Unlike employees, who have income, Social Security, and Medicare taxes withheld from their wages, self-employed individuals must prepay their taxes by making periodic estimated tax payments. These are referred to as estimated tax payments because the self-employed individual must estimate his or her net earnings for the year and pay taxes per an IRS schedule according to that estimate. Failure to do so will result in interest penalties. 

The self-employed are not the only ones who are subject to estimated tax payment requirements; anyone who has income on which no income tax has been withheld, and even those whose taxes are not sufficiently withheld, should be making estimated tax payments. Thus, if you have income from stock sales, property sales, investments, taxable alimony, partnerships, S-corporations, inherited pension plans, or other sources that are not subject to withholding, you may also be required to pay either estimated taxes or an underpayment penalty. Others subject to making estimated payments are individuals who must pay special taxes such as the 3.8% tax on net investment income or the employment tax on household employees. 

Although these payments are often termed “quarterly” estimates, the periods they cover do not usually coincide with a calendar quarter. 

2026 ESTIMATED TAX INSTALLMENTS DUE DATES
Quarter	Period Covered	Months	Due Date
First	January through March	3	April 15, 2026
Second	April and May	2	June 15, 2026
Third	June through August	3	September 15, 2026
Fourth	September through December	4	January 15, 2027

An underestimate penalty does not apply if the tax due on a return (after withholding and refundable credits) is less than $1,000; this is the “de minimis amount due” exception. When the tax due is $1,000 or more, underpayment penalties are assessed. 

These underpayment penalties are determined per the periods as shown in the above table, so an underpayment in an earlier period cannot be made up for in a later period; however, an overpayment in an earlier period is applied to the following period. 

The amount of an estimated payment is determined by estimating one fourth of the taxpayer’s tax for the entire year; the projected tax is paid in four installments. When the income is seasonal, sporadic, or the result of a windfall, the IRS provides a special form, and the underpayment penalty is based on actual income for the period. 

For individuals who do not want to take the time to estimate their tax for the current year but who still want to avoid the underpayment penalty, Uncle Sam also provides safe-harbor estimates. However, even these can be tricky. 

Generally, a taxpayer can avoid an underpayment penalty if his or her withholding and estimated payments are equal to or greater than 

• 90% of the current year’s tax liability, or 

• 100% of the prior year’s tax liability

However, these safe harbors do not apply if the prior year’s adjusted gross income is over $150,000, in which case, the safe harbors are 

• 90% of the current year’s tax liability, or 

• 110% of the prior year’s tax liability

Sometimes, individuals who have withholding on some (but not all) of their sources of income will increase that withholding to compensate for the additional income sources that have no withholding. Although this may work, withholding adjustments are not as precise as the per-period payments and should be used with caution. 

This office can assist you in estimating payments, adjusting withholding, and setting up safe-harbor payments. Please call for assistance. 

Tax season is a busy time for taxpayers. It is also a busy time for criminals as they ramp up efforts to trick people into sharing sensitive personal information. Identity thieves use this information to try filing false tax returns and stealing refunds, plus scam you financially in other ways. 

You may think you are harp on a lot about protecting yourself against identity theft and tax scams. It because having your identity stolen becomes an absolute financial nightmare, sometimes taking years to straighten out. Identity thieves are clever, relentless, and always coming up with new schemes to trick you. And all you have to do is slip up just once to compromise your identity and your nightmare begins. 

Awareness

Identity thieves and scammers often imitate the IRS name, logo or web site to convince taxpayers that the scam is a genuine communication from the IRS. Scammers may use other federal agency names, such as the U.S. Department of the Treasury. 

In an identity theft scam, a fraudster, often posing as a trusted government, financial or business institution or official, tries to trick a victim into revealing personal and financial information, such as credit card numbers and passwords, bank account numbers and passwords, Social Security numbers and more. Generally, identity thieves use someone’s personal data to steal his or her financial accounts, run up charges on the victim’s existing credit cards, or apply for new loans, credit cards, services, or benefits in the victim’s name and even file fraudulent tax returns. 

Scams come in many forms and are usually initiated by a letter, fax, email or with a phone call or text. When scam artists use email to lure its victims, it is referred to as “phishing” scams. 

Seniors Are Frequent Targets

Scammers frequently target people over age 65 or nearing retirement for personal or financial information or money. Often, once seniors give them money, they ask for more. When a person is scammed out of tax-deferred retirement funds, the lost funds may be considered a taxable distribution, subject to ordinary income tax and potential early withdrawal penalties if the account owner is under age 59½. While victims might claim a theft loss deduction if the scam was profit-motivated and recovery is unlikely, this process is complex. 

Encourage your elderly family members to discuss any suspicious messages or offers with you or another trusted individual before taking any action, as this can help them avoid falling victim to scams. Regular conversations about new scam tactics can empower them to make informed decisions and protect their financial well-being. 

How to Spot a Scam 

Phishing emails and smishing texts, often share common characteristics that can help in identifying them. Typically, they create a sense of urgency, pressuring potential victims to act swiftly without much deliberation—whether it’s claiming you’re in trouble, that you’ve won an unexpected prize, or that there’s a problem needing immediate attention. Be wary of unsolicited communications, especially those requesting personal information or payment over the phone or through unexpected emails and texts. Scammers may also pose as legitimate companies or government entities, using official-sounding language to gain trust. Additionally, if an offer seems too good to be true, it likely is. Verify suspicious communications by contacting the company or individual through official channels and consult with someone you trust before proceeding with unfamiliar requests. Here are some signs to watch for, such as an email that: 

• Requests detailed or an unusual amount of personal and/or financial information, such as name, SSN, bank or credit card account numbers or security-related information, such as your mother’s maiden name, either in the email itself or on another site to which a link in the email sends the recipient. 

• Dangles bait to entice the recipient to respond to the email, such as mentioning a tax refund or offering to pay the recipient to participate in an IRS survey. 

• Threatens a consequence for not responding to the email, such as additional taxes or blocking access to the recipient’s funds. 

• Gets the Internal Revenue Service or other federal agency names wrong. 

• Uses incorrect grammar or odd phrasing (many of the email scams originate overseas and are written by non-native English speakers). 

• Uses a long address in any link contained in the email message or one that does not start with the actual IRS web site address (www.irs.gov). To see the actual link address or URL, move the mouse over the link included in the text of the email. 

• When trying to spot a potential scam, taking a closer look at the sender’s email address can provide valuable clues. Scammers often use email addresses that slightly deviate from real company domains, perhaps with misspellings or extra characters. Additionally, if the domain or extension appears unusual or originates outside the U.S., it should immediately raise red flags. 

Common Phishing Emails

Scammers use emails to install malware or direct victims to fake websites that mimic official sites to steal credentials.  

• Phony Tax Refunds - Emails stating you qualify for a large refund and must click a link to access it. 

