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HEATHER DOERING 11/26/24 HEATHER DOERING 11/26/24

It’s not too late to trim your 2024 taxes

As the end of the year draws near, savvy taxpayers look for ways to reduce their tax bills. This year, the sense of urgency is higher for many because of some critical factors.

Indeed, many of the Tax Cuts and Jobs Act provisions are set to expire at the end of 2025, absent congressional action. However, with President-Elect Donald Trump set to take power in 2025 and a unified GOP Congress, the chances have greatly improved that many provisions will be extended or made permanent. With these factors in mind, here are tax-related strategies to consider before year end.

Bunching itemized deductions

For 2024, the standard deduction is $29,200 for married couples filing jointly, $14,600 for single filers, and $21,900 for heads of households. “Bunching” various itemized deductions into the same tax year can offer a pathway to generating itemized deductions that exceed the standard deduction.

For example, you can claim an itemized deduction for medical and dental expenses that are greater than 7.5% of your adjusted gross income (AGI). Suppose you’re planning to have a procedure in January that will come with significant costs not covered by insurance. In that case, you may want to schedule it before year end if it’ll push you over the standard deduction when combined with other itemized deductions.

Making charitable contributions

Charitable contributions can be a useful vehicle for bunching. Donating appreciated assets can be especially lucrative. You avoid capital gains tax on the appreciation and, if applicable, the net investment income tax (NIIT).

Another attractive option for taxpayers age 70½ or older is making a qualified charitable distribution (QCD) from a retirement account that has required minimum distributions (RMDs). For 2024, eligible taxpayers can contribute as much as $105,000 (adjusted annually for inflation) to qualified charities. This removes the distribution from taxable income and counts as an RMD. It doesn’t, however, qualify for the charitable deduction. You can also make a one-time QCD of $53,000 in 2024 (adjusted annually for inflation) through a charitable remainder trust or a charitable gift annuity.

Leveraging maximum contribution limits

Maximizing contributions to your retirement and healthcare-related accounts can reduce your taxable income now and grow funds you can tap later. The 2024 maximum contributions are:

$23,000 ($30,500 if age 50 or older) for 401(k) plans.
$7,000 ($8,000 if age 50 or older) for traditional IRAs.
$4,150 for individual coverage and $8,300 for family coverage, plus an extra $1,000 catch-up contribution for those age 55 or older for Health Savings Accounts.

Also keep in mind that, beginning in 2024, contributing to 529 plans is more appealing because you can transfer unused amounts to a beneficiary’s Roth IRA (subject to certain limits and requirements).

Harvesting losses

Although the stock market has clocked record highs this year, you might find some losers in your portfolio. These are investments now valued below your cost basis. By selling them before year end, you can offset capital gains. Losses that are greater than your gains for the year can offset up to $3,000 of ordinary income, with any balance carried forward.

Just remember the “wash rule.” It prohibits deducting a loss if you buy a “substantially similar” investment within 30 days — before or after — the sale date.

Converting an IRA to a Roth IRA

Roth IRA conversions are always worth considering. The usual downside is that you must pay income tax on the amount you transfer from a traditional IRA to a Roth. If you expect your income tax rate to increase in 2026, the tax hit could be less now than down the road.

Regardless, the converted funds will grow tax-free in the Roth, and you can take qualified distributions without incurring tax after you’ve had the account for five years. Moreover, unlike other retirement accounts, Roth IRAs carry no RMD obligations.

In addition, Roth accounts allow tax- and penalty-free withdrawals at any time for certain milestone expenses. For example, you can take a distribution for a first-time home purchase (up to $10,000), qualified birth or adoption expenses (up to $5,000 per child) or qualified higher education expenses (no limit).

Timing your income and expenses

The general timing strategy is to defer income into 2025 and accelerate deductible expenses into 2024, assuming you won’t be in a higher tax bracket next year. This strategy can reduce your taxable income and possibly help boost tax benefits that can be reduced based on your income, such as IRA contributions and student loan deductions.

If you’ll likely land in a higher tax bracket in the near future, you may want to flip the general strategy. You can accelerate income into 2024 by, for example, realizing deferred compensation and capital gains, executing a Roth conversion, or exercising stock options.

Don’t delay

With the potential for major tax changes on the horizon, now is the time to take measures to protect your bottom line. We can help you make the right moves for 2024 and beyond.

HEATHER DOERING 11/26/24 HEATHER DOERING 11/26/24

Should a married couple use a joint trust or separate trusts?

There are many benefits of including a revocable trust in your estate plan. This trust type allows you to minimize probate expenses, keep your financial affairs private and provide for the management of your assets in the event you become incapacitated. Importantly, they offer flexibility: You’re free to amend the terms of the trust or even revoke it altogether at any time.

If you’re married, you and your spouse must decide whether to use a joint trust or separate trusts. The right choice depends on your financial and family circumstances, applicable state law, and other factors.

Maintaining a joint trust is simpler

If you’re comfortable with your spouse inheriting your combined assets (and vice versa), a joint trust can be less complex to set up and administer than separate trusts. Funding the trust is a simple matter of transferring assets into it and avoids the need to divide assets between two separate trusts.

In addition, during your lifetimes, you and your spouse have equal control over the trust’s assets, which can make it easier to manage and conduct transactions involving the assets. On the other hand, separate trusts may be the way to go for spouses who aren’t comfortable sharing control of their combined assets.

Separate trusts may provide greater asset protection

If shielding assets from creditors is a concern, separate trusts usually offer greater protection. With a joint trust, if a creditor obtains a judgment against one spouse, all trust assets may be at risk. A spouse’s trust is generally protected from the other spouse’s creditors.

Also, when one spouse dies, his or her trust becomes irrevocable, making it more difficult for creditors of either spouse to reach the trust assets. Keep in mind that the degree of asset protection a trust provides depends on the type of debt involved, applicable state law and the existence of a prenuptial agreement.

Factor in taxes

For most couples today, federal gift and estate taxes aren’t a concern. This is because they enjoy a combined gift and estate tax exemption of more than $27 million in 2024 and 2025.

However, if a couple’s wealth exceeds the exemption amount, or if they live in a state where an estate or inheritance tax kicks in at lower asset levels, separate trusts offer greater opportunities to avoid or minimize these taxes. For example, some states have exemption amounts as low as $1 million or $2 million. In these states, separate trusts can be used to make the most of each spouse’s exemption amount and minimize exposure to death taxes.

It’s also important to consider income tax. As previously mentioned, when one spouse dies, his or her trust becomes irrevocable. That means filing tax returns for the trust each year and, to the extent trust income is accumulated in the trust, paying tax at significantly higher trust tax rates.

A joint trust remains revocable after the first spouse’s death (it doesn’t become irrevocable until both spouses have passed). In this case, income is taxed to the surviving spouse at his or her individual tax rate.

Review the pros and cons

Joint and separate trusts each have advantages and disadvantages. Contact us to determine which is right for you. We’d be pleased to review your circumstances and help you make a final decision.

HEATHER DOERING 11/26/24 HEATHER DOERING 11/26/24

Businesses can still cut their 2024 taxes

President-Elect Trump will take power early next year along with a unified GOP Congress. However, it’s still unknown how the tax landscape will change in the coming years. The good news is that businesses have several avenues to explore before year end to trim their federal tax liability for 2024.

Pass-through entity tax deduction

About three dozen states offer some form of the pass-through entity (PTE) tax deduction on the individual tax returns of owners of pass-through entities, such as partnerships, S corporations and limited liability companies. These deductions are intended to bypass the Tax Cuts and Jobs Act’s $10,000 limit on the state and local taxes (SALT) deduction.

Details vary by state, but if available, PTE tax deductions typically allow an entity to pay a mandatory or elective entity-level state tax on its income and claim a business expense deduction for the full amount. In turn, partners, shareholders or members receive a full or partial tax credit, deduction, or exclusion on their individual tax returns, without eating into their limited SALT deduction.

