Start Social Security planning early

In your 20s: If you’re like a lot of people, you’re embarking on a career. At this point, there’s no guarantee that Social Security will be around in its current form when you’re ready to retire. The smart move is to build up retirement savings on your own. For instance, you could be participating in a 401(k) or other qualified plan at work. If done, Social Security benefits will be a pleasant surprise when you retire.

In your 30s: As you continue making retirement contributions, begin checking on your Social Security wage history. Go to the Social Security Administration (SSA) website to set up and review your account. Eventually, benefits will be based on your work history. Make sure your wages are reported correctly and correct any errors. At the same time, increase retirement plan contributions.

In your 40s: Typically, your earnings increase significantly. Be aware of the key rules relating to Social Security benefits. For example, realize that the SSA uses your average earnings from the 35 highest-earning years to calculate your retirement payments. So keep track of this and continue to replace lower-income years with higher-income years. This will result in higher benefit checks when you retire.

Thoughts near retirement

In your 50s: Circle a target date for retirement. While not etched in stone, having a target date allows you to assess whether you’ll be able to maintain your current lifestyle given your expected income and expenses. This exercise is more important if you’re considering early retirement. Continue to check the income being reported to the SSA and create a forecast for the future. If you wait until your 60s to begin this planning process, it may be too late to save enough to meet your retirement goals.

In your 60s: Decide whether you want to begin taking benefits at age 62 (the earliest age), age 67 (the current full retirement age), or somewhere in between. The longer you wait, the greater your monthly benefits will be, but you’ll be giving up use of the money in the meantime. Factor in aspects like your health, plan payouts, required minimum distributions, and other earnings. Finally, remember that up to 85% of Social Security benefits are taxable at the federal level, so it’s worth starting to plan now!

As always, please contact our RRBB advisors with any questions or concerns regarding your situation.

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Second quarter estimated taxes for 2026

The requirement is to withhold at least 90% of your 2026 tax obligation or 100% of your 2025 tax obligation. If your income is over $150,000 ($75,000 if married filing separate), you must pay 110% of your 2025 tax obligation. These payments will allow you to avoid an underpayment penalty.

A quick look at your 2025 tax return and a projection of your 2026 tax obligation can help determine if a payment is necessary. Here are some other things to consider.

Additional tax considerations

• Avoid an underpayment penalty. If you do not have proper tax withholdings during the year, you could be subject to an underpayment penalty. The penalty can occur if you do not have proper withholdings throughout the year.
• W-2 withholdings have special treatment. A W-2 withholding payment can be made at any time during the year and be treated as if it were made throughout the year. If you do not have enough to pay the estimated quarterly payment now, you may be able to adjust your W-2 withholdings to make up the difference.
• Self-employed workers need to account for FICA taxes. In addition to your income taxes, remember to also account for your Social Security and Medicare taxes. Creating and funding a savings account for this purpose can help you avoid a potential cash-flow hit each quarter when you pay your estimated taxes.
• Don’t forget state obligations. You are often required to make estimated state tax payments if you have to do so for your federal taxes. However, there are exceptions for a few states. Consider reviewing your state obligations to ensure you also comply with these quarterly estimated tax payments.

Contact our RRBB advisors if you have any questions or are ready to take the next step.

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Strategy 1: Balance income across years to manage tax brackets

Who should consider this approach? Anyone over age 59 who has balances will be subject to the required minimum.

Distributions from retirement income in later years. Individuals with variable or multi-source income, such as investors with taxable portfolios, business owners, or anyone who experiences fluctuations from bonuses, capital gains, or distributions. The key to this strategy is to be tax-efficient each year by leveraging the tax code’s progressive structure.

Planning tips:

1. Intentionally recognize more income in lower-income years to take advantage of lower tax rates, up to the next tax bracket
2. Focus on limiting additional taxable income in years when you’re stuck in higher tax brackets
3. Calculate your RMD withdrawal requirements when you hit age 73 to know how much you will be required to withdraw and understand the projected tax rate
4. Avoid stacking multiple income events into the same year when you have flexibility
5. Be mindful of how portfolio distributions, rebalancing, and external income may overlap

Strategy 2: Coordinate income with losses and deductions

Who should consider this approach? Anyone whose income or deductions vary from year to year. If you expect a spike in income this year or in the near future, whether from a bonus, business income, asset sales, or a one-time event, you can begin identifying deductions now to help offset that income when it occurs.

