Category: Tax

What to do if you receive a notice from the IRS

Posted on by don@mbn.io

July 24, 2025 | by Atherton & Associates, LLP

Opening your mailbox to find a letter from the IRS can be nerve-wracking. But before you assume the worst, know that many notices are routine and often resolved without much trouble.

The key is knowing what you’re looking at and how to respond. Understanding what IRS notices mean and how to act protects your rights, minimizes penalties, and often leads to faster, less stressful resolutions.

Common reasons you might hear from the IRS

IRS notices come in many forms, each tied to a specific issue. Here are some of the most common:

  • Balance Due Notices (e.g., CP14 Notice): These indicate that, according to IRS records, you owe additional taxes, penalties, or interest.
  • Math Error Notices (e.g., CP11 Notice): If the IRS finds a miscalculation or discrepancy on your return, they may adjust it and send a notice showing the correction.
  • Request for Additional Information: Sometimes the IRS needs more documentation to verify items on your return, such as income, deductions, or credits.
  • Notification of Changes (e.g., CP2000 Under-Reporter Notice): The IRS may correct or amend your return due to errors or processing updates. These notices detail what was changed and why.
  • Audit Notifications: Less common, but more serious. Audit-related letters range from simple correspondence exams (handled entirely by mail) to in-person field audits.

First steps you should take

The moment you receive a notice from the IRS, your first priority should be to stay calm and approach the letter methodically. Start by reading the notice in full, not just the headline or balance due. Each IRS notice contains a specific code, usually in the upper right corner, that identifies its purpose (e.g., CP14 for a balance due, CP11 for a math error). You can use this code to look up additional information on IRS.gov, which can help you better understand the issue at hand.

Next, it’s critical to verify that the notice is legitimate. IRS-related scams are, unfortunately, common, especially during tax season. A genuine IRS notice will arrive by U.S. mail, not email or phone, and will never ask for payment via wire transfer, prepaid debit card, or gift card. The IRS may contact you by phone after sending a letter, but first contact is always by U.S. mail. If anything about the letter seems suspicious – incorrect formatting, threatening language, or unusual payment instructions – contact the IRS directly using the phone number listed on their official website to confirm whether the notice is real. Genuine IRS notices will not threaten arrest or immediate legal action without giving you a chance to respond first.

Finally, pay close attention to any deadlines stated in the letter. Every IRS notice gives a specific response date – commonly 21, 30, or 60 days, depending on the notice type. Missing that date can add penalties or limit your appeal rights, so mark it immediately. Whether the IRS is requesting payment, documentation, or clarification, missing this deadline can lead to additional interest, penalties, or even an assumption that you agree with the IRS’s findings. Acting promptly is essential, even if that action is simply reaching out to a tax professional for guidance on next steps.

By taking these early steps carefully and confidently, you set the tone for a smoother resolution and reduce the risk of unnecessary complications.

Common mistakes to avoid

Once you receive an IRS notice, how you respond can make a difference. One of the most damaging missteps is ignoring the notice altogether. It’s tempting to set it aside, especially if the content is confusing or stressful, but doing so can lead to serious consequences. Interest and penalties continue to accrue on unpaid balances, and inaction may prompt the IRS to initiate further enforcement actions, including liens or levies.

Another common mistake is assuming the IRS is always right and sending payment without reviewing the details. Notices may reflect errors in IRS data entry, misapplied payments, or misunderstandings about reported income or deductions. Blindly paying a balance due (especially a large one) without cross-checking against your filed return or supporting documentation can cost you more than necessary.

Equally problematic is responding out of frustration. Emotional reactions often lead to poorly written replies, missed opportunities to clarify key facts, or even unintentional admissions of fault. The IRS is far more receptive to well-organized, factual communication than to reactive or confrontational messaging. If you’re feeling overwhelmed, that’s a sign to pause – and possibly reach out to a tax professional who can help you craft a thoughtful response.

How professional accounting firms can help

IRS language can be dense or ambiguous, leaving many taxpayers uncertain about the meaning of a notice. CPAs can help interpret the notice you’ve received and clarify whether it is informational, requests action, or alleges an error. This helps clients avoid overreacting to routine correspondence or underestimating something more serious.

Beyond interpretation, accounting professionals can help prepare and organize the necessary documentation. Whether the IRS is requesting proof of deductions, additional income records, or clarification on a credit claimed, responding accurately and thoroughly is critical. A professional can ensure all supporting materials are complete, properly formatted, and submitted on time, reducing the likelihood of further inquiries or delays.