Qualified business income deduction

The qualified business income (QBI) deduction allows owners of pass-through entities, including sole proprietors, to deduct up to 20% of their QBI. The deduction is set to expire in 2026, at which point income would be taxed at owners’ individual income tax rates. (However, with Republicans in control of the White House, the Senate and the House of Representatives beginning in 2025, tax experts don’t expect the deduction to expire.)

To make the most of the QBI deduction for 2024, consider increasing your W-2 deductions or purchasing qualified property. You also can avoid applicable income limits on the deduction through timing tactics.

Income and expense timing

Timing the receipt of income and payment of expenses can cut your taxes by reducing your taxable income. For example, if you expect to be in the same or a lower income tax bracket next year and use the cash method of accounting, consider delaying your customer billing to push payment into 2025. Accrual method businesses can delay shipments or services until early January for the same effect. Similarly, you could pre-pay bills and other liabilities due in 2025.

Bonuses often make a prime candidate for careful timing. A closely held C corporation might want to reduce its income by paying bonuses before year-end. This applies to cash-method pass-through businesses, too. Accrual method businesses generally can deduct bonuses in 2024 if they’re paid to nonrelatives within 2½ months after the end of the tax year.

Asset purchases

There’s still time to make asset purchases and place them into service before year-end. You can then deduct a big chunk of the purchase price, if not the entire amount, for 2024.

The Section 179 expensing election allows 100% expensing of eligible assets in the year they’re placed in service. Eligible assets include new and used machinery, equipment, certain vehicles, and off-the-shelf computer software. You also can immediately expense qualified improvement property (QIP). This includes interior improvements to your facilities and certain improvements to your roof, HVAC, and fire protection and security systems.

Under Sec. 179, in 2024, the maximum amount you can deduct is $1.22 million. The deduction begins phasing out on a dollar-per-dollar basis when qualifying purchases exceed $3.05 million. The amount is also limited to the taxable income from your business activity, though you can carry forward unused amounts or apply bonus depreciation to the excess.

For this year, bonus depreciation allows you to deduct 60% of the purchase price of tangible property with a Modified Accelerated Cost Recovery System period of no more than 20 years (such as computer systems, office furniture and QIP). The allowable first-year deduction will drop by 20% per subsequent year, zeroing out in 2027, absent congressional action. Bonus depreciation isn’t subject to a taxable income limit, so it can create net operating losses (NOLs). Under the TCJA, NOLs can be carried forward only and are subject to an 80% limitation.

Important: Depreciation-related deductions can reduce QBI deductions, making a cost-benefit analysis vital.

Research credit

The research credit (often referred to as the ‘research and development,’ ‘R&D’ or ‘research and experimentation’ credit) is a frequently overlooked opportunity. Many businesses mistakenly assume they’re ineligible, but it’s not just for technology companies or industries known for innovation and experimentation — or for companies that show a profit. It may be worth investigating whether your business has engaged in qualified research this year or in previous years.

The credit generally equals the sum of 20% of the excess of a business’s qualified research expenses for the tax year over a base amount. The Inflation Reduction Act made the research credit even more valuable for qualified small businesses. It doubled the credit amount such businesses can apply against their payroll taxes, from $250,000 to $500,000.

Take action

No business wants to pay more taxes than it needs to. We can help ensure you’re doing everything possible to minimize your taxes with these opportunities and others.

HEATHER DOERING 11/25/24 HEATHER DOERING 11/25/24

Ensure you’re properly documenting your charitable donations

If you’re charitably inclined and itemize deductions, you may be entitled to deduct charitable donations. The key word is “may” because there are requirements you must meet. One such requirement is the need to substantiate charitable gifts with proper documentation that will satisfy the IRS. Indeed, a charitable gift may be legitimate, but if the taxpayer fails to substantiate it properly, the deduction may be lost.

Making cash donations

Cash donations, regardless of the amount, must be substantiated with one of the following:

Bank records. These can include bank statements, electronic fund transfer receipts, canceled checks (including scanned images of both sides of a check from the bank’s website) or credit card statements.

Written communication. This can be in the form of a letter or email from the charitable organization, showing the donee’s name, the contribution date and the amount. A blank pledge card furnished by the donee isn’t sufficient.

In addition to the above, cash donations of $250 or more require a contemporaneous written acknowledgment (CWA) from the donee that details the following:

The contribution amount, and
A description and good faith estimate of the value of any goods or services provided in consideration (in whole or in part) for the donation.

You can use a single document to meet both the written communication and CWA requirements. For the CWA to be “contemporaneous,” you must obtain it by the earlier of 1) the extended due date of your tax return for the year the donation is made, or 2) the date you file your return.

Making noncash donations

You must substantiate noncash donations of less than $250 with a receipt from the donee showing the donee’s name and address, the date of the contribution, and a detailed description of the property. For noncash donations of $250 or more, there are additional substantiation requirements depending on the size of the donation:

Donations of $250 to $500 require a CWA.
Donations over $500 but not more than $5,000 require a CWA and you must complete Section A of Form 8283 and file it with your tax return. Section A includes a description of the property, its fair market value and the method of determining that value.
Donations over $5,000 require all the above, plus you must obtain a qualified appraisal of the property and complete Section B of Form 8283 (signed by the appraiser and the donee). There may be additional requirements in certain situations. For instance, if you donate art of $20,000 or more, or any donation valued over $500,000, you must attach a copy of the appraisal to your return. Note: No appraisal is required for donations of publicly traded securities.

Additional rules may apply to certain types of property, such as vehicles, clothing, household items or securities.

The rules are complex

The regulations on substantiating charitable donations are complex, and one mistake can cause you to lose valuable tax deductions. When in doubt, contact us to ensure you follow all the rules correctly.

HEATHER DOERING 11/25/24 HEATHER DOERING 11/25/24

Now what? Assessing the likely tax impacts of the 2024 election

President-Elect Donald Trump will return to the White House in 2025 — a year that already was expected to see significant activity on the federal tax front. A projected unified GOP Congress is poised to help him notch early legislative tax victories. (Republicans have won back a majority in the U.S. Senate and are projected to retain a majority in the U.S. House of Representatives.) The most obvious legislative win will likely be the extension and expansion of Trump’s signature 2017 tax legislation, the Tax Cuts and Jobs Act (TCJA).

While Trump didn’t issue detailed tax policies during the campaign, he briefly proposed several measures on the trail that could be included in a TCJA update or other law. Let’s take a closer look at what might be on the table for business and individual taxpayers in 2025 and beyond.

The TCJA’s ticking clock

The TCJA brought wide-ranging changes to the federal tax landscape, including:

A 21% corporate income tax rate,
Lower marginal tax rates for individuals,
A higher standard deduction,
The doubling of the Child Tax Credit for some parents,
The creation of a qualified business income deduction for pass-through entities, and
The doubling of the federal gift and estate tax exemption.

Although most of the corporate provisions are permanent, many TCJA provisions regarding individual taxes, as well as the doubled gift and estate tax exemption, are scheduled to expire at the end of 2025. Trump has endorsed extending those tax breaks. The nonpartisan Congressional Budget Office has estimated that the 10-year cost of permanently extending the expiring provisions will ring in at $4.6 trillion.

Additional proposals affecting business taxes

During the campaign, Trump proposed several tax changes that businesses would welcome. For example, he would further reduce the corporate tax rate, to 15%, for companies that make their products in the United States.

He also has called for two changes that may have bipartisan support. Trump would allow companies to immediately expense their research and experimentation costs, rather than capitalize and amortize them, and return to 100% first-year bonus depreciation for qualifying capital investments. Under the TCJA, the allowable first-year bonus deduction is 60% for 2024, and for 2025 it’s slated to be 40%. Without congressional action, it will drop to zero in 2027.

