5 Strategies to Help Your Business Leverage Change for Growth and Resilience

Change is an unavoidable part of every business journey — not just from external forces like market shifts or economic conditions, but from within the business itself. Whether you’re expanding your operations, streamlining internal processes, bringing on new leadership, or preparing for eventual succession, change happens at every stage of your business’s lifecycle.

The businesses that thrive aren’t the ones that avoid change—they embrace it to improve profitability and build long-term resilience. Here are five essential strategies to help your business embrace change at every stage — positioning you for success today and securing your legacy for tomorrow.

1. Know Your Numbers

Smart business decisions start with data-driven insights. Yet, many business owners either track the wrong metrics or fail to monitor key financial indicators altogether. Tracking the right numbers provides clarity and control, helping you steer your business toward long-term success. Common KPIs include gross revenue, net profit margin, customer acquisition costs, and operational efficiency metrics.

2. Make Tax-Smart Decisions

Many business owners see taxes as a necessary evil—something to be dealt with at the end of the year. But smart tax planning can actually be a competitive advantage. You can reduce liabilities and improve cash flow by leveraging tax-saving strategies, optimizing deductions, and ensuring your business is structured efficiently.

3. Scale Effectively

As your business grows, so do your operational demands. A critical decision every business owner faces is whether to handle tasks in-house or outsource them. Outsourcing certain tasks—such as IT management, payroll processing, or marketing—can cut costs, increase efficiency, and allow your team to focus on what they do best.

4. Know Your Wealth

For most business owners, their company represents a significant portion of their net worth—yet many fail to look at the bigger picture. Understanding how your business and personal finances are connected is key to long-term security. Knowing your total wealth allows you to make better retirement, investment, and succession planning decisions. Taking time to evaluate your wealth annually can prevent surprises and ensure financial stability for you and your family.

5. Plan for the Future

What’s next for your business? Whether you’re planning for expansion, a leadership transition, or an eventual sale, having a clear long-term strategy is crucial. The best time to plan for the future is now. Proactive business planning keeps you in control and ensures your company continues to thrive—even through change.

Embrace Change as a Growth Opportunity

Change isn’t something to fear — it’s an opportunity to strengthen your business, increase profitability, and build long-term wealth. By focusing on these five strategies, you can turn today’s challenges into tomorrow’s successes.

Want to learn more? Read our eBook “5 Steps for Thriving Through Change,” which explains each step in detail with practical tips and action steps for you and your business.

Download our eBook

Yeo & Yeo is pleased to announce that Carrie Lapka, CPA, CPPM, will lead the firm’s Healthcare Services Group.

Yeo & Yeo’s Healthcare Services Group is a strategic team of accountants, practice consultants, medical billers, and HR/payroll professionals with a deep understanding of the unique challenges healthcare providers face. This dedicated group provides comprehensive accounting, audit, tax planning, medical billing, and practice consulting solutions tailored for healthcare entities across Michigan.

Lapka succeeds Yeo & Yeo Medical Billing & Consulting President Kati Krueger, CMPE, and Yeo & Yeo CPAs & Advisors Principal Suzanne Lozano, CPA, who have co-led the group for more than five years. Krueger and Lozano remain integral members of the group and expressed their enthusiasm in providing Lapka with this leadership opportunity, bringing a new and innovative perspective to the team.

“Carrie is the perfect fit to lead the Healthcare Services Group,” Lozano said. “Her deep understanding of the healthcare industry and her proactive approach to problem-solving will undoubtedly continue to drive the success of our team and clients.”

Lapka is a Senior Manager with more than 20 years of experience in accounting and physician practice management. She started her career with Yeo & Yeo in 2004. After nearly ten years in public accounting with a specialization in the healthcare industry, Lapka went on to work in private practice as a Practice Manager before rejoining Yeo & Yeo in 2024. She is a Certified Physician Practice Manager, possessing extensive knowledge in revenue cycle management, human resources, healthcare billing and compliance, and general business processes. Beyond her experience in practice management, Lapka has an extensive background in business consulting, preparation and analysis of financial statements, and tax planning and preparation. She holds a Bachelor of Professional Accountancy from Saginaw Valley State University.

In the community, she is involved with Caseville Public Schools, serving as a board member and treasurer, and as chair of both the Finance and Sports Committees. She is also a middle school volleyball coach. Lapka is based in Yeo & Yeo’s Saginaw office.

“Returning to Yeo & Yeo and stepping into this leadership role is truly an honor,” Lapka said. “I’m eager to build upon the foundation set by Kati and Suzanne, and to lead a team that is passionate about helping our clients thrive in a complex and ever-changing industry.”

Prior to the enactment of the Tax Cuts and Jobs Act (TCJA), businesses were able to claim a tax deduction for most business-related interest expense. The TCJA created Section 163(j), which generally limits deductions of business interest, with certain exceptions.

If your business has significant interest expense, it’s important to understand the impact of the deduction limit on your tax bill. The good news is there may be ways to soften the tax bite in 2025.

The nuts and bolts

Unless your company is exempt from Sec. 163(j), your maximum business interest deduction for the tax year equals the sum of:

30% of your company’s adjusted taxable income (ATI),
Your company’s business interest income, if any, and
Your company’s floor plan financing interest, if any.

Assuming your company doesn’t have significant business interest income or floor plan financing interest expense, the deduction limitation is roughly equal to 30% of ATI.

Your company’s ATI is its taxable income, excluding:

Nonbusiness income, gain, deduction or loss,
Business interest income or expense,
Net operating loss deductions, and
The 20% qualified business income deduction for pass-through entities.

When Sec. 163(j) first became law, ATI was computed without regard to depreciation, amortization or depletion. But for tax years beginning after 2021, those items are subtracted in calculating ATI, shrinking business interest deductions for companies with significant depreciable assets.

Deductions disallowed under Sec. 163(j) may be carried forward indefinitely and treated as business interest expense paid or accrued in future tax years. In subsequent tax years, the carryforward amount is applied as if it were incurred in that year, and the limitation for that year will determine how much of the disallowed interest can be deducted. There are special rules for applying the deduction limit to pass-through entities, such as partnerships, S corporations and limited liability companies that are treated as partnerships for tax purposes.

Small businesses are exempt from the business interest deduction limit. These are businesses whose average annual gross receipts for the preceding three tax years don’t exceed a certain threshold. (There’s an exception if the business is treated as a “tax shelter.”) To prevent larger businesses from splitting themselves into small entities to qualify for the exemption, certain related businesses must aggregate their gross receipts for purposes of the threshold.

Ways to avoid the limit

Some real estate and farming businesses can opt out of the business interest deduction limit and therefore avoid it or at least reduce its impact. Real estate businesses include those that engage in real property development, redevelopment, construction, reconstruction, acquisition, conversion, rental, operation, management, leasing or brokerage.

