April 2, 2026by admin
April 15
- Tax returns for C corporations (Form 1120) and individuals (Form 1040) due
- First quarter estimated tax payment for 2026 due
- Deadline to file for an automatic extension (Forms 4868 or 7004)
April 2, 2026by admin
Most businesses close their books for tax and accounting purposes on December 31 because it aligns with the calendar year. But a calendar year isn’t always the best option. For some companies, choosing a fiscal year end that better reflects their business cycle can improve financial reporting and simplify year-end procedures and tax filing. Here’s what you should know when deciding on the right tax year end for your business.
Fiscal-year basics
A fiscal year is a 12-month accounting period that doesn’t end on December 31. For example, a company might operate on a fiscal year running from July 1 through June 30.
Some businesses use a 52- or 53-week fiscal year. These periods don’t necessarily end on the last day of a month. Instead, they may close on the same weekday each year, such as the last Friday in March. This approach is common in industries where weekly activity cycles are more meaningful than monthly reporting.
Using a fiscal year also changes tax filing deadlines. Pass-through entities — including partnerships, limited liability companies and S corporations — generally must file their tax returns by the 15th day of the third month after their fiscal year ends. For example, a business with a June 30 fiscal year end would file its return by September 15. Fiscal-year C corporations generally must file by the 15th day of the fourth month following the fiscal year close. (These correspond to the calendar-year deadlines of March 15 for pass-throughs, which is the 15th day of the third month after December 31, and April 15 for C corporations, which is the 15th day of the fourth month after December 31.)
When a fiscal year makes sense
Not every business can choose its own tax year. Sole proprietorships typically must use a calendar year because the business isn’t legally separate from its owner, who files an individual tax return based on the calendar year.
Other businesses may be able to adopt a fiscal year if they can demonstrate a valid business purpose or qualify for certain IRS elections. In practice, this usually means aligning the tax year with the company’s operating cycle. For seasonal businesses, a fiscal year can provide a clearer view of performance. Construction companies, farms, accounting firms and retailers often experience significant fluctuations throughout the year.
Consider a snowplowing company that earns most of its revenue between November and March. A December 31 year end divides one winter season into two tax years, making it harder to evaluate profitability for that period. A fiscal year ending after the winter season may present financial results more accurately than a calendar year would.
Businesses that restructure or significantly change their operations may also consider changing their tax year. Doing so generally requires IRS approval by filing Form 1128, “Application to Adopt, Change or Retain a Tax Year.” Companies that change their tax year usually must also file a return for the short period created during the transition.
Beyond taxes
The benefits of adopting a fiscal year aren’t limited to tax reporting. Choosing the right year end can also make financial reporting and planning easier.
If a company’s busiest months fall late in the calendar year, closing the books on December 31 can disrupt operations and strain accounting staff during an already demanding period. Moving the year end to a slower time can make it easier to perform inventory counts, review contracts and complete financial statements. This can be especially helpful for businesses that rely on detailed job costing or inventory management. Completing year-end accounting tasks when operations are less hectic can reduce errors and improve the financial data that business owners and stakeholders rely on for decision-making.
We can help
Selecting a fiscal year end involves more than choosing a convenient date. The right year end can streamline reporting, provide more meaningful insights and support better planning. If you’re thinking about a change, contact us. We’ll help you determine the best fit for your operations and guide you through the IRS approval process.
April 2, 2026by admin
Did you know that you can claim tax deductions for animals that serve a bona fide business purpose? This benefit extends beyond agricultural operations. Working animals in many sectors may qualify. Here are the details.
Working animals vs. personal pets
A working animal must provide a clear and direct business benefit. Common examples include:
- Dogs used to deter theft, vandalism or unauthorized entry at a business location,
- Cats used to control rodents that could damage inventory, equipment or facilities, and
- Animals used in agricultural operations.
In these cases, the animal’s presence directly supports business operations, making related expenses potentially deductible.
However, it’s important to distinguish bona fide working animals from those that provide personal companionship or emotional support. If an animal is a part-time worker and part-time pet, you can deduct only the percentage of expenses that correspond to the animal’s working time. For instance, if a dog spends approximately 60% of its time guarding a warehouse and 40% as a pet, only 60% of eligible expenses would typically be deductible.