In addition, Trump has spoken of doubling the ceiling on the Sec. 179 expensing deduction for small businesses’ qualifying investments in equipment. The TCJA permanently capped the deduction at $1 million, adjusted annually for inflation ($1.22 million for 2024). The deduction is subject to a phaseout when the cost of qualifying purchases exceeds $2.5 million ($3.05 million for 2024, adjusted for inflation).

Additional proposals affecting individual taxes

One TCJA provision that Trump has expressed second thoughts about is the $10,000 cap on the state and local tax deduction. The cap, which hits taxpayers hardest in states with high property taxes, is set to expire after 2025. Congress could just let it expire or even terminate it early, depending on how quickly lawmakers can move tax legislation.

A TCJA expansion or additional legislation could incorporate Trump’s promises to eliminate taxes on tips for restaurant and hospitality workers. (It’s unclear if he was referring only to federal income taxes or also payroll taxes.) Without limitations, such a provision could benefit individuals who restructure their compensation to reduce their tax bills by, for example, classifying bonuses as tips.

Trump has also proposed excluding overtime pay and Social Security payments from taxation. It’s worth noting that a Trump administration may reduce the number of employees eligible for overtime. And exempting Social Security benefits would shrink the funding for both that program and Medicare. In addition, the president-elect has proposed a new deduction for interest on car loans for vehicles manufactured in the United States and a reduction in taxes for Americans living abroad.

Trump also said he’d consider making police officers, firefighters, active duty military members and veterans exempt from paying federal taxes. And in a social media post, he wrote that if he won, hurricane victims could deduct the cost of a home generator, retroactive to September 1, 2024.

The threat of tariffs

Trump has repeatedly pledged to impose a baseline tariff of 10% on imported goods, with a 60% tariff on imports from China and possibly a higher tariff on imports from Mexico. Taxpayers likely will face higher prices as a result.

Although Trump routinely claims that the exporting countries will bear the cost of the tariffs, history suggests otherwise. The more common scenario is that U.S. companies that buy imported goods pass the tariffs along to their customers, opening the door for their competitors that don’t purchase imports to similarly raise their prices. Some major U.S. companies and the National Retail Federation have already warned that if Trump’s tariff proposals come to fruition, higher prices on many products may follow.

Rollback of the IRA

The GOP has had the Inflation Reduction Act (IRA) in its crosshairs since the law first passed with zero Republican votes. Trump has vowed to cut unspent funds allocated for the IRA’s tax incentives for clean energy projects. He also may want to eliminate the business and individual tax credits going forward.

But a significant number of clean energy manufacturing projects that rely on the credits are planned or underway in Republican districts and states, which could give the GOP pause. In fact, a group of Republican legislators signed a letter to Speaker of the House Mike Johnson this past August, opposing a full repeal of the IRA. Trump could instead advocate for keeping some of the tax credits or restricting them, for example, through tighter eligibility requirements.

Stay tuned

While it’s always dicey to assume that candidates can deliver on big campaign promises, one thing is certain — 2025 will be a critical year for tax legislation. In addition to the issues discussed above, so-called “tax extenders” for various temporary business and individual tax provisions will come up for debate. We’ll keep you apprised of the developments that could affect your tax liability.

HEATHER DOERING 11/25/24 HEATHER DOERING 11/25/24

Business owners: Be sure you’re properly classifying cash flows

Properly prepared financial statements provide a wealth of information about your company. But the operative words there are “properly prepared.” Classifying information accurately isn’t always easy — especially as the business grows and its financial transactions become more complex.

Case in point: your statement of cash flows. Customarily, it shows the sources (money entering) and uses (money exiting) of cash. That may sound simple enough, but optimally classifying different cash flows can be complicated.

Under U.S. Generally Accepted Accounting Principles (GAAP), statements of cash flows are typically organized into three sections: 1) cash flows from operating activities, 2) cash flows from investing activities, and 3) cash flows from financing activities. Let’s take a closer look at each.

Operating activities

This section of the statement of cash flows usually starts with accrual-basis net income. Then, it’s adjusted for items related to normal business operations. Examples include income taxes; stock-based compensation; gains or losses on asset sales; and net changes in accounts receivable, inventory, prepaid assets, accrued expenses and payables.

The cash flows from operating activities section is also adjusted for depreciation and amortization. These noncash expenses reflect wear and tear on equipment and other fixed assets.

The bottom of the section shows the cash used in producing and delivering goods or providing services. Several successive years of negative operating cash flows can signal that a business is struggling and may be headed toward liquidation or a forced sale.

Investing activities

If your company buys or sells property, equipment or marketable securities, such transactions should show up in the cash flows from investing activities section. It reveals whether a business is reinvesting in its future operations — or divesting assets for emergency funds.

Business acquisitions and disposals are generally reported in this section, too. However, contingent payments from an acquisition are classified as cash flows from investing activities only if they’re paid soon after the acquisition date. Later contingent payments are classified as financing outflows. Any payment over the liability is classified as an operations outflow.

Financing activities

This third section of the statement of cash flows shows your company’s ability to obtain funds from either debt from lenders or equity from investors. It includes new loan proceeds, principal repayments, dividends paid, issuances of securities or bonds, additional capital contributions by owners, and stock repurchases.

Noncash transactions are reported in a separate schedule at the bottom of the statement of cash flows or in a narrative footnote disclosure. For example, suppose a business buys equipment using loan proceeds. In such a case, the transaction would typically appear at the bottom of the statement rather than as a cash outflow from investing activities and an inflow from financing activities.

Other examples of noncash financing transactions are:

Issuing stock to pay off long-term debt, and
Converting preferred stock to common stock.

In those two instances and others, no cash changes hands. Nonetheless, financial statement users, such as investors and lenders, want to know about and understand these transactions.

Help is available

As you can see, deciding how to classify some transactions to comply with GAAP can be tricky. Whenever confusion or uncertainty arises, give us a call. We can work with you and your accounting team to make the best decision. We can also help you improve your financial reporting in other ways.

HEATHER DOERING 11/14/24 HEATHER DOERING 11/14/24

Taking the long view of long-term care insurance

The U.S. Department of Health and Human Services reports that roughly 70% of Americans age 65 or over will require some form of long-term care (LTC). How will you pay for these services?

For many people, the possibility that they’ll incur significant LTC expenses is one of the biggest threats to their estate plans. These expenses — such as for nursing home stays or home health aides — can quickly deplete funds you’ve set aside for retirement or to provide for your family. A practical solution is to purchase an LTC insurance policy.

What does LTC insurance cover?

Most LTC policies operate like some other forms of insurance that you’re probably familiar with, such as homeowners or auto insurance. The policy’s terms control the amount of benefits you’ll receive daily or monthly, up to a stated lifetime maximum or number of years. This is predicated on the type of care provided, for example, in-home care or a nursing home. You may be able to add to your coverage over time.

Typically, you’re subject to a waiting period of 30 to 180 days before you’re eligible for benefits (90 days is the norm). Generally, the shorter the waiting period, the more expensive the policy. Similarly, you can expect to pay more for policies with higher maximum benefits.

LTC policies typically provide benefits when you can no longer perform several basic activities of daily living — including bathing, dressing, eating, transferring and managing incontinence — or if you’re cognitively impaired. Once that occurs and you start receiving benefits, your premiums cease. However, if you stop paying on the policy first, you usually forfeit any future benefits. Note that coverage may be affected by several factors. For example, you may not qualify for coverage because of a preexisting condition.

Any factors to take into account?

Unlike homeowners and auto insurance, you typically have only one good shot at buying LTC insurance. Should you take the plunge, there are several key factors to consider, including your:

Financial situation. Do you have the wherewithal to pay for long-term care assistance without jeopardizing your overall financial situation? Take an objective look at your entire financial picture.