Remember that opting out of the interest deduction limit comes at a cost. If you do so, you must reduce depreciation deductions for certain business property by using longer recovery periods. To determine whether opting out will benefit your business, you’ll need to weigh the tax benefit of unlimited interest deductions against the tax cost of lower depreciation deductions.

Another tax-reduction strategy is capitalizing interest expense. Capitalized interest isn’t treated as interest for purposes of the Sec. 163(j) deduction limit. The tax code allows businesses to capitalize certain overhead costs, including interest, related to the acquisition or production of property.

Interest capitalized to equipment or other fixed assets can be recovered over time through depreciation, while interest capitalized to inventory can be deducted as part of the cost of goods sold. We can crunch the numbers to determine which strategy would provide a better tax advantage for your business.

You also may be able to mitigate the impact of the deduction limit by reducing your interest expense. For example, you might rely more on equity than debt to finance your business or pay down debts when possible. Or you could generate interest income (for example, by extending credit to customers) to offset some interest expense.

Weigh your options

Unfortunately, the business interest deduction limitation isn’t one of the many provisions of the Tax Cuts and Jobs Act scheduled to expire at the end of 2025. But it’s possible Congress could act to repeal the limitation or alleviate its impact. If your company is affected by the business interest deduction limitation, contact us to discuss the impact on your tax bill. We can help assess what’s right for your situation.

Even if you’re single and have no children, having an estate plan helps ensure your final wishes are clearly documented and respected. Estate planning isn’t solely about passing assets on to direct descendants; it’s about taking control of your future.

Without a formal estate plan, state laws will determine how your assets are distributed, and those default decisions might not align with your values or desires. Whether they’re your financial investments or personal assets, a comprehensive estate plan allows you to specify exactly who should receive what, be they close friends, extended family or even charitable organizations.

Without a will, who’ll receive your assets?

It’s critical for single people to execute a will that specifies how and to whom their assets should be distributed when they die. Although certain types of assets can pass to your intended recipient(s) through beneficiary designations, absent a will, many types of assets will pass through the laws of intestate succession.

Those laws vary from state to state but generally provide for assets to go to the deceased person’s spouse or children. For example, the law might provide that if someone dies intestate, half of the estate goes to his or her spouse and half goes to the children. However, if you’re single with no children, these laws set out rules for distributing your assets to your closest relatives, such as your parents or siblings. Or, if you have no living relatives, your assets may go to the state.

By preparing a will, you can ensure your assets are distributed according to your wishes, whether that’s to family, friends or charitable organizations.

Who’ll handle your finances if you become incapacitated?

Consider signing a durable power of attorney that appoints someone you trust to manage your investments, pay bills, file tax returns and otherwise make financial decisions should you become incapacitated. Although the law varies from state to state, typically, without a power of attorney, a court will appoint someone to make those decisions on your behalf. Not only will you have no say in who the court appoints, but the process can be costly and time consuming.

Who’ll make medical decisions on your behalf?

You should prepare a living will, a health care directive (also known as a medical power of attorney) or both. This will ensure your wishes regarding medical care — particularly resuscitation and other lifesaving measures — will be carried out in the event you’re incapacitated. These documents can also appoint someone you trust to make medical decisions that aren’t expressly addressed.

Without such instructions, the laws in some states allow a spouse, children or other “surrogates” to make those decisions. In the absence of a suitable surrogate, or in states without such a law, medical decisions are generally left to the judgment of health care professionals or court-appointed guardians.

What strategies should you use to reduce gift and estate taxes?

When it comes to taxes, married couples have some big advantages. For example, they can use both of their federal gift and estate tax exemptions (currently, $13.99 million per person) to transfer assets to their loved ones tax-free. Also, the marital deduction allows spouses to transfer an unlimited amount of property to each other — either during life or at death — without triggering immediate gift or estate tax liabilities.

For single people with substantial estates, it’s important to consider employing trusts and other estate planning techniques to avoid, or at least defer, gift and estate taxes.

Form your plan

Finally, planning ahead can help avoid potential complications in the future. Unexpected events can lead to family disputes if there’s no clear guidance on how your affairs should be handled.

With an estate plan, your personal wishes are followed precisely, ensuring that your legacy — whether it includes contributions to a cause you believe in or support for a family member — is preserved exactly as you intend. Contact us if you’re single, without children and have no estate plan. We can help draft one that’s best suited for you.

The IRS has issued proposed regulations under the SECURE 2.0 Act that, if finalized, would significantly impact how catch-up contributions are handled for higher-income employees. While these changes are not yet final, they could require plan administrators to update plan documents, payroll systems, and participant communications before the effective date of January 1, 2026.

This article explores the key provisions of the proposed regulations and important administrative considerations for plan sponsors. Staying informed and preparing early will help ensure a smooth transition—should the proposed regulations pass.

Q1: What is the main change proposed for catch-up contributions?

The IRS has proposed that, effective January 1, 2026, catch-up contributions for higher-income employees (those earning over $145,000 in the prior year) must be made as Roth contributions. This applies to 401(k), 403(b), and governmental 457(b) plans.

Q2: Who is affected by this change?

This change affects participants who:

Are age 50 or older, and
Earned more than $145,000 in the prior year (indexed for inflation), and
Wish to make catch-up contributions

Q3: What happens if a plan doesn’t offer Roth contributions?

If a plan doesn’t offer Roth contributions, it will not be able to accept catch-up contributions from higher-income employees starting in 2026. Plans may need to add a Roth option to continue allowing catch-up contributions for these employees.

Q4: How is the $145,000 threshold determined?

The $145,000 threshold is based on the participant’s prior-year compensation from the employer sponsoring the plan. In future years, this amount will be indexed for inflation.

Q5: What are the compliance requirements for plan administrators?

Plan administrators will need to:

Identify participants eligible for catch-up contributions
Determine which participants exceed the $145,000 threshold
Ensure catch-up contributions for higher-income employees are made as Roth contributions
Update plan documents, processes, and communications

Q6: What is the timeline for implementing these changes?

The proposed effective date is January 1, 2026. However, plan administrators should start preparing well in advance to ensure compliance and smooth implementation.

Q7: How should plan administrators communicate these changes to participants?

Plan administrators should:

Develop clear communication materials explaining the changes
Provide guidance on how the new rules affect different income groups
Offer education on the differences between pre-tax and Roth contributions
Update enrollment materials and plan summaries

Q8: What are the potential challenges in implementing these changes?

Challenges may include:

Updating payroll and recordkeeping systems
Ensuring accurate tracking of participant income
Modifying plan documents and administrative procedures
Educating participants about the impact on their retirement savings

Q9: Are these regulations final?

