Protect Business Continuity with an Emergency Succession Plan

Unanticipated crises can threaten even the most well-run company. And the risk is often greater for small to midsize businesses where the owner wears many hats. That’s why your company needs an emergency succession plan.

Unlike a traditional succession plan — which focuses on the long-term and is certainly important, too — an emergency succession plan addresses who’d take the helm tomorrow if you’re suddenly unable to run the business. Its purpose is to clarify responsibilities, preserve operational continuity and reassure key stakeholders.

Naming the right person

When preparing for potential disasters in the past, you’ve probably been urged to devise contingency plans to stay operational. In the case of an emergency succession plan, you need to identify contingency people.

Larger organizations may have an advantage here. After all, a CFO or COO may be able to temporarily or even permanently replace a CEO relatively easily. For small to midsize companies, the challenge can be greater — particularly if the owner is heavily involved in retaining key customers or bringing in new business.

For this reason, an emergency succession plan should name someone who can credibly step into the leadership role if you become seriously ill or otherwise incapacitated. Look to a trusted individual whom you expect to retain long-term and who has the skills and personality to stabilize the company during a difficult time.

After you identify this person, consider the “domino effect.” That is, who’ll take on your emergency successor’s role when that individual is busy running the company?

Empowering your pick

After choosing an emergency successor, meet with the person to discuss the role in depth. Listen to any concerns and take steps to alleviate them. For instance, you may need to train the individual on certain duties or allow the person to participate in executive-level decisions to get a feel for running the business.

Just as important, ensure your emergency successor has the power and access to act quickly. This includes:

• Signatory authority for bank accounts,

• Access to accounting and payroll systems, and

• The ability to execute contracts and approve expenditures.

Updating company governance documents to reflect temporary leadership authority is a key step. Be sure to ask your attorney for guidance.

Centralizing key information

It’s also critical to document the financial, operational and administrative information your emergency successor will rely on. This includes maintaining a secure, centralized location for key records such as:

• Banking credentials,

• Vendor and customer contracts,

• Payroll records and procedures,

• Human resources data,

• Tax filings and financial statements, and

• Login details for essential systems.

Without this documentation, even the most capable interim leader may struggle to keep the business functioning smoothly.

Also, ensure your successor will have access to insurance records. Review your coverage to verify it protects the company financially in the event of a sudden transition. Key person insurance, disability buyout policies, and the structure of ownership or buy-sell agreements should align with your emergency succession plan’s objectives.

Getting the word out

A traditional succession plan is usually kept close to the vest until it’s fully formulated and nearing execution. An emergency succession plan, however, must be transparent and communicated as soon as possible.

When ready, inform your team about the plan and how it will affect everyone’s day-to-day duties if executed. In addition, develop a strategy for communicating with customers, vendors, lenders, investors and other stakeholders.

Acting now

If you haven’t created an emergency succession plan, year end may be a good time to get started. Already have one? Be sure to review it at least annually or whenever there are significant changes to the business. FMD would be happy to help you evaluate areas of financial risk, better document internal controls and strengthen the processes that will keep your company moving forward — even in the face of the unexpected.

Hiring a Bookkeeper for Your Small Business

Choosing the right bookkeeper is one of the most important staffing decisions your business will make. A skilled bookkeeper maintains accurate financial records, manages cash flow, and ensures compliance with accounting and tax requirements. But finding the right person can be challenging, especially in today’s competitive job market. Whether you’re replacing a long-time team member or hiring for the first time, here are some key factors to consider when interviewing candidates.

Education and experience

A good starting point is evaluating each candidate’s educational background. Some bookkeepers have degrees in accounting, finance or business, while others have completed bookkeeping training programs or earned software certifications. Advanced training isn’t required, but it can demonstrate professionalism and a commitment to maintaining current skills.

Experience and up-to-date accounting knowledge also matter. Most small businesses benefit from hiring someone with several years of bookkeeping experience, ideally in a similar industry or in a business of comparable complexity. Familiarity with U.S. Generally Accepted Accounting Principles and applicable tax laws is valuable, even if a candidate isn’t a formally trained accountant. Because accounting and tax rules change frequently, you’ll want someone who stays current on the latest developments.

Technical skills

Modern bookkeepers rely heavily on technology. Ask candidates about their experience with your specific accounting program and related tools, such as payroll systems, tax software, budgeting applications, artificial intelligence tools and spreadsheet programs.

If you’re open to changing systems, experienced bookkeepers can often recommend software solutions that improve efficiency and visibility. A bookkeeper’s ability to adapt to new technology or automate manual processes is often just as valuable as his or her ability to keep the books balanced.

Compliance awareness is another important factor. Many bookkeepers manage or assist with payroll filings, sales tax reporting, Form 1099 preparation and other compliance tasks. Even if you rely on a CPA firm for final tax returns, your bookkeeper’s understanding of the underlying rules drives the work’s accuracy and timeliness. Someone who’s handled these responsibilities in previous roles will likely require significantly less training and supervision.