• False Legal/Criminal Charges – Messages threatening immediate legal action or arrest for alleged tax fraud, pressuring you to act without thinking. 

• Underreported Income Notices – Emails claiming to be a notice of underreported income and containing an attachment or link to a bogus “tax statement”. Opening the attachment or clicking the link can download malware to your computer. 

• “Update Your Account” Requests - Emails with suspicious links, such as “IRSgov” (missing the dot), instructing you to update your IRS online account or IP PIN immediately. 

• Offers of Third-Party Help - Scammers posing as a “helpful” third party offering to create your IRS Online Account to steal your personal information.  

Common Smishing Texts

These text messages often use alarming language or promise financial assistance to trick you into clicking malicious links.  

• Account on Hold/Unusual Activity – Texts claiming, “Your account has now been put on hold,” or “Unusual Activity Report,” with a link to “restore” your account. 

• Unexpected Refunds/Payments - Messages mentioning an unexpected tax refund or economic impact payment and providing a suspicious link. 

• Urgent Action Demands - Texts with an urgent tone, pressuring you to open a link or attachment to avoid penalties or take advantage of a credit. 

• Callback Numbers – Messages that include a phone number to call back, which connects you directly to a scammer.  

How to Protect Yourself

• Do not click links or open attachments in unsolicited emails or texts claiming to be from the IRS or other tax-related entities. 

• The IRS will never demand immediate payment, demand a specific payment method (like gift cards or wire transfers), or threaten arrest or deportation. 

• Verify contact directly with the agency using official contact numbers listed on the IRS website or by logging into your secure IRS Online Account if you have previously established one. 

• Report suspicious messages by forwarding the email to phishing@irs.gov and the text message details (sender number, content, date/time) to the same email address with “Text” in the subject line. 

• Obtain an identity protection PIN (IP PIN), which is a unique six-digit number assigned by the IRS to prevent identity thieves from filing fraudulent federal income tax returns using your Social Security number (SSN) or Individual Taxpayer Identification Number (ITIN).  

It acts as an authentication tool. If a return is filed without the correct IP PIN, the IRS will reject it, preventing someone else from claiming a refund in your name. An IP PIN is valid for one calendar year. A new PIN is generated every year for security. It is used only for federal tax forms in the 1040 series. 

Those who have been victims of tax-related identity theft and have had their issues resolved are automatically enrolled and receive a new IP PIN by mail annually. Any taxpayer with an SSN or ITIN who can verify their identity can voluntarily join the program to add a layer of security at the IRS Get an IP PIN tool. 

Social media

Misinformation about taxes is rampant on social media, and misleading advice can have serious repercussions for taxpayers, particularly surrounding credit or refund eligibility. Influencers, who often lack formal tax training, might encourage individuals to falsify information on their tax forms, claiming it will maximize their refunds or credits. Worse, they may propagate unfounded claims that the IRS is concealing certain tax credits from the public. Such misinformation not only jeopardizes tax compliance but can also invite audits and penalties. Additionally, these misleading social media posts often serve as gateways for scammers, who exploit the guise of tax advice to gain trust and ultimately steal sensitive personal information. It’s crucial for taxpayers to seek professional guidance for accurate tax information. 

Conclusion

Be aware the IRS will never contact you via email, text messages, or social media to request personal or financial information; instead, they typically reach out by sending official notices through the U.S. Postal Service. 

If you have questions or need assistance with any of the issues discussed in this article, please contact our office. 

After revenue, and even after gross margin, there’s one phrase business owners say more than almost any other: 

“We’re profitable… so why does cash still feel tight?” 

It’s a fair question. And an incredibly common one. 

Because profit and cash flow are related — but they are not the same thing. And confusing the two is one of the fastest ways a healthy business ends up feeling constantly under pressure. 

Profit Looks Back. Cash Flow Lives in Real Time. 

Profit is a historical number. 
It tells you what already happened. 

Cash flow tells you what’s happening now — and whether your business can keep operating comfortably. 

You can be profitable and still struggle with cash if: 

• Customers pay slowly 

• Expenses hit before revenue arrives 

• Growth requires upfront investment 

• Payroll, taxes, or inventory timing is off 

On paper, things look fine. In real life, decisions feel stressful. 

That gap is where most cash flow problems live. 

Cash Flow Isn’t a Math Problem. It’s a Timing Problem. 

At a high level, cash flow reflects how money moves in and out of your business over time — not whether you’re making money overall. 

This is why growing businesses often feel more strained than struggling ones. 

More sales mean: 

• More payroll before collections 

• More vendors to pay upfront 

• More operational complexity 

Growth amplifies timing issues. And without visibility, it creates pressure that feels confusing and constant. 

This is usually the moment owners say, “We’re doing better than ever… so why does it feel harder?” 

The Cash Flow Traps No One Warns You About 

Cash flow issues rarely come from one big mistake. They usually come from a few small ones, stacking quietly. 

Things like: 

• Invoicing promptly, but not collecting consistently 

• Offering payment terms without tracking their impact 

• Hiring ahead of cash, not profit 

• Forgetting how taxes affect real cash availability 

Individually, none of these seems dangerous. Together, they can drain liquidity without showing up clearly on a profit and loss statement. 

Why Cash Flow Gets More Fragile as You Scale 

The bigger your business gets, the more sensitive cash flow becomes. 

A delay that didn’t matter at $500K in revenue can become painful at $2M. A single slow-paying client can disrupt an entire month. One unexpected expense can force short-term decisions you didn’t plan for. 

This is why many businesses hit a ceiling, not because they lack demand, but because cash flow can’t support the next step comfortably. 

And this is exactly where CFO-level thinking changes the outcome.  

This Is a CFO Advisory Conversation — Not a DIY Fix 

Managing cash flow isn’t about checking a bank balance more often. 

It’s about understanding: 

• How long cash is tied up before it’s usable 

• Where timing gaps consistently occur 

• Which activities consume cash without creating leverage 

• How growth decisions impact liquidity months in advance 

CFOs don’t just ask, “Are we profitable?” 
They ask, “How long does our cash last, and what pressures it?” 

Those answers shape smarter decisions around hiring, pricing, expansion, and risk. 

The Goal Isn’t More Cash. It’s Predictable Cash. 

Healthy cash flow doesn’t mean stockpiling money. 

It means knowing: 

• When cash will arrive 

• When it will leave 

• And how much flexibility you actually have 

When cash becomes predictable, stress drops. Decisions slow down in a good way. Growth becomes intentional instead of reactive. 

And suddenly, profit starts to feel real. 

A Final Thought 

Profit keeps score. 
Cash flow keeps the business alive. 

If your numbers look good but your business still feels tight, this isn’t a failure. It’s a signal. 

And it’s a signal worth paying attention to. 

If you want help understanding what’s really happening with your cash — and how timing, growth, and decisions are shaping it — don’t go it alone. 

This is where CFO advisory guidance turns confusion into clarity, and clarity into confidence. 

