Weighing the pluses and minuses of HDHPs + HSAs for businesses
March 19, 2025
Will your company be ready to add a health insurance plan for next year, or change its current one? If so, now might be a good time to consider your options. These things take time.
A popular benefits model for many small to midsize businesses is sponsoring a high-deductible health plan (HDHP) accompanied by employee Health Savings Accounts (HSAs). Like any such strategy, however, this one has its pluses and minuses.
Ground rules
HSAs are participant-owned, tax-advantaged accounts that accumulate funds for eligible medical expenses. To own an HSA, participants must be enrolled in an HDHP, have no other health insurance and not qualify for Medicare.
In 2025, an HDHP is defined as a plan with at least a $1,650 deductible for self-only coverage or $3,300 for family coverage. Also in 2025, participants can contribute pretax income of up to $4,300 for self-only coverage or $8,550 for family coverage. (These amounts are inflation-adjusted annually, so they’ll likely change for 2026.) Those age 55 or older can make additional catch-up contributions of $1,000.
Companies may choose to make tax-deductible contributions to employees’ HSAs. However, the aforementioned limits still apply to combined participant and employer contributions.
Participants can make tax-free HSA withdrawals to cover qualified out-of-pocket medical expenses, such as physician and dentist visits. They may also use their account funds for copays and deductibles, though not to pay many types of insurance premiums.
Pluses to ponder
For businesses, the “HDHP + HSAs” model offers several pluses. First, HDHPs generally have lower premiums than other health insurance plans — making them more cost-effective. Plus, as mentioned, your contributions to participants’ HSAs are tax deductible if you choose to make them. And, overall, sponsoring health insurance can strengthen your fringe benefits package.
HSAs also have pluses for participants that can help you “sell” the model when rolling it out. These include:
- Participants can lower their taxable income by making pretax contributions through payroll deductions,
- HSAs can include an investment component that may include mutual funds, stocks and bonds,
- Account earnings accumulate tax-free,
- Withdrawals for qualified medical expenses aren’t subject to tax, and the list of eligible expenses is extensive,
- HSA funds roll over from year to year (unlike Flexible Spending Account funds), and
- HSAs are portable; participants maintain ownership and control of their accounts if they change jobs or even during retirement.
In fact, HSAs are sometimes referred to as “medical IRAs” because these potentially valuable accounts are helpful for retirement planning and have estate planning implications as well.
Minuses to mind
The HDHP + HSAs model has its minuses, too. Some employees may strongly object to the “high deductible” aspect of HDHPs.
Also, if not trained thoroughly, participants can misuse their accounts. Funds used for nonqualified expenses are subject to income taxes. Moreover, the IRS will add a 20% penalty if an account holder is younger than 65. After age 65, participants can withdraw funds for any reason without penalty, though withdrawals for nonqualified expenses will be taxed as ordinary income.
Expenses are another potential concern. HSA providers (typically banks and investment firms) may charge monthly maintenance fees, transaction fees and investment fees (for accounts with an investment component). Many companies cover these fees under their benefits package to enhance the appeal of HSAs to employees.
Finally, HSAs can have unexpected tax consequences for account beneficiaries. Generally, if a participant dies, account funds pass tax-free to a spouse beneficiary. However, for other types of beneficiaries, account funds will be considered income and immediately subject to taxation.
Powerful savings vehicle
The HDHP + HSAs model helps businesses manage insurance costs, shifts more of medical expense management to participants, and creates a powerful savings vehicle that may attract job candidates and retain employees. But that doesn’t mean it’s right for every company. Please contact us for help assessing its feasibility, as well as identifying the cost and tax impact.
