Potential tax breaks

1. Qualified charitable distributions. If you’re age 70½ or older, you can transfer up to $111,000 (or a total of $222,000 for joint filers) directly from your IRA to a qualified charitable organization without paying any tax. Because distributions done this way are not subject to federal tax, it’s like contributing with pre-tax dollars. Plus, your contribution counts as a required minimum distribution for tax purposes.
2. Appreciated securities. Donate appreciated property (like securities) to a qualified charity, and you can deduct the current fair market value (FMV) of the property if you’ve owned it longer than a year. For example, if you acquired stock three years ago for $7,500 and it’s now worth $10,000, you can donate it and deduct the entire $10,000 FMV if you itemize your deductions. There’s no capital gains tax on the $2,500 appreciation in value ever! This is a great strategy if you are close to or over the itemized deduction threshold in a given year.
3. Bunching donations. Under current tax law, the standard deduction is more than double the historic rates, effectively lowering the number of taxpayers who will itemize their deductions. As a result, it now makes sense to “bunch” large gifts of property, like securities (see #2), in a tax year in which you expect to itemize. Conversely, if you don’t anticipate itemizing in the current tax year, you may consider postponing donations into the next year. The idea is to get the most tax deductions possible over a multiyear period.

Charitable deduction ideas

• Consider a Donor Advised Fund (DAF). This idea is to be used in conjunction with tips 2 and 3. With this idea, you create a Donor Advise Fund. You then donate appreciated assets (stocks) into the fund (tip 2). You donate enough in one year to exceed the standard deduction for that year (tip 3). You then donate your funds out of the DAF over the years. While the money is no longer yours, you still control which qualified charities receive it. Note: You cannot use a DAF to qualify for the new, non-itemized charitable giving rule outlined in tip 4.
• Leverage the new charitable deduction rule. Beginning in 2026, you can now directly deduct charitable contributions without itemizing. The amount is $1,000 ($2,000 for a married filing joint tax return).

With each of these ideas, it’s essential to follow the rules when donating. If not, your good intentions may not be deemed a qualified donation for tax purposes. Contact our RRBB advisors if you’d like to review your situation.

The post Great charitable deduction ideas appeared first on RRBB.

Toss this, not that

• Keep a copy of your Form 1040 indefinitely. Do not toss or destroy any of your 1040s. You may need them to correct historic Social Security earnings statements or to prove that you filed a tax return.
• You must retain supporting documents for three years. Records to support your tax return (i.e., W-2s, 1099s, K-1s, receipts, canceled checks, bank statements, and mileage logs) should be kept for a minimum of three years from the later of the tax filing due date, the date you filed your taxes, or the date you paid your tax in full. This approach ensures that your records are available for a potential IRS audit.
• Hold onto property and investment records longer. To prove your cost/basis and taxable gain or loss, all records relating to property that you own (your home, rental properties, stocks, bonds, and other investments) need to be kept for at least three years after it’s sold or disposed of.
• Be mindful of other record retention requirements. The three-year period is the federal guidance for standard returns. There are other factors to consider, including:
  • State record retention requirements (often six months to one year longer)
  • Requirements for insurance, banking or estate management
  • W-2s to confirm and defend your historic Social Security earnings statement
  • Additional federal requirements for tax returns including unreported income (six years), worthless securities (seven years) or bad debt (seven years)
  • No audit time limit for fraudulent returns
• Pay special attention to new rules. Remember this past year was the first year for tax-free tips and tax-free overtime. Pay special attention here to ensure you can defend your deduction with employer or vendor documentation. And in 2026, the above-the-line charitable contribution will need proof to take the deduction.
• A specific filing system is not a requirement, but organization is key. The ability to easily locate your documents during an audit will make the process much simpler. Here are some tips:
  • File records by year rather than income or deduction type.
  • Within the file, order your records to match the flow of the Form 1040.
  • Consider scanning your files to create a digital backup.
  • Create 2026 files now to save documents for the current year.
  • Shred old documents; don’t just throw them away.