Because the goal isn’t just making money. 
It’s being able to use it. 

Ask a business owner how things are going, and you’ll usually hear the same answer first: 

“Revenue’s up.” 

That sounds like good news. And sometimes it is. 

But there’s a number hiding underneath revenue that tells a very different story. One that quietly determines whether a business is actually healthy or just busy. 

That number is gross margin. 

And for many small and mid-sized businesses, it’s the most misunderstood — and most dangerous — number on the financials. 

Why Revenue Gets All the Attention 

Revenue is loud. 
It’s easy to track. 
It feels like progress. 

More clients. Bigger contracts. Higher top-line numbers. 

But revenue doesn’t tell you what it costs to generate that income. And it doesn’t tell you whether the work you’re doing is actually worth it. 

That’s where gross margin comes in. 

At a high level, gross margin is the percentage of revenue left after accounting for the direct costs required to deliver your product or service. It’s what remains before overhead, taxes, and everything else come into play. 

And it tells the truth in a way revenue never can. 

Gross Margin: The Number That Tells the Truth About Your Business 

Here’s the problem: most business owners only look at gross margin in the aggregate — if they look at it at all. 

And overall gross margin can lie. 

When margins are blended across the entire business, profitable work often masks unprofitable work. 

You might have: 

• One service that performs exceptionally well 

• Another that barely breaks even 

• A client that consumes far more time and resources than they pay for 

Blended together, everything looks fine. 

Until it doesn’t. 

Until cash feels tight. 
Until growth feels heavier instead of easier. 
Until you’re working harder without seeing the payoff you expected. 

That’s usually when business owners say, “We’re making more money, but it doesn’t feel like it.” 

That’s not a revenue problem. 
That’s a margin problem. 

Why Margin Mistakes Get More Dangerous as You Grow 

Low-margin work doesn’t just reduce profit. As your business grows, it creates pressure in places you don’t expect. 

It absorbs your best people. 
It limits your ability to invest. 
It makes hiring riskier. 
It increases burnout at the exact moment you should be building momentum. 

What makes this especially dangerous is that growth can hide the issue for a while. More revenue covers more inefficiency. Until one day it doesn’t. 

This is why businesses that look successful on paper sometimes struggle to scale, hit cash flow walls, or feel stuck despite “doing everything right.” 

This Is a CFO Advisory Conversation — Not a DIY Exercise 

Understanding gross margin in a meaningful way isn’t about pulling a report or running a formula. 

It’s about asking better questions. 

Questions like: 

• Which services actually drive profit? 

• Which clients quietly erode margins? 

• What work looks good on the surface but costs more than it returns? 

• What would change if certain work stopped entirely? 

These aren’t spreadsheet questions. They’re strategic ones. 

And they’re exactly the kind of conversations CFOs have regularly, because margin clarity drives smarter decisions around pricing, staffing, capacity, and growth. 

The Goal Isn’t Perfection. It’s Visibility. 

This isn’t about squeezing every dollar or cutting corners. 

It’s about knowing: 

• What work is worth doing 

• What work needs to change 

• What work might need to go 

When you understand your gross margins clearly — by service, by client, or by growth stage — decisions get easier. Pricing becomes more confident. Growth feels intentional instead of reactive. 

And suddenly, revenue starts behaving the way you expected it to all along. 

A Final Thought 

Revenue may be the headline number. 

But gross margin is the number that determines whether your business actually works. 

If you’ve ever wondered why growth feels harder than it should, or why cash flow doesn’t match your effort, this is a conversation worth having. 

If you want help understanding what your margins are really telling you — and how they impact pricing, capacity, and long-term stability — don’t go it alone. 

This is where CFO-level advisory guidance turns numbers into clarity, and clarity into better decisions. 

Because the most dangerous number in your financials isn’t the one you’re watching. 
It’s the one you’re not. 

Most small business owners don’t wake up to a cash flow crisis. 

It creeps in quietly. 

Margins shrink. Cash feels tighter. Decisions that used to feel easy suddenly don’t. And while revenue might still look “fine” on paper, the bank account tells a different story. 

This isn’t poor management. It’s the result of several slow-moving financial pressures hitting at once, many of which accelerated over the last two years. 

Let’s break down the biggest silent cash flow killers small and medium-sized businesses are dealing with right now—and what owners can do before they turn into real problems. 

1. The Inflation Hangover Is Still Here 

Even as headline inflation cools, the aftereffects remain. 

Many businesses locked in higher costs during peak inflation years: 

• Supplies 

• Rent 

• Vendor contracts 

• Insurance premiums 

Those costs rarely come back down quickly. 

At the same time, customers have become more price-sensitive, making it harder to simply pass increases along. The result is a squeeze that doesn’t always show up as a single red flag—but steadily erodes profitability. 

2. Payroll Creep Is Eating Margins 

Payroll is now one of the fastest-growing expenses for SMBs. 

Between: 

• Competitive wage pressure 

• Higher benefits costs 

• Payroll taxes 

• Overtime becoming the norm instead of the exception 

Many owners are paying significantly more for the same output they had a few years ago. 

The challenge is that payroll creep often feels justified in isolation. One raise here. One new hire there. Over time, it quietly becomes the largest drag on cash flow. 

3. Tariffs and Supply Chain Costs Are Still Passing Through 

Even businesses that don’t import directly are feeling the effects of tariffs and global supply chain disruptions. 

Higher costs get passed down: 

• From manufacturers 

• To distributors 

• To vendors 

• To you 

The problem is timing. Those increases often hit months after pricing decisions were made, leaving businesses absorbing the difference instead of planning for it. 

4. Subscription Sprawl Is Death by a Thousand Charges 

Subscriptions rarely feel dangerous because each one is “only” $30, $50, or $100 a month. 

But add them up: 

• Software tools 

• Apps 

• Platforms 

• Services that were never fully adopted 

What started as productivity upgrades can quietly turn into thousands per month in fixed overhead. 

Because subscriptions auto-renew, they often go unchecked for years, draining cash without delivering meaningful ROI. 

5. Tax Surprises Are Catching Owners Off Guard 

This is one of the most painful—and preventable—cash flow shocks. 

Common issues include: 

• Underestimated quarterly payments 

• Changes in deductions or credits 

• Entity structure no longer matching how the business operates 

• One-time income events creating unexpected tax exposure 

Many owners assume taxes will “sort themselves out” at filing time. When they don’t, the result is a surprise bill that hits cash flow hard and fast. 

Why These Issues Are So Dangerous Together 

Any one of these pressures is manageable. 

The real risk is when they stack. 

Higher payroll plus sticky inflation. 
Subscriptions layered on top of supply chain increases. 
All capped off with an unexpected tax bill. 

That’s how otherwise healthy businesses suddenly feel strained. 

What Smart Owners Are Doing Differently 

The most resilient small business owners aren’t reacting to problems. They’re reviewing them before they escalate. 