© 2025
When it comes to estate planning, one important decision many people struggle with is whether to share the details of their plans with family members. There’s no one-size-fits-all answer — it largely depends on your goals and your family’s dynamics. However, thoughtful communication can go a long way in reducing confusion and conflict after your death. Let’s take a closer look at the pros and cons of sharing your estate planning decisions with your family. The pros Sharing the details of your estate plan provides many benefits, including: Explaining your wishes. When they design their estate plans, most people want to treat all their loved ones fairly. But “fair” doesn’t always mean “equal.” The problem is that your beneficiaries may not understand that without an explanation. For example, suppose you have adult children from a previous marriage and minor children from your second marriage. Treating both sets of children equally may not be fair, especially if the adult children are financially independent and the younger children still face significant living and educational expenses. It may make sense to leave more of your wealth to your younger children. And explaining your reasoning upfront can go a long way toward avoiding hurt feelings or disputes. Obtaining feedback. Sharing your plans with loved ones allows them to ask questions and provide feedback. If family members feel they’re being treated unfairly, you may wish to discuss alternatives that better meet their needs while still satisfying your estate planning objectives. Streamlining estate administration. Sharing details of your plan with your executor, trustees and any holders of powers of attorney will enable them to act quickly and efficiently when the time comes. This is particularly important for people you’ve designated to make health care decisions or handle your financial affairs if you become incapacitated. The cons There may be some disadvantages to sharing the details of your plan, including: Strained relationships. Some loved ones may be disappointed when they learn the details of your estate plan, which can lead to strained relationships. Keeping your plans to yourself allows you to avoid these uncomfortable situations. On the other hand, it also deprives you of an opportunity to resolve such conflicts during your lifetime. Encouragement of irresponsible behavior. Some affluent parents worry that the promise of financial independence may give their children a disincentive to behave in a financially responsible manner. They may not pursue higher education, remain gainfully employed and generally lead productive lives. Rather than keeping your children’s inheritance a secret, a better approach may be to use your estate plan to encourage desirable behavior. Don’t forget to factor in your state’s laws As you think over how much you wish to disclose to your loved ones about your estate plan, be sure to consider applicable state law. The rules governing what a trustee must disclose to beneficiaries about the terms of the trust vary from state to state. Some states permit so-called “quiet trusts,” also known as “silent trusts,” which make it possible to keep the trust a secret from your loved ones. Other states require trustees to inform the beneficiaries about the trust’s existence and terms, often when they reach a certain age. For example, trustees may be required to provide beneficiaries with a copy of the trust and an annual accounting of its assets and financial activities. However, many states allow you to place limits on the information provided to beneficiaries. Sharing is caring Ultimately, a well-crafted estate plan should speak for itself. But open communication, when done thoughtfully, can support your plan’s success and give your loved ones clarity and peace of mind. Contact us with questions. © 2025
Like many business owners, you’ve probably received a lot of technology advice. One term you may hear frequently is “tech stack.” Information technology (IT) folks love to throw this one around while sharing their bits and bytes of digital wisdom. Well, they’re not wrong about its importance. Your tech stack is crucial to maintaining smooth operations, but it can be a major drain on cash flow if not managed carefully. Everything you use For the purpose of running a business, a tech stack can be defined as all the software and other digital tools used to support the company’s operations and IT infrastructure. It includes assets such as your: Accounting software, Customer relationship management platform, Project management tools, Cloud storage, and Communication apps. Note: In a purely IT context, the term is widely defined as the set of technologies used to develop an application or website. For businesses, a tech stack’s objective is to streamline workflows and promote productivity while maintaining strong cybersecurity. Unfortunately, as it grows, a tech stack can leave companies struggling with overspending, inefficiencies and employee apathy. Case in point: For its 2025 State of Digital Adoption Report, software platform provider WalkMe surveyed nearly 4,000 enterprise leaders and employees worldwide. The data showed that about 43% of enterprise tech stacks are currently more complex than they were three years ago. Disturbingly, the report found the average large enterprise lost $104 million in 2024 because of underused technology, fragmented IT strategy and low employee adoption of tech tools. Although these results focus on larger companies, small to midsize businesses face the same risks. Over time, companies often layer technologies upon technologies, sometimes introducing redundant or extraneous tools that are largely ignored. 