Planning tips:

1. Time the sale of appreciated assets in years when you have realized losses available
2. Be mindful of timing so losses and deductions aren’t wasted in lower-income years
3. Consider bunching itemized deductions, such as property taxes or charitable contributions, in a year you anticipate a large bonus or spike in income

For business owners, consider timing major expenses, such as equipment purchases, to coincide with higher-income years, allowing you to immediately expense the cost and offset the increase in income.

Strategy 3: Manage which income to use each year

Who should consider this approach? You’re not always stuck with how your income gets taxed. The order in which you pull income, and which sources you rely on in a given year, can significantly change whether that income is taxed at lower capital gains rates or higher ordinary income rates.

Planning tips:

1. Manage the mix of ordinary income and capital gains to avoid unnecessary tax increases
2. Coordinate portfolio income with external income like salary, bonuses, or business earnings
3. Adjust withdrawals or distributions to keep total taxable income within target ranges
4. Use flexibility across accounts to avoid stacking multiple high-tax income sources in the same year

How to be tax-efficient with multi-year planning strategies

A multi-year approach to tax planning is less about reacting and more about controlling outcomes. By spreading income, coordinating deductions and offsets, and choosing where to draw your income, you can reduce unnecessary tax increases and create more consistent, tax-efficient results over time. Contact our RRBB advisors if you have any questions.

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Why the IRS Will Audit

1. Your income is high or low. The reasoning is simple: higher earnings may lead to larger errors, and lower earnings may lead to incorrect deductions. The adjusted gross income (AGI) range with the least audit risk is $25,000 to $200,000. As your income moves toward the extremes in either direction, the chance of an audit increases.
2. You fail to report all your income. The IRS Automated Underreporter Program matches W-2 and 1099 information with the information you report on your tax return. When a mismatch occurs, expect to receive an automated CP2000 notice from the IRS that notifies you of the discrepancy and the additional tax due. And remember, even if you do not receive a 1099, you are required to report any income.
3. You own a business. Rules regarding business deductions are confusing and constantly changing. The IRS knows this. Incorrectly deducting personal expenses or having your business classified as a hobby, thereby eliminating deductions, can get you in trouble with the IRS. Cash-heavy businesses are under increased scrutiny due to higher rates of fraud. Solid tracking processes and good records are necessary for income and expense substantiation.
4. You make a math error. The IRS issued over 1 million math error notices in 2024, the most recent year for which statistics are available. The biggest culprits were tax liability and credit calculations. Math errors can create a two-fold problem for you. Additional tax owed and more scrutiny applied to other parts of your tax return.
5. You claim the earned income tax credit. According to the IRS, up to 33% of EITC payments are paid in error. Numbers that large are sure to get the IRS’s attention. Confusion over eligibility and calculation errors are mostly to blame.

What to do when audited

While some risk factors are beyond your control, you can minimize many. If you are selected for an audit, don’t handle it alone; please contact our RRBB advisors.

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Simple bookkeeping tips

1. Record small expenses consistently. Small expenses like coffee meetings, parking, subscriptions, and quick purchases are easy to lose track of. Left untracked, they turn into forgotten receipts and add up to significant missed deductions over time. Capturing these expenses consistently can immediately increase your total deductions. What feels insignificant day-to-day can meaningfully lower your taxable income by year-end.
2. Reconcile monthly, not annually. Many business owners think of reconciliation as only something for bank accounts. But it’s also for all asset, liability, and equity accounts. It’s much easier to double-check your numbers every month than to wait until year-end, when something may become a bigger problem. Keeping your records accurate helps ensure that every legitimate expense, and by extension every tax deduction, is accounted for before it’s forgotten.
3. Be intentional about when you pay and collect. Cash-based businesses recognize income when it’s received and expenses when they’re paid, which means the exact timing of when you send invoices or pay bills directly determines when that income or expense shows up on your tax return. Start now by consistently recording income when it’s received and expenses when they’re paid. As year-end approaches, you can lower taxable income by accelerating expenses or postponing invoices until the following year.