They’re asking: 

• Where is cash leaking quietly? 

• Which costs grew without scrutiny? 

• Are we paying taxes efficiently—or just paying them? 

This isn’t about cutting for the sake of cutting. It’s about alignment. 

The Bottom Line 

Cash flow problems don’t usually announce themselves. 

They show up slowly, disguised as “normal” increases, small decisions, and delayed consequences. 

A proactive review can uncover inefficiencies, missed planning opportunities, and tax strategies that help stabilize cash before it becomes a fire drill. 

A proactive tax check-in can uncover savings most owners miss. 
 
If these pressures sound familiar, contact our office to take a closer look before small issues turn into big ones. 

With the introduction of Trump Accounts under President Trump’s Working Families Tax Cuts Act, also known as the One Big Beautiful Bill Act (or OBBBA), a new opportunity has been created for American families to set up tax-advantaged savings accounts for their children younger than 18, and for those born between January 1, 2025, and December 31, 2028, to participate in a pilot program contribution of $1,000 made by the government. 

Overview of Trump Accounts 

Trump Accounts are innovative savings vehicles akin to individual savings accounts (IRAs) designed to help families build wealth from the birth of a child. For a child born in 2025 through 2028, they come with the option of receiving a one-time $1,000 government seed contribution. Additional contributions of up to $5,000 annually, adjusted for inflation, are permitted up to the year before a child turns age 18. The funds are invested in broad, and low-cost, stock market index funds, providing a substantial growth potential over time. 

Eligibility and Contributions 

Any child under 18 with a valid Social Security number can have a Trump Account, which is managed by a parent or guardian until the child reaches adulthood. These accounts are inclusive, allowing contributions from a wide range of sources. 

1. Eligibility to Contribute: 

• Contributions to Trump Accounts can be made by various parties, including children, parents or guardians, grandparents, family members, friends, and employers. The standard annual contribution limit starts off at $5,000 per child and will be adjusted for inflation in the future. 

• Contributions are not tax deductible (but see next bullet). 

• Employers can contribute up to $2,500 annually towards the $5,000 cap. The employer is allowed a deduction for the contribution, and it is not taxable to the employee. 

• To ensure the annual $5,000 contribution limit to Trump Accounts is not exceeded, robust safeguards must be put in place due to the diverse array of qualified contributors. A centralized record-keeping system should be established to monitor all contributions made under each child’s account, requiring real-time updates and access for contributors to verify current contribution levels. Contributors should be encouraged or mandated to register their planned contributions in advance, allowing the system to automatically flag any attempts that would exceed the limit. Additionally, implementing automated alerts for both contributors and account holders upon approaching the $5,000 threshold can prevent unsolicited over-contributions. Transparent communication channels and clear guidelines on contribution reporting obligations will also be crucial. By integrating these comprehensive systems and procedures, the integrity of the annual contribution cap can be effectively upheld, avoiding any missteps that could potentially disrupt the intended benefits of the Trump Accounts. 

2. Qualified Class Contributions: Qualifying charitable organizations and government entities (such as states, tribes, and localities) are also eligible to make contributions. However, these entities (charities and governmental bodies) must specify a “qualified class” of account beneficiaries to whom the contribution is to be distributed. This means the contributions are directed towards a defined group of beneficiaries, such as all children born in a specific year or within a certain geographic area, rather than to individual accounts without specification. 

This framework allows charitable organizations and government entities to significantly contribute to the foundational development of these tax-advantaged savings accounts for the eligible children. 

Example: Michael and Susan Dell, through the Michael & Susan Dell Foundation, are contributing $6.25 billion to seed Trump Accounts with $250 for children who are 10 or under who were born before Jan. 1, 2025. The pledged funds will cover 25 million children age 10 and under in ZIP codes with a median income of $150,000 or less. 

The $1,000 Government Seed Contribution 

The federal government will provide a one-time $1,000 contribution to eligible Trump Accounts. This seed money is intended to give newborns a financial jumpstart through long-term investing in the stock market. The government seed amount applies to a specific cohort of children: 

• Birth Date Range - The child must be born on or after January 1, 2025, and before January 1, 2029. 

• Citizenship - The child must be a U.S. citizen with a valid Social Security number. 

• Account Opened - An election must be made by a parent or guardian to open a Trump Account on the child’s behalf. 

• One-Time Contribution - It is a one-time, initial deposit of $1,000; the government does not make recurring contributions. 

• Does Not Count Toward Limits - The government’s $1,000 contribution does not count toward the annual private contribution limit (currently $5,000). 

• Taxed Upon Distribution - The $1,000 seed amount, along with investment earnings, grows tax-deferred but is considered pre-tax money and will be taxed as ordinary income when withdrawn after age 18. 

Children born outside this four-year window (e.g., before 2025) are eligible to have a Trump Account opened for them and receive other benefits (like potential employer contributions and those from charitable organizations like the Dell Foundation), but they will not receive the $1,000 government seed money. 

Investment Strategy 

Trump Accounts must adhere to specific investment rules: they can only invest in broad U.S. equity index funds that do not use leverage and charge minimal fees. This restriction aims to simplify the investment process and ensure transparency while capitalizing on the growth potential of the U.S. stock market. 

Tax Implications 

For taxpayers, understanding the tax implications of Trump Accounts is critical. Like a Roth IRA, contributions are not tax deductible, but like a traditional IRA the earnings grow tax-deferred until withdrawn. Once the child reaches 18, the account follows standard IRA withdrawal rules, including potential taxes and penalties for early withdrawals. 

• Distributions Before Age 18 - Distributions from Trump Accounts are not permitted until the account beneficiary reaches the age of 18. This restriction ensures that the funds are preserved and potentially grow within the account until the beneficiary comes of age. 
   
  In the unfortunate event that a child with a Trump Account dies, the funds within the account can be transferred to the child’s estate, or alternatively, the account can be transferred to a designated survivor or beneficiary specified for such circumstances. It’s essential to have clear directives in place to manage these accounts ensuring that the transfer of funds is handled smoothly and according to the account holder’s intentions. 

• Distributions After Age 18 - When the beneficiary is 18 or older, distributions have two components: 

• After-tax contributions (made by parents, relatives, etc.) can be withdrawn tax-free because taxes were already paid on the money before it was contributed. 

• Pre-tax contributions/amounts (such as earnings on investments, the $1,000 government seed grant, and employer/charitable contributions) are taxed as ordinary income upon withdrawal. 

• Penalty - Additionally, a 10% early withdrawal penalty generally applies to taxable distributions taken before the beneficiary reaches age 59½, unless an exception applies. 

• Tax-Exempt Scenarios (Exceptions to the 10% Penalty) - While the pre-tax portion of the distributions is still subject to ordinary income tax, the 10% penalty may be waived if the funds are used for “qualified expenses” once the child is 18 or older: 

• Higher Education Expenses: Tuition, fees, books, and other related costs for post-secondary education. 