No, these are proposed regulations. The IRS is seeking comments from the public, and final rules may differ. Plan administrators should stay informed about any updates or changes to the proposed regulations.

Staying ahead of these changes is critical. Review plan documents, engage with payroll providers, and consult legal or benefits professionals to ensure your plan remains compliant. Acting early can minimize disruptions and support participants in making informed retirement decisions.

As a business owner, you may be eligible to claim home office tax deductions that will reduce your taxable income. However, it’s crucial to understand the IRS rules to ensure compliance and avoid potential IRS audit risks. There are two methods for claiming this tax break: the actual expense method and the simplified method. Here are answers to frequently asked questions about the tax break.

Who qualifies?

In general, you qualify for home office deductions if part of your home is used “regularly and exclusively” as your principal place of business.

If your home isn’t your principal place of business, you may still be able to deduct home office expenses if:

You physically meet with patients, clients or customers on your premises, or
You use a storage area in your home (or a separate free-standing structure, such as a garage) exclusively and regularly for business.

What expenses can you deduct?

Many eligible taxpayers deduct actual expenses when they claim home office deductions. Deductible home office expenses may include:

Direct expenses, such as the cost of painting and carpeting a room used exclusively for business,
A proportionate share of indirect expenses, including mortgage interest, rent, property taxes, utilities, repairs, maintenance and insurance,
Security system if applicable to your business, and
Depreciation.

But keeping track of actual expenses can take time and requires organized recordkeeping.

How does the simplified method work?

Fortunately, there’s a simplified method: You can deduct $5 for each square foot of home office space, up to a maximum of $1,500.

The cap can make the simplified method less valuable for larger home office spaces. Even for small spaces, taxpayers may qualify for larger deductions using the actual expense method. So, tracking your actual expenses can be worth it.

Can you change methods?

You’re not stuck with a particular method when claiming home office deductions. For instance, you might choose the actual expense method on your 2024 return, use the simplified method when you file your 2025 return next year and then switch back to the actual expense method for 2026. The choice is yours.

What if you sell your home?

If you sell — at a profit — a home on which you claimed home office deductions, there may be tax implications. We can explain them to you.

Also, be aware that the amount of your home office deductions is subject to limitations based on the income attributable to your use of the office. Other rules and limits may apply. However, any home office expenses that you can’t deduct because of these limitations can be carried over and deducted in later years.

Do employees qualify?

The Tax Cuts and Jobs Act suspended the business use of home office deductions through the end of 2025 for employees. Those who receive paychecks or Form W-2s aren’t eligible for deductions, even if they’re currently working from home because their employers require them to and don’t provide office space.

Home office tax deductions can provide valuable tax savings for business owners, but they must be claimed correctly. We can help you determine if you’re eligible and how to proceed.

Life insurance plays a vital role in your estate plan because its proceeds can provide for your family in the event of your untimely death. And for wealthier families, life insurance proceeds can cover any estate tax liability not covered by the current $13.99 million federal gift and estate tax exemption.

But when was the last time you reviewed your policy? The amount of life insurance that’s right for you depends on your circumstances, so it’s critical to regularly review your life insurance policy.

Reevaluating your policy

Life insurance isn’t a one-size-fits-all solution. Milestones such as marriage, having children, buying a home or starting a business bring new financial responsibilities. A policy purchased years ago may no longer protect your loved ones adequately.

Conversely, you may be over-insured, paying for coverage you no longer need. For example, if your children are financially independent or you’ve paid off significant debts, your coverage requirements might decrease.

The right amount of insurance depends on your family’s current and expected future income and expenses, as well as the amount of income your family would lose in the event of your untimely death.

On the other hand, health care expenses for you and your spouse may increase. When you retire, you’ll no longer have a salary, but you may have new sources of income, such as retirement plans and Social Security. You may or may not have paid off your mortgage, student loans or other debts. And you may or may not have accumulated sufficient wealth to provide for your family.

When you sit down to reevaluate your life insurance policy, consider the:

Coverage amount. Is your policy sufficient to cover current expenses, future obligations and debts?

Policy type. Term life insurance can be cost-effective for temporary needs, while whole life or universal policies may offer long-term benefits such as cash value accumulation.

Beneficiaries. Ensure your policy lists the correct beneficiaries, especially after a major life event such as marriage, divorce or the birth of a child.

Premiums. Are you paying a competitive rate? Shopping around or converting an old policy could save money.

While reviewing your policy, keep in mind your broader financial plan. How does your policy currently fit within your overall strategy, including tax implications, estate planning and business succession planning?

Turn to us for help

Taking the time to reassess your life insurance needs is an investment in your family’s financial security. Contact us to ensure your coverage aligns with your current and future estate planning goals.

Join Yeo & Yeo Principals Marisa Ahrens, CPA, Ali Barnes, CPA, CGFM, and Alan Panter, CPA, CGFM, for an informative webinar on how to navigate your employee benefit plan audit with confidence.

Our presenters will guide you through:

Preparing for your audit
An overview of Form 5500
Common audit deficiencies and how to prevent them
Secure Act 2.0 updates taking effect in 2025 and their impact
Reviewing audit findings and implementing changes

Take advantage of this opportunity to gain insights from experienced audit professionals and ensure compliance with evolving regulations.

Please join us!

Presenters:

Marisa Ahrens, CPA, leads the firm’s Employee Benefit Plan Services Group and holds the American Institute of Certified Public Accountants Advanced Defined Contribution Plans Audit Certificate.
Ali Barnes, CPA, CGFM, leads the firm’s Assurance Technical Team and is a member of the firm’s Quality Assurance Committee, Government Services Group, and Employee Benefit Plan Services Group.
Alan Panter, CPA, CGFM, is a member of the firm’s Government Services Group and Employee Benefit Plan Services Group. Alan has more than 28 years of experience providing audit and consulting services.

If an individual taxpayer has substantial business losses, unfavorable federal income tax rules can potentially come into play. Here’s what you need to know as you assess your 2024 tax situation.

Disallowance rule

The tax rules can get complicated if your business or rental activity throws off a tax loss — and many do during the early years. First, the passive activity loss (PAL) rules may apply if you aren’t very involved in the business or if it’s a rental activity. The PAL rules generally only allow you to deduct passive losses to the extent you have passive income from other sources. However, you can deduct passive losses that have been disallowed in previous years (called suspended PALs) when you sell the activity or property that produced the suspended losses.