Additional considerations for business owners

1. Separate your accounts cleanly. Blurring business and personal spending in one account can potentially inflate your tax bill, bury legitimate deductions, and raise red flags if your records are ever reviewed by the IRS. Clean separation makes every expense easier to justify and capture. You keep more deductions and give your accountant clearer data to work with.
2. Separate owners’ pay from other business expenses. Mixing owner pay with regular business expenses can potentially create confusion and distort your financials. Without clear separation, it’s harder to track true profitability and apply the right tax treatment to your income. Cleanly separating salary, draws, or distributions gives you a clearer picture of your business’s performance. It also helps ensure your income is taxed correctly and avoids costly misclassification errors.

If properly implemented, your bookkeeping system will produce accurate financial statements that support key financial decisions. Feel free to contact our RRBB advisors to discuss bookkeeping solutions or to improve your business’s finances.

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Lower your tax obligation in 2026

1. Check on your withholdings. Review your taxable income and the amount of tax you’ve paid to Uncle Sam so far this year. How do the numbers compare to last year? Based on your analysis, you may have to adjust your paycheck withholdings or make estimated tax payments during the balance of the year to avoid underpayment penalties or a surprise tax bill. Remember to pay special attention if:

• You have a tip income
• You have overtime income
• You or your spouse is eligible for the special senior deduction (over age 55)

2. Build up your retirement accounts. Pump up your retirement savings during the remainder of the year. In fact, setting aside more money for retirement can lower this year’s tax bill. For instance, if you have a 401(k) plan at work, you can defer up to $24,500 of salary in 2026, plus an extra $8,000 if you’re age 50 – 59 and over 64 ($11,250 for ages 60 – 63).

3. Identify potential taxable events. It’s easy to overlook one-time events that will have an impact on your 2026 tax liability. For instance, if you win a prize at a church raffle, the prize is generally taxable to you. Perhaps you changed jobs, lost a child as a dependent, or got married. Each of these events can create a change in your tax obligation. Review your records now to avoid any unpleasant tax surprises later.

More ideas if you are self-employed

4. Consider business property needs. If you acquire business property, you can often choose to write off the cost in the first year the property is placed in service under the latest tax laws. If it makes sense, consider combining the benefits of the Section 179 expensing deduction, up to a maximum of $2.56 million (indexed for inflation), with 100% bonus depreciation for both new and used property.

5. Account for gig taxes. Finally, workers in the gig economy (like Uber and Lyft drivers) should understand the basic tax rules. Generally, income from such jobs is fully taxable, but you may be entitled to offsetting deductions. Essentially, you’re treated like a self-employed individual. Estimated quarterly tax payments are often required for these workers.

Should you wish to have your situation reviewed, contact our RRBB advisors today. It’s better to be prepared than surprised when it comes to your tax obligation.

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Understanding the gift-giving tax

You may give up to $19,000 (up $1,000) to any individual (donee) within the calendar year 2026 and avoid any gift tax filing requirements. If married, you and your spouse may transfer up to $38,000 per donee. If you give a gift to your spouse who is not a U.S. citizen, the annual exclusion amount for 2026 is $175,000.