Post-tax-filing record retention

If you are unsure whether to retain or shred a document, keep it unless you know that you can replace it. Contact our RRBB advisors today if you have questions or need assistance.

The post Your guide to post-tax-filing record retention appeared first on RRBB.

The value of the gift

When you gift stock, there are not one but two values to consider.

1. Gift value. This is the market value of the stock at the time of your gift. Since there is a possible gift tax to you if the value of all gifts given by you to a person during the year is $19,000 or over ($38,000 for a married couple), you will need to calculate this value prior to finalizing your decision to provide the gift.
2. Value (basis) of the stock. You need to determine the cost to you at the time you originally purchased the shares. This includes any brokerage or other fees. Provide the date(s) you purchased the stock and these costs to the person who will be receiving the gift.

Providing important information

Basis is key. Those receiving your direct gift of stock are not required to sell it. But when they do, they will need to know the following:

• The original cost of the stock and when it was purchased
• The date and fair market value of the stock when it was given
• If the giver paid any gift tax

Timing is important. If the recipient of your gift sells the stock right away, the tax rate applied will depend on the length of time the stock was owned by you. A gain on a stock held one year or less is considered ordinary income. More than one year is a long-term capital gain. The time frame for this calculation usually goes all the way back to your purchase records.

The benefits of gifting stock

• No taxes. Gifts of stock allow you to avoid paying capital gains tax on the ownership transfer. As long as annual gift amounts to one person are less than $19,000 ($38,000 for a married couple), there is no tax consequence.
• Lower taxes. In addition, the future sale of the stock could result in lower taxes. This is because long-term capital gains tax rates can range from 0% to 20%. Short-term capital gains tax rates can be as high as 37%. An additional 3.8% Medicare tax or net investment income tax may also apply. Assuming your child or grandchild has lower income than you, the resulting sale creates a potential tax savings. Care must be taken if the gain is high, as the Kiddie Tax rules could create a tax bite at the parents’ tax rate.
• Kiddie Tax benefit. If the gift stock pays dividends, future dividend income can potentially be taxed at your recipient’s lower tax rate. This technique can be used to provide dividend income without a child having to pay any taxes up to the Kiddie Tax annual limit in 2026 of $2,700 ($1,350 of unearned income is tax-free, and the next $1,350 is taxed at the child’s tax rate).
• Gift to anyone. Your gift can be provided to anyone you wish, not just a relative. These gift rules also apply to other investments, such as mutual funds, land, and other property.

Some wrinkles when gifting stock

1. If your stock is losing value, it is usually better to sell it and take the tax benefit of the loss. If the stock you gift has a fair market value less than your cost, providing the information noted here to the recipient of your gift is even more important.
2. It is no longer your property. When gifted, it is owned by the recipient. This is not a problem for your child, but it could be if it is a grandchild or if the child reaches adulthood. So a grandchild going through a parent’s divorce could create an interesting scenario.
3. This property could impact future aid. If your gift is to a child and the funds are intended for future educational needs, the value of the stock could affect the amount of federal aid they receive.

Please ask for help if you are considering a gift of stock or property. If handled incorrectly, your gift could create unforeseen tax consequences. But when used in conjunction with other contribution techniques, it can be a powerful tax-planning tool. Contact our RRBB advisors today.

The post A gift of stock appeared first on RRBB.

Errors in the IRS’s favor

Errors discovered that result in an additional tax obligation must be corrected by filing an amended tax return. This is especially true if the discovered error is due to missing information on a Form 1099 or a Form W-2. Why? This information is being reported to the IRS, and matching programs will typically catch the error. The sooner you amend your return and pay the tax, the lower the possible interest and penalties.

Errors that result in a lower tax liability

If correcting the error or omission results in a large additional refund, the answer is usually obvious. File the amended return. But this is not always the case.

