Right smack dab in the middle of summer might seem like the worst time to think about your taxes, but it’s actually the perfect time. Here’s what taking a pause in July allows you to do.
Get Organized
Do you have all your receipts? Are your records up to date? Did you move, get married, or change your name? If so, you’ll need to notify the IRS. In fact, you can create an individual IRS online account to look at your tax records, manage communication preferences, make payments, and more.
Take a Financial Snapshot
When was the last time you looked at your checking, savings or investments to see if you’re where you want to be? If you take the time now, you can start with January and analyze the big picture. You can see if you’re happy with the growth of your investments and discover where you can make adjustments. Taking time to do this now will pay off in the long run.
Examine Your Paycheck
Are your earnings correct? Are you withholding enough taxes? As mentioned at the top, any big life event (divorce, having a child, buying a home) can affect your taxes. If you need help, the IRS has a Tax Withholding Estimator that can help you figure out your income tax, credits, adjustments, and more. If you need to change anything, the Estimator will show you how to update your withholding with your employer or direct you to where you can submit a new W-4. Taking time to review could help you avoid an unwanted large tax bill and/or penalty come tax season.
Double-Check Deductions and Credits
Are you maximizing these? Early planning allows you to identify and leverage available deductions and credits, reducing your taxable income and potentially increasing your tax refund.
Increase Your 401K Contribution
Are you happy with your contribution? Can you increase it and still make ends meet? When you contribute more from each paycheck, you’ll decrease your taxable income for the year. Since employers usually have matching programs, it’s a great way to get free money and build your nest egg. Make sure you’re in it if your company offers this.
Convert a Traditional IRA to a Roth IRA
If you think you’ll be in a higher tax bracket when you’re in retirement, converting a traditional IRA into a Roth IRA is one way to reduce your tax payments in the long run. Here’s how it works. The money you contribute to a Roth IRA is taxed the moment you contribute, unlike a traditional IRA, which is taxed at the moment of withdrawal. When you convert to a Roth IRA, you’ll be paying taxes at your current rate instead of the (probably) higher tax rate in the future. Translated: You’ll pay taxes up front, which might be a big savings. Finally, Roth IRAs are not subject to the same Required Minimum Distributions as traditional IRAs are. That means more freedom when you want it most – when you retire.
Getting a handle on your finances by being proactive now gives you a great opportunity to take a breath, assess, and change direction if you need to. If anything, it will help prevent stress and scrambling in tax season. It’s safe to say that nobody wants that.
Right smack dab in the middle of summer might seem like the worst time to think about your taxes, but it’s actually the perfect time. Here’s what taking a pause in July allows you to do.
Get Organized
Do you have all your receipts? Are your records up to date? Did you move, get married, or change your name? If so, you’ll need to notify the IRS. In fact, you can create an individual IRS online account to look at your tax records, manage communication preferences, make payments, and more.
Take a Financial Snapshot
When was the last time you looked at your checking, savings or investments to see if you’re where you want to be? If you take the time now, you can start with January and analyze the big picture. You can see if you’re happy with the growth of your investments and discover where you can make adjustments. Taking time to do this now will pay off in the long run.
Examine Your Paycheck
Are your earnings correct? Are you withholding enough taxes? As mentioned at the top, any big life event (divorce, having a child, buying a home) can affect your taxes. If you need help, the IRS has a Tax Withholding Estimator that can help you figure out your income tax, credits, adjustments, and more. If you need to change anything, the Estimator will show you how to update your withholding with your employer or direct you to where you can submit a new W-4. Taking time to review could help you avoid an unwanted large tax bill and/or penalty come tax season.
Double-Check Deductions and Credits
Are you maximizing these? Early planning allows you to identify and leverage available deductions and credits, reducing your taxable income and potentially increasing your tax refund.
Increase Your 401K Contribution
Are you happy with your contribution? Can you increase it and still make ends meet? When you contribute more from each paycheck, you’ll decrease your taxable income for the year. Since employers usually have matching programs, it’s a great way to get free money and build your nest egg. Make sure you’re in it if your company offers this.
Convert a Traditional IRA to a Roth IRA
If you think you’ll be in a higher tax bracket when you’re in retirement, converting a traditional IRA into a Roth IRA is one way to reduce your tax payments in the long run. Here’s how it works. The money you contribute to a Roth IRA is taxed the moment you contribute, unlike a traditional IRA, which is taxed at the moment of withdrawal. When you convert to a Roth IRA, you’ll be paying taxes at your current rate instead of the (probably) higher tax rate in the future. Translated: You’ll pay taxes up front, which might be a big savings. Finally, Roth IRAs are not subject to the same Required Minimum Distributions as traditional IRAs are. That means more freedom when you want it most – when you retire.
