Tax problems can happen to even the most organized small business owners. A cash flow crunch, an unexpected tax notice, a missed filing deadline or a payroll tax oversight can be stressful, especially when penalties and interest begin to add up. Fortunately, businesses can get back on track by addressing tax issues promptly and strategically.

What should I do if I receive a tax notice?

If you or your business receives a tax notice from the IRS or a state agency, don’t ignore it. Start by reviewing the notice carefully. It may relate to:

• -A balance due,
• -A missing tax return,
• -A proposed tax adjustment,
• -A payroll tax deposit issue, or
• -A request for documentation.
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Be aware that tax notices typically include response deadlines — and missing them can limit your options and lead to additional penalties and interest. Tax authorities may eventually pursue collection measures (such as liens or levies) on unpaid amounts. A lien is a legal claim against property, which can affect your ability to secure credit or complete financial transactions. A levy allows the tax agency to seize assets to satisfy the debt.

Before making a payment or sending a response, confirm that the notice is accurate. We can help you compare the notice with your business records, gather supporting documentation and prepare an appropriate response.

How far back can I file unfiled tax returns?

If you have unfiled tax returns, it’s important to address them as soon as possible. In many cases, you’ll need to file past-due returns before you can qualify for certain resolution options, such as a payment plan or settlement program.

How far back you need to file depends on your circumstances, the type of return involved and the tax agency’s requirements. There generally isn’t a simple time limit that makes an unfiled return “go away.”

For federal income taxes, the statute of limitations for the IRS to assess additional tax for a particular tax year generally starts only after a valid return is filed. It’s typically three years, but it’s six years if you understate your gross income by more than 25%. If you fail to file a return (or you file a false or fraudulent return), the IRS has an unlimited amount of time to assess tax for the tax year.

So filing past-due returns can help reduce the risk of penalties, interest and collection activity, as well as the risk that the taxing authority could create a “substitute for return” for you. (This is generally undesirable because the return likely will include your income but not all the deductions, credits and other tax breaks you may be eligible for.)

If you’re owed a refund, filing promptly is especially important because you may lose the ability to receive an otherwise valid refund if you wait too long. Federal income tax refunds and credits generally must be claimed by the later of three years from the date you filed the return or two years from the date you paid the tax.

What are my options if I owe back taxes?

Some business owners who owe tax can’t immediately pay the full balance due. If you owe back taxes, you may have several options depending on the amount owed, the type of tax involved and your financial situation. Ways to manage tax debt may include:

• -Making a payment,
• -Asking for a temporary delay in collection due to financial hardship,
• -Participating in a settlement program (see below), and
• -Setting up an installment agreement or payment plan.
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An installment agreement or payment plan may give qualifying taxpayers extra breathing room to pay the balance over time. However, you must generally stay current with future tax filings and payments. Falling behind again can cause you to default on your payment plan and potentially lead to additional collection actions.

Can I settle my tax debt for less than the full amount owed?

Some tax agencies offer settlement programs that allow eligible taxpayers to settle tax debt for less than the full amount owed. For federal tax debt, the offer in compromise (OIC) program may be available in limited circumstances.

However, an OIC isn’t available to all taxpayers and may not be the best option in every situation. The IRS reviews income, expenses, asset equity and ability to pay when determining whether to approve an OIC request. Before applying, you’ll generally need to have all required tax returns filed. You also must be current with ongoing tax obligations, including estimated tax payments and federal tax deposits.

Can tax penalties be reduced or removed?

Penalty relief may be available in certain circumstances. Depending on the penalty and the facts involved, you may qualify for administrative relief, such as an automatic exemption from penalty, first-time penalty abatement or relief based on reasonable cause.

Reasonable cause may apply when you made a good-faith effort to meet your tax obligations but were unable to do so because of circumstances beyond your control, such as:

• -A serious illness,
• -A death in your immediate family,
• -A natural disaster, or
• -Loss of records.
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Penalty abatement isn’t automatic. You must follow the instructions in the notice. You might need to call the IRS or submit a written request with a clear explanation and supporting documentation. Even if penalties are reduced, interest may still apply, so it’s advisable to respond as soon as possible.

Why are payroll tax-withholding problems so serious?

Payroll tax-withholding problems are among the most urgent tax issues small business owners can face. If you have employees on your payroll, you’re responsible for withholding federal income tax, state income tax (if applicable), Social Security tax and Medicare tax from their wages and remitting those amounts to the government. Tax agencies closely monitor these tax remittances because you’re withholding money on behalf of your employees and holding it in trust until you deposit it with the taxing authority.