Oversight and planning abilities

Strong bookkeepers do more than record transactions — they can also help streamline daily operations. Ask candidates about their experience closing the books each month, preparing timely financial statements, reconciling accounts, minimizing workflow bottlenecks and supporting audit requests.

Some bookkeepers also take on higher-level financial responsibilities. For instance, they may prepare budgets, forecasts or weekly management summaries. These skills can be particularly valuable because they may help relieve you of some strategic planning tasks and provide a sounding board for major business decisions. Some candidates may even have training in forensic accounting, which you can leverage to tighten internal controls and reduce fraud risks.

Soft skills

Technical skills are only part of the hiring equation. A bookkeeper works with sensitive financial data, so trustworthiness, confidentiality and sound judgment are essential.

A bookkeeper also interacts with vendors, employees, customers and your outside accounting firm, so strong communication and collaboration skills matter. Consider whether candidates can explain financial concepts clearly, are organized and proactive, and maintain professionalism. Discuss how they’ve handled reporting discrepancies or audit adjustments in previous roles. You might even present a recent accounting challenge from your business and ask how they’d address it. When assessing competency, you may find that a candidate’s problem-solving approach often reveals as much as his or her resumé.

Long-term potential

Even the most experienced bookkeeper may struggle if their working style doesn’t align with your business or mesh well with your existing staff. The ideal candidate will demonstrate leadership qualities, a willingness to take initiative and a desire to grow with your company.

When searching for the right candidate for this critical position, a thoughtful hiring process can prevent costly turnover, reporting errors and frustration down the road. In addition to helping brainstorm questions and referring qualified candidates, we can temporarily handle your bookkeeping tasks. Contact FMD for guidance during your search.

Pairing a Living Trust with a Pour-over will can Help Cover All Your Assets

A living trust is one of the most versatile estate planning tools available. It offers a streamlined way to manage and transfer assets while maintaining privacy and control. Unlike a traditional will, a living trust allows your assets to pass directly to your beneficiaries without going through probate. By placing assets into the trust during your lifetime, you create a clear plan for how they should be distributed, and you empower a trustee to manage them smoothly if you become incapacitated. This combination of efficiency and continuity can provide significant peace of mind for you and your family.

However, even the most carefully created living trust can’t automatically account for every asset you acquire later or forget to transfer into it. That’s where a pour-over will becomes essential.

Defining a pour-over will

A pour-over will acts as a safety net by directing any assets not already held in your living trust to be “poured over” into the trust at your death. Your trustee then distributes the assets to your beneficiaries under the trust’s terms. Although these assets may still pass through probate, the pour-over will ensures that everything ultimately ends up under the trust’s umbrella, following the same instructions and protections you’ve already put in place.

This setup offers the following benefits:

Convenience. It’s easier to have one document controlling the assets than it is to “mix and match.” With a pour-over will, it’s clear that everything goes to the trust, and then the trust document determines who gets what. That, ideally, makes it easier for the executor and trustee charged with wrapping up the estate.

Completeness. Generally, everyone maintains some assets outside of a living trust. A pour-over will addresses any items that have fallen through the cracks or that have been purposely omitted.

Privacy. In addition to conveniently avoiding probate for the assets that are titled in the trust’s name, the setup helps maintain a level of privacy that isn’t available when assets pass directly through a regular will.

Understanding the roles of your executor and trustee

Your executor must handle specific bequests included in the will, as well as the assets being transferred to the trust through the pour-over provision before the trustee takes over. (Exceptions may apply in certain states for pour-over wills.) While this may take months to complete, property transferred directly to a living trust can be distributed within weeks of a person’s death.

Therefore, this technique doesn’t avoid probate completely, but it’s generally less costly and time consuming than usual. And, if you’re thorough with the transfer of assets made directly to the living trust, the residual should be relatively small.

Note that if you hold back only items of minor value for the pour-over part of the will, your family may benefit from an expedited process. In some states, your estate may qualify for “small estate” probate, often known as “summary probate.” These procedures are easier, faster and less expensive than regular probate.

After the executor transfers the assets to the trust, it’s up to the trustee to do the heavy lifting. (The executor and trustee may be the same person, and, in fact, they often are.) The responsibilities of a trustee are similar to those of an executor, with one critical difference: They extend only to the trust assets. The trustee then adheres to the terms of the trust.

Creating a coordinated estate plan

When used together, a living trust and a pour-over will create a comprehensive estate planning structure that’s both flexible and cohesive. The trust handles the bulk of your estate efficiently and privately, while the pour-over will ensures that no assets are left out or distributed according to default state laws. This coordinated approach helps maintain consistency in how your estate is managed and can reduce stress and confusion for your loved ones.

Because living trusts and pour-over wills involve legal considerations, we recommend working with an experienced estate planning attorney to finalize the documents. We can assist you with the related tax and financial planning implications. Contact FMD to learn more.

Is it Time for Your Business to Start Outsourcing?

As a small to midsize business grows, demands on its time, talent and resources inevitably expand right along with it. Many business owners reach a point where continuing to do everything in-house — or even themselves — begins to slow progress or expose the company to unnecessary risk. Have you reached this point yet? If so, or even if you’re getting close, outsourcing could be a smart move.

