Business Briefs

Payroll Taxes

As a business owner, you know that running payroll involves much more than just compensating employees. Every paycheck represents a complex web of tax obligations that your company must handle accurately and consistently.

Indeed, staying compliant with payroll tax rules is essential to maintaining your business’s reputation and avoiding costly penalties. That’s why it’s essential to regularly review your key payroll tax responsibilities to ensure nothing falls through the cracks.

Federal, state and local

Let’s start with the big ones. As you’re well aware, employers must withhold federal income tax from employees’ paychecks. The amount withheld from each person’s pay depends on two factors: 1) the wage amount, and 2) information provided on the employee’s Form W-4, “Employee’s Withholding Certificate.” Additional withholding rules may apply to commissions and other forms of compensation.

Be sure to stay apprised of your non-federal payroll tax obligations. State income tax withholding rules, for example, apply to many employers. However, nine states have no income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming.

Certain localities also impose income taxes. And in some places, withholding is required to cover short-term disability, paid family leave or unemployment benefits.

FICA and FUTA

Many an accounting or HR staffer has had to repeatedly explain what these two abbreviations mean. The first one stands for the Federal Insurance Contributions Act (FICA). Under this law, payroll taxes consist of two individual taxes.

First is Social Security tax, which is 6.2% of wages up to an annually inflation-adjusted wage base limit. For 2025, that limit is $176,100 (up from $168,600 in 2024). Both the employee and employer pay 6.2% up to that amount, meaning the business withholds the employee’s share and contributes a matching amount for a total of 12.4%. The second is Medicare tax, which is 1.45% of all wages, with no wage base cap. Again, both the employee and employer pay the percentage for a total of 2.9%.

The other abbreviation stands for the Federal Unemployment Tax Act (FUTA). Under it, employers must pay 6% on the first $7,000 of each employee’s annual wages, before any credit. In many cases, if state unemployment taxes are paid fully and on time, the business can receive a credit of up to 5.4%, yielding an effective rate of 0.6%.

Be aware that certain states with outstanding federal unemployment-trust-fund loans may not qualify for the full credit, so employers could face higher effective FUTA rates in those jurisdictions. FUTA taxes are paid only by the employer, so you shouldn’t withhold them from employees’ wages.

Additional Medicare tax

This payroll tax often flies under the radar. Under a provision of the Affordable Care Act, an additional Medicare tax of 0.9% applies to employee wages above:

• $200,000 for single filers,
• $250,000 for married couples filing jointly, and
• $125,000 for married couples filing separately.

Only employees pay this tax. However, employers are responsible for withholding it once an employee’s wages exceed $200,000 — even if the employee ultimately may not owe it (for example, for joint filers).

State unemployment insurance

Every state also runs its own unemployment insurance program to provide benefits to eligible workers who are involuntarily terminated. State unemployment obligations vary widely in terms of wage base, rate and employer vs. employee contributions.

Generally, the rate employers must pay is based on their experience rating. The more claims made by former employees, the higher the tax rate. States update these rates annually.

Get stronger

Managing payroll taxes can be complex — especially as rates and rules may change from year to year. But you can confidently meet your compliance requirements with the right system, procedures, employees and professional guidance in place. We’d be happy to review your current approach, flag potential risks and recommend ways to strengthen your payroll tax processes. Contact us for more information.

Employee Fraud: What To Look For

The more things change, the more they stay the same. This age-old saying applies to many things, and one of them is fraud perpetrated against businesses by their employees.

In fact, occupational fraud cost organizations about 5% of their revenue on average last year, according to the Association of Certified Fraud Examiners’ Occupational Fraud 2024: A Report to the Nations. Let’s review its three basic categories.

Misappropriating assets

The first category is asset misappropriation. It comprises theft or misuse of any business asset, but related schemes often involve cash. These types of scams are the most common type of occupational fraud, though they’re typically less costly than crimes committed under the other two categories.

One classic example is the “ghost” employee ploy, where a staff member with payroll access channels funds to a nonexistent worker. Naturally, those funds end up in the real employee’s pocket.