In some cases, business owners or other responsible individuals may be held personally liable for unremitted taxes through the Trust Fund Recovery Penalty. The penalty can apply to individuals who are responsible for collecting, accounting for or depositing the taxes and who willfully fail to do so. If your business falls behind on these tax deposits, professional guidance is critical.

How can I avoid future tax problems?

For small business owners, preventing future tax issues starts with strong accounting systems, accurate bookkeeping and timely tax filings. You should also engage in proactive tax planning by reviewing financial reports regularly, setting aside funds for taxes, and making estimated income tax payments and depositing withheld taxes by the required deadlines.

If you’re facing tax resolution issues, contact us. We can help you understand your options, communicate with tax authorities and create a plan to keep your business moving full speed ahead.

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Rules and restrictions

Roth IRA contributions aren’t deductible, but they’re beneficial because you reap tax savings on the back end. (More on that later.) For 2026, the annual contribution limit is $7,500 (up from $7,000 for 2025). If you’ll be 50 or older by the end of the tax year, you can make an additional $1,100 catch-up contribution. The same limits apply to traditional IRAs, and your Roth IRA limit is reduced by any traditional IRA contributions you make for the year.

But your ability to make Roth IRA contributions is phased out if your modified adjusted gross income (MAGI) exceeds certain levels. For 2026, the phaseout ranges are:

• -$153,000 to $168,000 for single individuals and heads of households, and
• -$242,000 to $252,000 for married couples filing jointly.
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If your MAGI falls within the range, your contribution limit is reduced. If it equals or exceeds the top of the range, your ability to contribute is eliminated.

Married individuals who file separately and live apart for the full year are treated as single individuals for the income limitations. However, separate filers who live together at any time during the year are subject to a phaseout range of $0 to $10,000.

Is your income too high to qualify?

At first glance, these figures may cause you to assume you’re ineligible for Roth contributions. But take another look.

When calculating MAGI for Roth IRA eligibility purposes, self-employed individuals may be able to significantly reduce their taxable income through deductions for:

• Certain business expenses, such as rent, home office expenses and computer costs,
• Contributions to a tax-deferred retirement plan, such as a solo 401(k), SEP IRA or SIMPLE,
• Health insurance premiums, and Self-employment tax.
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These deductions, along with others, are subtracted when calculating MAGI. Therefore, a self-employed person can have relatively high gross income from his or her business while having a much lower MAGI.

The choice between contributing to a Roth IRA or a tax-deferred account isn’t an all-or-nothing proposition. Depending on your situation, you may decide to contribute to both types of accounts, subject to applicable limits. Contributing to a tax-deferred retirement plan provides immediate tax savings. And, because these contributions lower your MAGI, they may put your taxable income below the phaseout limits for Roth IRA contributions.

Additional benefits

The main upside of contributing to a Roth IRA is that qualified withdrawals won’t be taxed. This can be advantageous if you expect to be in a higher tax bracket in retirement or if tax rates increase. Moreover, withdrawals from Roth accounts aren’t counted when calculating the taxable portion of your Social Security benefits.

Another Roth IRA advantage is that you don’t have to take withdrawals at any age, meaning the account can continue to grow tax-free. With a traditional IRA (and other tax-deferred retirement accounts), at age 73, you generally must begin to take required minimum distributions or face a penalty equal to 25% of the amount you should have withdrawn but didn’t. In addition, if your Roth IRA is passed on to your heirs, it can continue to grow tax-free, and their withdrawals generally will be tax-free. However, most non-spouse beneficiaries will be required to deplete the account within 10 years of inheriting it.

Bottom line

A Roth IRA offers many potential benefits, and self-employed individuals may be more likely to qualify to make Roth IRA contributions than other taxpayers with similar gross incomes. But they aren’t right for every situation. We can help evaluate your eligibility and develop a long-term retirement strategy that aligns with your personal and financial goals. Contact us to learn more.

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Every business will eventually face leadership transitions. Whether key people retire, pursue new opportunities or become unable to do their job, your business must maintain continuity. Often, smooth transitions depend on “bench strength.” This refers to the depth of employees prepared to step into critical roles. Developing this internal talent pool is one of the most effective ways to support your succession plan and protect your organization’s stability and well-being.

Why it matters

Succession plans are only as strong as the individuals available to carry them out. Many organizations identify successors for specific positions. But what if a designated successor leaves your business or is unable to assume the role when needed? Bench strength enhances flexibility by preparing multiple employees to step into critical roles as circumstances change.

Cultivating your bench can reduce the risk of operational disruptions and help preserve institutional knowledge. Instead of launching a time-consuming external search if a vacancy arises, your business can promote qualified employees who already understand your culture, customers and strategic priorities. Internal promotions often accelerate leadership transitions while reassuring employees that advancement opportunities exist within your organization.