• There can be an extension period of time during which the IRS can audit your tax return. Federal tax returns are typically subject to audit for three years after the original tax return due date or the date the return was filed, whichever is later. If you file an amended tax return, the audit clock may change based on the amended return filing date and degree of change requested. It may trigger an IRS request to extend the audit review period. The refund also resets the IRS’s erroneous refund recovery statute, adding another 2 to 5 years during which the IRS can review the refund, based on the date of the latest tax return refund.
• The amended return may be examined. Amending a tax return puts a spotlight on your tax return. The IRS has certain topics that trigger individual examinations for amendment requests. Amended tax returns based on things like the Earned Income Tax Credit, Qualified Business Income Deduction, and the Research Tax Credit for small businesses could result in a visit from your local IRS examiner. Because of this, keep all the necessary records to substantiate your amended tax return close at hand.
• Amending one tax return may require amending several other returns. Making a minor change in one year may require you to make changes in other tax years. Is it worth it?
• Don’t forget other taxing authorities. Making a change on your federal tax return may require you to file an amended state or local tax return. Do not assume that an amendment in your favor at the federal level will necessarily also be in your favor at the state and local levels.
• Don’t expect the refund to be timely. The process of amending a tax return can take a long period of time. There have been cases where the IRS has delayed the initial review of an amended return for more than a year, only to decide to examine the return. While not typical, the process could take up to 18 months to resolve.
• Timing is important. Remember, there is also a time limit for requesting a change to your tax return and receiving an additional refund. This is typically three years after the initial filing deadline of the tax return. Make sure you file these tax returns using certified mail. Should the IRS delay responding to your amendment, you may need to prove the timing of it.
• You have a chip in your pocket. If the refund amount is not large enough to justify an amended tax return, keep the documentation anyway. Should you receive an audit letter, you can often present your case at that time to offset any additional tax.

To amend a tax return

While finding an error or omission on your tax return can be unsettling, rest assured there are ways to fix the problem, but it is often worth taking a balanced approach to determine the best solution. Contact our RRBB advisors today if you have questions or need assistance.

The post Is it always a good idea to amend your tax return if you find an error? appeared first on RRBB.

Know whether you’re an employee or an independent contractor

Many contractors and freelancers assume they’re taxed the same way as at their day job. Then tax season arrives, and they discover no one was setting aside money for Social Security, Medicare, or income taxes. In some cases, it is surprising to learn they were in a different classification than expected.

Before accepting additional income, ask about the method of payment and whether you’ll receive a Form W-2 or Form 1099. A short conversation upfront can prevent a much longer conversation when you prepare your tax return.

Employee income isn’t always simple

Your employer withholds Social Security and Medicare taxes from your paychecks, which makes payroll taxes feel largely automatic. The problem starts when you add a second job or other side income. Each employer calculates withholding as if it’s your only source of income, which can leave you short when the sum of everything together is on your tax return. Some workers may also receive tax forms other than a traditional W-2, creating another opportunity for confusion.

You must review your withholdings whenever you add a new income stream. A quick check during the year is much easier than finding out in April that your paycheck withholding wasn’t keeping pace with your total earnings.

Contracting income means more responsibility

Receiving a 1099 often feels very different from receiving a paycheck because there are no tax withholdings occurring along the way. You’re responsible for both sides of Social Security and Medicare taxes, which can make the final tax bill larger than expected. Mixing business and personal spending can also make it harder to identify expenses that could reduce taxable income.

Keep business income and expenses separate from personal spending, whether that means opening a dedicated account or tightening up the one already in place. And if additional income becomes regular, build estimated tax payments into the routine instead of treating them as a year-end problem. A quick estimate during the year can help decide whether quarterly payments make sense.

Avoiding issues that come with adding extra income

Extra income can create new opportunities, but it also introduces new tax responsibilities. A little planning now can help keep more of what you earn and prevent unpleasant tax surprises later. Contact our RRBB advisors if you have questions about your extra income.

The post Avoid the tax pitfalls of adding extra income appeared first on RRBB.

What is a pass-through entity?

Pass-through entities do not pay taxes with a separate business tax return. Instead, the business’s taxable income is on the owner’s individual tax return. A sole proprietor reports this on their Schedule C, while other entities, such as partnerships and S corporations, report owners’ respective shares of profits via a K-1 tax form.