The IRS will likely deny deductions for an animal that’s clearly primarily a household pet. Likewise, service animals for owners or employees aren’t eligible for business deductions.
Deductible expenses
Many costs associated with the care of a working animal may be deductible as ordinary and necessary business expenses. These include costs for raising, feeding, caring for, training and managing animals used in a trade or business. Examples include:
- Food and treats,
- Veterinary care and medications,
- Grooming necessary for the animal’s role,
- Training costs related to the animal’s work function, and
- Supplies such as leashes, collars, bedding and shelter.
The deduction applies only to reasonable expenses connected to the animal’s business use. Luxury or purely personal costs may draw IRS scrutiny.
It’s important to note that different tax rules apply to farmers, ranchers and professional breeders. In general, farmers may deduct feed, veterinary care and other costs directly associated with the business use of animals. The costs associated with animals used for draft, breeding, sport or dairy purposes are typically capitalized and depreciated, rather than immediately deducted, unless they’re included in inventory.
Recordkeeping requirements
Proper documentation is key to supporting deductions for working animals. You’ll need to maintain records to demonstrate that the animal performs a legitimate business function, the expenses are ordinary and necessary for your industry, and any allocation between business and personal use is reasonable. Contact us to discuss your situation and assess your eligibility.
April 2, 2026by admin
Many businesses offer health care and dependent care flexible spending accounts (FSAs) as part of their employee benefits package. These plans provide valuable tax savings to employees and payroll tax savings to employers.
If your company operates a calendar-year FSA with a 2½-month grace period, employees have until March 15 to incur eligible expenses for their 2025 plan balances. After that, any unused 2025 funds may be forfeited under the “use-it-or-lose-it” rule. Here’s a refresher on how FSAs work and what employers can do with forfeited balances.
The basics
Under an employer-sponsored FSA plan, employees may be able to contribute a portion of their pay to a:
Health care FSA. These accounts may be used for qualifying out-of-pocket medical, dental and vision expenses for the employee and his or her spouse and/or qualified dependents. For 2026, the maximum employee contribution to a health care FSA increases to $3,400 (from $3,300 in 2025). (The limit is annually indexed for inflation.)
Dependent care FSA. These accounts may be used for qualifying child care or adult dependent care expenses. For 2026, under 2025 tax legislation, the dependent care FSA contribution limit increases to $7,500 per household ($3,750 for married couples filing separately). The limit for 2025 was $5,000 ($2,500 for separate filers). (The limit isn’t inflation-indexed, so it won’t go up in the future unless another increase is passed by Congress and signed into law.)
Employee contributions are made on a pretax basis, reducing federal income tax, Social Security tax and Medicare tax (and often state income tax). The FSA plan directly pays or reimburses employees for qualified expenses, and the payments or reimbursements are tax-free.
Use-it-or-lose-it rule
If employees don’t use their full FSA balances by the end of the plan year, leftover balances generally revert to the employer under the use-it-or-lose-it rule. However, there are two exceptions:
- An FSA plan can allow a grace period of up to 2½ months. Most FSA plans operate on a calendar-year basis. For a calendar-year FSA plan, the grace period gives employees until March 15 of the following year to incur qualified expenses to drain their unused FSA balances from the previous year.
- A health care FSA plan can allow employees to carry over up to an annually inflation-indexed amount of unused balances from one year to the next. The amount that can be carried over from 2026 to 2027 is $680 (up from the $660 that could be carried over from 2025 to 2026).
It’s important to note that a health care FSA plan can offer either the carryover or the grace period, but not both. Dependent care FSA plans can offer only the grace period, not the carryover.
Options for forfeited FSA funds
After any applicable grace period ends, or after applying any permitted health care FSA carryover, employers may retain forfeited balances under IRS cafeteria plan rules. Many businesses use the funds to offset plan administrative expenses.
Other permitted uses generally include, on a reasonable and uniform basis: 1) reducing the amount employees need to contribute in a future year to reach a certain FSA balance (for example, employees need to contribute only $950 to have a $1,000 FSA balance, with the extra $50 funded by forfeited balances from a previous year), or 2) returning amounts to participants (typically treated as taxable wages and subject to payroll taxes and income tax withholding).
