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.

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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.

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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.

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Kwong v. United States

The decision interprets IRC § 7508A(d), as in effect during the COVID-19 disaster period, to require postponement of certain tax deadlines from January 20, 2020, through July 10, 2023. Commentators have noted that this interpretation may support claims for refund or abatement of certain penalties and interest computed by reference to deadlines falling within that period. However, the law remains unsettled, and the government has appealed the decision.

Because refund limitation periods under IRC § 6511 are highly fact-specific and generally depend on when the return was filed and when the tax, penalty, or interest was paid, taxpayers who may be affected should promptly consider preserving their rights. Many commentators have identified July 10, 2026, as an important protective-claim date for potential COVID-period claims, although the actual deadline may vary depending on the taxpayer’s facts.

Next steps

We will review your 2019 through 2022 tax filings to determine whether this development may create a refund or abatement opportunity. If so, we may recommend filing a protective claim on Form 843, Claim for Refund and Request for Abatement, for the applicable year or years. Any such claim would be provided to you for signature along with filing instructions.

Contact our RRBB advisors if you have any questions or concerns.

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A financial checklist for the summer

1. Beat the heat without burning cash. Summer utility bills can rise fast when temperatures climb, making this the ideal time to reassess your energy habits. Small changes like adjusting your thermostat, replacing filters, or sealing drafts can help lower monthly expenses without sacrificing comfort.
2. Make vacation memories while keeping spending in check. Travel spending adds up quickly when meals, activities, and unexpected costs are not planned ahead of time. Creating a vacation budget before booking helps you enjoy your trip while keeping your finances on track once you return home.
3. Don’t leave summer tax perks on the table. Summer can open the door to valuable tax opportunities, especially for families with children enrolled in camps or for investors reviewing gains and losses midyear. Taking time to organize receipts and revisit tax strategies now can make filing season much smoother later.
4. Turn your clutter into a summer side hustle. Summer cleaning is not just good for your home – it can also boost your bank account. Selling unused clothing, furniture, electronics, or sporting goods can generate extra income while helping you create a more organized space.
5. Give your emergency fund a warm-weather boost. A midyear contribution to your emergency fund can strengthen your financial safety net before the busy fall and holiday seasons arrive. Even small additions from side gigs, bonuses, or garage sale profits can make a meaningful difference over time.
6. Stop sneaky summer spending in its tracks. Streaming services, outdoor events, dining out, and seasonal activities can quietly inflate your monthly budget during the summer months. Reviewing recurring charges and prioritizing lower-cost entertainment options can help keep spending under control.
7. Get ahead of fall before it gets expensive. Preparing early for upcoming seasonal expenses can help you avoid relying on credit cards later in the year. Setting aside money now for school supplies, clothing, or extracurricular activities makes those costs feel much more manageable.
8. Give your summer paychecks a fresh purpose. Extra income from overtime, seasonal work, or reduced school-year expenses can create an opportunity to strengthen your finances. Consider directing a portion toward savings, debt payoff, or long-term financial goals before everyday spending absorbs it.
9. Refresh your financial goals before the year speeds up. Summer is a natural midpoint to revisit the goals you set at the beginning of the year. Reviewing your progress now gives you time to adjust your budget, savings habits, or investment strategy before the busy fall season arrives.

Take the next step

A few thoughtful money moves this summer can create more flexibility and a stronger financial foundation for the rest of the year. Contact our RRBB advisors if you have any questions or are ready to take the next step on your summer financial checklist.

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I received an IRS notice. Now what?

1. Insufficient records will cost you. When selected for an audit, the IRS will typically issue a written request for specific documents. The list may include receipts, bills, legal documents, loan agreements, and other records. If you are missing something from the list, things get dicey. It may be possible to reconstruct some of your records, but that comes at a cost. You might have to rely on a good explanation to avoid additional taxes, plus a possible 20% negligence penalty.
2. Too much information can add audit risk. While most audits are limited in scope, they can expand that scope based on what they find during their initial review. That means that if they find a document or hear something you say that sounds suspicious, they can extend the audit to additional areas. Preparing proper support and concise, smart answers to their questions is the best approach to limiting further audit risk.
3. Missing an audit deadline can lead to trouble. When you receive the original audit request, it will include a response deadline (typically 30 days). If you miss the deadline, the IRS will change your tax return using their interpretation of findings, not yours. This typically means assessing new taxes, interest, and penalties. If you wish your point of view to be heard, get help right away to prepare a plan and manage the IRS deadlines.

Get help for an IRS notice

Remember, IRS auditors do this for a living – you don’t. Seasoned IRS agents have seen your situation many times and know the rules better than you. Even worse, they are under no obligation to teach you the rules. Just like a defendant needs the help of a lawyer in court, you need someone in your corner who knows your rights and understands the correct tax code to apply in correspondence with the IRS.

Tax audits are never fun, but they don’t have to be pull-your-hair-out stressful. Mapping out a plan and taking it step by step ensures the best possible outcome. With help, you’ll rest easy knowing your audit situation is being handled with the proper expertise by someone who also has your best interests in mind. Contact our RRBB advisors if you have received a notice or have any questions or concerns.

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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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