5 factors to consider Balancing functionality and innovation without overspending is the key to staying on top of your tech stack. Here are five factors to focus on: 1. Composition. Many business owners lose track of the many complex elements of their tech stacks. The best way to stay informed is to conduct regular IT audits. These are formal, systematic reviews of your IT infrastructure, which includes your tech stack. Audits often reveal redundant software subscriptions and underused or forgotten software licenses. 2. Integration/compatibility. When tech tools don’t play well together — or at all — data silos spring up and redundant work drags everyone down. This leads to more errors and less productivity. When managing your tech stack, choose solutions that integrate well across your operations. As feasible, replace those that don’t. 3. Price to value. Choosing IT tools primarily based on cost is risky. Although you should budget carefully, opting for cheaper solutions can ultimately increase technology expenses because of greater inefficiencies and the constant need to add tools to fill functionality gaps. Stay mindful of getting good value for the price and make choices that align with your strategic objectives. 4. Scalability. Generally, as a business grows, its technology needs expand and evolve. That doesn’t mean you always have to buy new software, however. Look for solutions that can scale up with growth or down during slower periods. Shop for assets that offer flexibility along with the right functionality. 5. Adoptability. Your company could have the most powerful software tool in existence, but if it sits unused, that item is just a wasted expense taking up space in your tech stack. Add new technology cautiously. Consult your leadership team, survey the employees who’ll be using it and ask for vendor references. When you do buy something, roll it out with an effective communication strategy and thorough training. A technological tree Like a tree, a tech stack can grow out of control and become a nuisance or even a danger to everyone around it. Properly pruned and otherwise well-maintained, however, it can be a powerful and functional business feature. Let us help you identify all your technology costs and assess the return on investment of every component of your tech stack. © 2025
When we prepare your tax return, we’ll check one of the following filing statuses: single, married filing jointly, married filing separately, head of household or qualifying widow(er). Only some people are eligible to file a return as a head of household. But if you’re one of them, it’s more favorable than filing as a single taxpayer. To illustrate, the 2025 standard deduction for a single taxpayer is $15,000. However, it’s $22,500 for a head of household taxpayer. To be eligible, you must maintain a household that, for more than half the year, is the principal home of a “qualifying child” or other relative of yours whom you can claim as a dependent. Tax law fundamentals Who’s a qualifying child? This is one who: Lives in your home for more than half the year, Is your child, stepchild, adopted child, foster child, sibling, stepsibling (or a descendant of any of these), Is under age 19 (or a student under 24), and Doesn’t provide over half of his or her own support for the year. If the parents are divorced, the child will qualify if he or she meets these tests for the custodial parent — even if that parent released his or her right to a dependency exemption for the child to the noncustodial parent. Can both parents claim head of household status if they live together but aren’t married? According to the IRS, the answer is no. Only one parent can claim head of household status for a qualifying child. A person can’t be a “qualifying child” if he or she is married and can file a joint tax return with a spouse. Special “tie-breaker” rules apply if the individual can be a qualifying child of more than one taxpayer. The IRS considers you to “maintain a household” if you live in the home for the tax year and pay over half the cost of running it. In measuring the cost, include house-related expenses incurred for the mutual benefit of household members, including property taxes, mortgage interest, rent, utilities, insurance on the property, repairs and upkeep, and food consumed in the home. Don’t include medical care, clothing, education, life insurance or transportation. Providing your parent a home Under a special rule, you can qualify as head of household if you maintain a home for your parent even if you don’t live with him or her. To qualify under this rule, you must be able to claim the parent as your dependent. You can’t be married You must be single to claim head of household status. Suppose you’re unmarried because you’re widowed. In that case, you can use the married filing jointly rates as a “surviving spouse” for two years after the year of your spouse’s death if your dependent child, stepchild, adopted child or foster child lives with you and you maintain the household. The joint rates are more favorable than the head of household rates. If you’re married, you must file jointly or separately — not as head of household. However, if you’ve lived apart from your spouse for the last six months of the year and your dependent child, stepchild, adopted child, or foster child lives with you and you “maintain the household,” you’re treated as unmarried. If this is the case, you can qualify as head of household. Contact us. We can answer questions about your situation. © 2025