Accounting professionals can negotiate with the IRS on your behalf, respond to administrative appeals, and handle audits. They may request penalty abatements, set up installment payment plans, or formally dispute inaccuracies through a written response or administrative appeal. However, if legal action arises in U.S. Tax Court, representation requires a licensed attorney or a properly credentialed tax professional who is admitted to practice before the Court.

If the situation escalates into an audit, a firm that’s already familiar with your financial profile and the history of the issue is well-positioned to mount a credible and organized defense, protecting both your interests and your rights throughout the process.

When you should definitely call a professional

While some IRS notices are straightforward and can be resolved independently, there are certain situations where professional help is strongly advised.

If the dollar amounts involved are significant, particularly if the IRS alleges you owe thousands of dollars or more, an accountant can help assess the accuracy of the claim and explore options for minimizing penalties or interest. Likewise, if the language of the notice is confusing or if you simply don’t understand what the IRS is asking, it’s worth consulting a professional who can provide clarity and direction.

It’s also critical to seek expert support if you disagree with the IRS’s findings. Whether it’s a proposed adjustment to your income, a disallowed deduction, or a claim that you failed to file, a qualified accountant can evaluate the underlying issue and prepare a formal dispute. Attempting to handle disputes alone can inadvertently weaken your position, especially if deadlines are missed or if the supporting documentation is insufficient.

And if you receive notice of an impending audit, lien, or levy, professional representation is highly advisable due to the significant financial and legal consequences involved. In short, if there’s any doubt about how to proceed, don’t go it alone. The cost of expert advice is often far less than the potential consequences of a misstep.

Don’t delay, get clarity

Receiving an IRS notice isn’t the end of the world, but ignoring it could be. Most issues can be resolved efficiently with the right information and a timely response.

If you get a letter from the IRS, don’t wait. Contact our office right away. Quick action and expert guidance can make all the difference.

Let’s Talk!

Call us at (209) 577-4800 or fill out the form below and we’ll contact you to discuss your specific situation.

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Posted in Tax

2025 Business Tax Law Update

Posted on by don@mbn.io

July 17, 2025 | by Atherton & Associates, LLP

 

Embracing Change: How OBBA’s Business Tax Updates are Reshaping Financial Strategies

Congress recently passed the One Big Beautiful Bill Act (OBBB), ushering in significant changes to business taxation beginning in 2025. The legislation aims to stimulate domestic investment, manufacturing, and employment while simplifying certain compliance burdens. While many provisions are labeled “permanent,” business owners should treat them as opportunities to act during a favorable planning window—as future Congresses retain the power to modify or repeal them. Below is a summary of the most impactful changes, along with planning insights. 

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Bonus Depreciation – 100% Expensing Returns 
The OBBB Act permanently reinstates 100% bonus depreciation for qualified property placed in service on or after January 19, 2025, including certain plants that are planted or grafted. This allows immediate expensing of eligible purchases like machinery, vehicles, and leasehold improvements. The change provides a major cash flow advantage for capital-intensive businesses and aligns with broader goals to boost domestic productivity. 

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Section 179 Expensing Expanded 
The maximum Section 179 expensing limit increases to $2.5 million, phasing out when total qualified purchases exceed $4 million. This update expands access to immediate expensing for small and midsize businesses investing in equipment, software, and tangible personal property. When paired with bonus depreciation, the increased limits offer substantial year-one tax savings for growing companies. 

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R&D Expensing Restored for Domestic Innovation 
Starting in 2025, businesses can once again immediately deduct domestic research and experimental (R&E) expenditures under Section 174. Foreign-based research must still be amortized over 15 years. 
Businesses with less than $31 million in average annual gross receipts may retroactively apply this change back to 2022, and all taxpayers can accelerate remaining amortized R&D costs over a one- or two-year period for 2022–2024 expenses. This change removes a major barrier to innovation for small and midsize companies investing in U.S.-based R&D. 

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Section 163(j) Relief: EBITDA Deduction Restored 
For tax years beginning after December 31, 2024, the limitation on business interest expense under IRC Section 163(j) reverts to being calculated using EBITDA rather than EBIT. This means businesses can again add back depreciation and amortization, increasing the amount of interest they can deduct—especially beneficial for capital-heavy industries such as manufacturing, construction, and real estate. 

For example, a company with $2 million in EBITDA and $600,000 of annual interest expense may deduct the full $600,000 (30% of EBITDA). Under the EBIT rule (which excludes depreciation and amortization), its adjusted taxable income might be only $1.3 million—limiting the deduction to $390,000 and deferring $210,000 of interest. The return to EBITDA helps restore that lost deduction. 

Businesses with average gross receipts under $30 million (for 2025, indexed annually) are exempt from Section 163(j) altogether under the small business exception, and can fully deduct their business interest without limitation. 