Deeper talent pool

To build bench strength, start by identifying promising employees and assessing potential leadership gaps. Regular performance reviews can help you evaluate employees’ skills, career aspirations and readiness for future roles. At the same time, examine upcoming organizational needs and determine which positions are essential for your business’s long-term success.

Leadership training, mentoring programs, cross-functional projects and job rotations can help employees gain experience beyond their current responsibilities. For example, a high-performing sales manager might be asked to lead a companywide initiative. A finance leader might participate in strategic planning discussions. These experiences broaden skills and prepare staffers for leadership responsibilities.

Connecting the two

Bench strength and succession planning are closely related, but they generally serve different purposes. Succession planning focuses on identifying and preparing specific individuals for key leadership positions. Bench strength, by contrast, emphasizes maintaining a broader pool of employees who can fill roles as business needs evolve.

The most resilient organizations integrate both activities. Your succession plan should ensure your business has qualified successors for critical leadership positions. Strong bench strength, meanwhile, provides the flexibility to respond to unexpected departures, organizational growth and changing market conditions. Together, these strategies help reduce talent gaps and support long-term business continuity.

Move forward confidently

Leadership transitions are inevitable, but disruption doesn’t have to be. Organizations that consistently develop internal talent are better positioned to manage change and maintain stability. When leadership transitions become necessary, a strong bench allows your business to move forward confidently, knowing capable successors are ready to step in and lead. For help building your bench and planning for succession, contact us.

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U.S. Bureau of Labor Statistics data shows that hiring has slowed in recent months. Even so, thousands of people continue to start new jobs, and every new hire represents a significant investment of time and money for organizations. With labor costs remaining a concern for many businesses, it’s more important than ever to help employees become productive members of your workforce as quickly as possible. An effective onboarding process can help you do this.

Start before day one

Successful onboarding begins before a new hire’s first day on the job. Once a candidate accepts your job offer, explain what to expect before, during and after the first day. A welcome email can provide practical details, such as where to park (for on-site employees), when to arrive and to whom to report. Whenever possible, give new hires digital access to employment forms, benefit information and introductory training materials so they can complete administrative tasks in advance and arrive better prepared.

The first day should combine orientation with a personal welcome. Designate a specific person, ideally the employee’s direct supervisor, to guide the new hire through a structured agenda. For on-site positions, ensure the workspace is fully set up with the necessary equipment before arrival. For remote employees, verify that technology and systems access are working properly. In either setting, introduce new employees to teammates and other key colleagues to help them begin building relationships immediately.

Investing in career development

Supervisors play a central role in helping new employees succeed, but experienced peer mentors can make the transition smoother. A mentor can answer day-to-day questions, explain workplace norms and help new hires navigate your organization’s culture. These informal connections often build confidence and accelerate integration into the team.

Training should begin immediately after orientation and continue beyond the first week. Avoid taking a one-size-fits-all approach or assuming employees will simply learn as they go. Instead, develop structured training programs tailored to each role, with clear learning objectives and opportunities for ongoing professional development. Employees who receive meaningful training are generally more confident and productive.

Continuous improvement

Many organizations assume their onboarding programs are effective until negative feedback reveals otherwise. Like any critical business process, onboarding should be regularly evaluated and refined.

Encourage supervisors to check in with new hires throughout the onboarding period, which typically lasts one to two weeks. These discussions should emphasize active listening and honest feedback. If your organization uses peer mentors, ask them to share observations as well. The insights you gather can help you identify weaknesses and improve your onboarding program.

Welcome, prepare and support

Employees who feel welcomed, prepared and supported from their first day on the job are more likely to become enthusiastic contributors and deliver stronger long-term performance. Contact us for help evaluating your onboarding process, measuring its return on investment and aligning it with your business objectives.

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Many small businesses don’t have enough employees to worry about the play-or-pay provisions of the Affordable Care Act (ACA). However, as your business grows, these rules can apply sooner than expected. This issue also may not be on your radar because there’s a common misconception that the repeal of ACA penalties under the Tax Cuts and Jobs Act applied to both individuals and businesses. While the individual mandate penalty was eliminated beginning in 2019, the employer shared responsibility rules are still in effect.

Don’t let ACA compliance become a blind spot for your business. Here’s what you need to know to comply with the law’s requirements.

The play-or-pay threshold

The ACA’s employer shared responsibility rules apply to applicable large employers (ALEs). In general, ALEs are businesses with 50 or more full-time employees, including full-time equivalents (FTEs). Once a business crosses that threshold, it must comply with several requirements related to employee health coverage. An employer’s size for the year is determined by the number of full-time employees plus FTEs in its prior year. The challenge is that many business owners don’t realize they’re approaching the ALE threshold until it’s too late.

