2026 Year-end tax planning with LFC

As we move into the last quarter of 2026, it is a good idea to consider reviewing one's tax situation before the close of the year.  This review will help with the following:

• Maximizing the benefits provided in the One Big Beautiful Bill (OBBB)
• If necessary, make adjustments to estimated tax payments (final quarter payment due 1/15/27)
• Determining contribution amounts for retirement plans
• Decide if making purchases on business equipment for additional depreciation deduction is warranted

Other important items for business owners include:

• Making sure year-end payroll processing is on track
• All vendor data files are in order for 1099 processing in Jan 2027
• Potential write-off of accounts receivable for non-collectible customer balances (bad debt expense) for accrual-based accounting systems
• Ensure all bank and credit card accounts have each month's reconciliation completed
• If business maintains inventory, perform a physical count of items on hand as of 12/31/26.  For retail businesses, this would include sellable goods inventory; for manufactures, it would include finished goods, works in progress, and parts.
• Review owner capital accounts for distributions, outstanding loans, and capital contributions for the current year
• Review fixed asset purchases and disposals during the current year to update fixed asset list
• Final review of accounting system before file is provided to tax preparer

LFC can help with the year-end review as well as tax preparation for your business.  We also provide tax services to individuals.

Use the Contact Us tab or schedule a meeting from this blog to reach out to us.

Charitable Contributions for 2026

 Starting in 2026, non-itemizing taxpayers will be able to deduct contributions to qualified public charities.  The limits on the deduction are as follows:

• $1,000 for single taxpayers
• $2,000 for married filing taxpayers

These contributions must be in the form of cash or credit card transactions.

Other important information on charitable contributions for itemizing taxpayers for 2026:

• Contribution limit for cash contributions at 60% of AGI has been made permanent by the One Big Beautiful Bill (OBBB)
• Contributions are subject to a .5% Adjusted Gross Income (AGI) floor

The .5% floor means deductible contributions for itemizers must surpass .5% of one's AGI before any contribution is allowed.  The excess contributions of the .5% floor are allowed for the current year; the portion reduced by the .5% floor are carried forward for up to 5 years.  Any carryover charitable deduction not used with the 5-year period will expire.

IRS On-line Services

 The IRS has been actively encouraging individual taxpayers to look into their array of online tools to help them gain information relating to one's tax situation.  This would include:

• Balance information
• Make payments
• View history
• View tax return information
• Access transcripts
• Check status of refunds
• View digital notices from the IRS
• Obtain identity protection

The individual account information can be obtained here.

Businesses can access IRS information through the IRS business account tool.  One will find information on:

• General business information on file with the IRS
• Account history and payment history
• Make payments and deposits
• View IRS notices and letters

Business Account information can be found here.

Other tools are available from the IRS:

• Get a transcript
• Direct Pay with Bank account
• Payment Plan Information
• Tax Withholding Estimator
• Tax Assistant
• Mobile App

Feel free to contact LFC for more information.  Use the contact tab from this blog.

Depreciation & Section 179 Explained

 Depreciation and Section 179 Deductions can be a challenging aspect of one's business accounting and tax return.  The regulations regarding these deductions can be complex.  Despite the complexity, general definitions and rules are provided below:

Depreciation defined

Depreciation - for assets with a useful life of greater than 1 year, an annual depreciation expense is available for each year of an asset's useful life.  Assets would include office furniture, vehicles, buildings, intangible assets, machinery, tools, etc. Each one of these assets has a recovery period (useful life) for which an expense can be taken.  Below are examples of various assets and their recovery periods per the IRS:

Office furniture                     7 years

Automobiles                          5 years

Appliances                             5 years

Residential Rental Prop     27.5 years

Computers                             5 years

Normally, these assets would be depreciated over its recovery period.  For example, an appliance costing $2000 and depreciated over 5 years would experience a $400 deduction each year for 5 years.

Section 179 defined

Section 179 deduction -  refers to expensing an asset on one's tax return in its first year (deducting its entire cost) rather than depreciating it over its useful life.  The IRS provides guidelines on when this is permissible and what the limitations are.  You can find information on Section 179 and other depreciation information  here.  

The use of 179 deduction for an asset in its first year is illustrated below in a simple example to reflect tax savings:

Purchase of asset:

Office computer                 $5000   (Purchased 1/1)

First year depreciation        1000     (5 year property)

179 Deduction                    5000

The 179 Deduction provides tax savings of:     5000

                                                                              .22   (tax bracket)

                                                                          1100    Tax savings

For businesses with frequent turnover of assets, a strategy of when to use Section 179 with asset purchases and when not to use it can provide optimal tax savings over the long term.  However, a point should be made regarding 179 deduction:   if an asset has been expensed using Section 179 and it is disposed (sold, donated to a charity, given away, etc) before its useful life has passed (example:  a computer disposed of before 5 years when it had been expensed by 179), the item is subject to depreciation recapture. This means the item needs to recapture the depreciation taken before it would have been fully depreciated had it not been expensed with 179.  The recaptured depreciation is added back on one's tax return in the year of disposal.

Handling depreciation expense for a business can be challenging.  Let LFC help your business work with you in determining a strategy for your fixed assets.  Use the Contact Us or Set Appointment feature on this blog to schedule a time.

 

Accounts Receivable & Accounts Payable in Quickbooks

 Accounts Receivable and Accounts Payable are processes in an accounting system to handle 2 important functions that aid in the production of financial statements for a business or organization.  Each process is explained below:

1.  Accounts Receivable

Accounts Receivable is part of the income side of a business.  Invoices are produced to record sales of products or services purchased by one's customers.  Invoices keep track of who purchased items as well as what was purchased.  They are vital in maintaining sales of inventory (if a business sells inventoried items) and Cost of Goods Sold for the financial statements (when items invoiced and sold).  

When a business provides terms to its customers (allow customer to pay over time - ex: Net 30 days), the invoice/accounts receivable system helps monitor when customers have paid and how much, which helps in knowing if invoices have been fully paid.  

Accounts Receivable system also helps businesses  monitor which customers are good customers who pay their invoices consistently, or which customers are not paying their invoices promptly (and ones not to extend additional credit).  

2.  Accounts Payable

Accounts Payable is part of the expense or asset purchases system of a business.  Bills from vendors are entered into accounts payable to record purchases of inventory items, various expenses (ex: utilities) or assets like machinery and equipment. Checks are cut or electronic transfers are made as payments for the bills to satisfy one's obligation to the vendors.  Accounts Payable provides the system to monitor bill payments to help with cashflow by determining when bills should be paid.  

Quickbooks software can help manage Accounts Receivable and Accounts Payable for businesses.  It will handle even the more sophisticated systems that involve electronic payments and online processing. It will ensure data is reporting correctly on the financial statements and one's customer and vendor records are maintained properly.