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Paid Family and Medical Leave Credit Made Permanent 
The Section 45S credit for employer-paid family and medical leave is now permanent, removing uncertainty around renewals and extensions. Employers offering qualifying paid leave can continue to claim a credit of up to 25% of wages paid, which supports workforce retention and promotes competitive employee benefit packages. 

 

Incentives for Manufacturing and Production Property 
A 100% first-year depreciation deduction for “qualified production property,” which generally includes nonresidential real estate used in manufacturing. The IRS has not yet released many detailed public examples for the new OBBB Act special depreciation allowance on qualified production property, which begins in 2025. However, this provision builds on existing bonus depreciation rules outlined in IRS Publication 946 (How to Depreciate Property) and IRS Notice 2022-05, which covers related changes under the Inflation Reduction Act. For example, a manufacturer placing a $5 million new factory wing in service in mid-2025—meeting the qualification criteria—could elect to immediately deduct the entire $5 million cost that year, reducing the property’s basis to zero for future depreciation. If, at any time during the 10-year period beginning on the date that any qualified production property is placed in service by the taxpayer, such property ceases to be used in a qualified way, Section 1245 recapture applies. Official IRS examples and updated guidance are expected to be released in the coming months through updates to Publication 946 and additional IRS notices. 

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Opportunity Zones and New Markets Credit Made Permanent 
The OBBB Act permanently extends both the Opportunity Zone program and the New Markets Tax Credit (NMTC). While the Opportunity Zone definition of “low-income community” is narrowed beginning in 2027, the permanency provides long-term stability for real estate developers, community lenders, and impact-focused businesses seeking to invest in underserved areas. 

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QSBS Gain Exclusion Increased to 100% 
For Qualified Small Business Stock (QSBS) acquired after the OBBB’s enactment: 

  • Gains are 75% excludable if held ≥ 4 years 

  • Gains are 100% excludable if held ≥ 5 years 

This change makes equity investment in qualified startups more attractive and improves after-tax returns for founders, early-stage investors, and employees receiving equity. 

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Excess Business Loss Limitation Made Permanent 
The Section 461(l) limitation on excess business losses for noncorporate taxpayers, previously set to expire after 2028, is now permanent. Importantly, proposed language that would have restricted carryovers as excess business losses (instead of net operating losses) was not included in the final law, preserving taxpayer flexibility and preserving future deductibility. 

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The One Big Beautiful Bill introduces powerful tax incentives for business investment, hiring, innovation, and long-term planning. While some changes offer clarity, others add complexity or come with income or industry-specific limitations. As always, understanding how these updates intersect with your business goals is key to optimizing your strategy in 2025 and beyond. 

 

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Tax Reform 2025: What the OBBB Act Means for You and Your Family

Posted on by don@mbn.io

July 17, 2025 | by Atherton & Associates, LLP

I. Introduction

The One Big Beautiful Bill Act (OBBB) ushers in fresh tax measures starting in 2025 that promise to influence the financial landscape for individuals and families across various income levels. Despite language that brands some changes as “permanent,” tax rules are always subject to future legislative adjustments. Consequently, it is critical to grasp these new provisions and plan proactively in order to make the most of the opportunities available right now.

With highlights like deductions for auto loan interest and temporary relief on state and local taxes (SALT), OBBB caters in large part to middle-income taxpayers. But individuals with higher incomes, retirees, and even small business owners will also be affected. Understanding how these provisions interact with your unique financial situation can help you adjust your strategies—from deciding whether to convert funds to a Roth IRA to optimizing charitable contributions—so that you minimize your overall tax burden.

II. Overview of the OBBB Act

One of the primary goals behind the OBBB Act is to alleviate strain on middle-income households facing rising debt and everyday expenses. As a result, provisions such as the above-the-line deduction for auto loan interest, overtime, and tip income stand out as hallmark features. At the same time, other measures address estate transfer planning and support for higher-income earners in key areas like capital gains recognition and entity-level SALT deductions. Nevertheless, no matter the bracket, it’s important to remember that opportunities presented here may be fleeting. Future Congresses can (and often do) revisit these “permanent” laws, making annual or even quarterly reviews of your financial plan essential.

It may seem daunting to keep track of every change. However, treating the new legislation as a window of opportunity can help you preserve more of your wealth through thoughtful planning. Whether you aim to limit your taxable income to qualify for favorable deductions or plan a robust estate strategy that accounts for a bigger exemption, these new laws provide reasons to re-examine your financial position now rather than later.