If you successfully clear the hurdles imposed by the PAL rules, you face another hurdle: You can’t deduct an excess business loss in the current year. For 2024, an excess business loss is the excess of your aggregate business losses over $305,000 ($610,000 for married joint filers). For 2025, the thresholds are $313,000 and $626,000, respectively. An excess business loss is carried over to the following tax year and can be deducted under the rules for net operating loss (NOL) carryforwards explained below.

Deducting NOLs

You generally can’t use an NOL carryover, including one from an excess business loss, to shelter more than 80% of your taxable income in the carryover year. Also, NOLs generally can’t be carried back to an earlier tax year. They can only be carried forward and can be carried forward indefinitely. The requirement that an excess business loss must be carried forward as an NOL forces you to wait at least one year to get any tax-saving benefit from it.

Example 1: Taxpayer has a partial deductible business loss

David is unmarried. In 2024, he has an allowable loss of $400,000 from his start-up AI venture that he operates as a sole proprietorship.

Although David has no other income or losses from business activities, he has $500,000 of income from other sources (salary, interest, dividends, capital gains and so forth).

David has an excess business loss for the year of $95,000 (the excess of his $400,000 AI venture loss over the $305,000 excess business loss disallowance threshold for 2024 for an unmarried taxpayer). David can deduct the first $305,000 of his loss against his income from other sources. The $95,000 excess business loss is carried forward to his 2025 tax year and treated as part of an NOL carryover to that year.

Variation: If David’s 2024 business loss is $305,000 or less, he can deduct the entire loss against his income from other sources because he doesn’t have an excess business loss.

Example 2: Taxpayers aren’t affected by the disallowance rule

Nora and Ned are married and file tax returns jointly. In 2024, Nora has an allowable loss of $350,000 from rental real estate properties (after considering the PAL rules).

Ned runs a small business that’s still in the early phase of operations. He runs the business as a single-member LLC that’s treated as a sole proprietorship for tax purposes. For 2024, the business incurs a $150,000 tax loss.

Nora and Ned have no income or losses from other business or rental activities, but they have $600,000 of income from other sources.

They don’t have an excess business loss because their combined losses are $500,000. That amount is below the $610,000 excess business loss disallowance threshold for 2024 for married joint filers. So, they’re unaffected by the disallowance rule. They can use their $500,000 business loss to shelter income from other sources.

Partnerships, LLCs and S corporations

The excess business loss disallowance rule is applied at the owner level for business losses from partnerships, S corporations and LLCs treated as partnerships for tax purposes. Each owner’s allocable share of business income, gain, deduction, or loss from these pass-through entities is taken into account on the owner’s Form 1040 for the tax year that includes the end of the entity’s tax year.

The best way forward

As you can see, business losses can be complex. Contact us if you have questions or want more information about the best strategies for your situation.

Payroll is one of the biggest costs for most small to midsize employers. Here are six ways to address payroll costs.

1. Conduct a payroll audit. If your organization has been operational for a while, you may have a relatively complex compensation structure and payroll system. By meticulously evaluating the related expenditures under a formal audit, you may be able to identify flexible or nonessential costs. These costs represent potential money-saving opportunities to be seized upon without drastically altering your existing structure and system.

2. Optimize how you use and classify workers. A long-standing risk for many employers is misclassifying employees as independent contractors. If anything, this risk has only grown as “gig workers” remain popular in various industries. So, first and foremost, review employee classification throughout your organization to verify that you’re not at risk for compliance penalties. From there, look at every position and consider whether it could or should be converted to a part-time role or contractual arrangement without adversely affecting productivity and efficiency.

3. Ensure you’re not overlooking payroll-related tax breaks. Your organization may be eligible for tax credits or incentives now, or you could shift your employment strategy to qualify for them. For example, if you need to expand your workforce later this year, the Work Opportunity Tax Credit potentially offers a dollar-for-dollar reduction in your tax liability for hiring individuals from certain target groups. There may also be state and local tax relief programs available. Identifying and claiming every tax break you’re eligible for can reduce payroll costs and improve cash flow.

4. Explore strategic compensation adjustments. When payroll costs become problematic, many employers want to immediately jump to drastic steps such as layoffs or cuts to salaries or wages. However, these may devastate employee morale and hamper hiring in the future. Explore the feasibility of more measured adjustments, such as:

Reducing work hours for some employees,
Suspending employer matches for your qualified retirement plan,
Transitioning from fixed bonuses to performance-based incentives, and
Entering into deferred compensation agreements with highly compensated employees or other key staff.

These or other actions can reduce immediate payroll costs without radically changing your compensation philosophy and program.

5. Consider technological improvements. Another good reason to undertake the aforementioned payroll audit is it might reveal financial losses attributable to compliance penalties, overpayments, or unnecessary or redundant administrative costs. Although there’s no guarantee better technology will solve such problems, enhanced automation and functionality tend to reduce human errors, eliminate redundancies and facilitate real-time monitoring that can catch minor inaccuracies before they turn into major crises.

6. Work with your professional advisors. Employers generally need to take a nimbler approach to payroll management, hiring and other operational functions during times of economic uncertainty. Obviously, you and your leadership team should keep an eye on the news, but your professional advisors can provide invaluable insights into their various areas of expertise. Please contact us for tailored guidance on cost management, tax optimization and regulatory compliance to ensure your payroll decisions support long-term sustainability.

Last month, the U.S. Department of Labor (DOL) announced its annual inflation adjustments to the civil monetary penalties for a wide range of violations related to health and welfare plans. Legislation enacted in 2015 requires annual adjustments to certain penalty amounts by January 15 of each year. This year, the DOL beat that deadline by five days.

The adjustments are effective for penalties assessed after January 15, 2025. Here are some potential foibles to watch out for:

Failure to file Form 5500, “Annual Return/Report of Employee Benefit Plan.” Employers must file this form annually for most plans subject to the requirements of the Employee Retirement Income Security Act. It provides the IRS and DOL with information about a plan’s operation and compliance with government regulations. The maximum penalty for failing to file Form 5500 has increased to $2,739 per day that the filing is late (up from $2,670 per day in 2024).

Failure to provide a summary of benefits and coverage (SBC). Under the Affordable Care Act, employers must provide this disclosure to each eligible employee. Its purpose is to provide a clear and concise overview of a health or welfare plan’s coverage and costs. The maximum penalty for failing to provide an SBC has increased to $1,443 per failure (up from $1,406 per failure in 2024).

Failure to comply with the Genetic Information Nondiscrimination Act (GINA) and/or the Children’s Health Insurance Program (CHIP). Violations of GINA may include establishing eligibility rules based on genetic information or requesting genetic data for underwriting purposes. CHIP violations may include failure to disclose Medicaid or CHIP assistance availability. Any such violations may result in penalties of $145 per participant per day (up from $141 per participant per day in 2024).