Estate planning objectives. An LTC policy may make sense if preserving wealth to pass on to your family is a primary estate planning objective.

Age and health. As you continue to age, the cost of LTC insurance premiums will increase. Also, you may have to pay more if you have a preexisting condition (if you can secure coverage at all). Apply for a policy as soon as possible and check for more lenient policies at a relatively reasonable cost.

There might be ways of obtaining coverage without buying a policy privately. For instance, you may be able to participate in a group policy offered by your employer or from another affiliation. This can be especially helpful if health conditions would otherwise cause insurers to hike your premiums or deny you coverage.

Assess your options

To determine whether an LTC policy is right for you, compare the costs, benefits and tax implications of various LTC insurance options. Your advisor can assess your specific needs and help you make an informed decision.

HEATHER DOERING 11/14/24 HEATHER DOERING 11/14/24

Marketing your B2B company via the right channels

For business-to-business (B2B) companies, effective marketing begins with credible and attention-grabbing messaging. But you’ve also got to choose the right channels. Believe it or not, some “old school” approaches remain viable. And of course, your B2B digital marketing game must be strong.

Press releases

It doesn’t get much more old school than this. Launching a new product? Introducing a new service? Opening a new location? When your company has big news, getting the word out with a press release can still pay off.

Be sure to follow best practices when writing them. Include the topic’s who, what, where, when and why. Add a quote of at least two sentences from you (the business owner) or another leadership team member. If appropriate and feasible, also incorporate customer or industry expert testimonials.

In addition, maintain an updated contact list of press release recipients. Customarily, these include media outlets, business news aggregators, key customers, prospects, investors and other stakeholders.

Authoritative articles

Do you know of one or more industry publications that would be a good fit for sharing your knowledge and experience? If so, and you’re comfortable with the written word, submit an idea for an article.

Getting published in the right places can position you (or a suitable staff member) as a technical expert in your field. For example, write an article explaining why the types of products or services that your company provides are more important than ever in your industry. Or write one on the technologies that are most affecting your industry and what you expect the future to look like.

But be careful: Publications generally won’t accept content that comes off as advertising. Write articles as objectively as possible with only subtle mentions of your company’s offerings.

There are other options, too. You could pen an opinion piece on how a legislative proposal will likely affect your industry. Or you might write a tips-oriented article that lends itself to an online publication looking for short, easy-to-read content. For any type of article, insist on attribution for you and your business.

Digital marketing

Over the last couple of decades, digital marketing has taken the business world by storm. This holds true for B2B companies as well. Virtual channels are many, with possibilities including your website, blogs, various social media platforms and podcasts.

In fact, there are so many digital avenues you could travel down, you may find the concept overwhelming. There’s also a high risk of burnout. Many businesses add blogs to their websites or open social media accounts, post a few things, and then disappear into the ether. That’s not a good look for companies trying to establish themselves as industry experts.

To be successful at digital marketing, or even just to keep your website up to date, create an editorial calendar and stick to it. Devise a strategy to push out quality content regularly on your optimal channels. It can be authored by you, one or more qualified staff members, or a content marketing provider.

Critical role

Companies that provide B2B products or services must establish credibility and demonstrate expertise in whatever industry they operate. Marketing plays a critical role in this effort, so choose your channels carefully. We can help you identify, quantify and analyze all your marketing costs.

HEATHER DOERING 11/14/24 HEATHER DOERING 11/14/24

Understand your spouse’s inheritance rights before getting remarried

One of the golden rules of estate planning is to revisit your plan after a significant life event. Such an event may be getting married, having a child, going through a divorce or getting remarried.

If you’re taking a second trip down the aisle, you may have different expectations than when you married the first time, especially when it comes to estate planning. For example, if you have children from a previous marriage, your priority may be to provide for them. You may feel your new spouse should have more limited rights to your assets than your spouse in your first marriage.

Unfortunately, your state’s law may not see it that way. Indeed, in nearly every state, a person’s spouse has certain property rights that apply regardless of the terms of the estate plan. And these rights are the same whether it’s your first marriage or your second or third.

Defining an elective share

Spousal property rights are creatures of state law, so it’s critical to familiarize yourself with the laws in your state to achieve your planning objectives. Many states provide a surviving spouse with an “elective share” of the deceased spouse’s estate, regardless of the terms of his or her will or certain other documents.

Generally, a surviving spouse’s elective share ranges from 30% to 50%, though some states start lower and provide for progressively larger shares as the duration of the marriage increases. Perhaps the most significant variable, with respect to planning, is the definition of assets subject to the surviving spouse’s elective share rights.

In some states, the elective share applies only to the “probate estate” — generally, assets held in the deceased spouse’s name alone that don’t have a beneficiary designation. In other states, it applies to the “augmented estate,” which is the probate estate plus certain nonprobate assets. By understanding how elective share laws apply in your state, you can identify potential strategies for bypassing them.

Transfer assets to a revocable trust

Elective shares are designed to protect surviving spouses from being disinherited. But there may be good reasons for limiting the amount of property that goes to your spouse when you die. For one thing, your spouse may possess substantial wealth in his or her own name. And you may want most of your estate to go to your children from a previous marriage. Or perhaps the bulk of your wealth is tied up in a family business that you want to keep in the family.

Strategies for minimizing the impact of your spouse’s elective share on your estate plan include transferring assets to a revocable trust. In most (but not all) probate-only states, transferring assets to a revocable trust is sufficient to shield them from your spouse’s elective share. In augmented estate jurisdictions, the elective share generally applies to revocable trusts. However, the laws of some states provide that the augmented estate only includes assets transferred to a revocable trust during marriage. In that case, it may be possible to protect assets from the elective share by transferring them to a revocable trust before remarrying.

Seek professional help

State elective share laws are complex and can vary dramatically from state to state. If you’re remarrying, we can evaluate their impact on your estate plan and explore strategies for protecting your assets.

HEATHER DOERING 11/14/24 HEATHER DOERING 11/14/24

How much can you contribute to your retirement plan in 2025? The IRS just revealed the answer

The IRS has issued its 2025 inflation-adjusted contribution amounts for retirement plans in Notice 2024-80. Many retirement-plan-related limits will increase for 2025 — but less than in prior years. Thus, depending on the type of plan you have, you may have limited opportunities to increase your retirement savings.

Type of limitation 2024 limit 2025 limit

Elective deferrals to 401(k), 403(b), 457(b)(2) and 457(c)(1) plans $23,000 $23,500

Annual benefit limit for defined benefit plans $275,000 $280,000

Contributions to defined contribution plans $69,000 $70,000

Contributions to SIMPLEs $16,000 $16,500

Contributions to traditional and Roth IRAs $7,000 $7,000

Catch-up contributions to 401(k), 403(b) and 457 plans for those age 50 or older $7,500 $7,500

Catch-up contributions to 401(k), 403(b) and 457 plans for those age 60, 61, 62 or 63* N/A $11,250

Catch-up contributions to SIMPLE plans for those age 50 or older $3,500 $3,500

Catch-up contributions to SIMPLE plans for those age 60, 61, 62 or 63* N/A $5,250

Catch-up contributions to IRAs for those age 50 or older $1,000 $1,000

Compensation for benefit purposes for qualified plans and SEPs $345,000 $350,000

Minimum compensation for SEP coverage $750 $750

Highly compensated employee threshold $155,000 $160,000

* A change that takes effect in 2025 under SECURE 2.0

Your MAGI may reduce or even eliminate your ability to take advantage of IRAs. Fortunately, IRA-related MAGI phaseout range limits all will increase for 2025:

Traditional IRAs. MAGI phaseout ranges apply to the deductibility of contributions if a taxpayer (or his or her spouse) participates in an employer-sponsored retirement plan:

For married taxpayers filing jointly, the phaseout range is specific to each spouse based on whether he or she is a participant in an employer-sponsored plan:

For a spouse who participates, the 2025 phaseout range limits will increase by $3,000, to $126,000–$146,000.
For a spouse who doesn’t participate, the 2025 phaseout range limits will increase by $6,000, to $236,000–$246,000.