Common candidates

Many business activities can be outsourced. The key is identifying functions that, if handled by an external provider, would improve efficiency, strengthen compliance, and give you and your team more time to focus on revenue-generating work. Here are some common candidates:

Accounting and financial reporting. A reputable provider can manage your books, collect payments, pay invoices and keep accounting technology up to date. It should also be able to prepare financial statements that meet the standards expected by lenders, investors and other outside parties.

Customer service. This may seem an unlikely candidate because you might believe that someone must work for your business to truly represent it. But that’s not necessarily true. Internal customer service departments often have high turnover rates, which drives up costs and reduces service quality. Outsourcing to a provider with a more stable, well-trained team can improve both customer satisfaction and operational consistency.

Information technology (IT). Bringing in an outside firm or consultant to manage your IT needs can provide significant benefits. For starters, you’ll be able to better focus on your mission without the constant distraction of changing technology. Also, a provider will stay current on the best hardware and software for your business, as well as help you securely access, store and protect your data.

Payroll and human resources (HR). These functions are governed by complex regulations that change frequently — as does the necessary software. A qualified vendor can help your business comply with current legal requirements while giving you and your employees a better, more secure platform for accessing payroll and HR information.

Downsides to watch out for

Naturally, outsourcing comes with potential downsides. You’ll need to spend time and resources researching and vetting providers. Then each engagement will involve substantial ongoing expenses.

You’ll also have to place considerable trust in providers — especially in today’s environment, where data breaches are common and cybersecurity is critical. Finally, even a solid outsourcing arrangement requires ongoing communication and management to maintain a productive relationship.

Not a one-size-fits-all solution

Every business owner must carefully consider when to outsource, which services are worth the money and how to measure return on investment over time. If you’d like help evaluating your options or better understanding the financial and tax implications of outsourcing, contact FMD.

Ready, Set, Count your Inventory

When businesses issue audited financial statements, year-end physical inventory counts may be required for retailers, manufacturers, contractors and others that carry significant inventory. Auditors don’t perform the counts themselves, but they observe them to evaluate the accuracy of management’s procedures, verify that recorded quantities exist and assess whether inventory is properly valued.

Even for businesses that aren’t subject to audit requirements, conducting a physical count is a smart end-of-year exercise. It provides an opportunity to confirm that the quantities in your accounting system reflect what’s actually on the shelves, uncover shrinkage or obsolescence, and pinpoint any weaknesses in your internal controls. Regular counts also support better purchasing decisions, more accurate financial reporting and improved cash flow management — making them a valuable exercise for companies of any size. Here are some best practices to help you prepare and maximize the benefits.

Streamlining the process

Planning is critical for an accurate and efficient inventory count. Start by selecting a date when active inventory movement is minimal. Weekends or holidays often work best. Communicate this date to all stakeholders to ensure proper cutoff procedures are in place. New inventory receipts or shipments can throw off counting procedures.

In the weeks before the counting starts, management generally should:

• Clean and organize stock areas,

• Order (or create) prenumbered inventory tags,

• Prepare templates to document the process, such as count sheets and discrepancy logs,

• Assign workers in two-person teams to specific count zones,

• Train counters, recorders and supervisors on their assigned roles,

• Preview inventory for potential roadblocks that can be fixed before counting begins,

• Write off any defective or obsolete inventory items, and

• Count and seal slow-moving items in labeled containers ahead of time.

If your company issues audited financial statements, one or more members of your external audit team will observe the procedures (including any statistical sampling methods), review written inventory processes, evaluate internal controls over inventory, and perform independent counts to compare to your inventory listing and counts made by your employees.

Handling discrepancies

Modern technology has made inventory counting far more efficient. Barcode scanners, mobile devices and radio frequency identification (RFID) tags reduce manual errors and speed up the process. Linking these tools to a perpetual inventory system keeps your records updated in real time, so what’s in your system more closely aligns with what’s on your shelves. However, even with automation, discrepancies can still happen.

When your books and counts don’t sync, quantify the magnitude of any inventory discrepancies and make the necessary adjustments to your records and financial statements. Evaluate whether your valuation and costing methods remain appropriate; if not, update them to ensure consistency and accuracy going forward.

Resist the temptation to simply write off the difference and move on. Instead, investigate the root causes, such as human counting errors, system data issues, mislocated items, theft, damage or obsolescence. Use the results to strengthen controls and processes. Possible improvements include revising purchasing and shipping procedures, upgrading inventory management software, installing surveillance in key areas, securing high-risk items, and educating staff on proper inventory handling and reporting procedures.

Also consider ongoing cycle counts that focus on high-value, high-turnover items to help detect issues sooner and reduce year-end surprises. For companies that issue audited financials, cycle counts complement — but don’t replace — year-end physical count requirements.

Formally documenting the inventory counting process, findings and outcomes helps management learn from past mistakes. And it provides an important trail for auditors to follow.