First, for ACA purposes, a full-time employee generally is an individual employed on average at least 30 hours of service per week or 130 hours per month. So some employees you might consider to be part-time because they work less than 40 hours a week may be considered full-time for ACA purposes.

Second, FTEs are determined by adding all hours of service for the month for employees who weren’t full-time employees (but no more than 120 hours per employee), and dividing by 120. This can push a company into ALE status faster than expected. For example, a small company with 35 full-time employees and a significant number of part-time workers could exceed the 50-full-time-employee threshold once part-time hours are aggregated.

2 types of penalties

Under the ACA, an ALE may incur a penalty if it doesn’t offer minimum essential coverage to its full-time employees and their eligible dependents or if it offers such coverage, but that coverage isn’t affordable and/or fails to provide minimum value. The penalty is typically triggered when at least one full-time employee receives a premium tax credit for buying individual coverage through a Health Insurance Marketplace.

One of two penalty structures may apply, depending on the circumstances. First, under Section 4980H(a), a penalty may be assessed if an ALE fails to offer coverage to at least 95% of its full-time employees and their dependents. This penalty is calculated based on the total number of full-time employees, excluding the first 30. Second, under Section 4980H(b), a penalty may apply for each full-time employee who receives a premium tax credit for purchasing coverage through a Health Insurance Marketplace because the employer’s coverage is unaffordable or doesn’t provide minimum value.

Updated penalties for 2026

The adjusted penalty amounts (per the applicable number of full-time employees used to calculate the specific penalty) for failures occurring in the 2026 calendar year are:

• $3,340 (up from $2,900 in 2025) under Sec. 4980H(a), for ALEs not offering health coverage, and $5,010 (up from $4,350 in 2025) under Sec. 4980H(b), for ALEs offering coverage but that have employees who qualify for premium tax credits or cost-sharing reductions.

The IRS uses Letter 226-J to inform ALEs of their potential liability for an employer shared responsibility penalty. A response form, Form 14764, “ESRP Response”,  is included with Letter 226-J so that an ALE can inform the IRS whether it agrees with the proposed penalty. A response is generally due within 30 days. Be on the lookout for this letter so that you’re prepared to promptly review and respond if the IRS contacts you.

Considerations for growing businesses

As your workforce expands, it’s important to address the following questions:

• How close is your company to the 50-full-time-employee threshold?
• Are you properly identifying who’s a full-time employee under the ACA and calculating your number of FTEs based on part-timers’ hours?
• If your company becomes an ALE, how will it structure health coverage to satisfy affordability and minimum value requirements?
• Are your payroll and human resource systems prepared to support ACA reporting requirements, including Forms 1094-C and 1095-C?

Addressing these issues early can help ensure that expansion plans don’t come with unexpected ACA penalties.

For more information

Careful compliance with the ACA remains critical for companies that qualify as ALEs. Growing small businesses should be particularly wary as they become midsize ones. Contact us with questions about your obligations and ways to better manage the costs of health care benefits.

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Small business owners must answer an important question: Should we use the cash or accrual accounting method for federal income tax purposes? Larger entities are required to use the accrual method. But certain small businesses can elect to use the cash method. You may want to consider this option if it will help lower your taxes. However, it’s not right (or even available) for every situation.

Does your business qualify for the cash method?

Under Internal Revenue Code Section 448(c), your business may be eligible for the cash accounting method if it had average annual gross receipts that don’t exceed a specific, inflation-adjusted threshold for the prior three-year period. For 2026, businesses with average annual gross receipts up to $32 million are eligible.

Some businesses may be eligible for cash accounting even if their gross receipts are above the threshold. Examples include S corporations, partnerships without C corporation partners, farming businesses and certain personal service corporations.

In addition, the Sec. 448(c) gross receipts test serves as the eligibility standard for several other tax provisions available to qualifying small businesses, such as:

• Simplified inventory accounting,
• An exemption from the uniform capitalization rules,
• An exemption from the business interest deduction limit, and
• The option to use the completed contract method (rather than the percentage-of-completion method) for certain long-term contracts.

When determining your business’s gross receipts, you may need to include those earned by certain related entities, such as those under common control. Special rules apply to organizations that have existed for less than three years. Also, tax shelters, including syndicates, don’t qualify for small business status, even if their gross receipts are below the threshold.

How do the methods differ?