III. Key Provisions and Their Implications

  1. Top Marginal Tax Rate Unchanged

    Under the OBBB Act, the highest marginal tax rate remains set at 37%. This continuity extends to capital gains rates as well, which stay at 0%, 15%, or 20%, depending on your overall taxable income. For those with significant income from investments, this means that strategies like carefully timing capital gains or performing Roth IRA conversions can continue without the worry that you might suddenly jump into a much higher bracket. Although some predicted a rate hike, the absence of such a change provides a measure of stability for the moment.

  2. Elimination of Personal Exemptions but Addition of a Senior Deduction

    While personal exemptions are now permanently repealed, the Act introduces a new $6,000 deduction specifically for seniors. Although this deduction will help offset tax for older individuals, it does not automatically make all Social Security tax-free. Depending on your other taxable income—such as pensions or retirement account distributions—up to 85% of Social Security can still be taxed. Strategic moves, like staggering the timing of required minimum distributions (RMDs) or transferring some balances into Roth accounts, can help keep more of your Social Security benefits in your pocket.

  3. Auto Loan Interest Deduction with Income Restrictions

    Middle-income earners could benefit from a new deduction that allows up to $10,000 of auto loan interest annually, so long as modified adjusted gross income (MAGI) stays under $100,000 for single filers or under $200,000 for joint filers. This limit phases out for those with higher income levels, making it less meaningful for wealthier taxpayers. However, individuals near the threshold might adjust their income through tactics such as deferring compensation, timing business deductions, or accelerating charitable giving.

  4. Expanded Child Tax Credit

    Parents can expect a modest lift from the Child Tax Credit, which rises to $2,200 per child and will be indexed for inflation going forward. Families at higher income levels should note that the same $400,000 joint-filer phaseout remains in place. While not a dramatic increase, it can still provide some financial breathing room each year as child-related expenses mount.

  5. Temporary Relief for SALT Deduction

    In 2025, the SALT deduction cap jumps from $10,000 to $40,000, offering a temporary but crucial respite for taxpayers in states with higher levies. This elevated cap is set to gradually revert to $10,000 by 2029. If you own a pass-through entity, the entity-level tax workaround remains one of the most powerful strategies to sidestep SALT limitations. However, watch for new deadlines. For example, California’s pass-through entity tax election is scheduled to expire at the end of 2025 unless lawmakers opt for an extension.

  6. Charitable Contribution Deductions Capped at a 35% Benefit

    Under the new law, donors in the 37% tax bracket will be limited to receiving a 35% tax benefit on their charitable contributions. While this may reduce the dollar-for-dollar advantage, there are still ways to optimize your giving. Strategies like donating long-term appreciated stock, establishing a donor-advised fund, or even bunching several years’ worth of contributions can yield a stronger overall tax benefit—despite the new limitation.

  7. Estate & Gift Tax Exemption Extended

    Beginning in 2026, the estate and gift tax exemption jumps to $15 million for an individual (or $30 million for a married couple), granting a larger buffer against federal estate taxes. Since it was previously set to drop to about half that amount, many families will enjoy a broader margin for wealth transfer. Legislative risk remains, though. As a result, forward-thinking estate planning is essential to lock in potential savings and maintain flexibility in the face of possible future changes.

  8. 529 Plan Enhancements and Expanded Qualified Expenses

    In an ongoing effort to encourage education savings, the OBBB Act broadens how 529 plans may be used. More K–12 expenses (such as tutoring) and professional credentialing can now be financed from these accounts without losing tax benefits. Beginning in 2026, up to $20,000 per year may be withdrawn to pay for K–12 tuition. Front-loading 529 contributions can be especially advantageous, as larger deposits have more time to grow and benefit multiple generations.

  9. New “Trump Accounts” for Children

    Children born between 2025 and 2028 may see a $1,000 initial federal contribution into a new kind of tax-deferred account—referred to by many as “Trump Accounts.” While these accounts function similarly to IRAs, the withdrawal rules and requirements remain somewhat unclear. Over time, they could provide comfortable savings for future goals, but the final guidance from the Department of the Treasury will be vital to clarifying how distributions should be managed.

  10. Deduction for Overtime and Tip Income

    For workers who rely on tips or overtime for a substantial slice of their earnings, an above-the-line deduction of up to $25,000 on tips and $12,500 on overtime (capped at $25,000 if filing jointly) applies from 2025 through 2028. This valuable benefit phases out at higher MAGI levels, so those approaching the threshold may benefit from fine-tuning their income flows or deferring certain receipts to maintain eligibility.

 

“These new provisions are exciting, but the real key is synchronizing them with each family’s financial goals. It’s not just about tax-reduction strategies in isolation. It’s about ensuring your overall plan aligns with life events, from purchasing a home to passing on wealth,” says Jackie Howell, Tax Partner at Atherton & Associates LLP.