For single and head-of-household taxpayers participating in an employer-sponsored plan, the 2025 phaseout range limits will increase by $2,000, to $79,000–$89,000.

Taxpayers with MAGIs in the applicable range can deduct a partial contribution; those with MAGIs exceeding the applicable range can’t deduct any IRA contribution.

But a taxpayer whose deduction is reduced or eliminated can make nondeductible traditional IRA contributions. The $7,000 contribution limit for 2025 (plus $1,000 catch-up, if applicable, and reduced by any Roth IRA contributions) still applies. Nondeductible traditional IRA contributions may also be beneficial if your MAGI is too high for you to contribute (or fully contribute) to a Roth IRA.

Roth IRAs. Whether you participate in an employer-sponsored plan doesn’t affect your ability to contribute to a Roth IRA, but MAGI limits may reduce or eliminate your ability to contribute:

For married taxpayers filing jointly, the 2025 phaseout range limits will increase by $6,000, to $236,000–$246,000.
For single and head-of-household taxpayers, the 2025 phaseout range limits will increase by $4,000, to $150,000–$165,000.

You can make a partial contribution if your MAGI falls within the applicable range, but no contribution if it exceeds the top of the range.

(Note: Married taxpayers filing separately are subject to much lower phaseout ranges for traditional and Roth IRAs.)

Revisit your retirement plan

To better ensure that your retirement plans remain on track, consider these 2025 inflation-adjusted contribution limits. We can help you review your plans and make any necessary modifications.

HEATHER DOERING 11/14/24 HEATHER DOERING 11/14/24

Surprise IT failures pose a major financial risk to companies

It’s every business owner’s nightmare. You wake up in the morning, or perhaps in the middle of the night, and see that dreaded message: “We’re down.” It could be your website, e-commerce platform or some other mission-critical information technology (IT) system. All you know is it’s down and your company is losing money by the hour.

A report released this past June by cybersecurity solutions provider Splunk drove home the financial risk of unanticipated downtime for today’s businesses. Entitled The Hidden Costs of Downtime, it was produced in partnership with Oxford Economics researchers who surveyed 2,000 large-company executives worldwide. They found that the total cost of downtime for responding businesses, including direct and hidden costs, was a staggering $400 billion annually. The biggest direct cost was revenue loss, averaging $49 million annually per company.

More than revenue

Of course, such losses for large businesses will be proportionately higher given the bigger amounts of revenue they generate. However, small to midsize companies are arguably at even greater risk because they may not be able to readily absorb any substantial revenue losses.

Diminished revenue is just one of the direct costs of surprise IT failures. Others include regulatory fines, blown IT budgets from coping with crises and elevated insurance premiums. Hidden costs may arise from diminished shareholder value (for publicly traded businesses), reduced productivity and brand/reputational damage.

Common threats

Worried yet? The good news is that your business can proactively address the threat of unanticipated technological downtime. The first step is to conduct a formal risk assessment to identify the most likely causes of IT failures based on the distinctive features of your systems and users.

Spoiler alert: You’ll probably find cyberattacks, such as phishing and ransomware scams, are your biggest threat. Unfortunately, these crimes have become so common that you should probably operate under the assumption that you’ll incur attacks fairly often, be they minor or major.

Indeed, the Splunk report attributed 56% of downtime incidents to cybersecurity breaches. Not far behind, however, were software or IT infrastructure failures. These caused 44% of reported downtime. And whether it was a cyberattack or a technological gaffe, human error was identified as the chief underlying cause. So, don’t be surprised if a risk assessment also identifies your employees as a major threat to your company’s ability to stay up and running.

Key strategies

Once you’ve pinpointed the IT risks with the greatest probability of occurring, you can address them. Just a few key strategies to strongly consider include:

Tracking incidents carefully. When downtime occurs, you should have an incident response plan in place to investigate and resolve the matter — as well as to record all pertinent details. Look for trends: As incidents happen more often, the likelihood of a major crisis increases.

Investing wisely in cybersecurity. Today’s companies need to look at substantial investment in cybersecurity as a cost of doing business. However, you must still scale these expenditures to your actual needs and risk level.

Training new hires and regularly upskilling employees. The Splunk report highlighted an essential truth: No matter how technologically advanced businesses become, people still make the difference.

Establishing a disaster recovery plan. As the saying goes, expect the best but plan for the worst. Implement a comprehensive plan involving sound backup policies and procedures, as well as recovery time and point objectives.

Assessing and testing regularly. The risk assessment mentioned above shouldn’t be a one-time thing. Adhere to a strict schedule of assessments and “stress tests” of mission-critical systems.

Continuous improvement

To prevent surprise IT failures at your company, apply a mindset of continuous improvement to all aspects of your policies, procedures and infrastructure. Our firm can help you identify and manage your technology costs.

HEATHER DOERING 11/4/24 HEATHER DOERING 11/4/24

Making defined-value gifts may benefit your estate plan

Time is running out to take advantage of the current federal gift and estate tax exemption ($13.61 million for 2024). Absent action from Congress, the amount will drop to an inflation-adjusted $5 million in 2026. One way to make the most of the current record-high exemption amount is to give substantial gifts to your loved ones, thus reducing the size of your taxable estate.

However, making certain hard-to-value gifts, such as interests in a closely held business or family limited partnership (FLP), can raise the concern of the IRS. Indeed, if the IRS determines that a gift was undervalued, you may be liable for gift tax (plus interest and possibly penalties). To help avoid an unexpected outcome, consider making a defined-value gift.

Formula vs. savings clauses

A defined-value gift is a gift of assets that are valued at a specific dollar amount rather than a certain number of stock shares or FLP units or a specified percentage of a business entity. A properly structured defined-value gift ensures that it won’t trigger a gift tax assessment later.

The key is to ensure that the defined-value language in the transfer document is drafted as a “formula” clause rather than an invalid “savings” clause. A formula clause transfers a fixed dollar amount, subject to adjustment in the number of shares necessary to equal that amount (based on a final determination of the value of those shares for federal gift and estate tax purposes). A savings clause, in contrast, provides for a portion of the gift to be returned to the donor if that portion is ultimately determined to be taxable.

Precise language matters

For a defined-value gift to be effective, use precise language in the transfer documents. In one case, the U.S. Tax Court rejected an intended defined-value gift of FLP interests and upheld the IRS’s gift tax assessment based on percentage interests. The documents called for transferring FLP interests with a defined fair market value “as determined by a qualified appraiser” within a specified time after the transfer.

The court found that the transfer documents failed to achieve a defined-value gift because a qualified appraiser determined the fair market value. The documents didn’t provide for an adjustment in the number of FLP units if their value “is finally determined for federal gift tax purposes to exceed the amount described.”

The bottom line: Before taking action, contact us to help ensure that your defined-value gift’s transfer documents are worded in a way to pass muster with the IRS. We’d be pleased to help.

HEATHER DOERING 11/4/24 HEATHER DOERING 11/4/24

Turnaround acquisitions are risky growth opportunities for today’s companies

When it comes to growth, businesses have two broad options. First, there’s organic growth — that is, progress made through internal efforts such as boosting sales, expanding into other markets, innovating new products or services, and improving operational efficiency. Second, there’s inorganic growth, which is achieved through externally focused activities such as mergers and acquisitions (M&A), and strategic partnerships.

Organic growth is, without a doubt, imperative to the success of most companies. But occasionally, or more often if you pursue M&A proactively, you may encounter the opportunity to acquire a troubled business. Although “turnaround acquisitions” can yield considerable long-term rewards, acquiring a struggling concern poses greater risks than buying a financially sound company.