Forfeitures can’t be returned to plan participants based on individual claims experience. Any allocation of returned funds must be nondiscriminatory and consistent with plan terms.
Natural check-in point
Around the grace-period deadline is a natural time for business owners to review how their FSA plans handle unused balances. It’s also a good opportunity to confirm that your current plan design, including grace period or carryover provisions, aligns with your employees’ needs and your administrative practices. Contact us to help review and modify your FSA plan provisions, handle forfeitures properly and prepare for next year’s enrollment cycle.
April 2, 2026by admin
If you used one or more vehicles in your business during 2025, you may be eligible for valuable tax deductions on your 2025 income tax return. Businesses can generally deduct expenses attributable to business use of a vehicle plus depreciation. However, the rules are complicated, and your deduction may be affected by factors such as the vehicle’s weight, business vs. personal use, and whether you use the actual expense method or the cents-per-mile rate.
Actual expenses plus depreciation
The year you place a vehicle in service, you can choose to deduct the actual expenses attributable to your business vehicle use or, if the vehicle is a car, SUV, van, pickup or panel truck, claim the cents-per-mile deduction (discussed later). Deductible expenses include gas, oil, tires, insurance, repairs, licenses and vehicle registration fees. You’ll need to track and substantiate these expenses.
If you use the actual expense method, you also can claim a depreciation deduction for the vehicle by making a separate depreciation calculation for each year until the vehicle is fully depreciated. According to the general rule, you calculate depreciation over a six-year span for a percentage of the purchase cost as follows:
- Year 1 — 20%
- Year 2 — 32%
- Year 3 — 19.2%
- Year 4 — 11.52%
- Year 5 — 11.52%
- Year 6 — 5.76%
If a vehicle is used 50% or less for business purposes, you must use the straight-line method (10% in Years 1 and 6 and 20% in Years 2 through 5) to calculate depreciation deductions instead of the percentages listed above.
Depending on the cost of a passenger auto, your deduction may be less than the percentage of cost above because “luxury auto” annual depreciation ceilings apply. These are indexed for inflation and may change annually. For a passenger auto placed in service in 2025, generally the ceilings are as follows:
- Year 1 — $20,200 ($12,200 if you don’t claim first-year bonus depreciation)
- Year 2 — $19,600
- Year 3 — $11,800
- Each remaining year until the vehicle is fully depreciated — $7,060
These ceilings are proportionately reduced for any nonbusiness use.
More favorable depreciation rules apply to heavier SUVs, pickups and vans. For example, 100% bonus depreciation or the normal Section 179 expensing limit ($2.5 million for 2025) generally is available for vehicles with a gross vehicle weight rating (GVWR) of more than 14,000 pounds. A reduced Sec. 179 limit of $31,300 applies to vehicles (typically SUVs) rated at more than 6,000 pounds but no more than 14,000 pounds. Again, this favorable tax treatment is available only if the vehicle is used more than 50% for business.
The cents-per-mile method
The 2025 cents-per-mile rate for the business use of a car, SUV, van, pickup or panel truck is 70 cents (increasing to 72.5 cents for 2026). This rate applies to gasoline- and diesel-powered vehicles as well as electric and hybrid-electric vehicles. A depreciation allowance is built into the rate, so you can’t claim both the depreciation deductions discussed earlier and the cents-per-mile rate for the same vehicle.
The rate is adjusted annually. It’s based on an annual study commissioned by the IRS about the fixed and variable costs of operating a vehicle, including gas, maintenance, repairs and depreciation. Occasionally, if there’s a substantial change in average gas prices, the IRS will change the cents-per-mile rate midyear.
The cents-per-mile rate is beneficial if you don’t want to keep track of actual vehicle-related expenses or worry about depreciation calculations. Although you don’t have to account for all your actual expenses, you still must record certain information, such as the mileage for each business trip, the date and the destination.
Choosing or changing your method
There’s much to consider before deciding whether to use the actual expense method or cents-per-mile method to deduct expenses for a vehicle your business placed in service in 2025. For a vehicle placed in service earlier, if you previously deducted actual expenses for the vehicle, you can’t use the cents-per-mile rate for 2025 (or any other future year). However, if you previously used the cents-per-mile rate, you can switch to the actual expense method in a later year — but you can claim only straight-line depreciation.