Generally, business owners prefer pass-through entities because:

1. The business income is taxed once instead of twice, as in the case of C corporations
2. The business format provides owners a level of legal protection that is not available by doing business as a sole proprietor

What you should know

• Individual tax rates. Changes in individual tax rates affect the amount of tax paid by all small businesses organized as pass-through entities.
• 20% QBI deduction. A 20% qualified business income deduction is available for pass-through entities and sole proprietorships. There are limitations and other complexities involved, but the bottom line is that many small business owners will see a tax break due to this deduction.
• Owing the tax and having money to pay it can be a problem. Small pass-through business owners must pay income tax on their share of business profits. However, it is not a requirement of the business entity to distribute cash from the company to help pay the tax. So pass-through owners could face a tax bill without the money to pay it.
• Concerns for minority shareholders. Minority shareholders may not only be unable to receive distributions to pay taxes due, but they are often precluded from selling their shares, and they do not have sufficient ownership to require a distribution of funds through shareholder voting.
• Popular business entity type. According to IRS statistics, S corporations are a popular business entity type, with 5.1 million in 2021. That is roughly three times the number of C corporations. LLCs are quickly becoming the new entity of choice, with growth from 120,000 entities in 1995 to over 21.6 million entities in 2025.
• LLC is not a tax entity choice. If you are in an LLC, you can choose how you wish to be taxed. You can choose a partnership or a corporation. So review your choices and make the decision that best fits your needs.
• Understand how FICA and other tax rules apply to your business. When making a pass-through election or change for your business, understand how Social Security, Medicare, and benefits are taxed and made available to your business. Understanding this can really impact how your business is taxed. For instance,
  • Partners in a partnership cannot make pre-tax contributions to a Health Savings Account
  • Company-provided health care is treated as a guaranteed payment to partners, since they are not considered employees
  • FICA is not paid on S-corporation earnings as long as owners take a reasonable salary

Understanding pass-through entities

With 95% of small businesses taxed on personal tax returns, it is important to understand that raising individual tax rates effectively increases taxes for most businesses in the United States. And given the diverse tax rules around these different pass-through entities, it makes sense to periodically review your business to ensure your entity choice still makes sense. As always, feel free to contact RRBB Advisors if you have any questions.

The post Understanding tax terms: Pass-through entities appeared first on RRBB.

Frequently asked tax questions

1. Is money earned through Venmo, PayPal, or Cash App taxable? It depends on why you received the money. Payments from friends for splitting dinner or reimbursing expenses are not taxable. However, money received for selling goods or providing services is generally taxable income and may be reported to the IRS on Form 1099-K.
2. Do I have to pay taxes if I sell items online? Maybe. Selling personal items for less than you originally paid generally doesn’t create taxable income, although the sale may still be reported to the IRS. If you sell items for a profit, the gain is usually taxable and should be reported on your tax return.
3. Can I deduct expenses for working from home? Employees cannot claim a federal deduction for home office expenses. Self-employed workers may qualify if part of their home is used regularly and exclusively for business purposes. The deduction can include a portion of rent, utilities, insurance, and other eligible costs.
4. Is cryptocurrency taxable? The IRS treats cryptocurrency as property, not currency. Selling crypto, trading one cryptocurrency for another, or using crypto to purchase goods and services can all create gains or losses that must be reported on your tax return. Even receiving cryptocurrency as payment, mining rewards, staking rewards, or certain promotional incentives may be taxable and must be reported on your return.

New questions to ask yourself

1. Is my tip income taxable? Tips are still considered taxable income and must still be reported. However, under the One Big Beautiful Bill Act, many workers in occupations that customarily receive tips can claim a federal income tax deduction for qualified tip income through 2028. To qualify for the deduction, tips must be reported on Form W-2, Form 1099, or other approved reporting methods, and the worker must be employed in a qualifying occupation designated by the IRS. The deduction is limited to $25,000 per year and begins phasing out for higher-income taxpayers. Social Security and Medicare taxes still apply.
2. How much of my overtime pay is deductible? Under the One Big Beautiful Bill Act, workers may deduct the overtime premium portion of qualified overtime pay through 2028. In a typical time-and-a-half situation, only the extra half-time portion is deductible, not the employee’s entire overtime paycheck. For example, if you normally earn $20 per hour and are paid $30 per hour for overtime, only the additional $10 premium qualifies. The deduction is capped at $12,500 annually ($25,000 for joint filers) and phases out at higher income levels. Social Security and Medicare taxes still apply.