For federal income tax purposes, the general rule is that rental real estate losses are passive activity losses (PALs). An individual taxpayer can generally deduct PALs only to the extent of passive income from other sources, if any. For example, if you have positive taxable income from other rental properties, that generally counts as passive income. You can use PALs to offset passive income from other sources, which amounts to being able to currently deduct them. Unfortunately, many rental property owners have little or no passive income in most years. Excess rental real estate PALs for the year (PALs that you cannot currently deduct because you don’t have enough passive income) are suspended and carried forward to future years. You can deduct suspended PALs when you finally have enough passive income or when you sell the properties that generated the PALs. Exception for professionals Thankfully, there’s a big exception to the general rule that you must have positive passive income to currently deduct rental losses. If you qualify for the exception, a rental real estate loss can be classified as a non-passive loss that can usually be deducted currently. This exception allows qualifying individual taxpayers to currently deduct rental losses even if they have no passive income. To be eligible for the real estate professional exception: You must spend more than 750 hours during the year delivering personal services in real estate activities in which you materially participate, and Those hours must be more than half the time you spend delivering personal services (in other words, working) during the year. If you can clear these hurdles, you qualify as a real estate professional. The next step is determining if you have one or more rental properties in which you materially participate. If you do, losses from those properties are treated as non-passive losses that you can generally deduct in the current year. Here’s how to pass the three easiest material participation tests for a rental real estate activity: Spend more than 500 hours on the activity during the year. Spend more than 100 hours on the activity during the year and make sure no other individual spends more time than you. Make sure the time you spend on the activity during the year constitutes substantially all the time spent by all individuals. If you don’t qualify Obviously, not everyone can pass the tests to be a real estate professional. Thankfully, some other exceptions may potentially allow you to treat rental real estate losses as currently deductible non-passive losses. These include the: Small landlord exception. If you qualify for this exception, you can treat up to $25,000 of rental real estate loses as non-passive. You must own at least 10% of the property generating the loss and actively participate with respect to that property. Properties owned via limited partnerships don’t qualify for this exception. To pass the active participation test, you don’t need to do anything more than exercise management control over the property in question. This could include approving tenants and leases or authorizing maintenance and repairs. Be aware that this exception is phased out between adjusted gross incomes (AGIs) of $100,000 and $150,000. Seven-day average rental period exception. When the average rental period for a property is seven days or less, the activity is treated as a business activity. If you can pass one of the material participation tests, losses from the activity are non-passive. 30-day average rental period exception. The activity is treated as a business activity when the average rental period for a property is 30 days or less and significant personal services are provided to customers by or on behalf of you as the property owner. If you can pass one of the material participation tests, losses from the activity are non-passive. Utilize all tax breaks As you can see, various taxpayer-friendly rules apply to owners of rental real estate, including the exceptions to the PAL rules covered here. We can help you take advantage of all available rental real estate tax breaks. © 2025
With the federal gift and estate tax exemption amount set at $13.99 million for 2025, most people won’t be liable for these taxes. However, capital gains tax on inherited assets may cause an unwelcome tax bite. The good news is that the stepped-up basis rules can significantly reduce capital gains tax for family members who inherit your assets. Under these rules, when your loved one inherits an asset, the asset’s tax basis is adjusted to the fair market value at the time of your death. If the heir later sells the asset, he or she will owe capital gains tax only on the appreciation after the date of death rather than on the entire gain from when you acquired it. Primer on capital gains tax When assets such as securities are sold, any resulting gain generally is a taxable capital gain. The gain is taxed at favorable rates if the assets have been owned for longer than one year. The maximum tax rate on a long-term capital gain is 15% but increases to 20% for certain high-income individuals. Conversely, a short-term capital gain is taxed at ordinary income