How to report the gift tax

• Amounts given in excess of this annual amount are subject to potential gift tax reporting. The amount of tax is currently unified with estate taxes, with a maximum rate of 40%. The donor of the gift is responsible for paying any associated tax. When you exceed the annual gift-giving amount, this triggers the need to file a gift tax form with your individual tax return. The excess gift amounts are netted against your lifetime unified credit. If your lifetime gifts do not exceed the credit, you may not owe additional taxes. Here are some instances when a gift tax problem may occur and ways to manage the problem:
• Gifts for college. Grandparents like to help with the tremendous cost of a college degree. Donations can quickly exceed the annual gift threshold. To avoid the gift tax, consider making payments directly to the college. This form of payment is excluded from the annual gift-giving limit so long as the funds are not used to pay for books, room, or board on behalf of the donee.
• Be careful with 529 plan funding. If your children are anticipating going to college, many consider creating a 529 college savings plan. You may then fund the savings plan (or have someone else fund it) on your child’s behalf. However, remember that deposits into 529 accounts are treated as gifts and are subject to the annual gift tax limits.
• Gifts to cover medical expenses. It is very easy to mount up a large medical bill. While you may want to step in and help by paying the individual’s medical bills, you may create a gift tax obligation. Better: make payments directly to health care providers for medical services on behalf of the patient to avoid gift tax exposure.
• Gifts to help make a down payment. It is becoming more common for family members to help their kids with the down payment on a first home. This can be tricky. Lenders will look for recent deposits in bank accounts and ask the prospective buyers to substantiate the source of funds. Providing the funds as a loan may disqualify the couple from obtaining a mortgage. Even worse is if the purchasing couple claims the funds are a gift. This action may create a gift tax obligation to the person providing the funds. You must ensure you provide an accurate audit trail to demonstrate that the gift does not exceed the annual limit.
• Gift of real estate. If you give property to a relative for little or nothing in return, you may need to file a gift tax form. Recent IRS studies suggest that over 50% of taxpayers fail to declare property transfers as gifts.

Other things to consider

You may provide gifts to or receive gifts from anyone. There are no limits or restrictions on who you may give a gift to or who may provide a gift to you. Creative gift-giving can be a useful way to help someone in need without creating a tax obligation.

Do not give a lump-sum gift for the maximum amount. If you provide a gift to an individual for the maximum allowable amount, you may not provide any other gifts to that person during the year. Otherwise, the event would be deemed excess gift-giving and require filing a gift tax form. For example, a grandmother gives her granddaughter $19,000 for college. She also pays for a family vacation to Disney World and provides a wonderful birthday gift. Technically, the additional gifts exceed the annual limit and would constitute a gift tax event.

The IRS is paying close attention to the massive noncompliance with the annual gift tax filing deadline. So much so that it is actively researching property transfers in key states to ensure the gift tax filing is taking place.

You may never need this tip, but if you do and you are unaware of this tax law, your tax life can get complicated quickly. Your main takeaway when understanding the gift-giving tax? Identifying when to ask about filing the gift tax form. Contact our RRBB advisors for more information or if you have any questions.

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Shifting income rules

In 2026, the first $1,350 of unearned income for each child is not taxed, and the next $1,350 is taxed at the child’s normally very low tax rate. Any earnings above $2,700 are taxed at the parent’s tax rate. Unearned income typically includes interest, dividends, royalties, and investment gains. As long as your child is under 18, or 24 if a full-time student, these rules apply.

Transfer enough income-producing assets to each child to approach the annual unearned income limits as closely as possible. Depending on your marginal tax rate, you could save as much as 37% on federal income taxes for the transferred amounts.

In addition to unearned income, consider investing in assets with long-term appreciation. This may help manage the timing and rate of capital gains taxes when selling the investment. For example, if you transfer assets in your child’s name and your child buys Amazon stock after the dot-com bubble for less than $10 per share. At age 25, the shares are worth $100,000+, but her first job out of college doesn’t pay much. So you sell a few shares of the appreciated stock and avoid capital gains tax altogether because of her lower income!

Remember that excess investment income may be subject to an additional 3.8% investment income surtax. Any investment income that can shift to your children could also save you this additional tax bite as well. However, moving assets from you to your children may affect their eligibility for college financial aid. Make sure to consider how your tax strategy affects college financing as they get older.

Leverage your children’s earned income

Wages your children earn are considered earned income. If you own a small business, finding ways to employ your children can be a way to shift income from your higher tax rate to their lower rate. Be careful, as you must be able to defend the work your child is doing and the amount they receive for that work. Some ideas include:

• Have your child clean your office a few times per week
• Put your child in charge of making local business deliveries
• Use your child in an advertisement for your business
• Have your child help assemble items or assist with mailings

Additional Tip: If you are a sole proprietor, you may hire your dependent children under age 18 and do not need to pay Social Security and Medicare taxes.