Please contact our RRBB advisors to schedule a tax-planning session so you can be prepared to navigate potential tax surprises on your 2026 tax return.

The post Common tax questions appeared first on RRBB.

U.S. tax history

1. In the 1790s, the federal government imposed a tax that sparked armed resistance in western Pennsylvania. What was the tax actually on?

• A. Horse ownership
• B. Whiskey distillation
• C. Imported tea
• D. Playing cards

2. During the Civil War, Congress briefly experimented with a federal income tax. What was one unexpected thing taxpayers were allowed to deduct?

• A. Bribes paid to avoid the draft
• B. The cost of hired farm labor
• C. Losses from shipwrecks
• D. Beard-grooming expenses

3. In the early nineteenth century, tariffs were the federal government’s main source of revenue. Which item was once considered so politically dangerous to tax that it helped trigger a constitutional crisis?

• A. Wool coats
• B. Iron nails
• C. Imported hats
• D. Cheap British textiles

4. Before payroll withholding existed, how did many Americans pay their income taxes during World War II?

• A. By mailing cash in envelopes
• B. Through quarterly visits from IRS agents
• C. In a single painful lump sum
• D. With war bonds only

5. In 1895 the Supreme Court ruled a federal income tax was unconstitutional. What was the main reason?

• A. It unfairly targeted farmers
• B. It violated states’ rights
• C. It wasn’t apportioned among the states
• D. Congress forgot to define income

6. At various points in U.S. history, Congress has taxed purely to change behavior rather than to raise money. Which of these was explicitly intended to discourage its use?

• A. Colored margarine
• B. Wooden houses
• C. Cheap paper
• D. Public theaters

Your score report

1. B. The Whiskey Tax wasn’t aimed at casual drinkers but at distillers, many of whom were small frontier farmers turning grain into shelf-stable income. To them, the tax felt like a coastal money grab, and protests escalated into the Whiskey Rebellion. George Washington personally led troops to put it down, proving two things early on—that the federal government would enforce tax laws and that Americans would complain loudly about them.
2. C. Shipwreck losses. In an era when commerce moved by sea and river, losing a shipment to a wreck was a real business risk. The government recognized this long before it figured out depreciation schedules or standardized forms. Sadly for the bearded, personal grooming never made the cut.
3. D. Cheap British textiles. Protective tariffs raised prices on imported cloth to support American manufacturers, but Southern states relied heavily on imports and exports. The resulting tariff fights fueled the Nullification Crisis, where South Carolina flirted with ignoring federal laws entirely. It turns out fabric can tear a nation, metaphorically and almost literally.
4. C. One lump sum. Taxpayers were expected to save throughout the year and then pay all at once, which went about as well as you’d expect. Withholding was introduced partly to fund the war efficiently and partly to stop widespread shock, confusion, and strongly worded letters to Washington, D.C.
5. C. Apportionment. The Constitution required certain taxes to be divided among states based on population, not income. The income tax didn’t do that, so it failed on technical grounds. The 16th Amendment later fixed this, proving that sometimes the solution to tax problems is more federal paperwork.
6. A. Colored margarine. To protect dairy farmers, from the 1880s to 1950, Congress taxed margarine that was artificially colored to look like butter. The result was grayish margarine and widespread consumer resentment. Eventually, common sense—and better food science—prevailed.

5 – 6 correct: You could probably audit the 18th century. Historians salute you, accountants trust you, and the IRS would like to know your availability for consulting.

3 – 4 correct: You may not be ready to draft tax policy, but you’d absolutely survive a colonial tavern debate about whiskey taxes.

1 – 2 correct: Consider this your official introduction to the wonderfully strange world of U.S. tax history and a reminder that some of these questions would have puzzled people in the actual centuries they happened in.