tax rates as high as 37%. Gains and losses are accounted for when filing a tax return, so high-taxed gains may be offset wholly or partially by losses. The amount of a taxable gain is equal to the difference between the basis of the asset and the sale price. For example, if you acquire stock for $10,000 and then sell it for $50,000, your taxable capital gain is $40,000. These basic rules apply to capital assets owned by an individual and sold during his or her lifetime. However, a different set of rules applies to inherited assets. How stepped-up basis works When assets are passed on through inheritance, there’s no income tax liability until the assets are sold. For these purposes, the basis for calculating gain is “stepped up” to the value of the assets on the date of your death. Thus, only the appreciation in value since your death is subject to tax because the individual inherited the assets. The appreciation during your lifetime goes untaxed. Securities, artwork, bank accounts, business interests, investment accounts, real estate and personal property are among the assets affected by the stepped-up basis rules. However, these rules don’t apply to retirement assets such as 401(k) plans or IRAs. To illustrate the benefits, let’s look at a simplified example. Dan bought XYZ Corp. stock 10 years ago for $100,000. In his will, he leaves all the XYZ stock to his daughter, Alice. When Dan dies, the stock is worth $500,000. Alice’s basis is stepped up to $500,000. When Alice sells the stock two years later, it’s worth $700,000. She must pay the maximum 20% rate on her long-term capital gain. On these facts, Alice has a $200,000 gain. With the 20% capital gains rate, she owes $40,000. Without the stepped-up basis, her tax on the $600,000 gain would be $120,000. What happens if an asset declines in value after the deceased acquired it? The adjusted basis of the asset the individual inherits is still the value on the date of death. This could result in a taxable gain on a subsequent sale if the value rebounds after death, or a loss if the asset’s value continues to decline. Turn to us for help Without the stepped-up basis rules, your beneficiaries could face much higher capital gains taxes when they sell their inherited assets. If you have questions regarding these rules, please contact us. © 2025
Financial statements can fascinate accountants, investors and lenders. However, for business owners, they may not be real page-turners. The truth is each of the three parts of your financial statements is a valuable tool that can guide you toward reasonable, beneficial business decisions. For this reason, it’s important to get comfortable with their respective purposes. The balance sheet The primary purpose of the balance sheet is to tally your assets, liabilities and net worth, thereby creating a snapshot of your business’s financial health during the statement period. Net worth (or owners’ equity) is particularly critical. It’s defined as the extent to which assets exceed liabilities. Because the balance sheet must balance, assets need to equal liabilities plus net worth. If the value of your company’s liabilities exceeds the value of its assets, net worth will be negative. In terms of operations, just a couple of balance sheet ratios worth monitoring, among many, are: Growth in accounts receivable compared with growth in sales. If outstanding receivables grow faster than the rate at which sales increase, customers may be taking longer to pay. They may be facing financial trouble or growing dissatisfied with your products or services. Inventory growth vs. sales growth. If your business maintains inventory, watch it closely. When inventory levels increase faster than sales, the company produces or stocks products faster than they’re being sold. This can tie up cash. Moreover, the longer inventory remains unsold, the greater the likelihood it will become obsolete. Growing companies often must invest in inventory and allow for increases in accounts receivable, so upswings in these areas don’t always signal problems. However, jumps in inventory or receivables should typically correlate with rising sales. Income statement The purpose of the income statement is to assess profitability, revenue generation and operational efficiency. It shows sales, expenses, and the income or profits earned after expenses during the statement period. One term that’s commonly associated with the income statement is “gross profit,” or the income earned after subtracting cost of goods sold (COGS) from revenue. COGS includes the cost of labor and materials required to make a product or provide a service. Another important term is “net income,” which is the income remaining after all expenses — including taxes — have been paid. The income statement can also reveal potential problems. It may show a decline in gross profits, which, among other things, could mean production expenses are rising more quickly than sales. It may also indicate excessive interest expenses, which could mean the business is carrying too much debt. Statement of cash flows The purpose of the statement of cash flows is to track all the sources (inflows) and recipients (outflows) of your company’s cash. For example, along with inflows from selling its products or services, your business may have inflows from borrowing money or selling stock. Meanwhile, it undoubtedly has outflows from paying expenses, and perhaps from repaying debt or investing in capital equipment. Although