 

How Atherton & Associates LLP Can Help

Atherton & Associates LLP provides comprehensive support for navigating the OBBB Act’s complexities. Whether you need a structured plan for your estate and trust or require guidance in maximizing deductions for auto loan interest, our multi-disciplinary team stands ready to assist. We help you stay in compliance with evolving laws, while also pinpointing opportunities to manage income and lower your tax exposure.

If you operate a business, our advisors can assess your current entity choice to ensure you benefit from pass-through entity workarounds and other relevant provisions. On the personal side, our team merges practical strategies for retirement income planning, charitable giving, and wealth transfer under the new tax rules. No matter where you find yourself in the income spectrum, we examine your situation holistically to help you make decisions that are flexible enough to adapt to the next wave of legislative shifts.

Conclusion

The OBBB Act has placed a range of new possibilities on the table—some designed to relieve middle-income households, yet also offering benefits to high earners and future generations. From rethinking timing on capital gains to leveraging fresh savings accounts for children, each change invites you to re-examine your financial roadmap. The fact that future congressional action can reshape these “permanent” rules demonstrates just how important it is to remain proactive. We have created a detailed chart to further explore the specific provisions, which you can download here | Provision Chart. By staying updated with each development, you can maximize today’s tax benefits and efficiently prepare for future requirements.

Expert Contributor

Jackie Howell, Tax Partner
Email: jhowell@athertoncpas.com
Jackie has been in public accounting since 2010, focusing on tax compliance, planning for individuals, and multi-state taxation for businesses. Her experience spans diverse industries, enabling her to craft tailored solutions for complex tax scenarios.

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Tax Planning: Financial Benefits for Individuals and Businesses

Posted on by don@mbn.io

July 17, 2025 | by Atherton & Associates, LLP

Financial Benefits of Tax Planning Strategies

July 17, 2025
From the Office of Roberto Galan-Uribe, Senior Tax Associate

Tax planning is a crucial strategy for minimizing tax liability while staying within the boundaries of the law. By strategically managing financial transactions and making informed decisions, individuals and businesses can significantly reduce their tax burden. Here’s a breakdown of the key benefits tax planning offers:

Reduced Tax Liability

  • By structuring transactions and income reporting methods efficiently, individuals and businesses can minimize the amount of income that is subject to tax.
  • This can be achieved through various legal mechanisms, such as deferring income, maximizing deductions, and taking advantage of tax credits.

Financial Planning Integration

  • By factoring in tax considerations, individuals and businesses can make informed decisions that are aligned with their long-term financial objectives.
  • Whether it’s saving for retirement, investing in real estate, or planning for education expenses, effective tax planning ensures that each decision optimizes both financial growth and tax efficiency.

Timing of Income and Deductions

  • The timing of income recognition and deduction claims can greatly impact the amount of taxes owed.

·        Proper timing of these elements ensures that tax liabilities are minimized, and overall tax efficiency is achieved.

Capital Gains Management

·        Capital gains management is a crucial aspect of tax planning for individuals and businesses who have investments or assets that appreciate in value.

·        By strategically planning when and how to realize capital gains, individuals and businesses can minimize their tax liability and maximize after-tax returns.

Retirement Planning

·       Contributing to retirement accounts, such as 401(k)s or IRAs, offers immediate tax advantages by deferring taxes on contributions or allowing for tax-free withdrawals, depending on the type of plan.

·       These contributions not only help individuals save for retirement but also provide current tax deductions that can lower taxable income in the present.

·       For businesses, offering tax-advantaged retirement plans can be an important part of employee compensation, fostering a secure and tax-efficient retirement future.

Business Structure Optimization

·       For businesses, tax planning involves selecting the most efficient business structure.

·       Each structure has different tax implications, and the right choice can lead to significant savings.

·       Optimizing the business structure to minimize taxes, while also considering operational and legal factors, can enhance a company’s bottom line and long-term success.

Action Item
By strategically managing income, deductions, capital gains, and retirement accounts, individuals and businesses can optimize financial outcomes. Contact your tax advisor to discuss your 2025 tax planning strategy to maximize savings and achieve your financial goals.

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Making the Most of your Vehicle Deduction

Posted on by don@mbn.io

July 10, 2025 | by Atherton & Associates, LLP

Factors to Consider When Purchasing a Vehicle

July 10, 2025
From the Office of Ashlyn Walker, Tax Associate

Vehicles are an essential business asset for many business owners. The tax implications for these investments will vary based on vehicle type and usage by the business. Whether you are investing in a vehicle that is used or new, gas or electric, it can be beneficial to consider the impact of any tax deductions or credits in your purchasing process.