Due diligence

Generally, successful turnaround acquisitions begin by identifying a floundering business with hidden value, such as untapped market potential, poor (but replaceable) leadership or excessive (yet fixable) costs.

But be careful: You’ve got to fully understand the target company’s core business — specifically, its profit drivers and roadblocks — before you start drawing up a deal. If you rush into the acquisition or let emotions cloud your judgment, you could misjudge its financial condition and, ultimately, devise an ineffective course of rehabilitative action. This is why so many successful turnarounds are conducted by buyers in the same industry as the sellers or by investors, such as private equity firms, that specialize in particular types of companies.

During the due diligence phase, pinpoint the source(s) of your target’s distress. Common examples include excessive fixed costs, lack of skilled labor, decreased demand for its products or services, and overwhelming debt. Then, determine what, if any, corrective measures can be taken.

Don’t be surprised to find hidden liabilities, such as pending legal actions or outstanding tax liabilities. Then again, you also might find potential sources of value, such as unclaimed tax breaks or undervalued proprietary technologies.

Cash management

Another critical step in due diligence is identifying cash flows, both in and out. Determine what products or services drive revenue and which costs hinder profitability. Would it make sense to divest the business of unprofitable products or services, subsidiaries, divisions, or real estate?

Implementing a long-term cash-management plan based on reasonable forecasts is also critical. Revenue-generating and cost-cutting measures — such as eliminating excessive overtime pay, lowering utility bills, and collecting unbilled or overdue accounts receivable — can often be achieved following a thorough evaluation of accounting controls and procedures.

Reliable due diligence hinges on whether the target company’s accounting and financial reporting systems can produce the appropriate data. If these systems don’t accurately capture transactions and fully list assets and liabilities, you’ll likely encounter some unpleasant surprises and struggle to turn around the business.

Buyers vs. sellers

Parties to a business acquisition generally structure the deal as a sale of either assets or stock. Buyers usually prefer asset deals, which allow them to select the most desirable items from a target company’s balance sheet. In addition, buyers typically receive a step-up in basis on the acquired assets, which lowers future tax obligations. And they’re often able to negotiate new contracts, licenses, titles and permits.

On the other hand, sellers generally prefer to sell stock, not assets. Selling stock simplifies the deal, and tax obligations are usually lower for sellers. However, a stock sale may be riskier for the buyer because the struggling target business remains operational while the buyer takes on its debts and legal obligations. Buyers also inherit sellers’ existing depreciation schedules and tax basis in target companies’ assets.

Reasonable assurance

For any prospective turnaround acquisition, you’ve got to establish reasonable assurance that the return on investment will likely exceed the acquisition’s immediate costs and ongoing risks. We can help you gather and analyze the financial reporting and tax-related information associated with any prospective M&A transaction.

HEATHER DOERING 11/4/24 HEATHER DOERING 11/4/24

Ease the financial pain of natural disasters with tax relief

Hurricane Milton has caused catastrophic damage to many parts of Florida. Less than two weeks earlier, Hurricane Helene victimized millions of people in multiple states across the southeastern portion of the country. The two devastating storms are among the many weather-related disasters this year. Indeed, natural disasters have led to significant losses for many taxpayers, from hurricanes, tornadoes and other severe storms to the wildfires again raging in the West.

If your family or business has been affected by a natural disaster, you may qualify for a casualty loss deduction and federal tax relief.

Understanding the casualty loss deduction

A casualty loss can result from the damage, destruction or loss of property due to any sudden, unexpected or unusual event. Examples include floods, hurricanes, tornadoes, fires, earthquakes and volcanic eruptions. Normal wear and tear or progressive deterioration of property doesn’t constitute a deductible casualty loss. For example, drought generally doesn’t qualify.

The availability of the tax deduction for casualty losses varies depending on whether the losses relate to personal- or business-use items. Generally, you can deduct casualty losses related to your home, household items and personal vehicles if they’re caused by a federally declared disaster. Under current law, that’s defined as a disaster in an area that the U.S. president declares eligible for federal assistance. Casualty losses related to business or income-producing property (for example, rental property) can be deducted regardless of whether they occur in a federally declared disaster area.

Casualty losses are deductible in the year of the loss, usually the year of the casualty event. If your loss stems from a federally declared disaster, you can opt to treat it as having occurred in the previous year. You may receive your refund more quickly if you amend the previous year’s return than if you wait until you file your return for the casualty year.

Factoring in reimbursements

If your casualty loss is covered by insurance, you must reduce the loss by the amount of any reimbursement or expected reimbursement. (You also must reduce the loss by any salvage value.)

Reimbursement also could lead to capital gains tax liability. When the amount you receive from insurance or other reimbursements (less any expense you incurred to obtain reimbursement, such as the cost of an appraisal) exceeds the cost or adjusted basis of the property, you have a capital gain. You’ll need to include that gain as income unless you’re eligible to postpone reporting the gain.

You may be able to postpone the reporting obligation if you purchase property that’s similar in service or use to the destroyed property within the specified replacement period. You can also postpone if you buy a controlling interest (at least 80%) in a corporation owning similar property or if you spend the reimbursement to restore the property.

Alternatively, you can offset casualty gains with casualty losses not attributable to a federally declared disaster. This is the only way you can deduct personal-use property casualty losses incurred in locations not declared disaster areas.

Calculating casualty loss

For personal-use property, or business-use or income-producing property that isn’t completely destroyed, your casualty loss is the lesser of:

The adjusted basis of the property immediately before the loss (generally, your original cost, plus improvements and less depreciation), or
The drop in fair market value (FMV) of the property as a result of the casualty (that is, the difference between the FMV immediately before and immediately after the casualty).

For business-use or income-producing property that’s completely destroyed, the amount of the loss is the adjusted basis less any salvage value and reimbursements.

If a single casualty involves more than one piece of property, you must figure each loss separately. You then combine these losses to determine the casualty loss.

An exception applies to personal-use real property, such as a home. The entire property (including improvements such as landscaping) is treated as one item. The loss is the smaller of the decline in FMV of the whole property and the entire property’s adjusted basis.

Other limits may apply to the amount of the loss you can deduct, too. For personal-use property, you must reduce each casualty loss by $100 (after you’ve subtracted any salvage value and reimbursement).

If you suffer more than one casualty loss during the tax year, you must reduce each loss by $100 and report each on a separate IRS form. If two or more taxpayers have losses from the same casualty, the $100 rule applies separately to each taxpayer.

But that’s not all. For personal-use property, you also must reduce your total casualty losses by 10% of your adjusted gross income after you’ve applied the $100 rule. As a result, smaller personal-use casualty losses often provide little or no tax benefit.

Keeping necessary records

Documentation is critical to claim a casualty loss deduction. You’ll need to show:

That you were the owner of the property or, if you leased it, that you were contractually liable to the owner for the damage,
The type of casualty and when it occurred,
That the loss was a direct result of the casualty, and
Whether a claim for reimbursement with a reasonable expectation of recovery exists.

You also must be able to establish your adjusted basis, reimbursements and, for personal-use property, pre- and post-casualty FMVs.

Qualifying for IRS relief

This year, the IRS has granted tax relief to taxpayers affected by numerous natural disasters. For example, Hurricane Helene relief was recently granted to the entire states of Alabama, Georgia, North Carolina and South Carolina and parts of Florida, Tennessee and Virginia. The relief typically extends filing and other deadlines. The IRS may provide additional relief to Hurricane Milton victims. (For detailed information about your area, visit: https://bit.ly/3nzF2ui.)

Be aware that you can be an affected taxpayer even if you don’t live in a federally declared disaster area. You’re considered affected if records you need to meet a filing or payment deadline postponed during the applicable relief period are located in a covered disaster area. For example, if you don’t live in a disaster area but your tax preparer does and is unable to pay or file on your behalf, you likely qualify for filing and payment relief.