the statement of cash flows may seem similar to the income statement, its focus is solely on cash. For instance, a product sale might appear on the income statement even though the customer won’t pay for it for another month. But the money from the sale won’t appear as a cash inflow until it’s collected. By analyzing your statement of cash flows, you can assess your company’s ability to meet its short-term obligations and manage its liquidity. Perhaps most importantly, you can differentiate profit from cash flow. A business can be profitable on paper but still encounter cash flow issues that leave it unable to pay its bills or even continue operating. Critical insights You can probably find more exciting things to read than your financial statements. However, you won’t likely find anything more insightful regarding how your company is performing financially. We can help you not only generate best-in-class financial statements, but also glean the most valuable information from them. © 2025
Suppose your adult child or friend needs to borrow money. Maybe it’s to buy a first home or address a cash flow problem. You may want to help by making a personal loan. That’s a nice thought, but there are tax implications that you should understand and take into account. Get it in writing You want to be able to prove that you intended for the transaction to be a loan rather than an outright gift. That way, if the loan goes bad, you can claim a non-business bad debt deduction for the year the loan becomes worthless. For federal income tax purposes, losses from personal loans are classified as short-term capital losses. You can use the losses to first offset short-term capital gains that would otherwise be taxed at high rates. Any remaining net short-term capital losses will offset any net long-term capital gains. After that, any remaining net capital losses can offset up to $3,000 of high-taxed ordinary income ($1,500 if you use married filing separate status). To pass muster with the IRS, your loan should be evidenced by a written promissory note that includes: The interest rate, if any, A schedule showing dates and amounts for interest and principal payments, and The security or collateral, if any. Set the interest rate Applicable federal rates (AFRs) are the minimum short-term, mid-term and long-term rates that you can charge without creating any unwanted tax side effects. AFRs are set by the IRS, and they can potentially change every month. For a term loan (meaning one with a specified final repayment date), the relevant AFR is the rate in effect for loans of that duration for the month you make the loan. Here are the AFRs for term loans made in April of 2025: For a loan with a term of three years or less, the AFR is 4.09%, assuming monthly compounding of interest. For a loan with a term of more than three years but not more than nine years, the AFR is 4.13%. For a loan with a term of more than nine years, the AFR is 4.52%. Key point: These are lower than commercial loan rates, and the same AFR applies for the life of the loan. For example, in April of 2025, you make a $300,000 loan with an eight-year term to your daughter so she can buy her first home. You charge an interest rate of exactly 4.13% with monthly compounding (the AFR for a mid-term loan made in April). This is a good deal for your daughter! Interest rate and the AFR The federal income tax results are straightforward if your loan charges an interest rate that equals or exceeds the AFR. You must report the interest income on your Form 1040. If the loan is used to buy a home, your borrower can potentially treat the interest as deductible qualified residence interest if you secure the loan with the home. What if you make a below-market loan (one that charges an interest rate below the AFR)? The Internal Revenue Code treats you as making an imputed gift to the borrower. This imaginary gift equals the difference between the AFR interest you “should have” charged and the interest you charged, if any. The borrower is then deemed to pay these phantom dollars back to you as imputed interest income. You must report the imputed interest income on your Form 1040. A couple of loopholes can potentially get you out of this imputed interest trap. We can explain the details. Plan in advance As you can see, you can help a relative or friend by lending money and still protect yourself in case the personal loan goes bad. Just make sure to have written terms and charge an interest rate at least equal to the AFR. If you charge a lower rate, the tax implications are not so simple. If you have questions or want more information about this issue, contact us. © 2025