Business Usage Rate

  • If a vehicle is used for personal purposes, then the personal costs cannot be deducted by the business.
  • Business usage can be calculated by dividing the business-related miles by the total miles driven in a year.
  • If a vehicle is solely used for business purposes, there is no business usage limitation and all related costs may be eligible for deduction.

·        It is in the taxpayer’s best interest to have an organized system in place to track personal and business use of vehicles over the course of the tax year.

Business Standard Mileage Rate

  • The business standard mileage rate varies from year to year.
  • For 2025, the rate is a 70 cent deduction per business mile driven, which is intended to account for fuel, expenses, and wear and tear over the course of the year.

·        A tax preparer will consider both the business usage rate and the business standard mileage rate to select the most advantageous deduction for clients.

Gross Vehicle Weight Rating (GVWR)

  • Gross Vehicle Weight Rating, or GVWR, is the maximum weight a vehicle, including its cargo and passengers can safely carry, as determined by the manufacturer.
  • If a truck, van, or SUV’s GVWR is less than 6,000 pounds, the purchase price will be deducted over the course of its useful life (generally five years), with limitations to the yearly deduction.
  • If these specs exceed 6,000 pounds, the deduction can speed up and be received earlier in the vehicle’s life, with less annual limitations.

Electric and Hybrid Vehicles

·       Electric and hybrid vehicles may also qualify for an additional tax credit beyond other deductions.

·       Upon purchase, review any documents from the dealership and provide them to your tax preparer so they may determine whether the vehicle qualifies for the credit.

·       The credit may have been received upon purchase or should be received when filing the related tax return.

Action Item
As with any investment, the top priority when purchasing a new vehicle is ensuring it is the right fit for your business needs. Please reach out to your tax advisor for more clarity on how to receive the most tax savings in this process.

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Cost Segregation: A Powerful Tool for Tax Savings

Posted on by don@mbn.io

July 03, 2025 | by Atherton & Associates, LLP

Key Benefits of Cost Segregation Studies

July 3rd, 2025
From the Office of Roberto Galan-Uribe, Senior Tax Associate

Cost segregation provides significant advantages for businesses and property owners. A cost segregation study is a detailed analysis of a building’s components to identify which parts of the property can be classified as personal property for tax purposes. This allows for accelerated depreciation, leading to immediate tax savings. Here’s a breakdown of the key benefits:

Accelerated Depreciation

  • This is the ability to accelerate depreciation deductions by identifying building components that qualify as personal property.
  • By reclassifying certain elements—such as lighting, HVAC systems, and landscaping—property owners can significantly increase cash flow in the early years of a building’s life cycle.
  • This results in reduced income taxes, especially during the property recovery period.

Energy Tax Deductions

  • Property owners may qualify for tax breaks related to energy-efficient improvements.
  • A detailed analysis can uncover prior and current expenditures eligible for these deductions, further reducing tax liability.

Compliance with Repair Regulations

  • Cost segregation studies help identify costs that may have been previously capitalized but should have been deducted as repairs.
  • Proper classification of expenses can prevent costly errors and ensure that tax benefits are maximized.

Partnership and Depreciation Adjustments

  • Partnerships and their partners can also benefit, particularly when a study is conducted after the partnership has been formed for several years.
  • This process can lead to significant depreciation adjustments, which can benefit new partners through Code Sec. 754 elections.
  • The ability to adjust depreciation allocations in a partnership can yield substantial tax savings, especially for those joining after the property has been in use for some time.

Action Item

When conducted in compliance with IRS guidelines, cost segregation studies can offer substantial tax savings.  Please reach out to your tax advisor to discuss whether a cost segregation study could benefit your business.

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Posted in Tax

Unlocking the Benefits of Residential and Commercial Clean Energy Tax Credits

Posted on by don@mbn.io

June 26, 2025 | by Atherton & Associates, LLP

Residential and Commercial Clean Energy Tax Credits: Key Highlights

June 26, 2025
From the Office of Bhavshriya Saini, Tax Associate

Clean energy tax credits are transforming how Americans invest in their homes and businesses, offering significant savings while encouraging a shift toward sustainability.

Residential Clean Energy Credit

  • Homeowners can claim 30% of the costs for installing qualifying clean energy systems.
  • Qualifying systems can include solar panels, wind turbines, geothermal heat pumps, fuel cells, and battery storage, on their primary or secondary U.S. residences.
  • The credit applies to systems installed from 2022 through 2032, with a gradual phase-down starting in 2033.
  • There is no annual or lifetime dollar limit for most property types, and unused credits can be carried forward to future tax years.

Energy Efficient Home Improvement Credit

  • Homeowners can claim 30% of the cost of qualifying improvements up to $3,200 annually.
  • Qualifying improvements can include insulation, air sealing, heat pumps, energy-efficient windows, doors, and home energy audits.
  • This credit is available through 2032, making it easier to spread out projects and maximize savings year after year.