Getting a handle on your finances by being proactive now gives you a great opportunity to take a breath, assess, and change direction if you need to. If anything, it will help prevent stress and scrambling in tax season. It’s safe to say that nobody wants that.
These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact a professional regarding the topics in these articles. The images linked to these articles are protected by copyright and should not be copied for any reason.
The One Big Beautiful Bill Act (OBBBA) passed the House on July 3 and was signed into law by President Trump. This comprehensive legislation makes several expiring tax cuts from the 2017 Tax Cuts and Jobs Act permanent while at the same time introducing several temporary provisions through 2028. In this two-part series, we will look at what the OBBBA means for taxpayers. In Part 1, we examine the impact on individual taxpayers; Part 2 will cover the Act’s impact on businesses, trusts, and estates.
Making TCJA Provisions Permanent
The bill primarily focuses on extending individual tax benefits sunsetting after 2025 since business tax benefits from the 2017 TCJA were already made permanent.
Income Tax Rates and Brackets: The current seven-bracket system is becoming permanent, with the highest rate staying at 37 percent.
Standard Deduction: The doubled standard deduction amounts are now permanent. For tax year 2025, this means individuals get $15,000, married couples filing jointly receive $30,000, and heads of household get $22,500.
Child Tax Credit: The credit increases from $2,000 to $2,200 per child, with future inflation adjustments. The credit remains subject to phase-outs beginning at $400,000 for joint filers and $200,000 for other taxpayers.
Alternative Minimum Tax (AMT): The TCJA increases to AMT exemptions are made permanent with inflation adjustments. For 2025, single filers get an $88,100 exemption that phases out at $626,350, while married couples filing jointly receive $137,000 that phases out at $1,252,700.
Changes to Deductions
State and Local Tax (SALT) Deductions: The current $10,000 cap on state and local tax deductions is raised temporarily to $40,000 with 1 percent annual increases through 2029. After that, it reverts to $10,000 in 2030. High earners with modified adjusted gross income in excess of $500,000 face a phase-down of this benefit.
Charitable Deductions: Starting in 2026, taxpayers who don’t itemize can claim an above-the-line deduction for charitable contributions up to $1,000 ($2,000 for married filing jointly). Those who itemize face new limits on deductions with modified carryover rules. The 60 percent contribution limit for cash gifts to qualified charities becomes permanent.
Mortgage Interest: The lower mortgage interest deduction cap of $750,000 (down from the previous $1 million) is made permanent. Interest on home equity debt unrelated to home improvements remains non-deductible.
What’s Eliminated: Several deductions are permanently eliminated, including personal exemptions (which remain at zero), miscellaneous itemized deductions subject to the 2 percent floor (unreimbursed employee expenses, tax preparation fees), and casualty and theft loss deductions except for federal disasters.
New Temporary Provisions (2025-2028)
Senior Deduction: Taxpayers over 65 can claim an additional $6,000 deduction, available whether they itemize or take the standard deduction. This phases out for joint filers earning $150,000 to $350,000 and other taxpayers earning $75,000 to $175,000. According to the White House, this provision will increase the percentage of seniors not paying tax on Social Security benefits from 64 percent to 88 percent.
No Tax on Tips: Workers in traditionally tipped industries who don’t itemize can deduct up to $25,000 of reported tips. This federal income tax deduction doesn’t affect state taxes or payroll taxes for Social Security and Medicare. High earners making over $160,000 are excluded, and the deduction applies to both cash and credit card tips.
No Tax on Overtime: A deduction for qualified overtime pay up to $12,500 ($25,000 for married filing jointly) is available for non-itemizers. This phases out for taxpayers with income over $150,000 ($300,000 for married filing jointly) and disappears entirely at $275,000 for single filers.
Auto Loan Interest: Interest on loans for U.S.-assembled cars becomes deductible up to $10,000, but only for vehicles assembled domestically. The deduction phases out for individuals earning over $100,000 (single) or $200,000 (married filing jointly). Campers and RVs are excluded.