If you lease a business vehicle, there also are deduction opportunities but the rules are different. Contact us if you’d like more information. We can also answer questions about claiming 2025 business vehicle expenses on your 2025 return or planning for and tracking 2026 expenses.
March 1, 2026by admin
March 16 (March 15 is Sunday)
- Tax returns for S corporations (Form 1120-S) and partnerships (Form 1065) due
- Furnish Schedule K-1 to partners/shareholders
- Deadline to elect S corporation status for 2026 (Form 2553)
March 31
- Electronic filing deadline for Form 3921
February 26, 2026by admin
An advance payment is one received by a business before it provides whatever is being paid for. For federal income tax purposes, generally advance payments must be reported as taxable income in the year received. This treatment always applies if your business uses the cash method of accounting for tax purposes. But, if your business uses the accrual method, it may qualify for favorable tax deferral treatment.
Tax deferral privilege
Accrual-basis businesses can elect to postpone including all or part of an eligible advance payment in taxable income until the year after it’s received. To be eligible for the deferral election, among other requirements, an advance payment must:
- At least partially be included in revenue for a later year according to your business’s applicable financial statement (AFS) or, if your business doesn’t have an AFS, treated as earned in a later year, and
- Be received for goods, services or other eligible items listed in IRS guidance.
If your accrual-basis business received eligible advance payments in 2025, you potentially can elect to defer reporting some or all of that income until 2026 for federal tax purposes.
What is an AFS?
An AFS can be an audited financial statement used for credit or financial reporting purposes or certain reports submitted to federal or state agencies. A form filed with the Securities and Exchange Commission, such as a 10-K or annual report, also can be an AFS.
If your business doesn’t have an AFS and elects to use the deferral method for advance payments, the payment must be included in taxable income in the year received to the extent of the amount that is treated by your business as earned in that year. The remaining portion of the advance payment must be included in taxable income the following year.
What types of payments are eligible?
Advance payments that may be eligible for deferral include payments for:
- Services,
- The sale of goods,
- Gift cards,
- The use of intellectual property,
- The sale or use of computer software,
- Warranty contracts, and
- Subscriptions.
Other payments specified in IRS guidance also may be eligible.
Eligible advance payments don’t include rents (with some exceptions), certain insurance premiums, payments for financial instruments, payments for certain service warranty contracts, and other payments specified in IRS guidance.
Some examples
The following examples illustrate how eligible advance payments can be deferred for federal income tax purposes:
Taxpayer has an AFS. A calendar-year accrual method S corporation provides tennis facilities and lessons. On November 15, 2025, it received payment for a one-year contract for 48 one-hour tennis lessons beginning on that date. Eight lessons were given in 2025. On its AFSs, the business recognizes one-sixth (8/48) of the advance payment as revenue for 2025 and five-sixths (40/48) as revenue for 2026. Making the advance payment deferral method election, the business includes only one-sixth of the advance payment in taxable income for 2025. The remaining five-sixths must be included in taxable income for 2026.
Taxpayer doesn’t have an AFS. A calendar-year accrual method LLC provides online security protection services for computers, tablets and cell phones. On September 1, 2025, it received payment for two years of protection services beginning on that date. The business determines that four months of its services should be treated as earned in 2025. Making the advance payment deferral election, the business includes only one-sixth (4/24) of the advance payment in taxable income for 2025. The remaining five-sixths (20/24) must be included in taxable income for 2026.
Can you benefit?
We’ve only scratched the surface of complicated tax rules and regulations that apply to the treatment of advance payments. Contact us for help determining if your business is eligible to defer 2025 advance payments. We can also calculate the possible current tax savings.
February 26, 2026by admin
The deadlines for filing 2025 tax returns (or extensions) are fast approaching. Although most tax planning moves must be completed by December 31 of the tax year, there are some decisions you can make when filing your return that can save taxes now or in the future. One such decision is whether to claim accelerated depreciation breaks.
Depreciation basics
For assets with a useful life of more than one year, the cost generally must be depreciated over a period of years (unless accelerated depreciation breaks are available). In other words, taxpayers can deduct only a portion of the asset’s cost each year over the depreciation period.