There are plenty of others. Asset misappropriation has long involved check tampering, whereby an employee steals, forges or alters company checks to reap ill-gotten financial rewards. Now that midsize and larger businesses rely more on electronic transactions, these companies are relatively less susceptible to check schemes. However, many small companies are still at risk.

If you run a cash-intensive business, be on the lookout for dishonest workers skimming funds before they’re recorded. And if your company maintains inventory or supplies, safeguard these carefully to avoid theft.

Engaging in corrupt activities

The second category of occupational fraud is corruption. Dishonest employees in positions of influence may commit crimes for personal gain and the company’s loss. These types of schemes are rarely simple and may go on for months — or even years — without anyone noticing.

For instance, a corrupt staffer may work with a vendor rep to inflate prices on the vendor’s goods and services. The two then split the difference when the business pays the bill. Collusion like this can hurt your company’s financial performance and business reputation. Leadership teams that fail to prevent such schemes risk losing the confidence and support of lenders and investors.

Don’t ignore the possibility of kickback schemes either. Here, a person of influence in the company uses a vendor or other provider, not because they’re the best choice, but because the employee involved gets a personal benefit. Examples might include cash, a valuable gift or free services.

Falsifying financial statements

The third category is financial statement fraud. In these schemes, perpetrators falsify financial statements to either hide poor performance or commit outright theft. On the upside, this category is generally the least prevalent of the three. The downside? It’s often the costliest — with such crimes costing companies many hundreds of thousands of dollars on average.

One example to watch out for is inflated revenue. A manager, perhaps angling for a promotion or fearful of termination, records sales that never actually occurred to make the business appear more profitable. On a similar tack, a dishonest employee may hide or delay recording legitimate expenses or debts to make financial results look stronger.

Fraudulent manipulation of financial statements can be particularly dangerous. These crimes are often sophisticated, hard to detect and damaging to a company’s reputation at the highest levels.

Common thread

As you can see, occupational fraud can take many forms. But the common thread is the financial and reputational damage to affected businesses. And the threat level is often higher for smaller companies because they may have fewer resources to fight back. Let us help you spot vulnerabilities in your operations, strengthen internal controls, and devise tailored fraud prevention and detection strategies.

2026 Retirement Plan Updates2

The IRS has issued 2026 retirement plan numbers. In 2026, individuals with IRAs can contribute up to $7,500 (up from $7,000 in 2025). The IRA catch-up contribution for those age 50 or over will increase to $1,100. For those with a 401(k) plan, the 2026 contribution limit will increase to $24,500, up from $23,500 in 2025. The same is true for 403(b) plans and 457 plans. The catch-up contribution limit for most employees 50 or over participating in these plans will be $8,000 for 2026 (up from $7,500 in 2025). In 2026, a catch-up limit of $11,250 will continue to apply for employees age 60 to 63 who participate in these plans.

Your Brand Is More Than A Logo

Your business’s brand is more than just a logo or tagline. It represents the culmination of everything you’ve accomplished to date, as well as a promise to uphold the reputation you’ve established.

But that doesn’t mean your brand has to remain static. In fact, it may need a refresh as your company grows, markets evolve and customer expectations change. The only way to know for sure is to occasionally shine a light on your brand to determine whether it’s still optimally visible to the people you want to reach.

Locate yourself

When reassessing your brand, first locate where your company stands today. Consider its strengths and how they’ve evolved over time — or very recently. Maybe you’ve pivoted over the last several years to address changing economic or market conditions. Look for strong suits such as:

• Notable excellence in product or service design,
• Exceptional customer service,
• Providing superior value for your price points, and
• Innovation in your industry.

You need to match your business’s mission, vision and strengths to the needs and wants of the market you serve — and express that through your brand. To that end, ask current customers what they like about doing business with you. And survey both customers and prospects about what they consider when making buying decisions.

Pinpoint your personality

If you look at any widely known brand, you’ll see a logo and broader branding effort that conveys a certain personality. Some companies want to appear creative and playful; others want to communicate stability and security.

