizing, while others are redesigning their layouts to accommodate shared desks and collaborative spaces. If you choose these alternatives, be aware of your lease commitments, maintenance and utility expenses, and renovation costs. Supporting a hybrid workforce also requires secure and reliable technology. This typically includes video conferencing tools, cloud-based software, cybersecurity measures, and internet and networking systems. These expenses often extend to both office and home setups. Beware of hidden costs, too. For instance, policy enforcement may cause your business to spend more on compliance-related technology, as well as training for HR staff and supervisors. Clear and constant view The surveys mentioned above, as well as other indicators, show that hybrid work is here to stay. Finding the optimal balance for your business depends on savvy scheduling, judicious policy enforcement, and a clear and constant view of the financial implications. We can help you assess all the expenses involved and align spending with productivity goals to ensure your hybrid model remains sustainable. © 2025 

Before the One Big Beautiful Bill Act (OBBBA), tip income and overtime income were fully taxable for federal income tax purposes. The new law changes that. Tip income deduction For 2025–2028, the OBBBA creates a new temporary federal income tax deduction that can offset up to $25,000 of annual qualified tip income. It begins to phase out when modified adjusted gross income (MAGI) is more than $150,000 ($300,000 for married joint filers). The deduction is available if a worker receives qualified tips in an occupation that’s designated by the IRS as one where tips are customary. However, the U.S. Treasury Department recently released a draft list of occupations it proposes to receive the tax break and there are some surprising jobs on the list, including plumbers, electricians, home heating / air conditioning mechanics and installers, digital content creators, and home movers. Employees and self-employed individuals who work in certain trades or businesses are ineligible for the tip deduction. These include health, law, accounting, financial services, investment management and more. Qualified tips can be paid by customers in cash or with credit cards or given to workers through tip-sharing arrangements. The deduction can be claimed whether the worker itemizes or not. Overtime income deduction For 2025–2028, the OBBBA creates another new federal income tax deduction that can offset up to $12,500 of qualified overtime income each year or up to $25,000 for a married joint-filer. It begins to phase out when MAGI is more than $150,000 ($300,000 for married joint filers). The limited overtime deduction can be claimed whether or not workers itemize deductions on their tax returns. Qualified overtime income means overtime compensation paid to a worker as mandated under Section 7 of the Fair Labor Standards Act (FLSA). It requires time-and-a-half overtime pay except for certain exempt workers. If a worker earns time-and-a-half for overtime, only the extra half constitutes qualified overtime income. Qualified overtime income doesn’t include overtime premiums that aren’t required by Section 7 of the FLSA, such as overtime premiums required under state laws or overtime premiums pursuant to contracts such as union-negotiated collective bargaining agreements. Qualified overtime income also doesn’t include any tip income. Payroll tax implications While you may have heard the new tax breaks described as “no tax on tips” and “no tax on overtime,” they’re actually limited, temporary federal income tax deductions as opposed to income exclusions. Therefore, income tax may apply to some of your wages and federal payroll taxes still apply to qualified tip income and qualified overtime income. In addition, applicable federal income tax withholding rules still apply. And tip income and overtime income may still be fully taxable for state and local income tax purposes. The real issue for employers and payroll management firms is reporting qualified tip income and qualified overtime income amounts so eligible workers can claim their rightful federal income tax deductions. Reporting details The tip deduction is allowed to both employees and self-employed individuals. Qualified tip income amounts must be reported on Form W-2, Form 1099-NEC, or another specified information return or statement that’s furnished to both the worker and the IRS. Qualified overtime income amounts must be reported to workers on Form W-2 or another specified information return or statement that’s furnished to both the worker and the IRS. IRS announcement about information returns and withholding tables The IRS recently announced that for tax year 2025, there will be no OBBBA-related changes to federal information returns for individuals, federal payroll tax returns or federal income tax withholding tables. So, Form W-2, Forms 1099, Form 941, and other payroll-related forms and returns won’t be changed. The IRS stated that “these decisions are intended to avoid disruptions during the tax filing season and to give the IRS, business and tax professionals enough time to implement the changes effectively.” Employers and payroll management firms are advised to begin tracking qualified tip income and qualified overtime income immediately and to implement procedures to retroactively track qualified tip and qualified overtime income amounts that were paid before July 4, 2025, when the OBBBA became law. The IRS is expected to provide transition relief for tax year 2025 and update forms for tax year 2026. Contact us with any questions. © 2025 