And remember, a proactive tax review can help uncover opportunities and minimize costly mistakes. Contact our RRBB advisors if you would like assistance with midyear tax-planning strategies tailored to your situation.

The post Tax quiz: American history edition appeared first on RRBB.

Financial performance

• Revenue and sales goals. Compare your year-to-date revenue against the goals you set at the beginning of the year. If you’re ahead or behind schedule, now is the time to adjust your expectations and strategy.
• Profit margins. Revenue growth doesn’t always translate into profitability. Review margins across products and services to identify areas where rising costs may be reducing returns.
• Cash flow health. Cash flow issues can develop even when sales are strong. Evaluate receivables, payables, and cash reserves to ensure your business remains financially flexible.

Employee and team performance

• Staffing levels and workforce needs. Consider whether your current team has the capacity to support business goals through the rest of the year. Growth, turnover, or changing priorities may require adjustments.
• Employee engagement and retention. Mid-year is a good opportunity to gauge morale and identify potential retention concerns. Simple conversations with employees can reveal issues before they become costly problems.
• Training and development progress. Review the skills your team has gained so far this year and identify any gaps that could limit performance. Investing in employee development can improve both productivity and retention.

Customer experience and marketing

• Customer satisfaction. Customer reviews, surveys, and support requests can provide valuable insights into the customer experience. Look for recurring themes that may require attention.
• Customer retention and loyalty. Acquiring new customers is important, but retaining existing ones is often more profitable. Review repeat purchase rates and customer retention trends to understand long-term customer value.
• Marketing effectiveness. Evaluate which marketing activities are generating results and which are falling short. Redirecting resources toward the most effective channels can improve return on investment.

Operations and productivity

• Operational efficiency. Examine daily workflows to identify bottlenecks, redundancies, or unnecessary complexity. Small process improvements can create meaningful gains over time.
• Technology and systems. Review the tools and systems your business relies on every day. Outdated software, manual processes, or underused technology may be limiting growth and efficiency.

Products and services

• Product and service performance. Analyze which offerings are driving revenue, profitability, and customer interest. Mid-year is an ideal time to refine, expand, or retire products and services based on actual performance rather than assumptions.

A mid-year review doesn’t need to be complicated. By focusing on the right areas now, small business owners can make practical adjustments, maintain momentum, and enter the second half of the year with a clearer sense of where attention is most needed. Contact our RRBB advisors today if you have any questions or to discuss your situation further.

The post A mid-year checklist for small business owners appeared first on RRBB.

Midyear tax review

1. Create midyear tax records. Good recordkeeping is one of the best ways to protect valuable tax deductions. Maintain documentation for expenses such as charitable donations, childcare costs, medical expenses, business mileage, travel expenses, and gambling losses. Establishing a reliable system now can save time and stress later. Also consider taking advantage of the new above-the-line charitable donation of up to $2,000 ($4,000 if married) while there is still plenty of time.
2. Boost retirement savings. Retirement contribution limits remain generous, giving you an opportunity to increase tax-advantaged savings before year-end. For 2026, eligible taxpayers can contribute up to the annual IRS limit for employer-sponsored retirement plans and IRAs, with additional catch-up contributions available for individuals age 50 and older. Increasing contributions may lower taxable income while helping strengthen long-term financial security.
3. Review education savings options. If you’re saving for a child’s education in a regular investment account, consider whether a 529 education savings plan could provide tax advantages. Earnings in these accounts grow tax-deferred, and withdrawals are generally tax-free when used for qualified education expenses. Starting earlier allows more time for potential tax-advantaged growth.
4. Update withholding and estimated taxes. Major life changes, such as marriage, divorce, a new job, or changes in income, can affect how much tax you should pay throughout the year. Reviewing your withholding and estimated tax payments now may help you avoid underpayment penalties or an unexpectedly large balance due next spring. At the same time, avoiding overpayment can improve cash flow during the year.

Tax planning assistance

A proactive tax review can help uncover opportunities and minimize costly mistakes. Contact our RRBB advisors if you would like assistance with midyear tax-planning strategies tailored to your situation.

The post Time for a tax planning review appeared first on RRBB.