• First-Time Home Purchase: Up to $10,000 may be used for a down payment on a first home. 

• Birth or Adoption: Up to $5,000 can be used for qualified expenses related to the birth or adoption of a child. 

• Disability Expenses: Expenses related to the disability of the beneficiary. 

• Other exceptions: Including disaster recovery and terminal illness. 

Account Management and Transfers 

To open a Trump Account, guardians must use IRS Form 4547, Trump Account Election(s), or an online tool or application at trumpaccounts.gov. Form 4547 can be filed with a taxpayer’s 2025 tax return while the online tool/application won’t be available until sometime in mid-2026. And accounts cannot begin to take contributions until July 4, 2026. 

Accounts are initially held with the Treasury’s designated agent, but they can be transferred to a preferred brokerage, offering flexibility once the initial setup is complete. 

This transferability is an advantage for account holders, allowing them to manage their investments actively and to select financial institutions that best align with their financial goals and service preferences.  
  

IMPORTANT

If you have a child or children under the age of 18, be sure Form 4547 is filed with your tax return if you want to elect a Trump Account for your children. The form accommodates 2 children, and multiple forms can be filed. It requires the name and SSN of the parent/guardian with their contact information. It also requires the name, SSN, date of birth and home address of the child. Importantly, it includes a box that must be checked if you want the child (born after January 1, 2025, and before January 1, 2029), to receive a $1,000 government contribution to their Trump Account.

 Please contact our office with questions and for filing assistance. 

With tax season upon us, taxpayers across the nation are trying to grasp the many tax changes for 2025. Central to these transformations is the One Big Beautiful Bill Act (OBBBA), a comprehensive tax reform. This pivotal legislation introduces a range of changes that will directly impact virtually everyone’s tax return—whether a working individual, a family, or a small business owner. From adjustments in child tax credits to new guidelines on deductions, the OBBBA aims to make tax preparation more beneficial for everyday Americans. In this article, we will explore the key provisions of the OBBBA and other crucial updates, helping to understand how to navigate these changes effectively and ensure taxpayers are well-prepared for tax season. Whether aiming to maximize deductions or simply file accurately and on time, staying informed will be the greatest asset in working with tax preparers or accountants this upcoming tax season. 

Before getting into the many changes affecting 2025, an understanding of Adjusted Gross Income (AGI) is needed as it has a significant impact on many of the new tax provisions for 2025. AGI is a foundational figure used in the U.S. tax system, representing a taxpayer’s total income for the year after accounting for specific deductions, such as contributions to retirement accounts or student loan interest. It serves as the baseline for determining taxable income and eligibility for various tax credits and deductions. Modified Adjusted Gross Income (MAGI), on the other hand, builds upon the AGI by adding back certain deductions and exclusions, such as foreign income, tax-exempt interest, or educational expenses, depending on the particular tax provision. MAGI is often used to assess eligibility for income-limited benefits or credits, making it slightly broader than AGI. When a tax provision phases out, it means that the benefits gradually decrease as your income surpasses a certain threshold, ultimately disappearing entirely once a higher income level is reached. This approach ensures that tax benefits are targeted towards individuals or families below certain income levels. 

The following is a list of significant changes beginning in 2025, with some being permanent and other only temporary for a specific number of years. 

Senior Deduction: From 2025 through 2028, seniors aged 65 or older can each claim a $6,000 deduction. It phases out for unmarried individuals with a MAGI over $75,000 and for married couples filing jointly over $150,000, reducing by $100 for each $1,000 exceeding these thresholds. Both itemizers and standard deduction filers are eligible. 

No Tax on Tips: From 2025 through 2028, a deduction up to $25,000 per year is allowed for qualified cash tips in customary tip-receiving occupations, excluding specified service trades. The IRS has provided a list of qualifying occupations in IR-2025-92. The deduction phases out when AGI is over $150,000 for singles and $300,000 for joint filers, reducing by $100 for every $1,000 over. The deduction applies per return and is available to both itemizers and standard deduction filers. Employers will include qualifying tips on the employee’s W-2, but since 2025 is a transition year, the employer may provide a separate statement that reports the tips. 

No Tax on Qualified Overtime: From 2025through2028, allows a deduction of up to $12,500 ($25,000 for MFJ) for overtime pay exceeding the individual’s regular pay rate. Phases out for MAGI over $150,000 (singles) and $300,000 (joint), reducing by $100 for every $1,000 over. Available to both itemizers and standard deduction filers. 

Example: 

Overtime Hourly Rate: $30.00 

Regular Hourly Rate: <$20.00> 

Deductible Amount:     $10.00 per overtime hour 

For the 2025 tax year, employers can use a reasonable method to estimate the deductible amount of overtime, as the IRS has not yet finalized its forms and guidance. For the 2026 tax year, the IRS is expected to require reporting qualified overtime with the W-2 

Vehicle Loan Interest Deduction: From 2025through 2028, individuals may deduct up to $10,000 per year in interest on loans secured by a new personal-use passenger vehicle, assembled in the U.S. and weighing under 14,000 pounds. Excludes family loans and non-personal vehicles like campers. Phases out for incomes between $100,000-$150,000 (single) and $200,000-$250,000 (MFJ). Available to both itemizers and standard deduction filers. 

Adoption Credit: OBBBA added a refundable amount. For 2025 the credit is $17,280 with a new $5,000 refundable amount. Those inflation adjusted amounts are $17,670 and for $5,120 for 2026. Phases out between $259,190 and $299,190 for 2025 and in 2026 between $265,080 and $305,080 for all filing statuses. Any excess can be carried forward 5 years. 

Child Tax Credit: OBBBS increased the credit amount. In 2025 through 2028 the credit is $2,200 ($1,700 refundable) for dependents under 17. Phases out at $400,000 MAGI for joint filers, $200,000 for others, decreasing by $50 per $1,000 above these limits. A work-eligible SSN is required for the child and one filer. 

Environmental Tax Credits: OBBBA terminated most of the environmental credits early. Electric vehicle credits ended after September 30, 2025. Residential clean energy credits, including solar, and home energy efficient improvement credits are no longer available after December 31,2025. 

SALT Deduction Limit: For 2025 OBBBA increased the itemized deduction limit for state and local taxes (SALT) to $40,000, up from the prior $10,000 limit. However, the SALT limit for higher income taxpayers’ phases down starting at $500,000 MAGI, reaching a $10,000 floor at $600,000. It never drops below $10,000. For 2026 the deductible limit increases to $40,400 and the phase down range goes from $505,000 to $606,333. The deduction limits continue to increase through 2029 and reverts to $10,000 in 2030 and subsequent years. 