Do you and your spouse together operate a profitable unincorporated small business? If so, you face some challenging tax issues. The partnership issue An unincorporated business with your spouse is classified as a partnership for federal income tax purposes, unless you can avoid that treatment. Otherwise, you must file an annual partnership return using Form 1065. In addition, you and your spouse must be issued separate Schedules K-1, which allocate the partnership’s taxable income, deductions and credits between the two of you. This is only the beginning of the unwelcome tax compliance tasks. The self-employment tax issue Self-employment (SE) tax is how the government collects Social Security and Medicare taxes from self-employed individuals. For 2025, the SE tax consists of 12.4% Social Security tax on the first $176,100 of net SE income plus 2.9% Medicare tax. Once your 2025 net SE income surpasses the $176,100 ceiling, the Social Security tax component of the SE tax ends. But the 2.9% Medicare tax component continues before increasing to 3.8% — because of the 0.9% additional Medicare tax — if the combined net SE income of a married joint-filing couple exceeds $250,000. (This doesn’t include investment income.) With your joint Form 1040, you must include a Schedule SE to calculate SE tax on your share of the net SE income passed through to you by your spousal partnership. The return must also include a Schedule SE for your spouse to calculate the tax on your spouse’s share of net SE income passed through to him or her. This can significantly increase your SE tax liability. For example, let’s say you and your spouse each have net 2025 SE income of $150,000 ($300,000 total) from your profitable 50/50 partnership business. The SE tax on your joint tax return is a whopping $45,900 ($150,000 × 15.3% × 2). That’s on top of regular federal income tax. (However, you do get an income deduction for half of the SE tax.) Here are three possible tax-saving solutions. 1. Use an IRS-approved method to minimize SE tax in a community property state Under IRS guidance (Revenue Procedure 2002-69), there’s an exception to the general rule that spouse-run businesses are treated as partnerships. For federal tax purposes, you can treat an unincorporated spousal business in a community property state as a sole proprietorship operated by one of the spouses. By effectively allocating all the net SE income to the proprietor spouse, only the first $176,100 of net SE income is hit with the 12.4% Social Security tax. That can cut your SE tax bill. 2. Convert a spousal partnership into an S corporation and pay modest salaries If you and your unincorporated spousal business aren’t in a community property state, consider converting the business to S corp status to reduce Social Security and Medicare taxes. That way, only the salaries paid to you and your spouse get hit with the Social Security and Medicare tax, collectively called FICA tax. You can then pay reasonable, but not excessive, salaries to you and your spouse as shareholder-employees while paying out most or all remaining corporate cash flow to yourselves as FICA-tax-free cash distributions. Keep in mind that S corps come with their own compliance obligations. 3. Disband your partnership and hire your spouse as an employee You can disband the existing spousal partnership and start running the operation as a sole proprietorship operated by one spouse. Then hire the other spouse as an employee of the proprietorship. Pay that spouse a modest cash salary. You must withhold 7.65% from the salary to cover the employee-spouse’s share of the Social Security and Medicare taxes. The proprietorship must also pay 7.65% as the employer’s half of the taxes. However, because the employee-spouse’s salary is modest, the FICA tax will also be modest. With this strategy, you file only one Schedule SE — for the spouse treated as the proprietor — with your joint tax return. That minimizes the SE tax because no more than $176,100 (for 2025) is exposed to the 12.4% Social Security portion of the SE tax. Additional bonus: You may be able to provide certain employee benefits to your spouse, such as retirement contributions, which may provide more tax savings. We can help Having a profitable unincorporated business with your spouse that’s classified as a partnership for federal income tax purposes can lead to compliance headaches and high SE tax bills. Work with us to identify appropriate tax-saving strategies. © 2025 