What personality will draw customers to your business? You may think every company in your industry has the same target audience. If that’s true, you must come up with an edge that differentiates your business from its rivals.

Your company may have various points of contact with customers, such as business cards, print advertisements and catalogs, and your website’s home page and social media accounts. All play a role in your brand’s personality.

Review what your company does at each contact point, considering whether and how these efforts accurately and effectively represent the business’s core values and emphasize its strengths. Doing so will give you more insight into the best way to portray your personality through your brand.

Check up on the competition

Of course, competitors have brands all their own — and they’re after your target audience. So, in creating or refining your brand, you’ll need to identify their tactics and develop countermeasures.

To do so, engage in competitive intelligence. This simply means ethically and legally gathering information on their latest products or services, pricing and special offers, marketing and advertising methods, and social media activities.

In some cases, you may discover that a full rebranding campaign is necessary to differentiate your business from the competition. For example, let’s say a major player has entered your market and you’re worried about visibility, or perhaps your brand is blurring with another company’s.

Stand out

Branding is an ongoing process of reflecting on your company’s identity and refining how you present it to the world. By building on your strengths, expressing a clear and consistent personality, and keeping a close eye on competitors, your business can stand out in a crowded marketplace. Let us help you evaluate branding from a cost-planning perspective to ensure that any chosen strategy aligns with your budget and strategic goals.

AI Is Advancing Fast. Is Your Company’s Governance Policy Keeping Up?

Artificial intelligence (AI) is changing the way businesses operate. Its capacity to gather and process data, as well as to mimic human interactions, offers remarkable potential to streamline operations and boost productivity.

But AI presents considerable challenges and concerns, too. With so many tools available, employees may inadvertently or purposely misuse the technology in ways that are unethical or even illegal. Compounding the problem is that many companies lack a formal AI governance policy.

Few in place

In August 2025, software platform provider Genesys released the results of an independent survey of 4,000 consumers and 1,600 enterprise customer experience and information technology (IT) leaders in more than 10 countries. It found that over a third (35%) of tech-leader respondents said their organizations have “little to no formal [AI] governance policies in place.”

This is a pointed problem, the survey notes, because many businesses are gearing up to deploy agentic AI. This is the latest iteration of the technology that can make decisions autonomously and act independently to achieve specific goals without depending on user commands or predefined inputs. The survey found that while 81% of tech leaders trust agentic AI with sensitive customer data, only 36% of consumers do.

7 steps to consider

Whether or not you’re eyeing agentic AI, its growing popularity is creating a trust-building imperative for today’s businesses. That’s why you should consider writing and implementing an AI governance policy.

Formally defined, an AI governance policy is a written framework that establishes how a company may use AI responsibly, transparently, ethically and legally. It outlines the decision-making processes, accountability measures, ethical standards and legal requirements that must guide the development, purchase and deployment of AI tools.

Creating an AI governance policy should be a collaborative effort involving your company’s leadership team, knowledgeable employees (such as IT staff) and professional advisors (such as a technology consultant and attorney). Here are seven steps your team should consider:

1. Audit usage. Identify where and how your business is using AI. For instance, do you use automated tools in marketing or when screening job applicants, auto-generated financial reports, or customer service chatbots? Inventory everything and note who’s using it, what data it relies on and which decisions it influences.

2. Assign ownership for AI oversight. This may mean appointing a small internal team or naming (or hiring) an AI compliance manager or executive. Your oversight team or compliance leader will be responsible for maintaining the policy, reviewing new tools and handling concerns that arise.

3. Establish core principles. Ground your policy in ethical and legal principles — such as fairness, transparency, accountability, privacy and safety. The policy should reflect your company’s mission, vision and values.

4. Set standards for data and vendor use. Include guidelines on how data used by AI tools is collected, stored and shared. Pay particular attention to intellectual property issues. If you use third-party vendors, define review and approval steps to verify that their systems meet your privacy and compliance standards.

5. Require human oversight. Clearly state that employees must remain in control of AI-assisted work. Human judgment should always be part of the process, including approving AI-generated content and reviewing automated financial reports.