There are many opportunities to leverage the tax advantages of having children. Reach out if you would like help creating a plan for your family. Contact our RRBB advisors for more information or if you have any questions.

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1. Make sure your charity is eligible. Only donations to qualified charitable organizations registered with the IRS are tax-deductible. You can confirm an organization qualifies by calling the IRS at (877) 829-5500 or visiting the IRS website.
2. Get receipts. Get receipts for your deductible contributions. You don’t file the receipts with your tax return, but you must keep them with your tax records. You must get the receipt at the time of the donation, or the IRS may not allow the deduction.
3. Keep track of mileage. If you drive for charitable purposes, this mileage can also be deductible. For example, you can deduct the miles you drive to deliver meals to the elderly, volunteer as a coach, or transport others to and from a charitable event at 14 cents per mile. You must maintain a mileage log to substantiate your charitable driving.
4. Take extra steps for noncash donations. You can make a contribution of clothing or household items you no longer use. If you decide to make one of these noncash contributions, it is up to you to determine the value of the contribution. However, many charities provide a donation value guide to help you determine the value of your contribution. Your donated items must be in good or better condition, and you should receive a receipt from the charitable organization for your donations. If your noncash contributions are greater than $500, you must file a Form 8283 to provide additional information to the IRS about your contribution. For noncash donations of more than $5,000, you must also obtain an independent appraisal to certify the value of the items.
5. Pay attention to the calendar. Contributions are deductible in the year they are made. To be deductible in 2017, contributions must be made by December 31, with an exception. Contributions by credit card are deductible even if you don’t pay off the charge until the following year, as long as the contribution is on your credit card statement by December 31. Similarly, contribution checks written before December 31 are deductible in the year written, even if the check is not cashed until the following year.
6. Itemize. You must itemize your deductions using Schedule A in order to take a deduction for a contribution. If you’re going to itemize your return to take advantage of charitable deductions, it also makes sense to look for other itemized deductions. These include state and local taxes, real estate taxes, home mortgage interest, and eligible medical expenses over a certain threshold.

Remember, charitable giving can be a valuable tax-deductible donation, but only if you take the right steps. Contact our RRBB advisors for more information or if you have any questions.

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Start a 529 education savings plan

529 education savings plans are a great way to start saving for a baby’s future educational costs. These plans offer investments that grow tax-free as long as the funds go toward eligible education expenses (including elementary and secondary tuition). States administer these plans, but that doesn’t mean you are stuck with the plan available in your home state. Feel free to shop around for a plan that works for you. Starting to save early maximizes the amount of tax-free compound interest you can earn in the 18+ years you have before kids go to college.

Bonus tip for family and friends: Anyone can contribute up to $19,000 to the plan in 2026 for each child! In addition, there is a special provision for 529 plans that allows up to 5 years’ worth of gift contributions at once. This is a great estate-planning strategy for grandparents.

Update Form W-4

Every year, you need to review your tax withholdings, especially if you have dependents. Remember, the birth of a child brings new tax breaks, including the $2,000 Child Tax Credit and the Child and Dependent Care Credit for childcare expenses. These credits can be used now to reduce tax withholdings and increase take-home pay, helping cover the cost of diapers and other needs that come with babies and children.

On the other side of the coin, these benefits fall away as your kids grow older. The Dependent Care Credit is for children under age 13. The Child Tax Credit is available for children under age 17. You must plan accordingly.

Prepare for medical expenses

Having a baby is expensive. So is watching your kids grow up! Fortunately, there are ways to be tax-smart when covering predictable medical and dental expenses. The first step is to pay as many out-of-pocket expenses as possible with pre-tax money. Many employers offer tax-advantaged accounts such as a Health Savings Account (HSA) or a Flexible Spending Account (FSA). So check this out and fund these accounts as much as possible. And while it’s more difficult to claim medical expenses as an itemized deduction, it’s impossible to do so if you don’t keep receipts.

Children can be expensive. Contact our RRBB advisors to make sure you’re getting all the tax breaks you deserve for having kids!

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