For more information

Physical inventory counts can enhance operational efficiency and financial reporting integrity. With the help of modern technology and advanced preparation, the process can be less disruptive and more valuable. When discrepancies arise, management needs to act decisively and systematically. Contact FMD for guidance on complying with the inventory accounting rules and optimizing inventory management.

Ease the Burden on Your Family Immediately after Your Death by Planning Now

Planning for the end of life is never easy, but including your funeral and memorial wishes in your estate plan can relieve a major burden from your loved ones. When your family is grieving, decisions about burial or cremation, service preferences, or even the type of obituary you’d like can feel overwhelming. By documenting these choices in advance, you not only help to ensure your wishes are honored but also give your family clarity and comfort.

Express your wishes

First, make your wishes known to family members. This typically includes instructions about where you’re to be buried or cremated, the type of memorial service you prefer (if any), and even the clothing you’ll be buried in. If you don’t have a next of kin or would prefer someone else to be in charge of arrangements, you can appoint another representative.

Be aware that the methods for expressing these wishes vary from state to state. With the help of your attorney, you can include a provision in your will, language in a health care proxy or power of attorney, or a separate form specifically designed for communicating your desired arrangements.

Whichever method you use, it should, at a minimum, state 1) whether you prefer burial or cremation, 2) where you wish to be buried or have your ashes interred or scattered (and any other special instructions), and 3) the person you’d like to be responsible for making these arrangements. Some people also request a specific funeral home.

Weigh your payment options

There’s a division of opinion in the financial community as to whether you should prepay funeral expenses. If you prepay and opt for a “guaranteed plan,” you lock in the prices for the arrangements, no matter how high fees may escalate before death. With a “nonguaranteed plan,” prices aren’t locked in, but the prepayment accumulates interest that may be put toward any rising costs.

When weighing whether to use a prepaid plan, the Federal Trade Commission recommends that you ask the following questions:

• What happens to the money you’ve prepaid?

• What happens to the interest income on prepayments placed in a trust account?

• Are you protected if the funeral provider goes out of business?

Before signing off on a prepaid plan, learn whether there’s a cancellation clause in the event you change your mind.

One alternative that avoids the pitfalls of prepaid plans is to let your family know your desired arrangements and set aside funds in a payable-on-death (POD) bank account. Simply name the person who’ll handle your funeral arrangements as the beneficiary. When you die, he or she will gain immediate access to the funds without the need for probate.

Incorporate your wishes into your estate plan

Thoughtful planning today can provide lasting peace of mind for the people you care about most. Don’t wait to incorporate your wishes into your estate plan — or to update your plan if needed. 

Businesses that Sponsor a 401(k) Must Stay on Top of It

If your business sponsors a 401(k) plan for employees, you know it’s a lot to manage. But manage it you must: Under the Employee Retirement Income Security Act (ERISA), you have a fiduciary duty to act prudently and solely in participants’ interests.

Once a plan is launched and operational, it may seem to run itself. However, problems can arise if you fail to actively oversee administration — even when a third-party administrator is involved. With 2025 winding down and a new year on the horizon, now may be a good time to review your plan’s administrative processes and fiduciary procedures.

Investment selection and management

Study your plan’s investment choices to determine whether the selections available to participants are appropriate. Does the lineup offer options along the risk-and-return spectrum for workers of all ages? Are any premixed funds, which are based on age or expected retirement date, appropriate for your employee population?

If the plan includes a default investment for participants who haven’t directed their investment contributions, look into whether that option remains appropriate. In the event your plan doesn’t have a written investment policy or doesn’t use an independent investment manager to help select and monitor investments, consider incorporating these risk management measures.

Should you decide to engage an investment manager, however, first implement formally documented procedures for selecting and monitoring this advisor. Consult an attorney for assistance. If you’re already using an investment manager, reread the engagement documentation to make sure it’s still accurate and comprehensive.

Fee structure

The fee structures of 401(k) plans sometimes draw media scrutiny and often aggravate employees who closely follow their accounts. Calculate the amount of current participant fees associated with your plan’s investments and benchmark them against industry standards.

In addition, examine the plan’s administrative, recordkeeping and advisory fees to understand how these costs are allocated between the business and participants. Establish whether any revenue-sharing arrangements are in place and, if so, assess their transparency and oversight.

It’s also a good idea to compare your total plan costs to those of similarly sized plans. This way, you can determine whether your overall fee structure remains competitive and reasonable under current market conditions.

Third-party administrator

Even if your third-party administrator handles day-to-day tasks, it’s important to periodically verify that their internal controls, cybersecurity practices and data-handling procedures meet current standards. Confirm that the administrator:

• Maintains proper documentation,

• Follows timely and accurate reporting practices, and

• Provides adequate support when compliance questions arise.

A proactive review of their service model can help ensure your business isn’t unknowingly exposed to risks from operational errors, data breaches or outdated administrative practices.

Overall compliance

Some critical compliance questions to consider are:

• Do your plan’s administrative procedures comply with current regulations?

• If you intend it to be a participant-directed individual account plan, does it follow all the provisions of ERISA Section 404(c)?