The depreciation period depends on the type of asset, ranging from three years (such as for software and small tools) to 39 years (for commercial real estate). The Modified Accelerated Cost Recovery System (MACRS) provides larger deductions in the early years of an asset’s life than the straight-line method.
In many cases, assets can be depreciated much more quickly under special tax breaks. Some of these breaks were enhanced by last year’s One Big Beautiful Bill Act (OBBBA).
First-year bonus depreciation
Under the OBBBA, 100% first-year bonus depreciation can be claimed on 2025 tax returns for qualified assets that were acquired after January 19, 2025, and placed in service in 2025.
Eligible assets include:
- Depreciable personal property, such as equipment, computer hardware and peripherals,
- Transportation equipment, including certain passenger vehicles, and
- Commercially available software.
First-year bonus depreciation can also be claimed for real estate qualified improvement property (QIP). QIP is defined as an improvement to an interior portion of a nonresidential building placed in service after the date the building was placed in service. However, expenditures attributable to the enlargement of a building, elevators or escalators, or the internal structural framework of a building don’t count as QIP and usually must be depreciated over 39 years.
The first-year bonus depreciation percentage is 40% for qualified assets acquired on or before January 19, 2025, and placed in service in 2025.
Bonus depreciation is automatically applied to eligible assets unless you elect out of it. However, you can elect out of it only on an asset class basis. For example, you can elect out of it for all three-year property, but you can’t elect out of it for just one specific three-year asset.
Section 179 expensing election
Sec. 179 expensing allows small businesses to write off the full cost of 2025 eligible assets. For tax years beginning in 2025, the maximum Sec. 179 deduction is $2.5 million (double the pre-OBBBA limit).
Eligible assets include:
- Depreciable personal property, such as equipment, computer hardware and peripherals,
- Transportation equipment, including certain passenger vehicles,
- Commercially available software, and
- Real estate QIP.
For nonresidential real property, Sec. 179 deductions are also allowed for qualified expenditures for:
- Roofs,
- HVAC equipment,
- Fire protection and alarm systems, and
- Security systems.
Finally, eligible assets include depreciable personal property used predominantly to furnish lodging, such as furniture and appliances in a property rented to transients.
In addition to the annual expense limit, Sec. 179 expensing is subject to a couple of other limits that don’t apply to bonus depreciation. First, the deduction is phased-out dollar for dollar if you put more than $4 million of qualifying assets into service last year. Second, Sec. 179 deductions can’t cause an overall business tax loss. The Sec. 179 deduction limits can be tricky if you own an interest in a pass-through business entity.
That said, claiming Sec. 179 expensing can be beneficial for assets not eligible for 100% bonus depreciation or if you want to immediately deduct the cost of some, but not all, assets in a particular asset class that is also eligible for bonus depreciation.
Depreciation deduction strategies
Claiming the maximum depreciation deductions you can on your 2025 income tax return will generally provide the greatest 2025 tax savings. Among other benefits, this can boost cash flow and provide more funds for further investment in the business.
But there are circumstances where it may be better to depreciate assets over a period of years. For example, the Section 199A qualified business income (QBI) deduction for pass-through businesses can be up to 20% of an owner’s QBI. Because of the income limitations on this deduction, claiming big first-year depreciation deductions can reduce QBI and lower or even eliminate your allowable QBI deduction.
Depreciating assets over a period of years can also be beneficial if you expect to be subject to higher tax rates in the future, such as if you may be in a higher tax bracket or lawmakers increase rates. When you claim 100% bonus depreciation or Sec. 179 expensing today, you’re eliminating your depreciation deductions for those assets in the future. And deductions save more tax when tax rates are higher.
Time to get started
We can identify which depreciation breaks you’re eligible for, review your overall tax situation and help determine whether it will be beneficial for you to maximize depreciation-related breaks on your 2025 tax return. We can also strategize with you on tax planning for 2026 asset investments. Please contact us to get started.
February 26, 2026by admin
Tax credits reduce tax liability dollar-for-dollar. As a result, they can be more valuable than deductions, which reduce only the amount of income subject to tax. One tax credit that hasn’t been getting much attention lately but can still be valuable for some small businesses is the credit for providing health insurance to employees.
Who’s eligible?