Trump Accounts: New tax-advantaged accounts benefit children under 8. Parents can contribute up to $5,000 annually (adjusted for inflation), with funds locked until the child turns 18. Withdrawals for college, first-time home purchases, or starting a business are taxed at favorable capital gains rates. The government will deposit $1,000 for qualifying U.S. citizen children born between Dec. 31, 2024, and Jan. 1, 2029, with no income limits.
Additional Provisions
529 Education Plans: Tax-free distributions can now cover K-12 expenses at private and religious schools, plus additional qualified higher education expenses, including “postsecondary credentialing expenses.”
Pease Limitations: The previous caps on itemized deductions for high earners are permanently eliminated, replaced by a 35-cent-per-dollar limit on itemized deductions.
Gambling Losses: The ability to deduct gambling losses and related expenses is made permanent, but losses are limited to 90 percent of gains from the taxable year.
Looking Ahead and Conclusion
Tax professionals will be busy helping clients navigate these changes and identify new planning opportunities. The legislation creates a complex mix of permanent and temporary provisions that will require careful tax planning, particularly as the temporary provisions expire after 2028. Taxpayers should consult with tax professionals to understand how these changes affect their specific situations and develop appropriate strategies.
One Big Beautiful Bill Act: Part 1 – What the New Tax Law Means for You
July 1, 2025 · Blog, Guest Post of the Month
⏱ 4 min read
Part 1
The One Big Beautiful Bill Act (OBBBA) passed the House on July 3 and was signed into law by President Trump. This comprehensive legislation makes several expiring tax cuts from the 2017 Tax Cuts and Jobs Act permanent while at the same time introducing several temporary provisions through 2028. In this two-part series, we will look at what the OBBBA means for taxpayers. In Part 1, we examine the impact on individual taxpayers; Part 2 will cover the Act’s impact on businesses, trusts, and estates.
Making TCJA Provisions Permanent
The bill primarily focuses on extending individual tax benefits sunsetting after 2025 since business tax benefits from the 2017 TCJA were already made permanent.
Income Tax Rates and Brackets: The current seven-bracket system is becoming permanent, with the highest rate staying at 37 percent.
Standard Deduction: The doubled standard deduction amounts are now permanent. For tax year 2025, this means individuals get $15,000, married couples filing jointly receive $30,000, and heads of household get $22,500.
Child Tax Credit: The credit increases from $2,000 to $2,200 per child, with future inflation adjustments. The credit remains subject to phase-outs beginning at $400,000 for joint filers and $200,000 for other taxpayers.
Alternative Minimum Tax (AMT): The TCJA increases to AMT exemptions are made permanent with inflation adjustments. For 2025, single filers get an $88,100 exemption that phases out at $626,350, while married couples filing jointly receive $137,000 that phases out at $1,252,700.
Changes to Deductions
State and Local Tax (SALT) Deductions: The current $10,000 cap on state and local tax deductions is raised temporarily to $40,000 with 1 percent annual increases through 2029. After that, it reverts to $10,000 in 2030. High earners with modified adjusted gross income in excess of $500,000 face a phase-down of this benefit.
Charitable Deductions: Starting in 2026, taxpayers who don’t itemize can claim an above-the-line deduction for charitable contributions up to $1,000 ($2,000 for married filing jointly). Those who itemize face new limits on deductions with modified carryover rules. The 60 percent contribution limit for cash gifts to qualified charities becomes permanent.
Mortgage Interest: The lower mortgage interest deduction cap of $750,000 (down from the previous $1 million) is made permanent. Interest on home equity debt unrelated to home improvements remains non-deductible.
What’s Eliminated: Several deductions are permanently eliminated, including personal exemptions (which remain at zero), miscellaneous itemized deductions subject to the 2 percent floor (unreimbursed employee expenses, tax preparation fees), and casualty and theft loss deductions except for federal disasters.
New Temporary Provisions (2025-2028)
Senior Deduction: Taxpayers over 65 can claim an additional $6,000 deduction, available whether they itemize or take the standard deduction. This phases out for joint filers earning $150,000 to $350,000 and other taxpayers earning $75,000 to $175,000. According to the White House, this provision will increase the percentage of seniors not paying tax on Social Security benefits from 64 percent to 88 percent.
No Tax on Tips: Workers in traditionally tipped industries who don’t itemize can deduct up to $25,000 of reported tips. This federal income tax deduction doesn’t affect state taxes or payroll taxes for Social Security and Medicare. High earners making over $160,000 are excluded, and the deduction applies to both cash and credit card tips.