If you’re considering opening an investment account for your minor child or grandchild to help him or her save for the future, a custodial account can be a useful option. Indeed, for many families, a custodial account strikes the right balance between gifting assets to a child and maintaining oversight until the child is legally an adult. It also has some benefits compared to a Trump Account, which the One Big Beautiful Bill Act will make available beginning in 2026. What is a custodial account? A custodial account is a financial account that an adult manages on behalf of a minor child until the child reaches the age of majority (typically 18 or 21, depending on the state). These accounts are often set up under the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers to Minors Act (UTMA), which provide a legal framework for transferring assets to minors without requiring a formal trust. The adult custodian — often a parent or grandparent — has control over the account, but the assets legally belong to the child. Once the child comes of age, the account is transferred into his or her full control. Trump Accounts will be similar in that, generally, the child won’t be able to access the account funds until reaching age 18. Custodial accounts can hold a wide range of assets, including cash, stocks, bonds, mutual funds, and, in the case of UTMA accounts, even real estate or other property. Trump Accounts, on the other hand, will generally be limited to investing in exchange-traded funds or mutual funds that track the return of a qualified index and meet certain other requirements. Custodial account funds can be used for any purpose and often are used to save for future expenses such as a first car or a down payment on a home. Trump Account funds also can be used for any purpose. Both types of accounts can be used to fund education expenses, but they don’t offer some of the tax benefits of education-specific savings options. What are the pluses and minuses? One of the most significant advantages of using a custodial account is its flexibility. Indeed, unlike some savings vehicles, such as Coverdell Education Savings Accounts (ESAs), anyone can contribute to a custodial account, regardless of their income level, and there are no contribution limits. (Trump Accounts will have annual contribution limits.) Also, as noted earlier, there are no restrictions on how the money in custodial accounts or Trump Accounts is spent. In contrast, funds invested in ESAs and Section 529 education savings plans must be spent on qualified education expenses — withdrawals not used for qualified expenses may be partially subject to a 10% penalty. (Trump Account withdrawals could also be partially subject to a 10% penalty if taken before age 59½). Contributions to custodial accounts can also save income taxes. A child’s unearned income up to $2,700 (for 2025) is usually taxed at low rates. (Income above that threshold is usually taxed at the parents’ marginal rate.) On the downside, other savings vehicles can offer greater tax benefits. Although custodial accounts can reduce taxes, ESAs, Section 529 plans and Trump Accounts allow earnings to grow on a tax-deferred basis. Also, ESA and 529 plan withdrawals are tax-free provided they’re spent on qualified education expenses. There may also be financial aid implications, as the assets in a custodial account are treated less favorably than certain other assets. Trump Accounts provide another potential benefit that custodial accounts don’t: U.S. citizens children born between Jan. 1, 2025, and Dec. 31, 2028, can potentially qualify for an initial $1,000 government-funded deposit to a Trump Account. It’s important to be aware that there’s a loss of control involved with both custodial accounts and Trump Accounts. After the child reaches the age of majority (or age 18 for Trump Accounts), he or she gains full control over the assets and can use them as he or she sees fit. If you wish to retain control longer, you’re better off opening an ESA or a 529 plan or creating a trust. Consider all your options Custodial accounts can be a valuable tool to build your child’s financial foundation while teaching him or her about money management. Still, it’s important to weigh the tax implications, college planning considerations and your long-term goals before opening one. Depending on the situation, another type of account may better fit your goals. Contact us with questions. © 2025 