Under the Affordable Care Act (ACA), certain small employers that provide employees with health care coverage are eligible for this tax credit. Although it’s been available for more than a decade and can generally be claimed for only 2 years, some small businesses may still be eligible. These may include newer businesses as well as older ones that only recently have begun offering health insurance.
The maximum credit is 50% of the employer’s group health coverage premiums, if the employer contributes at least 50% of the total premium or a benchmark premium. For 2025, the full credit is available for employers with 10 or fewer full-time equivalent employees (FTEs) and average annual wages of $33,300 or less per employee. Partial credits are available on a sliding scale to businesses with fewer than 25 FTEs and average annual wages of less than $66,600. (These amounts are annually adjusted for inflation and increase to $34,100 and $68,200, respectively, for 2026.)
As noted, the credit can be claimed for only two years. Also, those years must be consecutive. (Credits claimed before 2014 don’t count, however.) If you started offering employee health insurance in 2025, you may be eligible for the credit on your 2025 return (and again on your 2026 return next year). If you’re offering coverage beginning in 2026, you may be able to claim the credit when you file your 2026 return next year (and then again on your 2027 return the following year).
Keep in mind that additional rules apply to the health care coverage credit. But premiums that aren’t eligible for the credit generally can be deducted, subject to the rules that apply to deductions for ordinary business expenses.
Can your business claim the credit?
If you’re not sure whether your business is eligible for a full (or partial) credit for health care coverage, contact us. We can help assess your eligibility. We can also advise on whether you may be eligible for other tax credits on your 2025 return and if you can take any steps this year so you can potentially claim credits on your 2026 return next year.
February 26, 2026by admin
Did your business make repairs to tangible property, such as buildings, equipment or vehicles, in 2025? Such costs may be fully deductible on your 2025 income tax return — if they weren’t actually for “improvements” that must be depreciated over a period of years.
Betterment, restoration or adaptation
In general, a cost that results in an improvement to a building structure or any of its building systems (for example, the plumbing or electrical system) or to other tangible property must be capitalized, with depreciation deductions spread over a few years or longer (depending on depreciation method and property type). An improvement occurred if there was a betterment, restoration or adaptation of the unit of property.
Under the “betterment test,” you generally must capitalize amounts paid for work that’s reasonably expected to materially increase the productivity, efficiency, strength, quality or output of a unit of property or that’s a material addition to a unit of property.
Under the “restoration test,” you generally must capitalize amounts paid to replace a part (or combination of parts) that is a major component or a significant portion of the physical structure of a unit of property.
Under the “adaptation test,” you generally must capitalize amounts paid to adapt a unit of property to a new or different use — one that isn’t consistent with your ordinary use of the unit of property at the time you originally placed it in service.
Immediate deduction safe harbors
Costs incurred on incidental repairs and maintenance can be expensed and immediately deducted. But distinguishing between repairs and improvements can be difficult. A few IRS safe harbors can help:
Routine maintenance safe harbor. Recurring activities dedicated to keeping property in efficient operating condition can be expensed. These are activities that your business reasonably expects to perform more than once during the property’s “class life,” as defined by the IRS.
Amounts incurred for activities outside the safe harbor don’t necessarily have to be capitalized, though. These amounts are subject to analysis under the general rules for improvements.
De minimis safe harbor. Amounts paid for tangible property can be currently deducted for tax purposes if those amounts are deducted for financial accounting purposes or in keeping your books and records. However, a dollar limit applies:
- $5,000 if you have an “applicable financial statement,” generally meaning one that’s audited by a CPA, or
- $2,500 if you don’t have an applicable financial statement.
Additional rules apply that may limit or eliminate your current deduction for a particular expense.
Small business safe harbor. For buildings that initially cost $1 million or less, qualified small businesses may elect to deduct the lesser of $10,000 or 2% of the unadjusted basis of the property for repairs, maintenance, improvements and similar activities each year. A qualified small business is generally one with average annual gross receipts of $10 million or less for the past three tax years.
A variety of tax-saving opportunities
As you can see, various options may be available to immediately deduct repair and maintenance costs safely. But keep in mind that improvements might also be eligible to be deducted immediately in certain circumstances, such as if they qualify for 100% bonus depreciation or Section 179 expensing. Contact us to discuss what you can deduct on your 2025 return and to start planning for tax-efficient repairs, maintenance and improvements in 2026.