Super Retirement Plan Catch Up Contributions: Beginning in 2025 catch-up contribution limits have significantly increased for individuals aged 60 through 63, who can now contribute the greater of $10,000 or 50% more than the standard catch-up amount to qualified plans, such as SIMPLE plans, 401(k)s, 403(b) annuities, and 457(b) government plans, but not IRAs. For 2025 the enhanced catch-up is $11,250 except for SIMPLE plans which is $5,250. The enhanced catch-up is inflation adjusted beginning in 2026. 

Third Party Network Transaction Reporting (1099-K): OBBBA retroactively repeals the American Rescue Plan Act’s lower reporting threshold for Form 1099-K. It restores the threshold to the original $20,000 in gross payments and 200 transactions, effective for tax years beginning in 2022. This change nullifies the lower, phased-in thresholds for 2024 and 2025. 

Sec 529 Plans Qualified Funds Usage: Effective for distributions after July 4, 2025, OBBBA expands the use of Section 529 plans, allowing funds to cover expenses associated with elementary and secondary school and postsecondary credentialing programs. This includes costs related to tuition, fees, books, and other educational expenses for both school levels, as well as expenses for obtaining professional certificates and licenses at the postsecondary level. By broadening the scope of qualified expenses, the OBBBA enhances the flexibility and utility of 529 plans, making them a more versatile tool for families planning educational investments across various stages of learning. 

Qualified Small Business Stock (QSBS): C Corporation shareholders can exclude gains from the sale of QSBS, and for QSBS acquired after July 4, 2025, the exclusion rates are 50% after three years, 75% after four years, and 100% after five years of holding the stock. The exclusion cap is raised to $15 million, and the corporation’s asset limit is increased to $75 million, both of which will be adjusted for inflation after 2026. More restrictive exclusions apply to QSBS acquired before July 5, 2025, the most recent being for the period September 28, 2010, through July 4, 2025, providing 100% exclusion for stock held for more than 5 years. 

Business Research or Experimental Expenditures: Effective beginning in 2025, domestic expenditures are immediately deductible. Expenses incurred outside the U.S. continue to be amortized over 15-years. 

Business Interest Deduction: In the past, the business interest deduction was generally limited to 30% of a taxpayer’s earnings before interest and taxes (EBIT) and any “floor plan financing interest” for the year. Effective for tax years after 2024 the limit is determined using taxpayer’s earnings before interest, taxes, depreciation, and amortization (EBITDA), which allows many businesses to deduct a higher amount of interest. 

However, the OBBBA also implements additional, less favorable changes to the business interest deduction for tax years beginning after December 31, 2025. These changes include:  

• Excluding foreign income items from the Adjusted Taxable Income (ATI) calculation, which may reduce the deductible interest amount for multinational companies. 

• Largely eliminating the effectiveness of electing to capitalize business interest to avoid the Section 163(j) limitation.  

Small businesses are exempt from this limitation in 2025 if their average gross receipts over the past three years do not exceed $31 million. The amount is inflation adjusted annually and increases to $32 million for 2026. 

Minimum Qualified Business Income (QBI) Deduction: Beginning in 2025, taxpayers with at least $1,000 of QBI from actively managed businesses are allowed a minimum deduction of $400.   

Qualified Production Property: To encourage domestic production, OBBBA, added a new temporary provision. Nonresidential real property placed in service after Jan 19, 2025, within the U.S. or its possessions can be expensed. The original use of the property must commence with the taxpayer. Construction of the property must begin after January 19, 2025, and before January 1, 2029, and be placed in service before January 1, 2031. This provision is geared to manufacturing, production (limited to agricultural and chemical production) or refining of qualified products. So, any portion of a property that is used for offices, administrative services, lodging, parking, sales activities, research activities, software engineering activities, or certain other functions is ineligible for this benefit. 

While generally thought of as affecting just big businesses, this provision may also apply to small, even mom-pop, manufacturing businesses. 

Section 179 Expensing: Allows businesses to immediately expense the cost of qualifying assets such as machinery, equipment, and certain vehicles, although SUVs are limited to a specific deduction cap. Sec 179 expensing benefits many small and medium-sized business enterprises provides upfront tax savings and encourages investment. OBBBA substantially increased the limits for Sec 179 expensing. For 2025 the limit was increased to $2.5 million and for 2026, it is inflation adjusted to $2.56 million. However, the deduction phases out dollar-for-dollar when purchases for the year exceed $4 million in 2025 and $4.09 million in 2026.   

A drawback to the Section 179 expensing method is that if the business’ use of the asset drops to 50% or less, some or all the amount deducted may need to be recaptured. 

Bonus Depreciation: 100% bonus depreciation was made permanent by OBBBA and after January 19, 2025, allows businesses to immediately write off 100% of the cost of qualifying assets in the year they are placed in service. This applies to new and used tangible property with a recovery period of 20 years or less, such as machinery, equipment, and certain improvements. This provision is designed to incentivize business investments by accelerating tax deductions, providing businesses immediate financial benefits and improved cash flow. For qualifying property placed in service between January 1, 2025, and January 19, 2025, the bonus depreciation rate was 40%. 

It’s more important than ever for individuals and businesses to be aware of the recent tax changes that could significantly impact their financial landscape. These updates not only influence how taxes are calculated but also provide opportunities for strategic advantages if navigated wisely. At our practice, we’re committed to ensuring that our clients are fully prepared to face these changes head-on. By partnering with us, you can gain a clear understanding of how the new provisions might affect your unique situation. Together, we’ll craft a tax strategy that not only complies with the latest regulations but also optimizes your financial outcomes. Trust us to guide you through this complex environment so you can focus on what truly matters—achieving your financial goals and securing peace of mind in an ever-evolving tax landscape. 

There’s nothing quite like opening the mailbox, seeing an envelope with “Internal Revenue Service” printed on it, and feeling your stomach drop. Even people who are perfectly organized — even people who’ve done everything right — feel the same jolt of panic when they receive an IRS notice. 

But here’s the truth: 
Most IRS notices are not emergencies. 
Many are routine. 
And almost all can be resolved calmly and cleanly once you know what you’re dealing with. 

So before you lose sleep, take a breath. Then take the next right steps. 

Why the IRS Sends Notices in the First Place 

The IRS sends millions of notices every year, and most fall into just a few categories: 

• Something didn’t match 
  This is the most common scenario. The IRS receives a form (like a 1099 or W-2) that doesn’t match what was on your return. This triggers an automatic letter — not an accusation. 

• They need more information 
  Sometimes a number wasn’t clear. A form didn’t show up. A math error correction triggered a follow-up. It’s often small. 

• A payment was short, delayed, or misapplied 
  Your payment might have gone to the wrong tax year, posted late, or not matched the number on your return. 

• They’re adjusting something on their end 
  This could be a refund recalculation or an update to a credit or deduction. 

• They’re confirming identity 
  Identity-theft protections are much stronger now, and sometimes the IRS asks you to verify you’re… you. 
  In most cases, the notice is informational — not a threat. 