Turning to us for help

If you’ve had the misfortune of incurring casualty losses due to a natural disaster, contact us. We’d be pleased to help you take advantage of all available tax benefits and relief.

HEATHER DOERING 11/4/24 HEATHER DOERING 11/4/24

Achieve multiple estate planning goals with one trust: A CRT

For many people, two common estate planning goals are contributing to a favorite charity and leaving significant assets to your family under favorable tax terms. A charitable remainder trust (CRT) can help you achieve both goals.

ABCs of CRTs

Typically, you set up one of two CRT types (described below) and fund it with assets such as cash and securities. The trust then pays out income to the designated beneficiary or beneficiaries — perhaps yourself or your spouse — for life or a term of 20 years or less. The CRT then distributes the remaining assets to one or more charities.

When using a CRT, you may be eligible for a current tax deduction based on several factors. They include the value of the assets at the time of the transfer, the ages of the income beneficiaries and the government’s Section 7520 rate. Generally, the greater the payout to you (and consequently, the lower the amount that ultimately goes to charity), the lower the deduction.

2 flavors of CRTs

There are two types of CRTs, each with its own pros and cons:

A charitable remainder annuity trust (CRAT) pays out a fixed percentage (ranging from 5% to 50%) of the trust’s initial value and doesn’t allow additional contributions once it’s funded.
A charitable remainder unitrust (CRUT) pays out a fixed percentage (ranging from 5% to 50%) of the trust’s value, recalculated annually, and allows additional contributions.

CRATs offer the advantage of uniform payouts, regardless of fluctuations in the trust’s value. CRUTs, on the other hand, allow payouts to keep pace with inflation because they increase as the trust’s value increases. And, as noted, CRUTs allow you to make additional contributions. One potential disadvantage of a CRUT is that payouts shrink if the trust’s value declines.

Who to choose as a trustee?

When setting up a CRT, appoint a trustee to manage the trust’s assets. The trustee should be someone with the requisite financial knowledge and a familiarity with your personal situation. Thus, it could be a professional or an entity, a family member, or a close friend.

Because of the potentially significant dollars at stake, many trust creators opt for a professional who specializes in managing trust assets. If you’re leaning in this direction, interview several candidates and choose the best one for your situation, considering factors such as experience, investment performance and the level of services provided.

Know that a trustee must adhere to the terms of the trust and follow your instructions. Thus, you still maintain some control if someone else handles these duties. For instance, you may retain the right to change the trustee if you become dissatisfied or designate a different charity to receive the remainder assets.

Finally, be aware that a CRT is irrevocable. In other words, you can’t undo it once it’s executed. So, you must be fully committed to this approach before taking the plunge. Contact us to learn whether a CRT might be a good fit to achieve your estate planning goals.

HEATHER DOERING 11/4/24 HEATHER DOERING 11/4/24

How businesses can better retain their sales people

The U.S. job market has largely stabilized since the historic disruption of the pandemic and the unusual fluctuations that followed. But the fact remains that employee retention is mission-critical for businesses. Retaining employees is still generally less expensive than finding and hiring new ones. And strong retention is one of the hallmarks of a healthy employer brand.

One role that’s been historically challenging to retain is salesperson. In many industries, sales departments have higher turnover rates than other departments. If this has been the case at your company, don’t give up hope. There are ways to address the challenge.

Lay out the welcome mat

For starters, don’t focus retention efforts only on current salespeople. Begin during hiring and ramp up with onboarding. A rushed, confusing or cold approach to hiring can get things off on the wrong foot. In such cases, new hires tend to enter the workplace cautiously or skeptically, with their eyes on the exit sign rather than the “upper floors” of a company.

Onboarding is also immensely important. Many salespeople tell horror stories of being shown to a cubicle with nothing but a telephone on the desk and told to “Get to it.” With so many people still working remotely, a new sales hire might not even get that much attention. Welcome new employees warmly, provide ample training, and perhaps give them a mentor to help them get comfortable with your business and its culture.

Incentivize your team

Even when hiring and onboarding go well, most employees will still consider a competitor’s job offer if the pay is right. So, to improve your chances of retaining top sales producers and their customers, consider financial incentives.

Offering retention bonuses and rewards for maintaining or increasing sales — in addition to existing compensation plans — can help. Make such incentives easy to understand and clearly achievable. Although interim bonus programs might be expensive in the near term, they can stabilize sales and prevent sharp declines.

When successful, a bonus program will help you generate more long-term revenue to offset the immediate costs. That said, financial incentives need to be carefully designed so they don’t adversely affect cash flow or leave your business vulnerable to fraud.

Give them a voice

Salespeople interact with customers and prospects in ways many other employees don’t. As a result, they may have some great ideas for capitalizing on your company’s strengths and shoring up its weaknesses.

Look into forming a sales leadership team to help evaluate the potential benefits and risks of goals proposed during strategic planning. The team should include two to four top sellers who are given some relief from their regular responsibilities so they can offer feedback and contribute ideas from their distinctive perspectives. The sales leadership team can also:

Serve as a clearinghouse for customer concerns and competitor strategies,
Collaborate with the marketing department to improve messaging about current or upcoming product or service offerings, and
Participate in developing new products or services based on customer feedback and demand.

Above all, giving your salespeople a voice in the strategic direction of the company can help them feel more invested in the success of the business and motivated to stay put.

Assume nothing

Business owners and their leadership teams should never assume they can’t solve the dilemma of high turnover in the sales department. The answer often lies in proactively investigating the problem and then taking appropriate steps to help salespeople feel more welcomed and appreciated. We can help your company calculate turnover rate, identify and track its hiring and employment costs, and assess the feasibility of financial incentives.

HEATHER DOERING 10/28/24 HEATHER DOERING 10/28/24

Taking the mystery out of the probate process

Few estate planning subjects are as misunderstood as probate. Its biggest downside, and the one that grabs the most attention, is the fact that probate is public. Indeed, anyone who’s interested can find out what assets you owned and how they’re being distributed after your death.

And because of its public nature, the probate process can draw unwanted attention from disgruntled family members who may challenge the disposition of your assets, as well as from other unscrupulous parties.

What does the probate process entail?

Probate is predicated on state law, so the exact process varies from state to state. This has led to numerous misconceptions about the length of probate. On average, the process takes no more than six to nine months, but it can run longer for complex situations in certain states. Also, some states exempt small estates or provide a simplified process for surviving spouses.

In basic terms, probate is the process of settling an estate and passing legal title of ownership of assets to heirs. If the deceased person has a valid will, probate begins when the executor named in the will presents the document in the county courthouse. If there’s no will — the deceased has died “intestate” in legal parlance — the court will appoint someone to administer the estate. After that, this person becomes the estate’s legal representative.

With that in mind, here’s how the process generally works, covering four basic steps.

First, a petition is filed with the probate court, providing notice to the beneficiaries of the deceased under the will. Typically, such notice is published in a local newspaper for the general public’s benefit. If someone wants to object to the petition, they can do so in court.

Second, the executor takes an inventory of the deceased’s property, including securities, real estate and business interests. In some states, an appraisal of value may be required. Then the executor must provide notice to all known creditors. Generally, a creditor must stake a claim within a limited time specified under state law.

Third, the executor determines which creditor claims are legitimate and then meets those obligations. He or she also pays any taxes and other debts that are owed by the estate. In some cases, state law may require the executor to sell assets to provide proceeds sufficient to settle the estate.

Fourth, ownership of assets is transferred to beneficiaries named in the will, following the waiting period allowed for creditors to file claims. If the deceased died intestate, state law governs the disposition of those assets. However, before any transfers take place, the executor must petition the court to distribute the assets as provided by will or state intestacy law.