As summer gives way to fall, many businesses begin their budget-setting processes for the upcoming year. This annual rite of passage can be stressful, contentious and, perhaps worst of all, disappointing if your budgets often fail to achieve their objectives. The good news is that there are many ways to enhance your company’s budgeting process and improve the likelihood that you’ll get good results. Here are five to consider. 1. Optimize data It’s not uncommon for a business to create its budget by applying an across-the-board percentage increase to the previous year’s actual results. However, this approach may be too simplistic in today’s uncertain economy and ever-changing marketplace. That’s not to say historical results aren’t a good starting point. But keep in mind that some costs are fixed rather than variable. And certain assets, such as equipment and employees, have capacity limitations. What troubles many companies is the presence of confusing or conflicting information, which eventually hampers their budget’s efficacy. The solution is data optimization. This is the process of refining how data is collected, stored, managed and applied to maximize efficiency and value. In the context of budgeting, data optimization involves steps such as removing duplicate entries, correcting errors and applying a standard format to strengthen accuracy. 2. Involve the entire organization Traditionally, many businesses rely only on their accounting departments to devise a budget. However, this approach often “puts blinders” on a company, leaving it at a disadvantage. When creating your budget, seek input from the entire organization. For example, your sales department may be in the best position to help you accurately estimate future revenue. Meanwhile, your operations or production managers can offer insights into potential staffing adjustments and expenses related to equipment maintenance or replacement. Soliciting broad participation also gives departments a greater sense of involvement in the budgeting process. In turn, this can help enhance employee engagement and improve your odds of achieving budgeted results. 3. “Sell” it to staff Good budgets encourage the hard work needed to grow revenue and cut costs. But targets must be attainable. Employees will likely become discouraged if they view a budget as unattainable or out of touch with current market trends — or reality in general. After years of failed attempts to meet budgets, workers may start to ignore them altogether. If this has been an issue for your business, you might need to “sell” your budget to staff. Doing so centers on devising and executing a communication strategy that clearly explains each budget’s rationale and objectives. Tying annual bonuses to achieving specific targets may encourage greater buy-in as well. 4. Monitor cash flow Even if expected revenue is forecast to cover expenses for the year, unexpected fluctuations in production costs can lead to temporary cash shortages. Slow-paying customers and uncollectible accounts may also inhibit cash flow. The truth is, any unanticipated cash shortfall can seriously derail your budget. So, once yours is set, monitor all your cash flows weekly or monthly. Then, create a plan for managing any major shortfalls that may occur. For instance, you and other owners may need to contribute extra capital. Or you might need to apply for a line of credit at your current bank or another one. Additionally, you might consider: Buying materials on consignment, Delaying payments to vendors (as long as you don’t incur penalties), or Tightening terms with slow-paying customers. Bottom line: Don’t put a budget in place and expect it to run on autopilot. Keep a close eye on cash flow and make adjustments as necessary. 5. Get an objective opinion Many companies’ budgets suffer from the old “because we’ve always done it that way” mentality. For a fresh perspective and an objective opinion on your budgeting process, please keep our firm in mind. We can help your business strengthen its budget by showing you how to better analyze historical financial data, forecast future performance, identify cost-saving opportunities, integrate tax planning and more. © 2025 

A major tax change is here for businesses with research and experimental (R&E) expenses. On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) reinstated the immediate deduction for U.S.-based R&E expenses, reversing rules under the Tax Cuts and Jobs Act (TCJA) that required businesses to capitalize and amortize these costs over five years (15 years for research performed outside the United States). Making the most of R&E tax-saving opportunities The immediate domestic R&E expense deduction generally is available beginning with eligible 2025 expenses. It can substantially reduce your taxable income, but there are strategies you can employ to make the most of R&E tax-saving opportunities: Apply the changes retroactively. If you qualify as a small business (average annual gross receipts of $31 million or less for the last three years), you can file amended returns for 2022, 2023 and/or 2024 to claim the immediate R&E expense deduction and potentially receive a tax refund for those years. The amended returns must be filed by July 4, 2026. Accelerate remaining deductions. Whatever the size of your business, if you began to amortize and capitalize