Clean Vehicle Tax Credit

  • This credit incentivizes the purchase of new and certain used electric vehicles (EVs) and plug-in hybrids.
  • Qualifying buyers can receive a federal tax credit of up to $7,500 for new EVs, depending on the vehicle’s battery capacity and manufacturer.
  • This credit helps offset the higher upfront cost of clean vehicles, making sustainable transportation more accessible.

Business Clean Energy Tax Credits: ITC and PTC

  • Investment Tax Credit (ITC): This credit allows businesses to deduct a percentage of the cost of installing renewable energy systems, such as solar or wind, from their federal taxes. The ITC remains at 30% for systems placed in service through 2032.
  • Production Tax Credit (PTC): The PTC offers a per-kilowatt-hour tax credit for electricity generated by qualifying renewable sources, such as wind or biomass, during the first ten years of operation.

Action Item

Whether you’re a homeowner looking to upgrade your property or a business seeking to reduce energy costs, understanding these credits-and how to claim them-can make a real difference in your tax strategy. Please contact your tax advisor to identify and maximize these opportunities, ensuring you get the most from available incentives.

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Posted in Tax

Tax Advantages Through Charitable Giving

Posted on by don@mbn.io

June 19, 2025 | by Atherton & Associates, LLP

Charitable Giving – Strategically Supporting the Causes You Care About

June 19, 2025
From the Emily Ryland, CPA, Senior Tax Associate

Charitable giving is a meaningful way to support the causes you care about and when done strategically, it can also offer valuable tax advantages. With thoughtful planning, charitable contributions can reduce your taxable income, help you avoid capital gains taxes, and even satisfy required minimum distributions (RMDs) in retirement. Understanding how charitable contributions affect your tax situation is key to maximizing both your impact and your deductions.

Tax Deductible Contributions

·       Cash donations are deductible up to 60% of your adjusted gross income (AGI).

·       Non-cash donations, like appreciated stocks or real estate, are generally limited to 30% of AGI, with unused amounts eligible to carry forward for up to five years.

  • To deduct charitable contributions on your tax return, you must itemize your deductions using Schedule A.

·       If your total itemized deductions don’t exceed the standard deduction, you may not receive a tax benefit for your donation.

Qualified Charitable Organizations

  • To claim a tax deduction, your donation must go to a qualified charitable organization.
  • Qualified charities include most religious, educational, and medical institutions, as well as recognized public charities and foundations.

Record Keeping

·       For any cash donation over $250, you’ll need a written acknowledgment from the charity.

·       Non-cash donations over $500 require Form 8283, and high-value gifts may require a qualified appraisal.

Qualified Charitable Distributions (QCDs)

·        For individuals aged 70½ or older, Qualified Charitable Distributions (QCDs) from IRAs provide another powerful giving strategy.

·        Taxpayers can transfer up to $100,000 annually directly from their IRA to a qualified charity.

·        These distributions count toward required minimum distributions (RMDs) but are excluded from taxable income.

Strategic Giving Techniques

·        One of the most tax-efficient ways to give is by donating long-term appreciated assets, such as publicly traded stocks, directly to a qualified charity.

·        This allows you to avoid capital gains taxes while still receiving a deduction for the asset’s full fair market value.

·        Other strategic giving techniques, such as bunching multiple years’ donations to exceed the standard deduction or contributing through a donor-advised fund (DAF) can further enhance tax efficiency.

Action Item

With careful structuring, donors can optimize deductions, reduce taxable income, and maximize the impact of their contributions. Please consult your tax advisor to ensure your 2025 giving strategy aligns with your financial goals.



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Posted in Tax

Retirement Planning and Considerations

Posted on by don@mbn.io

June 12, 2025 | by Atherton & Associates, LLP

Retirement Savings Tools 

June 12, 2025
From the Office of Colton Cummings, Tax Associate

When thinking about retirement, it’s never too early (or too late) to start utilizing the many tools out there to build wealth while maximizing tax savings. While having money in a savings account may generate some interest year over year, there are much more beneficial retirement savings tools available that some may not be aware of.

Health Savings Account (HSA)

  • A Health Savings Account (HSA) is a tax-advantaged savings account that allows individuals to set aside money for qualified medical expenses.
  • This tool can be used not only to generate earnings on contributions made over time, but also to cover qualified medical expenses such as doctor visits, medications, hospital stays, and medical equipment to name a few.
  • Contributions reduce your taxable income, and if distributions are used to cover medical expenses, then these distributions are tax-exempt as well.
  • While there are no income limits, there are contribution limits, and to qualify, you must be covered under a high-deductible health plan (HDHP).