6. Include a mandatory review-and-update clause. Schedule regular reviews — at least annually — to assess whether your policy remains relevant. This is especially important as innovations, such as agentic AI, come online and new regulations emerge.

7. Communicate with and train staff. Incorporate AI governance into onboarding for new employees and follow up with regular training and reminder sessions thereafter. Ask staff members to sign an acknowledgment that they’ve read the policy and perhaps another to confirm they’ve completed the required training. Encourage everyone to ask questions and report potential issues.

Financial impact

Writing an AI governance policy is just one part of preparing your business for the future. Understanding its financial impact is another. Let us help you analyze the costs, tax implications and return on investment of AI tools so you can make informed decisions that balance innovation with sound financial management and robust compliance practices.

 Today’s employees have a wealth of information at their fingertips and many distractions competing for their attention. Maintaining focus and productivity can be challenging.

One proven lever for promoting engagement is a performance-based bonus plan. When carefully structured, these plans acknowledge individual contributions while accelerating the company toward its strategic goals. However, if not optimally designed, bonuses can backfire — feeding worker frustration and wasting resources. That’s why the right approach is essential.

What are the goals?

The first step in creating an effective employee bonus plan is to set specific and reasonable strategic goals that inspire employees and improve your business’s financial performance. They should be tied to metrics that describe intended operational improvements, such as:

• Increased sales or profits,
• Enhanced customer retention, or
• Reduced waste.

Structure the bonus plan so that staff members’ priorities and performance goals align with the company’s strategic goals, as well as the purpose of their respective positions. Employee goals must also be specific and measurable. You may allow some workers to set “stretch” goals that require them to exceed normally expected performance levels. But don’t permit anything so difficult that an employee will likely get discouraged and give up.

It often makes sense to also set departmental goals. This way, team members can better see how their work, both individually and as a group, propels progress toward company goals. For example, the bonuses of assembly line workers at a manufacturing plant could be tied to limiting unit rejects to no more than 1%. This, in turn, would directly relate to the business’s strategic goal of reducing overall waste by 5%.

How can you do it right?

A well-structured bonus plan should do more than set employees on a “side quest” to earn more money. Ideally, it needs to educate and inspire them to think more like business owners seeking to grow the company rather than workers earning a paycheck.

For starters, keep it simple. Sometimes, bonus plans get so complicated that employees struggle to understand what they must do to receive their awards. Design a straightforward plan that clearly explains all the details. Write it in plain language so both leadership and staff have something to refer to if confusion arises.

Also, seek balance when calculating bonus amounts. This can be tricky: A bonus that’s too small won’t provide adequate motivation, while an amount that’s too large could cause cash flow issues or even jeopardize the bottom line. Many businesses structure their incentive arrangements as profit-sharing plans, so payouts are based directly on the company’s profitability.

Make the plan flexible, too, by adjusting it as business conditions change. For instance, you might tweak your bonus plan when you update your company’s strategic goals at year end. But don’t set goals that are too open-ended. Measure both strategic and individual goals on a consistent schedule with firm starting and ending dates. Companies generally track goals quarterly or annually.

Finally, consider allowing the highest achievers to reap the biggest rewards. In many businesses, salespeople have the biggest impact on the company’s overall performance. If that’s the case for your business, perhaps your sales team should be able to earn the highest amounts.

Who can help?

A thoughtfully designed bonus plan can align employee efforts with company priorities while supporting long-term growth. Let us help you create one that motivates employees, safeguards your bottom line, and keeps your business in full compliance with the tax and accounting rules.

Launching a new business brings tough decisions. And that holds true whether you’re a fledgling entrepreneur starting your first company or an experienced businessperson expanding into a second or third enterprise.

 Among the most important calls you’ll need to make is how to structure the start-up for tax purposes. For many business owners, electing S corporation status is a savvy move. But it’s not right for everyone. Here are some important points to consider before you decide.

 What’s it all about?

An S corporation is a tax election available only to certain U.S. companies. To make the election, you’ll need to file IRS Form 2553, “Election by a Small Business Corporation,” typically within 75 days of forming the business or the start of the tax year to which you want the election to apply.