Violations of reporting requirements for Multiple Employer Welfare Arrangements (MEWAs). A MEWA is generally defined as a single plan that covers the employees of two or more unrelated employers. MEWAs must, among other things, file Form M-1, “Report for Multiple Employer Welfare Arrangements (MEWAs) and Certain Entities Claiming Exception (ECEs).” Penalties for failure to meet applicable filing requirements for such arrangements, which include annually filing Form M-1 and filings upon origination, have increased to $1,992 per day (up from $1,942 per day in 2024).

Other penalties related to health and welfare plans, including those for failing to provide certain information requested by the DOL, as well as for certain defined benefit plan compliance failures, have also been adjusted. For example, the penalty for failing to provide DOL-requested documents has increased to $195 per day (up from $190 per day in 2024). This penalty amount, however, can’t exceed $1,956 per request.

As you might have noticed, every penalty amount we’ve mentioned has increased when adjusted for inflation — making each one more onerous for employers. The good news is that violations don’t always trigger the highest permitted penalty. In some instances, such as under programs designed to encourage Form 5500 filing, the DOL has the discretion to impose lower penalties.

Contact us for further information about all of this year’s penalties related to health and welfare plans, as well as for assistance in managing the costs of your benefits.

In a significant move to bolster Michigan’s innovation landscape, Governor Gretchen Whitmer signed into law a series of bipartisan bills on January 13, 2025, introducing the Michigan Innovation Fund and a Research and Development (R&D) Tax Credit. The most widely applicable of these bills are House Bills 5100 (Public Act 186 of 2024) and 5101 (Public Act 187 of 2024), re-establishing a Michigan R&D tax credit. This initiative is designed to foster innovation, stimulate job growth, help leverage Michigan universities, and reinforce Michigan’s position as a leader in technological advancement.

R&D Tax Credits: A New Incentive for Innovation

The newly introduced R&D tax credits are set to take effect for tax years beginning on or after January 1, 2025. These credits are structured to provide substantial financial incentives for corporate and flow through businesses engaging in research and development activities within the state.

Large Businesses (250+ Employees)

Large businesses are eligible for a tax credit calculated as 3% of their qualifying R&D expenses up to a predefined base amount. For expenses that exceed this base amount, the credit increases to 10%. However, the total credit a large business can claim is capped at $2,000,000 per tax year.

Small Businesses (<250 Employees)

Smaller businesses can claim a more generous credit of 15% of R&D expenses exceeding the base amount, while the rate remains 3% for expenses up to the base amount. The cap for small businesses is set at $250,000 per tax year.

Credit Limitations

The aggregate amount of credit available is capped at $100,000,000 per calendar year. If the aggregate amount of tentative claims exceed this limit, a proration system is applied.

Refundability

If the amount of the credits allowed under this section exceeds the taxpayer’s tax liability for the tax year, the portion of the credit that exceeds the taxpayer’s tax liability for the tax year must be refunded.

Additional Incentives for University Collaboration

Collaboration between businesses and research universities can lead to groundbreaking innovations. To promote such partnerships, an additional 5% tax credit is available for R&D expenses incurred through collaborations with state research universities and used to calculate the credit above. This credit is capped at $200,000 per year and requires a formal agreement between the business and the university. This provision not only supports businesses but also strengthens the ties between industry and academia, fostering an ecosystem of shared knowledge and resources.

Claim Submission and Deadlines

To benefit from these credits, businesses must adhere to strict submission guidelines. Regardless of a taxpayer’s year end, tentative claims must be filed by March 15 for the preceding calendar year activities, except for calendar 2025 (due date is April 1, 2026).

A Brief History of Michigan’s R&D Credit

Michigan’s journey with R&D tax credits has evolved significantly over the years, reflecting changes in the state’s broader tax landscape. Initially, the R&D credit was part of the Single Business Tax (SBT), which was Michigan’s primary business tax from 1976 until it was repealed effective December 31, 2007. The SBT included provisions for R&D credits to encourage innovation within the state.

The Michigan Business Tax (MBT) replaced the SBT effective January 1, 2008. The MBT, which also incorporated R&D credits, faced criticism for its complexity and was eventually replaced by the Michigan Corporate Income Tax (CIT) effective January 1, 2012. The CIT simplified the tax structure but eliminated most credits, including the R&D credit, leading to calls from the business community for incentives to support research and development.

The reintroduction of R&D tax credits under the current legislation marks a return to incentivizing innovation, aligning with Michigan’s historical commitment to foster technological advancement and economic growth.

A Bold Step Forward

The introduction of the Michigan Innovation Fund and R&D Tax Credit marks a bold step forward in Michigan’s economic strategy. By incentivizing research and development, the state aims to attract high-tech industries, create high-paying jobs, and solidify its reputation as a hub for innovation.

Whether you’re a small business looking to optimize your tax savings or a large corporation seeking to maximize your credit potential, our team can guide you through eligibility, claim submission, and strategic planning. Don’t leave valuable tax incentives on the table—contact Yeo & Yeo today to ensure your business takes full advantage of these new opportunities.

A revocable trust (sometimes referred to as a “living trust”) is a popular estate planning tool that allows you to manage your assets during your lifetime and ensure a smooth transfer of those assets to your family after your death. Plus, trust assets bypass the probate process, which can save time, reduce costs and maintain privacy. However, like any legal instrument, a revocable trust has certain disadvantages.

A revocable trust in action

A revocable trust’s premise is relatively simple. You establish the trust, transfer assets to it (essentially funding it) and name a trustee to handle administrative matters. You can name yourself as trustee or choose a professional to handle the job. Regardless of who you choose, name a successor trustee who can take over the reins if required.

If you designate yourself as the trust’s initial beneficiary, you’re entitled to receive income from the trust for your lifetime. You should also designate secondary beneficiaries, such as your spouse and children, who are entitled to receive the remaining assets after the trust terminates.

Added flexibility

One of the primary benefits of a revocable trust is its flexibility. As the grantor, you retain control over the trust and can change its terms, add or remove assets, or even dissolve it at any time during your life. This control makes it a flexible tool for adapting to changing life circumstances, such as new family members, changes in financial status or shifts in your estate planning goals.

For many people, the main reason for using a revocable trust — and sometimes the only one that really matters — is that the trust’s assets avoid probate. Probate is the process of settling an estate and passing the legal title of ownership of assets to heirs specified in a will. Depending on applicable state law, probate can be costly and time consuming. The process is also open to the public, which can be a major detriment if you treasure your privacy.

Assets passing through a revocable trust aren’t subject to probate. This gives you control to decide who in the family gets what without all the trappings of a will. Along with the flexibility, it keeps your personal arrangements away from prying eyes.