Staying compliant with payroll tax laws is crucial for small businesses. Mistakes can lead to fines, strained employee relationships and even legal consequences. Below are six quick tips to help you stay on track. 1. Maintain organized records Accurate recordkeeping is the backbone of payroll tax compliance. Track the hours worked, wages paid and all taxes withheld. Organizing your documentation makes it easier to verify that you’re withholding and remitting the correct amounts. If you ever face an IRS or state tax inquiry, having clear, detailed records will save time and reduce stress. 2. Understand federal withholding Federal income tax. Employees complete Form W-4 so you can determine how much federal income tax to withhold. The amounts can be calculated using IRS tax tables. FICA taxes (Social Security and Medicare). Your business is responsible for withholding a set percentage from each employee’s wages for Social Security and Medicare, and you must match that amount as an employer. The current tax rate for Social Security is 6.2% for the employer and 6.2% for the employee (12.4% total). Taxpayers only pay Social Security tax up to a wage base limit. For 2025, the wage base limit is $176,100. The current rate for Medicare tax is 1.45% for the employer and 1.45% for the employee (2.9% total). There’s no wage base limit for Medicare tax. All wages are subject to it. 3. Don’t overlook employer contributions Depending on your state and industry, you may need to contribute additional taxes beyond those withheld from employee paychecks. Federal Unemployment Tax Act (FUTA) tax. Employers pay FUTA tax to fund unemployment benefits. State unemployment insurance. Requirements vary by state, so consult your state’s labor department for details. You can also find more resources at the U.S. Department of Labor. 4. Adhere to filing and deposit deadlines Deposit schedules. Your deposit frequency for federal taxes (monthly or semi-weekly) depends on the total amount of taxes withheld. Missing a deadline can lead to penalties and interest charges. Quarterly and annual filings. You must submit forms like the 941 (filed quarterly) and the 940 (filed annually for FUTA tax) on time, with any tax due. Under the Trust Fund Recovery Penalty, a “responsible person” who willfully fails to withhold or deposit employment taxes can be held personally liable for a steep penalty. The penalty is equal to the full amount of the unpaid trust fund tax, plus interest. For this purpose, a responsible person can be an owner, officer, partner or employee with authority over the funds of the business. 5. Stay current with regulatory changes Tax laws are never static. The IRS and state agencies update requirements frequently, and new legislation can introduce additional obligations. A proactive approach helps you adjust payroll systems or processes in anticipation of changes, rather than scrambling at the last minute. 6. Seek professional advice No matter how meticulous your business is, payroll taxes can be complex. We can provide guidance specific to your industry and location. We can help you select the right payroll system, calculate employee tax withholding, navigate multi-state filing requirements and more. In short, we can help ensure that every aspect of your payroll is set up correctly. © 2025
If your estate planning goals include distributing your wealth while also encouraging specific behaviors or achievements among your heirs, using an incentive trust might be right for your plan. Unlike a traditional trust, which distributes assets according to a set schedule or upon a beneficiary reaching a certain age, an incentive trust includes specific conditions that must be met before distributions are made. These conditions can align with your values, such as pursuing higher education, maintaining gainful employment, engaging in charitable work or avoiding destructive behaviors like substance abuse. Setting guidelines Essentially, an incentive trust sets guidelines for how a beneficiary becomes eligible to benefit from the trust. Distributions can, for instance, be contingent on a beneficiary graduating from high school, earning certain grades, or enrolling in or graduating from college. Then again, perhaps you’re more concerned about a beneficiary’s physical well-being than his or her intellectual one. In this case, you might structure an incentive trust to disallow payouts if the beneficiary indulges in harmful or illegal behavior, such as abusing alcohol or using illegal drugs. Going this route will, however, require that you appoint a trustee who knows the issues and who can monitor the beneficiary’s activities and enforce the provision. From a business perspective, an incentive trust can include provisions that reward your beneficiary for becoming involved in the family business or mapping out a career path of his or her own. Build in matching charitable donations and you can help the beneficiary develop an appreciation for community service and volunteerism. Minding the risks Incentive trusts come with some inherent risks. If the provisions are too restrictive, or simply don’t suit the beneficiary in question, the incentive may backfire. For instance, say Jane, a 20-year-old college dropout, learns that her Aunt Lucy has provided her with $500,000 in trust. However, Jane can withdraw the trust funds only if she returns to college and earns a bachelor’s degree. The problem is, Jane never really liked Aunt Lucy, who often scolded her for making bad choices and meddled in her life. And Jane didn’t really like college either. As a result, the trust only furthers Jane’s resolve to never return to college — no matter how much money she loses. In other cases, the beneficiary may force him- or herself to complete a degree but wind up living an unfulfilled life because he or she had other dreams in mind. Or you might end up “motivating” a beneficiary to work for the family business when he or she really doesn’t want to, which, in turn, could hurt the company. Communicating with clarity A big part of making sure an incentive trust will work is clearly communicating with your trustee. He or she should generally have broad discretionary powers because, as time passes, a beneficiary’s circumstances might change. For example, a student might develop learning or other disabilities that prevent him or her from achieving the academic goals set by the incentive provisions. In general, the trust should provide enough of a safety net that, if the beneficiary fails to achieve the trust’s goals, he or she will still be able to support him- or herself. The incentive provisions can apply to only a part of the trust assets. The trust should also provide for giving some or all the funds to a secondary beneficiary, in case the primary beneficiary fails to meet the stated goals or dies. Contact us if you have questions regarding an incentive trust. © 2025