 If you elect S corporation status, the IRS will treat your start-up as a “pass-through” entity. This means the business generally won’t pay federal income taxes. Instead, profits and losses will pass through to your individual tax return and those of other shareholders.

As a result, you’ll avoid the “double taxation” faced by shareholders of C corporations — whereby the company pays taxes on the business’s income and then shareholders pay tax on any dividends received. In addition, S corporation shareholders may be eligible for the Section 199A qualified business income deduction for pass-through entity owners. It was recently made permanent under the One Big Beautiful Bill Act.

 Which businesses qualify?

IRS rules limit which companies can elect S corporation status. To qualify, your start-up must:

• Be an eligible domestic corporation or limited liability company (LLC),
• Have no more than 100 shareholders who must be U.S. citizens or residents (certain trusts and estates may also be eligible), and
• Offer only one class of stock.

 Insurance companies, financial institutions using the reserve method of accounting and domestic international sales corporations are generally ineligible.

 Why do it?

As mentioned above, the main advantage of electing S corporation vs. C corporation status is avoiding double taxation. But there are other reasons to do it.

 For example, many start-ups incur losses in their first few years. S corporation status allows owners to offset other income with those losses, a tax benefit that’s unavailable to C corporation shareholders.

 S corporations also have advantages over other types of pass-through entities. Generally, all trade or business income that flows through to sole proprietors and partners in partnerships is subject to self-employment taxes — even if the income isn’t actually distributed to the owners. S corporations can divide their income into shareholder-employee salaries and distributions. The salary portion is subject to payroll taxes, but distributions aren’t. So, by drawing a smaller salary (but one that’s reasonable in the eyes of the IRS) and taking the remainder as distributions, S corporation shareholder-employees can reduce their overall tax burden.

 Liability protection is another advantage S corporations have over sole proprietorships and partnerships. S corporation status shields shareholders’ personal assets from business debts and legal claims, provided applicable rules are followed. Operating as an S corporation can also make your new business appear more credible to lenders, investors and customers because of its formalized, protective framework.

 What are the drawbacks?

Electing to be treated as an S corporation has its drawbacks. Your start-up will have to follow strict IRS rules, which include keeping up with filing requirements and maintaining accurate financial records. Failure to comply could lead to back taxes, interest and penalties. It could even mean losing your S corporation status in a worst-case scenario.

 Indeed, S corporations tend to incur higher administrative expenses than other pass-through entities. You’ll need to file corporate tax returns and meet state-level requirements. The extra complexity may outweigh the tax advantages — especially for newly launched companies with little to no profits.

 Finally, it bears repeating: Although the salary/distributions income-splitting strategy mentioned above is advantageous, it can draw IRS scrutiny. Paying shareholder-employees an unreasonably low salary to avoid payroll taxes could trigger an audit with negative consequences.

 Who can help?

Congratulations and best wishes on your forthcoming start-up! Electing S corporation status may be the right way to go. However, you’ll need to assess a wide variety of factors, including projected profits, the number of shareholders and your comfort level with the administrative requirements.

 Before you do anything, contact us. We can help you evaluate whether operating as an S corporation aligns with your strategic and financial goals. If it does, we’d be happy to assist you with the filing process and compliance going forward.

 As summer gives way to fall, many businesses begin their budget-setting processes for the upcoming year. This annual rite of passage can be stressful, contentious and, perhaps worst of all, disappointing if your budgets often fail to achieve their objectives.

The good news is that there are many ways to enhance your company’s budgeting process and improve the likelihood that you’ll get good results. Here are five to consider.

1. Optimize data

It’s not uncommon for a business to create its budget by applying an across-the-board percentage increase to the previous year’s actual results. However, this approach may be too simplistic in today’s uncertain economy and ever-changing marketplace.

That’s not to say historical results aren’t a good starting point. But keep in mind that some costs are fixed rather than variable. And certain assets, such as equipment and employees, have capacity limitations. What troubles many companies is the presence of confusing or conflicting information, which eventually hampers their budget’s efficacy.