The Most Important Thing: Don’t Respond Alone 

The biggest mistake people make is replying to the IRS too fast or without guidance. 

You may be tempted to: 

• Pay whatever number the letter shows 

• Call the IRS immediately 

• Send documents without context 

• Ignore it and hope it goes away 

Those reactions almost always make things harder. 

The IRS letter is talking to you — but you should talk to your financial professional first. 

They’ll help you understand: 

• Whether the notice is accurate 

• Whether you actually owe anything 

• Whether the IRS made an error 

• Whether this is a simple fix or needs representation 

• What documentation (if any) needs to be provided 

• Whether you should respond at all 

You are not meant to navigate this alone. 

What Your Notice Actually Means 

Every notice has a code (such as CP2000, CP14, or CP75). Those codes help identify the issue quickly. 

Here’s a quick guide to the most common ones: 

CP2000 — Underreported Income 

This is the big one. It means the IRS thinks your income was higher than what you filed. This does not mean you did something wrong. Often, a vendor filed a form late or incorrectly. 

CP14 — Balance Due 

This shows a balance the IRS thinks you owe. It could be accurate… or it could be the result of a timing issue. 

CP75 — Audit Documentation Request 

The IRS wants proof related to a credit or deduction. Again, not a panic situation — just a request. 

Letter 5071C — Identity Verification 

This is part of fraud prevention. It’s not about your return being “wrong.” 

Notice of Intent to Levy (LT11/CP504) 

This is more serious and requires prompt action — but still not panic. Professionals resolve these daily. 

Whatever the code, context matters more. And that’s where guidance helps. 

What NOT To Do When You Receive an IRS Notice 

A calm, correct response almost always leads to a clean resolution. But these common mistakes make things significantly worse: 

Don’t ignore the notice. Deadlines matter. 

Don’t call the IRS before reviewing the notice with a professional. You may accidentally agree to something you shouldn’t. 

Don’t pay the amount automatically. The number may be wrong — sometimes by a lot. 

Don’t send documents without explanation. The IRS reads what you send literally. Context is everything. 

Don’t assume this means you’re being audited. Most notices have nothing to do with audits. 

 How the Process Usually Goes 

Here’s what a calm, correct resolution typically looks like: 

1. You contact your financial professional and share the notice. 

2. They review your return and the IRS data to see what triggered the letter. 

3. They determine whether the IRS is correct or incorrect. 

4. They prepare the appropriate response — or advise that no response is needed. 

5. If money is owed, they ensure the amount is accurate and the payment is sent to the correct tax year. 

6. If the IRS is mistaken, they prepare a clear explanation and supporting documents. 

Most cases resolve with a single letter. Some take a few rounds. But almost all are manageable.  

Why Having Professional Support Makes a Huge Difference 

IRS notices feel intimidating, but a professional sees these all the time. They know: 

• How to interpret the codes 

• How to match the notice to your return 

• Where IRS errors commonly happen 

• How to fix misapplied payments 

• How to communicate with the IRS clearly and effectively 

• When to escalate an issue 

• When not to respond at all 

And most importantly… they know how to keep you calm and protected through the process. 

 If You Got a Notice, You Don’t Have to Solve It Alone 

The most important thing you can do is reach out sooner rather than later. 

If you’ve received an IRS notice — whether it’s confusing, alarming, or just unexpected — contact our firm. We’ll review it with you, explain what it means, and help you resolve it the right way. 

No panic. 

No guesswork. 

Just clarity, support, and a clean path forward.

Most people think their financial professional focuses on the past: last year’s tax numbers, last quarter’s profit, last month’s expenses. That’s the compliance world. It’s essential, of course. But it’s focused on what has already happened. 

Advisory is something different. 
Advisory is about shaping what comes next. 

It’s a shift from “Here’s your report” to “Here’s how we reach your goals.” From reacting to numbers to intentionally influencing them. And if you’ve ever wished money felt less uncertain — or wished for a clearer path toward the life or business you want — advisory may be the upgrade you didn’t know was available. 

Why Compliance Alone Leaves People Stuck 

Compliance keeps you accurate. Advisory keeps you moving forward. 

Most individuals and business owners only see the backward-facing side of financial work. That’s why they often run into patterns like: 

• Finding out their tax bill when it’s too late to change it 

• Making big business decisions without a roadmap 

• Setting goals without the structure to reach them 

• Reviewing profitability rather than designing profitability 

• Feeling like money is unpredictable rather than manageable 

These aren’t failures. They’re symptoms of operating with historical data instead of a future-focused strategy. 

So… What Exactly Is Advisory? 

Advisory is an ongoing, collaborative process that uses forward-looking insights to help you make smarter financial decisions, reduce stress, and progress toward long-term goals. 

There are two main types that many people find the most helpful. 

1. Tax Advisory 

Tax advisory is proactive tax planning — the strategies, timing, and decision-making that help reduce future tax obligations before a return is ever filed. 

It tackles questions like: 

• “What steps can I take this year to lower my tax bill next year?” 

• “Should I consider a different business structure as I grow?” 

• “How do I plan for capital gains, retirement withdrawals, or rental income?” 

• “What tax strategies apply if I start or sell a business?” 

Tax advisory shifts the focus from reporting taxes to designing tax outcomes. 

2. CFO Advisory 

CFO advisory focuses on the financial direction of your business — not just what happened, but what’s possible. 

It helps you explore questions such as: 

• “How much cash will I actually have in three or six months?” 

• “Does our pricing support the level of profit we need?” 

• “Are we ready to hire, or should we outsource a little longer?” 

• “What would it take to expand, open a new location, or launch a new service?” 

• “How do we build a budget that reflects our goals instead of just our costs?” 

CFO advisory gives you a clearer view of how decisions today shape results tomorrow. 

It’s not bookkeeping. It’s strategic guidance. 

Compliance vs. Advisory: A Clearer Comparison 

Compliance	Advisory
Looks at the past	Plans for the future
Answers “What happened?”	Answers “What should we do next?”
Necessary for accuracy	Essential for growth
Often once a year	Ongoing partnership
Reporting-focused	Goal- and strategy-focused
Reactive	Proactive

The difference isn’t only in services — it’s in mindset. Compliance is about clarity. Advisory is about progress. 

Who Benefits the Most From Advisory? Business Owners 

Whether you’re just starting or scaling, advisory helps with pricing, cash flow, hiring decisions, profit margins, budgeting, and long-term growth planning. 

Individuals With Complex or Growing Financial Lives 

Side gigs, rental properties, investments, stock compensation, and multi-source income all benefit from proactive planning. 

People Approaching Major Life or Financial Milestones 

Retirement, business sales, home purchases, expansions, or college planning often require a long runway to optimize outcomes. 

Anyone Who Wants More Control and Less Guesswork 

If you want financial clarity instead of surprises, advisory gives you structure and strategy. 