• Have there been any major changes to other 401(k) regulations recently?

Along with testing the current state of your plan against ERISA requirements, evaluate whether your operational practices align with your plan document — an area where many sponsors stumble. Double-check key items such as contribution timelines, eligibility determinations, vesting schedules and loan administration. Verify that procedures precisely follow the terms of your plan document.

Conducting periodic internal audits can help identify inconsistencies and operational errors before they become costly compliance failures. You might even discover fraudulent activities.

Great power, great responsibility

A 401(k) plan is a highly valuable benefit that can attract job candidates, retain employees and demonstrate your business’s commitment to participants’ financial well-being. However, with this great power comes great responsibility on your part as plan sponsor.

If your leadership team and key staff haven’t reviewed your company’s oversight practices recently, year end may be an ideal time to take stock. FMD can help you identify plan costs and fees, spot potential compliance gaps, and tighten internal controls.

Minimize Your Business’s 2025 Federal Taxes by Implementing Year-end Tax Planning Strategies

The One Big Beautiful Bill Act (OBBBA) shifts the landscape for year-end tax planning. The law has significant implications for some of the most tried-and-true tax-reduction measures. It also creates new opportunities for businesses to reduce their 2025 tax liability before December 31. Here are potentially some of the most beneficial ones.

Investments in capital assets

Thanks to bonus depreciation, businesses have commonly turned to year-end capital asset purchases to cut their taxes. The OBBBA helps make this strategy even more powerful for 2025.

Under the Tax Cuts and Jobs Act (TCJA), 100% first-year bonus depreciation declined by 20 percentage points each year beginning in 2023, falling to 40% in 2025. The OBBBA restores and makes permanent 100% bonus depreciation for qualified new and used assets acquired and placed in service after January 19, 2025. (Qualified purchases made in 2025 on or before January 19 remain subject to the 40% limit.)

The law also boosts the Section 179 expensing election limit for small and midsize businesses to $2.5 million, with the phaseout threshold lifted to $4 million. (Both amounts will be adjusted annually for inflation.)

Most assets eligible for bonus depreciation also qualify for Sec. 179 expensing. But Sec. 179 expensing is allowed for certain expenses not eligible for bonus depreciation — specifically, roofs, HVAC equipment, fire protection and alarm systems, and security systems for nonresidential real property, as well as depreciable personal property used predominantly in connection with furnishing lodging.

Sec. 179 expensing is subject to several limitations that don’t apply to first-year bonus depreciation, especially for S corporations, partnerships and limited liability companies treated as partnerships for tax purposes. So, when assets are eligible for either break, claiming allowable 100% first-year bonus depreciation may be beneficial.

However, Sec. 179 expensing is more flexible — you can take it on an asset-by-asset basis. With bonus depreciation, you have to take it for an entire class of assets (for example, all MACRS 7-year property). Business vehicles are popular year-end purchases to boost depreciation-related tax breaks. They’re generally eligible for bonus depreciation and Sec. 179 expensing, but keep in mind that they’re subject to additional rules and limits. Also, if a vehicle is used for both business and personal use, the associated expenses, including depreciation, must be allocated between deductible business use and nondeductible personal use.

As an added perk, the OBBBA changes the business interest deduction — specifically, the calculation of adjusted taxable income — which could allow you to deduct more interest on capital purchases beginning in 2025.

Pass-through entity tax deduction

Dozens of states enacted pass-through entity tax (PTET) deduction laws in response to the TCJA’s $10,000 limit on the federal deduction for state and local taxes (SALT), also referred to as the SALT cap. The mechanics vary, but the deductions generally let pass-through entities (partnerships, limited liability companies and S corporations) pay an elective entity-level state tax on business income with an offsetting tax benefit for the owners. The organization deducts the full payment as a business expense.

Before year end, it’s important to review whether a PTET deduction is available to you and, if so, whether it’ll make sense to claim it. This can impact other year-end tax planning strategies.

The PTET deduction may be less relevant for 2025 because the OBBBA temporarily boosts the SALT cap to $40,000 (with 1% increases each year through 2029). The higher cap is subject to phaseouts based on modified adjusted gross income (MAGI); when MAGI reaches $600,000, the $10,000 cap applies.

But the PTET deduction may still be worthwhile in some circumstances. It could pay off, for example, if an owner’s MAGI excludes the owner from benefiting from the higher cap or if an owner’s standard deduction would exceed his or her itemized deductions so the owner wouldn’t benefit from the SALT deduction.

By reducing the income passed through from the business, a PTET deduction election could also help an owner reduce his or her liability for self-employment taxes and avoid the 3.8% net investment income tax. Moreover, lower income could unlock eligibility for other tax breaks, such as deductions for rental losses and the Child Tax Credit. Bear in mind, though, that while a PTET deduction could help you qualify for the Section 199A qualified business income (QBI) deduction despite the income limit (see below), it also might reduce the size of the deduction.

QBI deduction

Eligible pass-through entity owners can deduct up to 20% of their QBI, whether they itemize deductions or take the standard deduction. QBI refers to the net amount of income, gains, deductions and losses, excluding reasonable compensation, certain investments and payments to partners for services rendered.