The solution is data optimization. This is the process of refining how data is collected, stored, managed and applied to maximize efficiency and value. In the context of budgeting, data optimization involves steps such as removing duplicate entries, correcting errors and applying a standard format to strengthen accuracy.

2. Involve the entire organization

Traditionally, many businesses rely only on their accounting departments to devise a budget. However, this approach often “puts blinders” on a company, leaving it at a disadvantage. When creating your budget, seek input from the entire organization.

For example, your sales department may be in the best position to help you accurately estimate future revenue. Meanwhile, your operations or production managers can offer insights into potential staffing adjustments and expenses related to equipment maintenance or replacement.

Soliciting broad participation also gives departments a greater sense of involvement in the budgeting process. In turn, this can help enhance employee engagement and improve your odds of achieving budgeted results.

3. “Sell” it to staff

Good budgets encourage the hard work needed to grow revenue and cut costs. But targets must be attainable. Employees will likely become discouraged if they view a budget as unattainable or out of touch with current market trends — or reality in general. After years of failed attempts to meet budgets, workers may start to ignore them altogether.

If this has been an issue for your business, you might need to “sell” your budget to staff. Doing so centers on devising and executing a communication strategy that clearly explains each budget’s rationale and objectives. Tying annual bonuses to achieving specific targets may encourage greater buy-in as well.

4. Monitor cash flow

Even if expected revenue is forecast to cover expenses for the year, unexpected fluctuations in production costs can lead to temporary cash shortages. Slow-paying customers and uncollectible accounts may also inhibit cash flow.

The truth is, any unanticipated cash shortfall can seriously derail your budget. So, once yours is set, monitor all your cash flows weekly or monthly. Then, create a plan for managing any major shortfalls that may occur.

For instance, you and other owners may need to contribute extra capital. Or you might need to apply for a line of credit at your current bank or another one. Additionally, you might consider:

• Buying materials on consignment,
• Delaying payments to vendors (as long as you don’t incur penalties), or
• Tightening terms with slow-paying customers.

Bottom line: Don’t put a budget in place and expect it to run on autopilot. Keep a close eye on cash flow and make adjustments as necessary.

5. Get an objective opinion

Many companies’ budgets suffer from the old “because we’ve always done it that way” mentality. For a fresh perspective and an objective opinion on your budgeting process, please keep our firm in mind. We can help your business strengthen its budget by showing you how to better analyze historical financial data, forecast future performance, identify cost-saving opportunities, integrate tax planning and more.

The One, Big, Beautiful Bill Act (OBBBA) includes numerous provisions affecting the tax liability of U.S. businesses. For many businesses, the favorable provisions outweigh the unfavorable, but both kinds are likely to impact your tax planning. Here are several provisions included in the new law that may influence your business’s tax liability.

Qualified business income (QBI) deduction

The Tax Cuts and Jobs Act (TCJA) created the Section 199A deduction for QBI for owners of pass-through entities (such as partnerships, limited liability companies and S corporations) and sole proprietorships. The deduction had been slated to expire after 2025, putting many business owners at risk of higher taxes.

The OBBBA makes the QBI deduction permanent. It also expands the deduction limit phase-in ranges for specified services trades or businesses, and other entities subject to the wage and investment limitation. For these businesses, the deduction is reduced when taxable income falls within the phase-in range and is eliminated for specified services trades or businesses when taxable income exceeds the range. The new law expands the phase-in ranges from $50,000 to $75,000 for individual filers and from $100,000 to $150,000 for joint filers.

The OBBBA also adds an inflation-adjusted minimum QBI deduction of $400, beginning in 2026. It’s available for taxpayers with at least $1,000 of QBI from one or more active businesses in which they materially participate.

Accelerated bonus depreciation

The OBBBA makes permanent 100% first-year bonus depreciation for the cost of qualified new and used assets acquired and placed into service after January 19, 2025. Under the TCJA, the deduction was limited to 40% for 2025, 20% in 2026 and 0% in 2027.