The Key Benefits: Why Advisory Pays Off 

Advisory often delivers a measurable return on investment because it directly influences taxes, cash flow, and long-term wealth-building. The most common benefits include: 

1. Better Tax Outcomes Year After Year 

Planning ahead opens the door to legal, strategic tax advantages you simply can’t access at filing time. 

2. A Clear, Actionable Financial Plan 

You’re no longer guessing. You know the steps required to reach your goals — and you have support following them. 

3. Improved Profitability and Cash Flow 

Businesses often discover hidden profit leaks and inefficiencies that can be corrected quickly. 

4. More Confidence in Decisions 

You gain clarity on the financial impact of every major move before you make it. 

5. Faster Progress Toward Your Milestones 

Whether you want to expand your business, retire early, or grow wealth, advisory accelerates the path. 

6. A Collaborative Relationship Focused on Your Wins 

Instead of one annual meeting, you get a strategic partner committed to helping you move forward throughout the year. 

Is Advisory Right for You? 

If you want more clarity, more control, more intentional financial planning — and fewer surprises — advisory may be exactly what you need. 

It’s not about adding complexity. It’s about replacing uncertainty with direction. 
And if you’re ready to explore how proactive planning can improve your financial outcomes, the next step is simple: 

If you think advisory might be right for you, reach out to our firm. Let’s talk about your goals and build a plan for where you want to go next. 

In today’s digital age, social media serves as a hub of information on almost every topic imaginable, from cooking recipes to financial advice, including taxes. However, as accessible as these platforms are, they pose a significant risk when used as a source for tax advice. Misleading or just plain wrong tax advice on social media can result in serious consequences for taxpayers. Here’s how to navigate these pitfalls and avoid detrimental impacts on your finances. 

The Rising Trend of Social Media Tax Advice

Social media platforms like Twitter, TikTok, and Instagram have seen a rise in influencers and self-proclaimed experts sharing tax tips and strategies. While many do this with good intentions, mistakes and outright false information are rampant. This misinformation often arises because users oversimplify complex tax issues, leading to a proliferation of errors. 

Common Misinformation Schemes

Recent trends have seen a variety of tax-related misinformation spreading across social media, including incorrect advice on tax credits like the Fuel Tax Credit and the Sick and Family Leave Credit. These credits are often touted as easily accessible by everyone, which is not the case. For example, the Fuel Tax Credit is specifically intended for off-highway business use and is not applicable to most taxpayers, while the Sick and Family Leave Credit refers to a tax credit that’s only available to eligible employers that pay wages to qualifying employees who are on paid family and medical leave — again not a credit most individuals can claim. Such misconceptions lead to incorrect claims, with hefty penalties for those who claim them without eligibility. 

Another popular scheme involves false use of Forms W-2 and 1099. Social media posts may suggest fabricating income figures to increase refund amounts, further complicating the taxpayer’s situation with the IRS. 

Classic Example 

A classic example is recent and still an ongoing problem relating to the Employee Retention Credit (ERC) and not understanding the tax provision and relying on advice from media and online promoters. The ERC was a refundable tax credit to incentivize employers to retain employees on their payroll during the economic hardships caused by the COVID-19 pandemic. But it has since become a tax and financial quagmire for those who were led to believe they were eligible for the credit by misleading promotions both online and on television. Promoters aggressively advertised the ERC as an easy way to obtain financial relief, often taking substantial fees upfront from business owners under the guise of filing their claims. However, many of these promoters presented fraudulent claims or inaccurately represented the eligibility of businesses, leading to inflated or wrongful claims filed with the IRS. Once their fees were collected, these promoters frequently disappeared, leaving business owners in a perilous situation—faced with IRS audits, penalties, and the daunting task of proving their claims’ legitimacy or repaying improperly received funds. Consequently, many small business owners, initially enticed by the promise of government aid and assurance from these promoters, found themselves entangled in legal and financial struggles, illustrating the profound impact that misinformation and fraud can have when disseminated by untrustworthy sources. 

The Real Consequences

Relying on false tax information can have dire outcomes. When taxpayers claim credits or deductions without basis, it can lead to severe financial and legal repercussions. Here are some potential dangers: 

1. Delayed or Denied Refunds: The IRS closely scrutinizes refund claims that appear suspicious. If a claim seems inflated or unsubstantiated, it can lead to delays and potential denial of the refund. 

2. Penalties and Fines: When taxpayers act on bad, incomplete, or fraudulent tax advice from social media, they expose themselves to a range of penalties that underscore the importance of accurate and responsible tax filing. For instance, the Excessive Claim Penalty imposes a charge of 20% on the excessive amount claimed if it exceeds what is allowable, potentially leading to thousands in additional costs if false claims are made. Furthermore, if the IRS determines that fraudulent intent was involved in the misrepresentation, the penalties can be even more severe—fraud penalties can reach a staggering 75% of the unpaid tax due to fraud. There is also the possibility of a 20% penalty for negligence or tax underpayment related to inaccuracies, which can quickly add up to significant financial burdens. Such punitive measures highlight how critical it is to base tax decisions on thoroughly vetted advice, avoiding the pitfalls of misleading social media recommendations. 

3. Legal Action: Persistent misuse can lead to audits and even criminal prosecution. If found guilty, individuals may face imprisonment. 

4. Identity Theft Risk: Engaging with providers of dubious tax advice puts taxpayers at risk of identity theft and fraud, as they might inadvertently share or use their private information online in unsecured ways. 

5. Long-Term Financial Implications: Incorrect filings can impact financial health, cause future audits and make it harder to receive tax credits and refunds in subsequent years. 

Taking Proactive Measures

 Given these potential risks, it is crucial to approach social media tax advice with skepticism. Here are some strategies to protect yourself: 

• Verify Before You Trust: Always cross-check social media advice with reliable sources. The official IRS website and licensed tax professionals offer dependable guidance. 

• Stay Informed About Common Scams: Keep an eye on the IRS’ “Dirty Dozen” list, an annual compilation of prevalent tax scams, to stay updated on the methods scammers use. 

• Report Fraud: If you encounter fraudulent promotions, report them using Form 14242 on the IRS website. By doing so, you help prevent more fraud and protect others from falling victim. 

Dealing with preparing and filing your tax returns is stressful enough without the additional complication of misinformation. While social media can be informative, it is essential to critically evaluate what advice you choose to follow. Misguided tactics not only affect your refund but could also lead to severe financial and legal consequences. 

Make informed decisions by leveraging the appropriate resources, such as IRS guidelines and professional help. Confidence in tax filing comes from knowledge, and by steering clear of dubious advice and embracing legitimate information, you ensure a smooth and secure tax process. Protect your financial health and future by sidestepping the alluring yet treacherous path of social media tax advice. 

For personalized tax advice and to explore legitimate tax benefits that can help you minimize your tax liability, contact our office for experienced professional guidance to assist you with accuracy and integrity.