The twisty journey of the Corporate Transparency Act’s (CTA’s) beneficial ownership information (BOI) reporting requirements has taken yet another turn. Following a February 18, 2025, ruling by a federal district court (Smith v. U.S. Department of the Treasury), the requirements are technically back in effect for covered companies. But a short time later, the U.S. Department of the Treasury announced it would suspend enforcement of the CTA against domestic reporting companies and U.S. citizens. Here are the latest developments and what they may mean for you. Latest announcement On March 2, the Treasury Department stated the following in a press release: “The Treasury Department is announcing today that, with respect to the Corporate Transparency Act, not only will it not enforce any penalties or fines associated with the beneficial ownership information reporting rule under the existing regulatory deadlines, but it will further not enforce any penalties or fines against U.S. citizens or domestic reporting companies or their beneficial owners after the forthcoming rule changes take effect either. The Treasury Department will further be issuing a proposed rulemaking that will narrow the scope of the rule to foreign reporting companies only. Treasury takes this step in the interest of supporting hard-working American taxpayers and small businesses and ensuring that the rule is appropriately tailored to advance the public interest.” The reinstatement On January 23, 2025, the U.S. Supreme Court granted the government’s motion to stay, or halt, a nationwide injunction issued by a federal court in Texas (Texas Top Cop Shop, Inc. v. Bondi). But a separate nationwide order from the Smith court was still in place until February 18, 2025, so the reporting requirements remained on hold. With that order now stayed, the new deadline to file a BOI report with the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) is technically March 21, 2025. Reporting companies that were previously given a reporting deadline later than this deadline are required to file their initial BOI report by the later deadline. For example, if a company’s reporting deadline is in April 2025 because it qualifies for certain disaster relief extensions, it’s allowed to follow the April deadline rather than the March deadline. Important: Due to ongoing litigation in another federal district court (National Small Business United v. Yellen), members of the National Small Business Association as of March 1, 2024, aren’t currently required to report their BOI to FinCEN. BOI requirements in a nutshell The BOI requirements are intended to help prevent criminals from using businesses for illicit activities, such as money laundering and fraud hidden through shell companies or other opaque ownership structures. Companies covered by the requirements are referred to as “reporting companies.” Such businesses have been reporting certain identifying information on their beneficial owners. FinCEN estimated that approximately 32.6 million companies would be affected by the reporting rules in the first year. Beneficial owners are defined as natural persons who either directly or indirectly 1) exercise substantial control over a reporting company, or 2) own or control at least 25% of a reporting company’s ownership interests. Individuals who exercise substantial control include senior officers, important decision makers, and those with authority to appoint or remove certain officers or a majority of the company’s governing body. For each beneficial owner, under the requirements, a reporting company must provide the individual’s: Name, Date of birth, Residential address, and Identifying number from an acceptable identification document, such as a passport or U.S. driver’s license, and the name of the issuing state or jurisdiction of the identification document. A reporting company also must submit an image of the identification document. BOI reporting isn’t an annual obligation. However, companies must report any changes to the required information previously reported about their businesses or beneficial owners. Updated reports are due no later than 30 days after the date of the change. Stay tuned The temporary stay of the injunction in the Smith case applies only until the U.S. Court of Appeals for the Fifth Circuit rules on FinCEN’s appeal of the lower court’s original injunction order in that case. The appeal was filed on February 5, 2025. Additional challenges are also proceeding in other courts. It’s also possible that Congress will pass legislation to repeal the BOI requirements. Meanwhile, the March 2 Treasury announcement appears to ease compliance concerns for domestic companies. However, FinCEN will continue to enforce requirements for foreign reporting companies. Contact us if you have questions about your situation. © 2025