The deduction is subject to limitations based on taxable income and, in some cases, on W-2 wages paid and the unadjusted basis of qualified property (generally, the purchase price of tangible depreciable property held at the end of the tax year). The OBBBA expands the phase-in ranges for those limits so that more taxpayers will qualify for larger QBI deductions beginning in 2026.

In the meantime, you can still take steps to increase your QBI deduction for 2025. For example, if your income might be high enough that you’ll be subject to the W-2 wage or qualified property limit, you could increase your W-2 wages or purchase qualified property. Timing tactics — generally, accelerating expenses into this year and deferring income into 2026 — might also help you avoid income limits on the deduction.

Research and experimental deduction

The OBBBA makes welcome changes to the research and experimental (R&E) deduction. It allows businesses to capitalize domestic Section 174 costs and amortize them over five years beginning in 2025.

It also permits “small businesses” (those with average annual gross receipts of $31 million or less for the previous three tax years) to claim the R&E deduction retroactive to 2022. And businesses of any size that incurred domestic R&E expenses in 2022 through 2024 can elect to accelerate the remaining deductions over either a one- or two-year period.

You don’t necessarily need to take steps before year end to benefit from these changes. But it’s important to consider how claiming larger R&E deductions on your 2025 return could impact your overall year-end planning strategies.

It’s also a good idea to start thinking about how you’ll approach the R&E expense deduction on your 2025 tax return. For example, it might make more sense to continue to amortize your qualified R&E expenses. You also should determine if it would be beneficial to recover remaining unamortized R&E expenses in 2025 or prorate the expenses across 2025 and 2026. And if you’re eligible to claim retroactive deductions, review your R&E expenses for 2022 through 2024 to decide whether it would be beneficial to do so.

Don’t delay

We’ve focused on year-end strategies affected by the OBBBA, but there are also strategies not significantly impacted by it that are still valuable. One example is accelerating deductible expenses into 2025 and deferring income to 2026 (or doing the opposite if you expect to be in a higher tax bracket next year). Another is increasing retirement plan contributions (or setting up a retirement plan if you don’t have one).

Now is the time to execute the last-minute strategies that will trim your business’s 2025 taxes. FMD can help you identify the ones that fit your situation.

Is your Accounting Software Working for Your Business — or Against it?

When buying new accounting software or upgrading your existing solution, it’s critical to evaluate your options carefully. The right platform can streamline operations and improve financial reporting accuracy. However, the wrong one can result in reporting delays, compliance risks, security breaches and strategic missteps. Here are some common pitfalls to avoid.

Relying on a generic solution

You might be tempted to choose a familiar, off-the-shelf software product. While this may seem like a practical solution, if the software isn’t tailored to your company and industry, you may be setting yourself up for inefficiencies and frustration later.

For example, construction firms often need job costing, progress billing and retainage tracking features. Not-for-profits need fund accounting and donor reporting features. Retailers may benefit from real-time inventory management and multi-channel sales integrations. Choosing a one-size-fits-all tool may result in a patchwork of manual fixes and workarounds that undermine efficiency and add risk.

Overspending or underspending

Accounting systems vary significantly in their features and costs. It’s easy to overspend on software with flashy dashboards and advanced add-ons — or to settle on a no-frills option that doesn’t meet the organization’s needs. Both extremes carry risk.

The ideal approach lies somewhere in the middle. Start by benchmarking your transaction volume, reporting complexity, staff skill levels and support infrastructure. Then build a prioritized feature “wish list” and set a realistic budget. Avoid paying for functions you’ll never use, but don’t underinvest in critical capabilities, such as automation, scalability or integration. Think strategically about where your business will be a year or two from now — not just today.

Clinging to legacy tools

Upgrading or moving to a new accounting platform is a major undertaking, so it’s easy to put these projects on the back burner. But waiting too long can lead to inefficiencies, data inaccuracies and missed opportunities. Modern platforms offer cloud-based access, AI-driven automation and mobile functionality — features that older systems can’t match. As more businesses shift to hybrid work and remote collaboration, staying current is essential for accuracy and speed.

If your financial closes take too long, if reports don’t reconcile easily or if you can’t view your numbers in real time, it may be time to modernize. Treat accounting software upgrades as part of ongoing business improvement — not an occasional “big project.”

Test your system periodically to ensure efficient data flows, accurate reconciliations and useful management reports. This exercise moves you from merely “keeping books” to driving financial insight.

Ignoring integration, mobility and security

In the past, accounting software was a standalone application, and data from across the company had to be manually entered into the system. But integration is the name of the game these days. Your accounting system should integrate with the rest of your tech suite — including customer resource management (CRM), inventory and project management platforms — so data can be shared seamlessly and securely. If you’re manually entering data into multiple systems, you’re wasting valuable resources.

Also consider the availability and functionality of mobile access to your accounting system. Many solutions now include apps that allow users to access real-time data, approve transactions and record expenses from their smartphones or tablets.