No Tax on Overtime: A deduction for qualified overtime pay up to $12,500 ($25,000 for married filing jointly) is available for non-itemizers. This phases out for taxpayers with income over $150,000 ($300,000 for married filing jointly) and disappears entirely at $275,000 for single filers.
Auto Loan Interest: Interest on loans for U.S.-assembled cars becomes deductible up to $10,000, but only for vehicles assembled domestically. The deduction phases out for individuals earning over $100,000 (single) or $200,000 (married filing jointly). Campers and RVs are excluded.
Trump Accounts: New tax-advantaged accounts benefit children under 8. Parents can contribute up to $5,000 annually (adjusted for inflation), with funds locked until the child turns 18. Withdrawals for college, first-time home purchases, or starting a business are taxed at favorable capital gains rates. The government will deposit $1,000 for qualifying U.S. citizen children born between Dec. 31, 2024, and Jan. 1, 2029, with no income limits.
Additional Provisions
529 Education Plans: Tax-free distributions can now cover K-12 expenses at private and religious schools, plus additional qualified higher education expenses, including “postsecondary credentialing expenses.”
Pease Limitations: The previous caps on itemized deductions for high earners are permanently eliminated, replaced by a 35-cent-per-dollar limit on itemized deductions.
Gambling Losses: The ability to deduct gambling losses and related expenses is made permanent, but losses are limited to 90 percent of gains from the taxable year.
Looking Ahead and Conclusion
Tax professionals will be busy helping clients navigate these changes and identify new planning opportunities. The legislation creates a complex mix of permanent and temporary provisions that will require careful tax planning, particularly as the temporary provisions expire after 2028. Taxpayers should consult with tax professionals to understand how these changes affect their specific situations and develop appropriate strategies.
Disclaimer
These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact a professional regarding the topics in these articles. The images linked to these articles are protected by copyright and should not be copied for any reason.
In this second part of our two-part series on the One Big Beautiful Bill Act (OBBBA), we examine the legislation’s impact on businesses, trusts, and estates. In addition, we will look at its overall economic impact.
Estate Tax Changes
The federal estate tax exemption receives a significant boost under OBBBA. Previously set to go back to pre-TCJA levels at the end of 2025, the exemption is now permanent. For 2026, the exclusion is $15 million per person, adjusted for inflation annually. This represents a substantial increase from the 2025 exemption of $13.99 million per person.
Business Tax Benefits
OBBBA extends several key business tax provisions that were set to expire, ensuring continued tax relief for various business structures.
Pass-Through Entities benefit significantly from the permanent extension of the Section 199A deduction. This 20 percent deduction on business income that applies to LLCs, S corporations, and sole proprietorships was scheduled to expire at the end of 2025. The House’s proposed increase to 23 percent didn’t make the final cut.
Depreciationrules become more favorable permanently. The 100 percent bonus depreciation provision, which was phasing out, is now permanent. Additionally, the Section 179 expensing limit jumps to $2.5 million and begins to get phased out at $4 million.
Research and Development expenses can now be fully expensed for domestic R&D activities, replacing the previous requirement to amortize costs.
Employee Retention Credit Reforms
The pandemic-era Employee Retention Credit faces significant restrictions. Unpaid claims submitted after Jan. 31, 2024, are prohibited from receiving refunds. The legislation also introduces penalties for ERC mill promoters and extends the statute of limitations to six years.
Conclusion
This legislation represents a significant commitment to extending business-friendly tax policies while substantially increasing the federal debt burden. For businesses and high net-worth individuals, OBBBA provides long-term tax planning certainty by making temporary provisions permanent.
One Big Beautiful Bill Act: Part 2 – What the New Tax Law Means for Your Business
July 1, 2025 · Blog, Guest Article of the Month
⏱ 2 min read
Part 2
In this second part of our two-part series on the One Big Beautiful Bill Act (OBBBA), we examine the legislation’s impact on businesses, trusts, and estates. In addition, we will look at its overall economic impact.
Estate Tax Changes
The federal estate tax exemption receives a significant boost under OBBBA. Previously set to go back to pre-TCJA levels at the end of 2025, the exemption is now permanent. For 2026, the exclusion is $15 million per person, adjusted for inflation annually. This represents a substantial increase from the 2025 exemption of $13.99 million per person.
Business Tax Benefits
OBBBA extends several key business tax provisions that were set to expire, ensuring continued tax relief for various business structures.