R&E expenses in 2022, 2023 and/or 2024, you can deduct the remaining amount either on your 2025 return or split between your 2025 and 2026 returns, rather than continuing to amortize and capitalize over what remains of the five-year period. Relocate research activities. Consider relocating foreign research activities to the United States. Before the OBBBA, the five-year vs. 15-year amortization period made domestic R&E activities more attractive from a tax perspective. Now the difference between a current deduction and 15-year amortization makes domestic R&E activities even more advantageous tax-wise. Take advantage of the research credit. A tax deduction reduces the amount of income that’s taxed, while a tax credit reduces the actual tax you owe dollar-for-dollar, providing much more tax savings than a deduction of an equal amount. So consider whether you may be eligible for the tax credit for “increasing research activities.” But keep in mind that the types of expenses that qualify for the credit are narrower than those that qualify for the deduction. And you can’t claim both the credit and the deduction for the same expense. We’re here to help With the recent changes to the R&E expense rules, understanding your options is more important than ever. Our team can walk you through the updates, evaluate potential strategies, and help you determine the best approach to maximize your savings and support your business goals. © 2025 

At back-to-school time, much of the focus is on the students returning to the classroom — and on their parents buying them school supplies, backpacks, clothes, etc., for the new school year. But teachers are also buying school supplies for their classrooms. And in many cases, they don’t receive reimbursement. Fortunately, they may be able to deduct some of these expenses on their tax returns. And, beginning next year, eligible educators will have an additional deduction opportunity under the One Big Beautiful Bill Act (OBBBA). The current above-the-line deduction Eligible educators can deduct some of their unreimbursed out-of-pocket classroom costs under the educator expense deduction. This is an “above-the-line” deduction, which means you don’t have to itemize and it reduces your adjusted gross income (AGI), which has an added benefit: Because AGI-based limits affect a variety of tax breaks, lowering your AGI might help you maximize your tax breaks overall. To be eligible, taxpayers must be kindergarten through grade 12 teachers, instructors, counselors, principals or aides. Also, they must work at least 900 hours a school year in a school that provides elementary or secondary education as determined under state law. For 2025, up to $300 of qualified expenses paid during the year that weren’t reimbursed can be deducted. (The deduction limit is $600 if both taxpayers are eligible educators who file a joint tax return, but these taxpayers can’t deduct more than $300 each.) The limit is annually indexed for inflation but typically doesn’t go up every year. Examples of qualified expenses include books, classroom supplies, computer equipment (including software), other materials used in the classroom, and professional development courses. For courses in health and physical education, the costs for supplies are qualified expenses only if related to athletics. A new miscellaneous itemized deduction The OBBBA makes permanent the Tax Cut and Jobs Act’s (TCJA’s) suspension of miscellaneous itemized deductions subject to the 2% of AGI floor. This had included unreimbursed employee business expenses such as teachers’ out-of-pocket classroom expenses. The suspension had been in place since 2018. But the OBBBA creates a new miscellaneous itemized deduction for educator expenses. This is in addition to the $300 above-the-line deduction. And this deduction isn’t subject to the 2% of AGI floor or a specific dollar limit. The new deduction is available for eligible expenses incurred after Dec. 31, 2025. Both who’s eligible and what expenses qualify are a little broader for the itemized deduction than for the above-the-line deduction. For example, interscholastic sports administrators and coaches are also eligible. And, for courses in health and physical education, the supplies don’t have to be related to athletics. Keep in mind that you’ll have to itemize deductions to claim this new deduction next year. Taxpayers can choose to itemize this and certain other deductions or to take the standard deduction based on their filing status. Itemizing deductions saves tax only when the total is greater than the standard deduction. The OBBBA has made permanent the nearly doubled standard deductions under the TCJA, so fewer taxpayers are benefiting from itemizing. Carefully track expenses If you’re a teacher or other educator, keep receipts when you pay for eligible expenses and note the date, amount and purpose of each purchase. Have questions about educator deductions or other tax-saving strategies? Please contact us. © 2025