Equally important is cybersecurity. With financial information increasingly stored online, prioritize systems with data encryption, secure cloud storage and multi-factor authentication. Protecting your data means protecting your business reputation.

Leaving your CPA out of the loop

Choosing the right accounting software isn’t just an IT project — it’s a strategic investment decision for your business. Our team has helped hundreds of companies select accounting technology tools that fit their needs. Let’s get started on defining your requirements, evaluating software features and rolling out a seamless implementation plan. Contact FMD to discuss your pain points, training needs and budget. We can help you find a solution that works for your business.

Is a QTIP Trust Right for Your Blended Family?

A qualified terminable interest property (QTIP) trust can be a valuable estate planning tool if you have a blended family. In such families — where one or both spouses have children from prior relationships — there’s often a delicate balance between providing for a current spouse and preserving assets for children from a previous marriage. A QTIP trust helps achieve this by allowing you, the grantor, to ensure that your surviving spouse is financially supported during his or her lifetime while your remaining assets ultimately go to the beneficiaries you’ve designated.   

QTIP trust in action

Generally, a QTIP trust is created by the wealthier spouse, though sometimes both spouses will establish such trusts. After the QTIP trust grantor’s death, the surviving spouse receives income from the trust for life, and in some cases, may also have access to principal if the trust terms allow it.

Basically, the surviving spouse assumes a “life estate” in the trust’s assets. A life estate provides the surviving spouse with the right to receive income from the trust but not ownership rights. This means that the surviving spouse can’t sell or transfer the assets.

Estate tax considerations

From an estate tax perspective, a QTIP trust also offers advantages. Assets transferred into the trust generally qualify for the marital deduction, meaning no estate tax is due at the first spouse’s death. The estate tax is deferred until the death of the surviving spouse, potentially allowing for more efficient tax planning.

This combination of financial security for the surviving spouse and inheritance protection for children makes a QTIP trust particularly well-suited for blended families seeking fairness, clarity and peace of mind in their estate plans.

Estate planning flexibility

A QTIP trust can also make your estate plan more flexible. For example, at the time of your death, your family’s situation or the estate tax laws may have changed. The executor of your will can choose to not implement a QTIP trust if that makes the most sense. Otherwise, the executor makes a QTIP trust election on a federal estate tax return. (It’s also possible to make a partial QTIP election — that is, a QTIP election on just a portion of the estate.)

To be effective, the election must be made on a timely filed estate tax return. After the election is made, it’s irrevocable.

Right for you?

If you’ve remarried and have children from your first marriage, consider the estate planning benefits of a QTIP trust. Questions? Contact FMD for additional information.

Expense or Capitalize? How to Maximize Deductions with the De Minimis Safe Harbor Rule

By: Katie Peabody and Reed Freiburger

When a business buys equipment, furniture, or software, the question often arises: capitalize or expense it immediately?  The answer can have a big impact on a business’ bottom line – especially with recent changes to federal and state depreciation rules.  Fortunately, the IRS’s ‘de minimis safe harbor election” offers a straightforward way to simplify compliance and maximize deductions.  This complexity at the Federal and State level provides opportunities for taxpayers. 

Back in 2013 the IRS introduced the Tangible Property Regulations. These regulations provided guidance on capitalization of assets as well as insight on repairs versus capitalizable assets. Within these regulations, the de minimis safe harbor rules were also introduced. Taxpayers can use these rules to confidently maximize current deductions while also getting the best outcomes for state income taxes as well. 

De Minimis Safe Harbor Expensing

One often-overlooked opportunity in the world of fixed assets is the de minimis safe harbor election. This rule allows taxpayers to immediately expense smaller asset purchases instead of capitalizing and depreciating them over time.

• Businesses without an audited financial statement can expense up to $2,500 per invoice or item.

• Businesses with an audited financial statement can expense up to $5,000 per invoice or item.

For non-audited taxpayers, to use this rule, a business must:

1. Have a written capitalization policy in place as of the start of the tax year, and

2. Expense purchases under $2,500 for both book and tax reporting purposes.

For audited taxpayers, to use this rule, a business must:

1. Have a written policy setting a $5,000 capitalization threshold, and

2. Expense purchases under the limit for tax reporting purposes; book treatment may differ.

Expensing Per Invoice vs Per Item

The safe harbor expensing limits can be applied on a per invoice or per item basis.

 If the total amount on an invoice does not exceed the capitalization threshold, it can be expensed in full, even if the invoice includes multiple items for a single project. This means if the contractor bills for wiring installed at $1,600, and separately bills $2,100 for painting, both of those separate invoices could be expensed. An anti-abuse rule prevents taxpayers from proactively splitting invoices for a single asset (i.e. a truck cannot be billed for various parts, so each invoice is under the capitalization threshold), so keep that in mind.  

Alternatively, if multiple items are purchased on one invoice, each item under the limit can also be expensed individually. The per unit price does not need to be listed on the invoice, but the number of units and the total cost does need to be shown. This means if 15 refrigerators are purchased for a multi-unit residential rental, for $15,000, all of those refrigerators could be expensed, even though the total invoice exceeds the safe harbor capitalization threshold, since each unit’s cost was only $1,000, the entire invoice can be expensed immediately.