Individual Retirement Accounts – Roth IRAs

  • After Tax Contributions: You contribute after-tax money that you’ve already paid taxes on.
  • Tax-Free Growth: Your investments inside the Roth IRA grow tax-free.
  • Tax-Free Withdrawals: Qualified withdrawals in retirement are tax-free and penalty-free once you reach age 59 ½ and the account has been open for at least five years.
  • Withdraw Contributions Anytime: You can withdraw your contributions at any time, tax-free and without penalty.
  • No Required Minimum Distributions (RMDs): Unlike Traditional IRAs, there are no required minimum distributions from a Roth IRA.
  • Roth IRAs are most effective if you believe that you will have higher income and be placed in a higher tax bracket closer to retirement.

Individual Retirement Accounts – Traditional IRAs

  • Tax Deductible Contributions: Contributions to a Traditional IRA are deductible from your taxable income, potentially reducing your current tax liability.
  • Taxable Withdrawals: A Traditional IRA will grow on a tax-deferred basis and when you withdraw money in retirement, it is taxed as ordinary income.
  • No Income Limits for Opening: Unlike a Roth IRA, there are generally no income limits to opening and contributing to a Traditional IRA.
  • Required Minimum Distributions (RMDs): Generally, you are required to start taking withdrawals from a Traditional IRA at age 73.
  • The Traditional IRA is most effective if you think you will be in a lower tax bracket heading into retirement compared to your current tax bracket.

Action Item
Health Savings Accounts and Individual Retirement Accounts (IRAs) can be beneficial retirement savings tools. Consult your tax advisor to discuss how these accounts could benefit you.    

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Tax Structuring: Choosing the Right Entity Structure for Your Business

Posted on by don@mbn.io

June 05, 2025 | by Atherton & Associates, LLP

Tax Structuring: Entity Choices

June 5, 2025
From the Office of Rodney Prasad, Tax Associate

Choosing the right entity structure for your business is a crucial step in tax planning, as it directly impacts your tax liability, legal obligations, and overall financial success. Here is an overview of common business structures and their tax implications:

Sole Proprietorship:

  • Structure: Owned and operated by a single individual.
  • Taxation: The business is not taxed separately; profits and losses are reported on the owner’s personal tax return (Schedule C).
  • Tax Implications:
    • Pros: Simple and inexpensive to set up, minimal reporting requirements, no corporate business taxes.
    • Cons: Unlimited personal liability (owner is personally responsible for business debts and obligations), difficulty in obtaining business financing, no perpetual existence.
    • Self-Employment Tax: Sole proprietors pay self-employment tax (Social Security and Medicare taxes) on their net earnings.

Partnership

  • Structure: Owned and operated by two or more individuals.
  • Taxation: Partnerships are “pass-through” entities where partners report their share of profits and losses on their individual tax returns.
  • Tax Implications:
    • Pros: Partnerships offer pass-through taxation and are relatively easy to set up.
    • Cons: General partners have unlimited personal liability, and a partnership agreement is required.
    • Self-Employment Tax: General partners are also subject to self-employment taxes.

Limited Liability Company (LLC)

  • Structure: A hybrid structure.
  • Taxation: LLCs can choose their tax structure. By default, they are taxed as sole proprietorships or partnerships but can elect to be taxed as corporations.
  • Tax Implications:
    • Pros: LLCs provide limited personal liability and flexible management and tax structures, while avoiding corporate business taxes (unless elected as a C Corporation).
    • Cons: They are not federally recognized and may not be recognized outside of the U.S.
    • Self-Employment Tax: Members generally pay self-employment tax on their share of income.

C Corporation

  • Structure: A separate legal entity from its owners.
  • Taxation: C Corporations pay corporate income tax, and dividends are taxed again at the individual level (double taxation).
  • Tax Implications:
    • Pros: C Corporations offer strong liability protection, have no limit on the number of shareholders, are preferred for raising capital, and have perpetual existence. 
    • Cons: They face double taxation and are more complex and expensive to maintain. 

S Corporation

  • Structure: A type of corporation that avoids the double taxation of a C Corporation.
  • Taxation: S Corporations are “pass-through” entities, passing profits and losses to owners’ personal income.
  • Tax Implications:
    • Pros: S Corporations provide limited liability, pass-through taxation, perpetual existence, and avoid corporate  business taxes.
    • Cons: They have restrictions on the number and type of shareholders and stricter qualification standards.

Action Item
When deciding which to choose from, it is important to look at tax obligations and the advantages and disadvantages of each business form. Please reach out to your tax advisor to discuss which business entity would be the best fit for you. 

 

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