The new law also introduces a 100% deduction for the cost of “qualified production property” (generally, nonresidential real property used in manufacturing) placed into service after July 4, 2025, and before 2031. In addition, the OBBBA increases the Sec. 179 expensing limit to $2.5 million and the expensing phaseout threshold to $4 million for 2025, with each amount adjusted annually for inflation.

Together, the depreciation changes are expected to encourage capital investments, especially by manufacturing, construction, agriculture and real estate businesses. And the permanent 100% bonus depreciation may alleviate the pressure on companies that didn’t want to delay purchases due to a smaller deduction.

Research and experimentation expense deduction

Beginning in 2022, the TCJA required businesses to amortize Sec. 174 research and experimentation (R&E) costs over five years if incurred in the United States or 15 years if incurred outside the country. With the mandatory mid-year convention, deductions were spread out over six years. The OBBBA permanently allows the deduction of domestic R&E expenses in the year incurred, starting with the 2025 tax year.

The OBBBA also allows “small businesses” (those with average annual gross receipts of $31 million or less) to claim the deduction retroactively to 2022. Any business that incurred domestic R&E expenses in 2022 through 2024 can elect to accelerate the remaining deductions for those expenditures over a one- or two-year period.

Clean energy tax incentives

The OBBBA eliminates many of the Inflation Reduction Act’s clean energy tax incentives for businesses, including the:

• Qualified commercial clean vehicle credit,
• Alternative fuel vehicle refueling property credit, and
• Sec. 179D deduction for energy-efficient commercial buildings.

The law accelerates the phaseouts of some incentives and moves up the project deadlines for others. The expiration dates vary. For example, the commercial clean vehicle credit can’t be claimed for a vehicle acquired after September 30, 2025, instead of December 31, 2032. But the alternative fuel vehicle refueling property credit doesn’t expire until after June 30, 2026.

Qualified Opportunity Zones

The TCJA established the Qualified Opportunity Zone (QOZ) program to encourage investment in distressed areas. The program generally allows taxpayers to defer, reduce or exclude unrealized capital gains reinvested in qualified opportunity funds (QOFs) that invest in designated distressed communities. The OBBBA creates a permanent QOZ policy that builds off the original program.

It retains the existing benefits and also provides for investors to receive incremental reductions in gain starting on their investment’s first anniversary. In the seventh year, taxpayers must realize their initial gains, reduced by any step-up in basis, the amount of which depends on how long the investment is held. The first round of QOFs available under the permanent policy will begin on January 1, 2027.

The OBBBA also introduces a new type of QOF for rural areas. Investments in such funds will receive triple the step-up in basis.

International taxes

The TCJA added several international tax provisions to the tax code, including deductions for foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI). It also established the base erosion and anti-abuse tax (BEAT) on U.S. corporations that 1) have average annual gross receipts greater than or equal to $500 million for the prior three tax years, and 2) have made deductible payments to related non-U.S. parties at or above 3% of all deductible payments.

The OBBBA makes permanent the FDII and GILTI deductions and adjusts the effective tax rates for FDII and GILTI to 14%. It also makes permanent the minimum BEAT, increasing the tax rate to 10.5%. These changes take effect beginning in 2026.

Employer tax provisions

The new law makes permanent the exclusion from gross income (for employees) and from wages for employment tax purposes (for employers) for employer payments of student loans. It also provides that the maximum annual exclusion of $5,250 be adjusted annually for inflation after 2026.

In addition, the OBBBA permanently raises the maximum employer-provided child care credit from 25% to 40% of qualified expenses, up to $500,000 per year. (For eligible small businesses, these amounts are 50% and up to $600,000, respectively.) The maximum dollar amount will be adjusted annually for inflation after 2026.

The OBBBA also makes permanent the employer credit for paid family and medical leave (FML) after 2025. It also provides employers the option to claim the credit for a portion of premiums paid for FML insurance instead of for a portion of the actual cost of pay to employees on qualified leave.

Employee Retention Tax Credit

If you filed an Employee Retention Tax Credit claim after January 31, 2024, you may not see your expected refund. The OBBBA bars the IRS from issuing refunds for certain claims submitted after that date. It also gives the IRS at least six years from the date of filing to challenge these claims.