Pass-Through Entities benefit significantly from the permanent extension of the Section 199A deduction. This 20 percent deduction on business income that applies to LLCs, S corporations, and sole proprietorships was scheduled to expire at the end of 2025. The House’s proposed increase to 23 percent didn’t make the final cut.
Depreciationrules become more favorable permanently. The 100 percent bonus depreciation provision, which was phasing out, is now permanent. Additionally, the Section 179 expensing limit jumps to $2.5 million and begins to get phased out at $4 million.
Research and Development expenses can now be fully expensed for domestic R&D activities, replacing the previous requirement to amortize costs.
Employee Retention Credit Reforms
The pandemic-era Employee Retention Credit faces significant restrictions. Unpaid claims submitted after Jan. 31, 2024, are prohibited from receiving refunds. The legislation also introduces penalties for ERC mill promoters and extends the statute of limitations to six years.
Conclusion
This legislation represents a significant commitment to extending business-friendly tax policies while substantially increasing the federal debt burden. For businesses and high net-worth individuals, OBBBA provides long-term tax planning certainty by making temporary provisions permanent.
Disclaimer
These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact a professional regarding the topics in these articles. The images linked to these articles are protected by copyright and should not be copied for any reason.
If you are in the market for a new job or are interested in extracting more value from your current one, consider some of the newer trends in company benefits. The following is a primer on what might be available to help supplement your income with your current employer or benefits to look for when considering a position with a new company.
The standard employee benefit package usually includes insurance (healthcare, dental, disability, life), retirement plans, and paid time off. In addition, federally mandated employee benefits include unemployment insurance, workers’ compensation, and family and medical leave, plus employers are required to deduct and submit Federal Insurance Contributions Act (FICA) taxes to fund the Social Security and Medicare programs.
However, some companies also offer an array of free and/or voluntary benefits (which you can purchase via payroll deductions). Many employers offer discounted “group rates” on items people normally buy anyway, or perhaps wouldn’t otherwise consider due to the extra expense. It’s smart to review the full breadth of benefit options during open enrollment to see what types of benefits you could use and how they can save you money.
Employee Assistance Program (EAP)
Most EAPs offer a plethora of benefits you can and should use right now, and the plan is generally paid for by the employer. These programs connect employees to specialists who offer free or discounted services. For example:
Legal advice and services (making it a good time to get your will and estate plan in order, or seek consultation if you’re considering a divorce or suing your neighbor)
Financial advisors who specialize in areas such as investment management, taxes, budget and debt management, bankruptcy, and other financial concerns
Identity theft insurance coverage and services
Mental health counselors and therapists
Dependent caregiving resources (for children, disabled, or elderly family members)
Employee discounts on common household goods and services, such as electronics, cell phone/internet services, office supplies, restaurants, gyms, yoga studios, salons, entertainment venues, access to exclusive deals and discounts on products, service,s and experiences like theme parks, hotel,s and entertainment
Voluntary Benefits
Even if your company does not offer an EAP, it may offer the opportunity to buy some of those benefits at lower group-rated prices. For example:
Vision plans
Dental plans
Supplementary life insurance
Supplementary disability insurance
Pet insurance or a discount plan
Travel insurance
Auto insurance
Homeowner’s insurance
Identity Theft insurance
Critical Illness insurance
Hospital Indemnity Insurance
Long Term Care insurance
Financial Wellness
Given recent high inflation and market volatility, many workers are understandably worried about making ends meet and saving for the future. That is why many employers have introduced multifaceted financial wellness programs. Unfortunately, some employees are reluctant to use these benefits because they don’t want their employer to know anything about their financial situation. However, these benefits are outsourced to third-party professionals who are emboldened by confidentiality laws that do not allow them to release personal information to your employer.
Some common financial wellness benefits include free access to counselors on topics like creating and following a budget, paying down and avoiding debt, saving for short and long-term goals, and making investment decisions. Some programs offer educational opportunities, such as college and retirement planning seminars. There are also some newer, non-traditional benefits designed to help cash-strapped workers make ends meet, like diverting (and sometimes matching) paycheck income to an emergency fund, and enabling faster access to pay through an on-demand system in which employees can request pay for hours worked in lieu of waiting until the end of the pay period.
Housing Assistance
Considering the huge jump in home prices over the last few years, some employers have implemented benefits to help fund a down payment, facilitate access to low-interest rate mortgage loans, and offer group rates for home warranty and homeowner insurance policies.