Potential drawbacks

One of the most notable drawbacks of a revocable trust is the upfront cost and effort involved in setting one up. Drafting a revocable trust requires the assistance of an attorney. You’ll also need to retitle your assets under the name of the trust, which can be time consuming and may incur fees.

Another limitation is that a revocable trust doesn’t provide asset protection from creditors or lawsuits during your lifetime. Because the trust is revocable, its assets are still considered your property and are thus subject to claims against you.

Finally, despite a common misconception, revocable living trusts don’t provide direct tax benefits. The assets are included in your taxable estate and dispositions of trust property can result in tax liability. You must report the income tax that’s due, including capital gains on sales of assets, on your personal tax return.

Right for you?

For many individuals, a revocable trust can be an invaluable part of their estate plans, offering flexibility, privacy and efficiency. However, it’s not a one-size-fits-all solution. Before deciding, weigh the benefits and drawbacks in the context of your unique financial situation and estate planning goals. Contact us with questions regarding a revocable trust. Be sure to consult with an estate planning attorney to draft your revocable trust.

Preventing financial losses from occupational fraud requires your company to remain vigilant. In a nutshell: Trust employees, but routinely verify they aren’t stealing. This includes salespeople who, if they’re unethical, could falsify sales commission records to illicitly line their own pockets. Because it’s sometimes impossible to spot crooks in your midst, be aware of potential sales commission fraud schemes and how best to detect and prevent them.

How some may cheat

Sales commission fraud can take several forms. For example, a retail employee bent on fraud may enter a nonexistent sale into a point of sale (POS) system to generate a commission. Or a dishonest sales associate might create a fraudulent contract that invents everything — including the customer.

Another risk is overstatement of sales. In such cases, workers alter internal sales reports or invoices or inflate sales captured via their company’s POS system. Or they might change their company’s commission records to reflect a higher pay rate. As for workers who don’t have access to such records, they might collude with someone who does (such as an accounting staffer) to alter rates.

Uncovering schemes in progress

Fortunately, you can use data from these types of fraud incidents to detect abuse. To uncover a scheme in progress:

Analyze commission expenses relative to company sales. After accounting for timing differences, the volume of commission payments should correlate to your business’s sales revenue.

Scrutinize individual commissions. Focus on outliers whose commission levels are significantly higher and ascertain the reasons for such differences. Consider setting benchmarks based on commission sales by employee type, location and seniority. This can enable you to detect fraud more easily.

Randomly sample sales. For sales associated with commissions, ensure you have documentation of the sales and commission payments. You might contact individual customers to verify sales transactions by framing your calls as customer satisfaction checks.

Monitor employee communications. Commission schemes sometimes involve collusion with other employees and customers, which usually leaves email, phone and text trails. But to prevent lawsuits, vet your intention to monitor worker communications with legal counsel.

Importance of internal controls

Detecting schemes already underway isn’t enough to prevent financial losses. You also need to adopt controls that discourage sales commission fraud. This starts with an ethical “tone at the top” and managers who set realistic sales goals that salespeople can meet without cheating.

Also, minimize opportunities to tamper with records by limiting access to files and scrutinizing unusual relationships between sales associates and accounting staffers. And if you don’t already have a confidential fraud reporting hotline open to employees, customers and vendors, put one in place.

We can help

Your business may not be equipped to routinely sift through sales data and spot potential fraud. Contact us for help. We can also assist you in implementing controls that make it harder for salespeople to falsify records.

Businesses in certain industries employ service workers who receive tips as a large part of their compensation. These businesses include restaurants, hotels and salons. Compliance with federal and state tax regulations is vital if your business has employees who receive tips.

Are tips becoming tax-free?

During the campaign, President Trump promised to end taxes on tips. While the proposal created buzz among employees and some business owners, no legislation eliminating taxes on tips has been passed. For now, employers should continue to follow the existing IRS rules until the law changes — if it does. Unless legal changes are enacted, the status quo remains in effect.

With that in mind, here are answers to questions about the current rules.

How are tips defined?

Tips are optional and can be cash or noncash. Cash tips are received directly from customers. They can also be electronically paid tips distributed to employees by employers and tips received from other employees in tip-sharing arrangements. Workers must generally report cash tips to their employers. Noncash tips are items of value other than cash. They can include tickets, passes or other items that employees receive from customers. Workers don’t have to report noncash tips to employers.

Four factors determine whether a payment qualifies as a tip for tax purposes:

The customer voluntarily makes a payment,
The customer has an unrestricted right to determine the amount,
The payment isn’t negotiated with, or dictated by, employer policy, and
The customer generally has a right to determine who receives the payment.

There are more relevant definitions. A direct tip occurs when an employee receives it directly from a customer (even as part of a tip pool). Directly tipped employees include wait staff, bartenders and hairstylists. An indirect tip occurs when an employee who normally doesn’t receive tips receives one. Indirectly tipped employees can include bussers, service bartenders, cooks and salon shampooers.

What records need to be kept?

Tipped workers must keep daily records of the cash tips they receive. To do so, they can use Form 4070A, Employee’s Daily Record of Tips. It’s found in IRS Publication 1244.

Workers should also keep records of the dates and values of noncash tips. The IRS doesn’t require workers to report noncash tips to employers, but they must report them on their tax returns.

How must employees report tips to employers?

Employees must report tips to employers by the 10th of the month after the month they were received. The IRS doesn’t require workers to use a particular form to report tips. However, a worker’s tip report generally should include the:

Employee’s name, address, Social Security number and signature,
Employer’s name and address,
Month or period covered, and
Total tips received during the period.

Note: If an employee’s monthly tips are less than $20, there’s no requirement to report them to his or her employer. However, they must be included as income on his or her tax return.

Are there other employer requirements?

Yes. Send each employee a Form W-2 that includes reported tips. In addition, employers must:

Keep employees’ tip reports.
Withhold taxes, including income taxes and the employee’s share of Social Security and Medicare taxes, based on employees’ wages and reported tip income.
Pay the employer share of Social Security and Medicare taxes based on the total wages paid to tipped employees as well as reported tip income.
Report this information to the IRS on Form 941, Employer’s Quarterly Federal Tax Return.
Deposit withheld taxes in accordance with federal tax deposit requirements.

In addition, “large” food or beverage establishments must file another annual report. Form 8027, Employer’s Annual Information Return of Tip Income and Allocated Tips, discloses receipts and tips.

What’s the tip tax credit?

Suppose you’re an employer with tipped workers providing food and beverages. In that case, you may qualify for a valuable federal tax credit involving the Social Security and Medicare taxes you pay on employees’ tip income.

How should employers proceed?