Miscellaneous provisions

The OBBBA increases the limit on the business interest deduction by excluding depreciation, amortization and depletion from the computation of adjusted taxable income (ATI), starting in 2025. The deduction is generally limited to 30% of ATI for the year.

The new law also makes permanent the excess business loss limit, which was set to expire in 2029. And it permanently extends the New Markets Tax Credit, which was scheduled to expire in 2026.

What’s next?

Since the OBBBA is simply extending or making relatively modest modifications to existing tax law, it probably won’t result in the years-long onslaught of new regulations and IRS guidance that followed the TCJA’s enactment. But we’ll keep you informed about any new developments.

Commission fraud: When salespeople get paid more than they’ve earned

Many employees — from retail workers to sales staffers involved in complex business-to-business transactions — receive part of their compensation from sales-related commissions. To attract and retain top talent, some companies even allow employees to earn unlimited commissions.

Unfortunately, some commission-compensated employees may be tempted to abuse this system by falsifying sales or rates. Fraud methods vary depending on an unethical salesperson’s employer and role. But companies need to be aware of the possibility of commission fraud and take steps to prevent it.

3 forms

Generally, commission fraud takes one of three forms:

1. Invention of sales. A retail employee enters a fake purchase at the point of sale (POS) to generate a commission. Or an employee involved in selling business services creates a fraudulent sales contract.
2. Overstatement of sales. Here, a worker alters internal sales reports or invoices or inflates sales captured via the company’s POS.
3. Inflation of commission rates. An employee changes a company’s commission records to reflect a higher pay rate. Employees who don’t have access to such records might collude with someone who does (such as an accounting staffer) to alter compensation rates.

More sophisticated schemes can involve collusion with customers and other outside parties.

Data-driven approach to detection

Regardless of the method used to commit commission fraud, these schemes create data and a document trail your business can use to detect abuse. For example, to uncover commission fraud in progress, you should regularly analyze commission expenses relative to your company’s sales. After accounting for timing differences, the volume of commission payments should correlate to sales revenue.

Also pay close attention to the total commission paid to each employee. Focus on outliers whose commission levels are significantly higher and analyze sales activity and the associated commission rates to ensure consistency. By creating benchmarks — based on commission sales by employee type, location and seniority — you can more easily detect fraud in subsequent periods. Randomly sampling sales associated with commissions and ensuring relevant documentation exists for each payment can be effective, too. You can contact individual customers to verify sales transactions by disguising your calls as customer satisfaction checks.

Commission schemes sometimes require cooperation with other employees and customers, which usually leaves an email trail. Consistent with your company’s policies and procedures, monitor employee email communications for evidence of wrongdoing.

Prevention processes

There are other processes your business can follow to prevent fraud from occurring in the first place. For example:

Formalize policies prohibiting it. State the consequences (for instance, termination and criminal charges) of committing commission fraud in your employee handbook. Also routinely stress your company’s commitment to detecting commission fraud and explain that management will regularly scrutinize individual payments for signs of malfeasance.

Minimize the potential for record tampering. To help prevent salespeople from accessing accounting records, rotate accounting staff assigned to recording commission payments. Segregation of all accounting duties is important to help prevent other fraud schemes from flourishing in your organization.

Set realistic sales goals. Although some employees commit fraud for personal enrichment, others cheat to meet their employer’s overly aggressive sales targets. Periodically solicit feedback from sales staff about their ability to meet objectives and pay close attention when salespeople complain or leave your company. If you encounter excessive frustration in meeting targets, make them more achievable.

Making manipulation difficult

When structured and managed correctly, a commission program can boost employee compensation and morale — and add to your company’s bottom line. But schemes to manipulate a company’s compensation structure often are all too simple for shady salespeople to commit. To make fraud much harder to perpetrate, you may need to step up data analysis and revamp your internal controls.

Many companies don’t have the internal resources to conduct this type of analysis and don’t know how to fix controls that aren’t working. That’s where a CPA or forensic accounting specialist can help. Contact us.