Family Planning Benefits
If you’re considering using fertility programs to help you have children, be aware that this can be very expensive. That’s why many larger employers offer monetary assistance to help offset some of the expense of intrauterine insemination (IUI), in vitro fertilization (IVF), gestational surrogacy, and egg freezing.
Portability
While company benefits can be valuable while you work for that employer, be wary of paying into policies that end when you leave your job. Some volunteer benefits are portable, meaning you can keep them when you leave. However, you may lose your employer discount rate and wind up paying a higher premium for the same policy.
Bear in mind that one of the key questions to ask before enrolling in new benefits is whether the policy is transferable should you leave the company. Be sure to read the policy information and talk to HR or the policy’s insurance broker to understand the portability and group rate conditions. If it’s a benefit you can use right away (e.g., gym membership, even pet insurance), it might be worth buying. But if it’s a benefit you may not use for years down the road, AND you lose the benefit (or group premium) when you leave, you may be better off buying a similar plan on the individual market.
Job Shopping: What’s New in Company Benefits
July 1, 2025 · Blog, Financial Planning
⏱ 5 min read
If you are in the market for a new job or are interested in extracting more value from your current one, consider some of the newer trends in company benefits. The following is a primer on what might be available to help supplement your income with your current employer or benefits to look for when considering a position with a new company.
The standard employee benefit package usually includes insurance (healthcare, dental, disability, life), retirement plans, and paid time off. In addition, federally mandated employee benefits include unemployment insurance, workers’ compensation, and family and medical leave, plus employers are required to deduct and submit Federal Insurance Contributions Act (FICA) taxes to fund the Social Security and Medicare programs.
However, some companies also offer an array of free and/or voluntary benefits (which you can purchase via payroll deductions). Many employers offer discounted “group rates” on items people normally buy anyway, or perhaps wouldn’t otherwise consider due to the extra expense. It’s smart to review the full breadth of benefit options during open enrollment to see what types of benefits you could use and how they can save you money.
Employee Assistance Program (EAP)
Most EAPs offer a plethora of benefits you can and should use right now, and the plan is generally paid for by the employer. These programs connect employees to specialists who offer free or discounted services. For example:
Legal advice and services (making it a good time to get your will and estate plan in order, or seek consultation if you’re considering a divorce or suing your neighbor)
Financial advisors who specialize in areas such as investment management, taxes, budget and debt management, bankruptcy, and other financial concerns
Identity theft insurance coverage and services
Mental health counselors and therapists
Dependent caregiving resources (for children, disabled, or elderly family members)
Employee discounts on common household goods and services, such as electronics, cell phone/internet services, office supplies, restaurants, gyms, yoga studios, salons, entertainment venues, access to exclusive deals and discounts on products, service,s and experiences like theme parks, hotel,s and entertainment
Voluntary Benefits
Even if your company does not offer an EAP, it may offer the opportunity to buy some of those benefits at lower group-rated prices. For example:
Vision plans
Dental plans
Supplementary life insurance
Supplementary disability insurance
Pet insurance or a discount plan
Travel insurance
Auto insurance
Homeowner’s insurance
Identity Theft insurance
Critical Illness insurance
Hospital Indemnity Insurance
Long Term Care insurance
Financial Wellness
Given recent high inflation and market volatility, many workers are understandably worried about making ends meet and saving for the future. That is why many employers have introduced multifaceted financial wellness programs. Unfortunately, some employees are reluctant to use these benefits because they don’t want their employer to know anything about their financial situation. However, these benefits are outsourced to third-party professionals who are emboldened by confidentiality laws that do not allow them to release personal information to your employer.
Some common financial wellness benefits include free access to counselors on topics like creating and following a budget, paying down and avoiding debt, saving for short and long-term goals, and making investment decisions. Some programs offer educational opportunities, such as college and retirement planning seminars. There are also some newer, non-traditional benefits designed to help cash-strapped workers make ends meet, like diverting (and sometimes matching) paycheck income to an emergency fund, and enabling faster access to pay through an on-demand system in which employees can request pay for hours worked in lieu of waiting until the end of the pay period.
Housing Assistance
Considering the huge jump in home prices over the last few years, some employers have implemented benefits to help fund a down payment, facilitate access to low-interest rate mortgage loans, and offer group rates for home warranty and homeowner insurance policies.
Family Planning Benefits
If you’re considering using fertility programs to help you have children, be aware that this can be very expensive. That’s why many larger employers offer monetary assistance to help offset some of the expense of intrauterine insemination (IUI), in vitro fertilization (IVF), gestational surrogacy, and egg freezing.