Running a business with tipped employees involves more than just providing good service. It requires careful adherence to wage and hour laws, thorough recordkeeping, accurate reporting and an awareness of changing requirements. While President Trump’s pledge to end taxes on tips hasn’t yet materialized into law, stay alert for potential changes. In the meantime, continue meeting all current requirements to ensure compliance. Contact us for guidance about your situation.

Financial forecasting provides a roadmap to guide your organization on the path to success. Forecasts support strategic planning by helping you allocate resources efficiently, manage risks effectively and optimize capital investments. However, today’s dynamic marketplace is uncharted territory, so you can’t rely solely on historical data. Reliable forecasts also consider external market trends and professional insights. Here are some tips to strengthen your forecasting models and help you avoid common pitfalls.

Determine the optimal approach

What’s the right forecasting method for your situation? The answer depends on several critical factors, including:

Forecast length. Short-term forecasts (that cover a year or less) often rely more heavily on historical data. These plans focus primarily on the organization’s immediate needs. Long-term forecasts require more qualitative inputs to account for uncertainties, such as market disruptions, economic shifts, and changing regulations and consumer behaviors. These plans are essential to support strategic decisions and attract funding from investors and lenders. The longer your forecast period is, the more likely internal and external conditions will change. So short-term forecasts tend to be more accurate than long-term plans. Long-term forecasts may need to be updated as market conditions evolve.

Stability of demand. Industries with consistent sales patterns may be able to use straightforward historical data analysis. However, those with seasonal and cyclical fluctuations might need to incorporate techniques like time-series decomposition to adjust for peaks and downturns. Companies experiencing unpredictable demand might consider using advanced forecasting software that integrates real-time sales data and external variables to enhance accuracy.

Availability of historical data. Techniques such as exponential smoothing require at least three years of data to generate reliable projections. For businesses launching new products or entering new markets, qualitative forecasting methods that incorporate expert opinions and market research may be more effective.

Business offerings. Companies with a wide range of products and services may prefer simplified forecasting models. Conversely, those with a focused product line can achieve greater accuracy with more complex statistical models.

Relying on just one forecasting model can be problematic. What happens if the forecast model gets things wrong? It may be more prudent to use a combination of approaches tailored to individual products and locations. Considering the results from multiple forecasting approaches can lead to better outcomes, especially when managing inventory levels.

Implement advanced forecasting techniques

Businesses seeking greater forecasting accuracy can implement advanced techniques, such as:

Time-series analysis, which breaks historical data into trend, seasonal and cyclical components to better understand patterns,
Regression models that identify relationships between financial variables to improve prediction accuracy,
Scenario planning that prepares best-case, worst-case and expected forecasts,
Sensitivity analysis that determines which forecasting assumptions have the greatest impact on expected financial outcomes, and
Rolling forecasts that are continuously updated based on current data to provide greater flexibility and adaptability.

Increasingly, businesses are leveraging artificial intelligence and machine learning to enhance forecasting precision. These technologies analyze large datasets quickly, identify trends and adjust predictions dynamically based on real-time changes. By integrating AI-driven forecasting tools, businesses can optimize their decision-making and gain a competitive edge.

Seek outside guidance

Financial statements are often the starting point for forecasts. Our accounting and auditing team can help ensure your historical data is accurate and then guide you through the process of developing reliable, market-driven forecasts based on your current needs. From developing realistic assumptions and reliable models to tracking forecast accuracy and updating for market shifts, we’ve got you covered. Contact us for more information.

Your estate plan is the perfect place to make charitable gifts if you’re a charitably inclined individual. One vehicle to consider using is a donor-advised fund (DAF).

What’s the main attraction? Among other benefits, a DAF allows you to set aside funds for charitable giving while you’re alive, and you (or your heirs) can direct donations over time. Plus, in your estate plan, you can designate your DAF as a beneficiary to receive assets upon your death, ensuring continued charitable giving in your name.

Setting up a DAF

A DAF generally requires an initial contribution of at least $5,000. It’s typically managed by a financial institution or an independent sponsoring organization, which, in return, charges an administrative fee based on a percentage of the account balance.

You have the option of funding a DAF through estate assets. And you can name a DAF as a beneficiary of IRA or 401(k) plan accounts, life insurance policies or through a bequest in your will or trust.

You instruct the DAF on how to distribute contributions to the charities of your choice. While deciding which charities to support, your contributions are invested and potentially grow within the account. Then, the charitable organizations you choose are vetted to ensure they’re qualified to accept DAF funds. Finally, the checks are cut and distributed to the charities.

DAF benefits

A DAF has several benefits. For starters, using a DAF is relatively easy. With all the administrative work and logistics handled for you, you simply make contributions to the fund. It may be possible to transfer securities directly from your bank account.

The contributions you make to the DAF generally are tax deductible. Therefore, if you itemize deductions on your tax return instead of taking the standard deduction, the gifts can offset your current income tax liability. Contributions can be deducted in the tax year you make them, rather than waiting until the fund distributes them.

For monetary contributions, you can write off the full amount, up to 60% of your adjusted gross income (AGI) in 2025. Any excess is carried over for five years. For a gift of appreciated property, the donation is equal to the property’s fair market value if you’ve owned the asset for longer than one year, up to 30% of AGI. Any excess is carried over for five years. Otherwise, the deduction for property is limited to your adjusted basis (often your initial cost).

If you prefer, distributions can be made to charities anonymously. Alternatively, you can name the fund after your family. In either event, the DAF may be created through your will, providing a lasting legacy.

DAF drawbacks

DAFs have their drawbacks as well. Despite some misconceptions, you don’t control how the charities use the money after it’s disbursed from the DAF.

Also, you can’t personally benefit from your DAF. For instance, you can’t direct that the money should be used to buy tickets to a local fundraiser you want to support if the cost of the tickets isn’t fully tax deductible. Lastly, detractors have complained about the administrative fees.

Leave a lasting legacy

Using a DAF in your estate plan can help maximize charitable giving, minimize taxes and create a lasting legacy aligned with your philanthropic goals. It provides flexibility and allows heirs to continue supporting charitable causes in your name. Contact us with questions regarding a DAF.

Yeo & Yeo is pleased to announce that Michael Rolka, CPA, CGFM, will lead the firm’s Government Services Group, which provides accounting, audit, and consulting solutions for governmental entities across Michigan.

Rolka succeeds Jamie Rivette, CPA, CGFM, who has led the group for ten years, establishing Yeo & Yeo as a leader in serving governmental entities. In her role as Assurance Service Line Leader, Rivette will continue to serve clients, provide mentorship, and drive growth for the firm.

“Mike is a trusted leader in the government sector and is constantly helping our clients and team stay ahead of changing regulations,” said Rivette. “He is committed to helping clients throughout the audit process and offering valuable insights along the way. With his leadership, our team will continue to be empowered to go above and beyond for our clients.”