The cash method often provides significant tax advantages. Because cash-basis businesses recognize income when received and deduct expenses when paid, they have greater control over the timing of income and deductions. For example, toward the end of the year, they can defer income by delaying invoices until the following tax year or shift deductions into the current year by accelerating expense payments.

In contrast, accrual-basis businesses recognize income when earned and deduct expenses when incurred, regardless of the timing of cash receipts or payments. Therefore, they have little flexibility to time the recognition of income or expenses for tax purposes.

The cash method also provides cash flow benefits. Because income is taxed in the year received, it helps ensure that a business has the funds needed to pay its tax bill.

However, for some businesses, the accrual method may be preferable. For instance, if your accrued income tends to be lower than your accrued expenses, the accrual method may result in a lower tax liability. Other potential advantages of the accrual method include the ability to deduct year-end bonuses paid within the first 2½ months of the following tax year and the option to defer taxes on certain advance payments.

Is it time for a change?

Even if your business would benefit from switching its accounting method, you should consider the administrative costs. Changing accounting methods for tax purposes may require IRS approval. And, if your business prepares its financial statements in accordance with U.S. Generally Accepted Accounting Principles, using the cash method for tax purposes would require you to maintain two sets of books (cash-basis tax records and accrual-basis financial reporting records).

Fortunately, you don’t have to make this decision by yourself. We can help determine the right method for your situation. Contact us to learn more.

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Most business owners would like to offer their employees a 401(k) retirement savings plan with all the bells and whistles. But for small businesses with lean budgets and small staffs, offering such benefits may be out of the question. Fortunately, SEP IRAs and SIMPLE IRAs are less expensive and easier to administer. Might one of these tax-advantaged options work for your workforce?

SEP: Flexible and zero setup fees

Simplified Employee Pension (SEP) IRAs are individual retirement accounts you establish on behalf of each participant. (Self-employed individuals can also establish SEP IRAs.) Participants own their accounts, so they’re immediately 100% vested. If participants decide to leave your company, their account balances go with them. Most people roll their accounts over into a new employer’s qualified plan or traditional IRA account.

SEP IRAs don’t require annual employer contributions. That means you can choose to contribute only when cash flow allows. In addition, there are typically no setup fees for SEP IRAs. But participants generally must pay trading commissions and fund expense ratios (a fee typically set as a percentage of the fund’s average net assets).

In 2026, the SEP IRA annual contribution limit is 25% of a participant’s compensation, up to $72,000. That amount is higher than the standard 401(k) account contribution limit of $24,500 (in 2026). What’s more, employer contributions are tax-deductible. Meanwhile, participants won’t pay taxes on their SEP IRA funds until they’re withdrawn.

However, there are a few downsides to consider. Although participants own their accounts, only employers can make SEP IRA contributions. And if you contribute sparsely or sporadically, participants may see little value in the accounts. Also, unlike many other qualified plans, SEP IRAs don’t permit participants age 50 or over to make additional “catch-up” contributions.

SIMPLE: Easy and participant-friendly

Another possibility is to offer a Savings Incentive Match Plan for Employees (SIMPLE) IRA. As with a SEP IRA, your business creates a SIMPLE IRA for each participant, who’s immediately 100% vested in the account. Unlike SEP IRAs, SIMPLE IRAs allow participants to contribute to their accounts if they choose.

Other advantages of SIMPLE IRAs include:

• They’re relatively easy for employers to set up and administer.
• They don’t require your business to file IRS Form 5500, “Annual Return/Report of Employee Benefit Plan.”
• You don’t need to submit the plan to nondiscrimination testing.
• Participants pay no setup fees and enjoy tax-deferred growth on their account funds.
• Participants can contribute up to $17,000 annually in 2026.
• Participants age 50 or over can make catch-up contributions of up to $4,000 in 2026 ($5,250 for those ages 60 to 63).

Participants can contribute more to a SIMPLE IRA than to a self-owned traditional or Roth IRA. But SIMPLE IRA contribution limits are lower than limits for 401(k)s. Also, because contributions are made with pretax dollars, participants can’t deduct them. They also can’t take out plan loans. Then again, making pretax contributions does lower their taxable income. 

Perhaps most important is that employer contributions to SIMPLE IRAs are mandatory, regardless of your cash-flow situation. However, in general, you can deduct contributions as a business expense.

SIMPLE Roth IRAs are available, too. Ask your financial and employee benefits advisors whether this might be a better option for your business.

Lower-cost options

If you’ve thought you can’t afford to offer workers a retirement plan, think again. In addition to SEP and SIMPLE IRAs, there are now some lower-cost 401(k) options available as well. We can review your budget, tax situation and benefit needs and suggest how best to proceed. Contact us.

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