Portability
While company benefits can be valuable while you work for that employer, be wary of paying into policies that end when you leave your job. Some volunteer benefits are portable, meaning you can keep them when you leave. However, you may lose your employer discount rate and wind up paying a higher premium for the same policy.
Bear in mind that one of the key questions to ask before enrolling in new benefits is whether the policy is transferable should you leave the company. Be sure to read the policy information and talk to HR or the policy’s insurance broker to understand the portability and group rate conditions. If it’s a benefit you can use right away (e.g., gym membership, even pet insurance), it might be worth buying. But if it’s a benefit you may not use for years down the road, AND you lose the benefit (or group premium) when you leave, you may be better off buying a similar plan on the individual market.
Disclaimer
These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact a professional regarding the topics in these articles. The images linked to these articles are protected by copyright and should not be copied for any reason.
Running a small business often means working with a mix of people: some full-time staff, part-time helpers, seasonal workers or project-based contractors. While this flexibility helps manage costs and workload, it creates a crucial decision point that many business owners underestimate: properly classifying each worker.
The stakes couldn’t be higher. Companies like FedEx have paid nearly half a billion dollars for getting this wrong, and even tech giants like Microsoft and Lyft have faced costly legal battles over worker misclassification.
Why Classification Matters More Than You Think
The difference between an employee and an independent contractor goes far beyond semantics; it fundamentally changes your legal and financial obligations.
When someone is your employee, you must:
Withhold income taxes, Social Security, and Medicare taxes
Pay the employer portion of Social Security and Medicare taxes
Potentially provide benefits like health insurance and retirement plans
Consider offering stock options or other incentive programs
Pay severance or unemployment compensation when appropriate
Comply with wage and overtime requirements
When someone is an independent contractor, you:
Simply pay them for their work
Issue a 1099-NEC form at year-end
Have no tax withholding obligations
Owe no employment benefits
Face no severance obligations
The Control Test: Your North Star for Classification
The Internal Revenue Service uses one primary principle: control. The more control you exercise over how, when, and where work gets done, the more likely that person is your employee.
Think of it this way: if you’re micromanaging the work process, you’re probably dealing with an employee. If you’re only concerned with the end result, you’re likely working with a contractor. The 20 factors identified by the IRS in Revenue Ruling 87-41 can be found in full here.
The IRS Three-Factor Framework
Rather than getting lost in complicated checklists, focus on these three core areas:
1. Behavioral Control – Do you dictate not just what work gets done, but how it’s performed? Employees typically receive training, follow company procedures, and work within established systems. Contractors bring their own methods and expertise.
2. Financial Control – Who controls the business aspects of the work? Independent contractors typically:
Invest in their own tools and equipment
Handle their own business expenses
Have multiple clients or income sources
Set their own rates and payment terms
3. Relationship Type – What does your working relationship look like? Employee relationships typically feature:
Written employment contracts
Ongoing work arrangements
Benefits packages
Work that’s central to your business operations
Beyond Taxes: The Broader Impact
Worker classification affects more than your tax bill. The Department of Labor’s 2024 updates to the Fair Labor Standards Act mean misclassification can trigger wage and overtime violations. State labor departments are also cracking down, with some states presuming workers are employees unless proven otherwise.
When Things Go Wrong: Your Options
If you realize you’ve made a mistake, don’t panic. You have several paths forward:
Get an Official Determination: File Form SS-8 with the IRS for an official ruling on a worker’s status. While it takes at least six months, you’ll have certainty going forward.
Claim Safe Harbor Protection: If you had a reasonable basis for your classification and treated similar workers consistently, you may qualify for tax relief under Section 530.
Use the Voluntary Settlement Program: The IRS Voluntary Classification Settlement Program lets you reclassify workers prospectively while receiving some tax relief.
The Bottom Line
Your worker classification isn’t just an administrative detail – it’s a fundamental business decision with major financial implications. When in doubt, err on the side of caution or consult with employment law and tax professionals.
The cost of getting expert advice upfront is minimal compared to the potential cost of getting it wrong.
Navigating Worker Classification: The Critical Difference Between Employees and Independent Contractors
July 1, 2025 · Blog, Tax and Financial News
⏱ 4 min read
Running a small business often means working with a mix of people: some full-time staff, part-time helpers, seasonal workers or project-based contractors. While this flexibility helps manage costs and workload, it creates a crucial decision point that many business owners underestimate: properly classifying each worker.