Rolka is a Principal specializing in audits of governmental entities. He began his career in Yeo & Yeo’s Saginaw office and later transferred to the Troy office to support and help expand the firm’s audit and assurance services in Southeast Michigan. He holds a Bachelor of Professional Accountancy from Saginaw Valley State University and the Certified Government Financial Manager designation, demonstrating his depth of knowledge in governmental accounting, auditing, financial reporting, internal controls, and budgeting.

In addition to his professional qualifications, Rolka is a board member for the Michigan Government Finance Officers Association (MGFOA) and a member of its Accounting Standards Committee. He has presented at various government conferences, including the Michigan Association of Certified Public Accountants’ Governmental Winter Conference. He is also an active member of the American Institute of Certified Public Accountants and the Michigan Association of Certified Public Accountants. In the community, Rolka serves on the Clinton River Watershed Council Finance Committee.

“I take great pride in helping government clients navigate audits, ensure regulatory compliance, and strengthen trust with stakeholders and citizens,” Rolka said. “As leader, I look forward to expanding our team’s expertise and services while building on the strong foundation Jamie has established.”

Yeo & Yeo is pleased to announce the promotion of four professionals to manager. Congratulations to Daniel Gruzd II, Nicholas McFadden, Steve Soules, and Joey Winterstein on this significant achievement.

Daniel Gruzd II, CPA, works in the firm’s Tax & Consulting Service Line. With over a decade of accounting experience, he is a trusted advisor specializing in tax planning and business consulting, with a focus on the manufacturing, construction, and retail industries. Daniel graduated from the Dale Carnegie leadership course in 2024 and is dedicated to professional development. He holds a Master of Business Administration in Accounting from Northwood University. Based in the Saginaw office, Daniel continues to make a meaningful impact by helping businesses thrive.

Nicholas McFadden, CPA, brings a depth of knowledge to the Tax & Consulting Service Line, specializing in strategic tax planning, multi-state taxation, corporate restructuring, and tax compliance. His diverse experience spans the construction, retail, manufacturing, transportation, and professional services industries. Holding a Master of Science in Taxation from Eastern Michigan University, Nicholas’ proactive approach and technical knowledge are valued assets to the Ann Arbor office and his clients.

Steve Soules, CPA, E.A., serves nonprofit and for-profit organizations and specializes in tax preparation, compilations, and reviews. A member of the Tax & Consulting Service Line, Steve holds the Enrolled Agent credential, the highest designation awarded by the IRS to tax professionals. Outside the office, he gives back to the community as a volunteer for Barry County United Way, the Epilepsy Foundation of Michigan, and the IRS Volunteer Income Tax Assistance (VITA) program. He is a graduate of Davenport University, where he earned a Master of Business Administration in Accounting, and he recently completed the Dale Carnegie leadership course. He is based in the Kalamazoo office.

Joey Winterstein, CPA, has been a key contributor to the Assurance Service Line since joining Yeo & Yeo in 2019. He specializes in audits of school districts, nonprofit organizations, and healthcare organizations. Joey is a member of the firm’s Education Services Group and is passionate about sharing his knowledge with clients and the community. He is a member of the Michigan School Business Officials and has presented on auditing topics at the Michigan Association of Certified Public Accountants’ Governmental Accounting & Auditing Conference. In the community, he serves as Treasurer of the Saginaw Valley Zoological Society (Saginaw Children’s Zoo). He holds a Bachelor of Business Administration in Accounting from Northwood University and is based in the firm’s Saginaw office.

“As we continue to grow, we are excited to see many individuals step into leadership roles,” said Yeo & Yeo President & CEO Dave Youngstrom. “Daniel, Nicholas, Steve, and Joey have demonstrated dedication, hard work, and commitment to the core values that define our firm, and we look forward to their continued success.”

A variety of tax-related limits that affect businesses are indexed annually based on inflation. Many have increased for 2025, but with inflation cooling, the increases aren’t as great as they have been in the last few years. Here are some amounts that may affect you and your business.

2025 deductions as compared with 2024

Section 179 expensing:
- Limit: $1.25 million (up from $1.22 million)
- Phaseout: $3.13 million (up from $3.05 million)
- Sec. 179 expensing limit for certain heavy vehicles: $31,300 (up from $30,500)
Standard mileage rate for business driving: 70 cents per mile (up from 67 cents)
Income-based phaseouts for certain limits on the Sec. 199A qualified business income deduction begin at:
- Married filing jointly: $394,600 (up from $383,900)
- Other filers: $197,300 (up from $191,950)

Retirement plans in 2025 vs. 2024

Employee contributions to 401(k) plans: $23,500 (up from $23,000)
Catch-up contributions to 401(k) plans: $7,500 (unchanged)
Catch-up contributions to 401(k) plans for those age 60, 61, 62 or 63: $11,250 (not available in 2024)
Employee contributions to SIMPLEs: $16,500 (up from $16,000)
Catch-up contributions to SIMPLEs: $3,500 (unchanged)
Catch-up contributions to SIMPLE plans for those age 60, 61, 62 or 63: $5,250 (not available in 2024)
Combined employer/employee contributions to defined contribution plans (not including catch-ups): $70,000 (up from $69,000)
Maximum compensation used to determine contributions: $350,000 (up from $345,000)
Annual benefit for defined benefit plans: $280,000 (up from $275,000)
Compensation defining a highly compensated employee: $160,000 (up from $155,000)
Compensation defining a “key” employee: $230,000 (up from $220,000)

Social Security tax

Cap on amount of employees’ earnings subject to Social Security tax for 2025: $176,100 (up from $168,600 in 2024).

Other employee benefits this year vs. last year

Qualified transportation fringe-benefits employee income exclusion: $325 per month (up from $315)
Health Savings Account contribution limit:
- Individual coverage: $4,300 (up from $4,150)
- Family coverage: $8,550 (up from $8,300)
- Catch-up contribution: $1,000 (unchanged)
Flexible Spending Account contributions:
- Health care: $3,300 (up from $3,200)
- Health care FSA rollover limit (if plan permits): $660 (up from $640)
- Dependent care: $5,000 (unchanged)

Potential upcoming tax changes

These are only some of the tax limits and deductions that may affect your business, and additional rules may apply. But there’s more to keep in mind. With President Trump back in the White House and the Republicans controlling Congress, several tax policy changes have been proposed and could potentially be enacted in 2025. For example, Trump has proposed lowering the corporate tax rate (currently 21%) and eliminating taxes on overtime pay, tips, and Social Security benefits. These and other potential changes could have wide-ranging impacts on businesses and individuals. It’s important to stay informed. Consult with us if you have questions about your situation.