For some estate plans, the will provides for the creation of a testamentary trust to benefit heirs. For instance, a trust may be established to benefit minor children who aren’t yet capable of managing funds. In this case, control over the trust assets is transferred to the named trustee. Finally, the petition should include an accounting of the inventory of assets unless this is properly waived under state law.

Can probate be avoided?

A revocable living trust may be used to avoid probate and protect privacy. The assets are typically transferred to the trust during your lifetime and managed by a trustee that you designate. You may even choose to act as a trustee during your lifetime. Upon your death, the assets will continue to be managed by a trustee or, should you prefer, the assets will be distributed outright to your designated beneficiaries.

HEATHER DOERING 10/28/24 HEATHER DOERING 10/28/24

Working capital management is critical to business success

Success in business is often measured in profitability — and that’s hard to argue with. However, liquidity is critical to reaching the point where a company can consistently turn a profit.

Even if you pile up sales to the sky, your bottom line won’t flourish unless you have the cash to fund operations to fulfill all those orders. The good news is there’s a tried-and-true way to stay liquid while you grow your company. It’s called working capital management.

Multifunctional metric

Working capital is a metric — current assets minus current liabilities — that’s traditionally used to measure liquidity. Essentially, it’s the amount of accessible cash you need to support short-term business operations. Regularly calculating working capital can help you and your leadership team answer questions such as:

Do we have enough current assets to cover current obligations?
How fast could we convert those assets to cash if we needed to?
What short-term assets are available for loan collateral?

Another way to evaluate liquidity is the working capital ratio: current assets divided by current liabilities. A healthy working capital ratio varies from industry to industry, but it’s generally considered to be 1.5 to 2. A ratio below 1.0 typically signals impending liquidity problems.

For yet another perspective on working capital, compare it to total assets and annual revenue. From this angle, working capital becomes a measure of efficiency.

Working capital requirement

The amount of working capital your company needs, known as its working capital requirement, depends on the costs of your sales cycle, operational expenses and current debt payments.

Fundamentally, you need enough working capital to finance the gap between payments from customers and payments to suppliers, vendors, lenders and others. To optimize your business’s working capital requirement, focus primarily on three key areas: 1) accounts receivable, 2) accounts payable and 3) inventory.

High liquidity generally equates with low credit risk. But having too much cash tied up in working capital may detract from important growth initiatives such as:

Expanding into new markets,
Buying better equipment or technology,
Launching new products or services, and
Paying down debt.

Failure to pursue capital investment opportunities can also compromise business value over the long run.

3 critical areas

The right approach to working capital management will obviously vary from company to company depending on factors such as size, industry, mission and market. However, as mentioned, there are three primary areas of the business to focus on:

1. Accounts receivable. The faster your company collects from customers, the more readily it can manage debt and capitalize on opportunities. Possible solutions include tighter credit policies, early bird discounts and collections-based sales compensation. Also, continuously improve your administrative processes to eliminate inefficiencies.

2. Accounts payable. From a working capital perspective, you generally want to delay paying bills as long as possible — particularly those from noncritical suppliers, vendors or other parties. One exception to this is when you can qualify for early bird discounts. Naturally, delaying payments should never drift into late payments or nonpayment, which can damage your business credit rating.

3. Inventory. If your company maintains inventory, recognize the challenge it presents to working capital management. Excessive inventory levels may dangerously reduce liquidity because of restocking, storage, obsolescence, insurance and security costs. Then again, insufficient inventory levels can frustrate customers and hurt sales. Be sure to give your inventory the “TLC” it deserves — including regular technology upgrades and strategic reconsideration of optimal levels.

The right balance

It isn’t easy to strike the right balance of maintaining enough liquidity to operate smoothly while also saving funds for capital investments and an emergency cash reserve. Our firm can help you assess precisely where your working capital stands and identify ways to manage it better.

HEATHER DOERING 10/18/24 HEATHER DOERING 10/18/24

Ease the financial pain of natural disasters with tax relief

Hurricane Helene has affected millions of people in multiple states across the southeastern portion of the country. It’s just one of many weather-related disasters this year. Indeed, natural disasters have led to significant losses for many taxpayers, from hurricanes, tornadoes and other severe storms to the wildfires again raging in the West.

If your family or business has been affected by a natural disaster, you may qualify for a casualty loss deduction and federal tax relief.

Understanding the casualty loss deduction

Factoring in reimbursements

If your casualty loss is covered by insurance, you must reduce the loss by the amount of any reimbursement or expected reimbursement. (You also must reduce the loss by any salvage value.)

Calculating casualty loss

For personal-use property, or business-use or income-producing property that isn’t completely destroyed, your casualty loss is the lesser of:

The adjusted basis of the property immediately before the loss (generally, your original cost, plus improvements and less depreciation), or
The drop in fair market value (FMV) of the property as a result of the casualty (that is, the difference between the FMV immediately before and immediately after the casualty).

For business-use or income-producing property that’s completely destroyed, the amount of the loss is the adjusted basis less any salvage value and reimbursements.

If a single casualty involves more than one piece of property, you must figure each loss separately. You then combine these losses to determine the casualty loss.

Keeping necessary records

Documentation is critical to claim a casualty loss deduction. You’ll need to show:

That you were the owner of the property or, if you leased it, that you were contractually liable to the owner for the damage,
The type of casualty and when it occurred,
That the loss was a direct result of the casualty, and
Whether a claim for reimbursement with a reasonable expectation of recovery exists.

You also must be able to establish your adjusted basis, reimbursements and, for personal-use property, pre- and post-casualty FMVs.

Qualifying for IRS relief

This year, the IRS has granted tax relief to taxpayers affected by numerous natural disasters. For example, Hurricane Helene relief was recently granted to the entire states of Alabama, Georgia, North Carolina and South Carolina and parts of Florida, Tennessee and Virginia. The relief typically extends filing and other deadlines. (For detailed information about your state, visit: https://bit.ly/3nzF2ui.)

Turning to us for help

If you’ve had the misfortune of incurring casualty losses due to a natural disaster, contact us. We’d be pleased to help you take advantage of all available tax benefits and relief.

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What are the duties of an executor?

A key decision you must make when drafting your estate plan is who to appoint as the executor. In a nutshell, an executor (called a “personal representative” in some states) is the person who will carry out your wishes after your death. Let’s take a look at the specific duties and how to choose the right person for the job.

Overview of duties

Typically, your executor shepherds your will through the probate process, takes steps to protect your estate’s assets, distributes property to beneficiaries according to the will, and pays the estate’s debts and taxes.

Most assets must pass through probate before they can be distributed to beneficiaries. (Note, however, that assets transferred to a living trust are exempt from probate.) When the will is offered for probate, the executor also obtains “letters testamentary” from the court, authorizing him or her to act on the estate’s behalf.

It’s the executor’s responsibility to locate, manage and disburse your estate’s assets. In addition, he or she must determine the value of property. Depending on the finances, assets may have to be liquidated to pay debts of the estate.

Also, your executor can use estate funds to pay for funeral and burial expenses if you didn’t make other arrangements to cover those costs. In addition, your executor will obtain copies of your death certificate. The death certificate will be needed for several purposes, including closing financial accounts, canceling certain benefit payments and filing the final tax return.

Right person for the job

So, whom should you choose as the executor of your estate? Your first inclination may be to name a family member or a trusted friend. But this can cause complications.

For starters, the person may be too grief-stricken to function effectively. And, if the executor stands to gain from the will, there may be conflicts of interest that can trigger contests of your will or other disputes by disgruntled family members. Furthermore, the executor may need more financial acumen for this position. Frequently, a professional advisor you know and trust is a good alternative.

Don’t forget to designate an alternate

An executor can renounce the right to this position by filing a written declaration with the probate court. This further accentuates the need to name a backup executor.

Without a named successor in the executor role, the probate court will appoint one for the estate. If you have additional questions regarding the role of an executor, please contact us.

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