The stakes couldn’t be higher. Companies like FedEx have paid nearly half a billion dollars for getting this wrong, and even tech giants like Microsoft and Lyft have faced costly legal battles over worker misclassification.
Why Classification Matters More Than You Think
The difference between an employee and an independent contractor goes far beyond semantics; it fundamentally changes your legal and financial obligations.
When someone is your employee, you must:
Withhold income taxes, Social Security, and Medicare taxes
Pay the employer portion of Social Security and Medicare taxes
Potentially provide benefits like health insurance and retirement plans
Consider offering stock options or other incentive programs
Pay severance or unemployment compensation when appropriate
Comply with wage and overtime requirements
When someone is an independent contractor, you:
Simply pay them for their work
Issue a 1099-NEC form at year-end
Have no tax withholding obligations
Owe no employment benefits
Face no severance obligations
The Control Test: Your North Star for Classification
The Internal Revenue Service uses one primary principle: control. The more control you exercise over how, when, and where work gets done, the more likely that person is your employee.
Think of it this way: if you’re micromanaging the work process, you’re probably dealing with an employee. If you’re only concerned with the end result, you’re likely working with a contractor. The 20 factors identified by the IRS in Revenue Ruling 87-41 can be found in full here.
The IRS Three-Factor Framework
Rather than getting lost in complicated checklists, focus on these three core areas:
1. Behavioral Control – Do you dictate not just what work gets done, but how it’s performed? Employees typically receive training, follow company procedures, and work within established systems. Contractors bring their own methods and expertise.
2. Financial Control – Who controls the business aspects of the work? Independent contractors typically:
Invest in their own tools and equipment
Handle their own business expenses
Have multiple clients or income sources
Set their own rates and payment terms
3. Relationship Type – What does your working relationship look like? Employee relationships typically feature:
Written employment contracts
Ongoing work arrangements
Benefits packages
Work that’s central to your business operations
Beyond Taxes: The Broader Impact
Worker classification affects more than your tax bill. The Department of Labor’s 2024 updates to the Fair Labor Standards Act mean misclassification can trigger wage and overtime violations. State labor departments are also cracking down, with some states presuming workers are employees unless proven otherwise.
When Things Go Wrong: Your Options
If you realize you’ve made a mistake, don’t panic. You have several paths forward:
Get an Official Determination: File Form SS-8 with the IRS for an official ruling on a worker’s status. While it takes at least six months, you’ll have certainty going forward.
Claim Safe Harbor Protection: If you had a reasonable basis for your classification and treated similar workers consistently, you may qualify for tax relief under Section 530.
Use the Voluntary Settlement Program: The IRS Voluntary Classification Settlement Program lets you reclassify workers prospectively while receiving some tax relief.
The Bottom Line
Your worker classification isn’t just an administrative detail – it’s a fundamental business decision with major financial implications. When in doubt, err on the side of caution or consult with employment law and tax professionals.
The cost of getting expert advice upfront is minimal compared to the potential cost of getting it wrong.
Disclaimer
These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact a professional regarding the topics in these articles. The images linked to these articles are protected by copyright and should not be copied for any reason.
Right smack dab in the middle of summer might seem like the worst time to think about your taxes, but it’s actually the perfect time. Here’s what taking a pause in July allows you to do.
The One Big Beautiful Bill Act (OBBBA) passed the House on July 3 and was signed into law by President Trump. This comprehensive legislation makes several expiring tax cuts from the 2017 Tax Cuts and Jobs Act permanent while at the same time introducing several temporary provisions through 2028. In this two-part series, we will look at what the OBBBA means for taxpayers. In Part 1, we examine the impact on individual taxpayers; Part 2 will cover the Act’s impact on businesses, trusts, and estates.
In this second part of our two-part series on the One Big Beautiful Bill Act (OBBBA), we examine the legislation’s impact on businesses, trusts, and estates. In addition, we will look at its overall economic impact.
If you are in the market for a new job or are interested in extracting more value from your current one, consider some of the newer trends in company benefits. The following is a primer on what might be available to help supplement your income with your current employer or benefits to look for when considering a position with a new company.
Running a small business often means working with a mix of people: some full-time staff, part-time helpers, seasonal workers or project-based contractors. While this flexibility helps manage costs and workload, it creates a crucial decision point that many business owners underestimate: properly classifying each worker.