Additional Benefits and Practical Examples

This per-item treatment can be particularly valuable for owners of residential rental property, since building improvements on residential real property typically do not qualify for bonus depreciation. For example, a 40-unit apartment building that replaces every door could expense the entire cost immediately, provided the cost of each door does not exceed $2,500 (or $5,000 if the entity has an audited financial statement). Conversely, this building improvement would not be bonus eligible since bonus can only be taken on Qualified Improvement Property (QIP) which excludes improvements to residential real property. 

Additionally, amounts expensed under the de minimis rule are not subject to Michigan’s newly enacted tax depreciation decoupling adjustment which became effective on January 1, 2025. Assets 100% expensed via bonus depreciation for Federal income tax will be required to be added back to the Michigan income tax base and depreciated with the old phase out bonus depreciation rules. Assets directly expensed under the de minimis safe harbor would not be subject to any add-back to Michigan taxable income which avoids the potential increase to the income tax on a Michigan return.

Go Forth and Expense (Wisely)!

Nearly every business invests in fixed assets, and the de minimis safe harbor offers a simple, powerful way to accelerate deductions while staying compliant. If you’d like help drafting a written de minimis expensing policy or evaluating fixed asset purchases for maximum benefit, the FMD team can help apply these rules with confidence. 

This post is part of a continuing series-check back for future insights. 

Productivity Metrics Can Help Business Owners See Reality

As a business owner, your eyes may tell you that your employees are working hard. But discerning whether their efforts are truly contributing to the bottom line might be a bit hazy. The solution: Track productivity metrics. When calculated correctly and consistently, quantitative measures can help you see business reality much more clearly.

Why the numbers matter

No matter how big or small, every company has three primary resources: time, talent and capital. Productivity metrics help you understand how effectively you’re using them.

Rather than relying on assumptions or gut feelings, running the numbers sheds light on whether productivity is booming, adequate or falling short. In turn, you’ll be able to more confidently improve workflows and align employee performance with strategic objectives.

Examples to consider

The right productivity metrics for any company vary depending on factors such as industry, mission and size. Nonetheless, here are some examples to consider:

Revenue per employee. This foundational metric equals total revenue divided by the average number of employees over a given period. It offers a quick snapshot of how efficiently the company converts labor into goods or services. A rising number signals increasing productivity, while a declining figure may indicate inefficiencies, such as operational bottlenecks, overstaffing or stagnant sales.

Output per hour worked. This metric goes a step further by dividing total output (in dollars or units) by total labor hours worked. It can highlight whether productivity issues are tied to work habits, staffing levels or operational processes.

Utilization rate. Many companies — particularly professional services firms — track this metric. It’s calculated by dividing billable or productive work hours by total available hours and multiplying by 100. Utilization rate contrasts with output per hour worked by measuring activity rather than results. Low rates may signal overstaffing or excessive administrative tasks.

Customer satisfaction scores. Sometimes considered a “soft” measure, these scores provide essential context. They’re typically derived from structured feedback and converted into quantifiable insights. While a team may produce high volumes of work, consistently low satisfaction scores can reveal underlying issues in service quality or communication. On the other hand, strong scores reflect a team that’s attentive, responsive and aligned with customer expectations — key traits of sustainable productivity.

Data in action

Choosing your productivity metrics is only the first step. The second is tracking them over time. The right interval depends on the metric. For example, revenue per employee and output per hour worked, which reflect broader operational efficiency, are typically best reviewed monthly or quarterly. Utilization rate may be worth tracking weekly because even small inefficiencies can add up quickly. And customer satisfaction scores often benefit from continuous tracking, which is then summarized monthly or quarterly for trend analysis.

The third and trickiest step is interpreting and acting on the data. For instance, suppose revenue per employee is flat while sales are growing. This might indicate the need to downsize or provide better onboarding and training to new hires. If you notice a decline in output per hour worked or utilization rate, you may want to reallocate workloads, streamline administrative duties or use artificial intelligence for repetitive tasks.

Now let’s say customer satisfaction scores drop — never a good thing. In this case, you could formally review communication processes and response times. And if you haven’t already, consider implementing customer relationship management software to better track interactions.

Consistency, technology and culture

Consistency is key. Track the same productivity metrics over carefully chosen periods to spot trends and measure operational impact. If you determine that any metric isn’t adequately insightful, you can make a change. But gather an adequate sample size.

Furthermore, leverage technology. For small businesses, simple spreadsheets may be adequate. However, don’t hesitate to explore more sophisticated solutions, such as digital dashboards and project management platforms.

Finally, productivity metrics are most effective when they’re part of a culture of accountability and high performance. Inform employees of what’s being measured and why. Stress that it’s not about surveillance; it’s about meeting strategic objectives. Integrate metrics into job reviews and team meetings.

Optimal approach

The optimal approach to productivity metrics combines strong quantitative data with objective observations and qualitative insight. To that end, contact FMD. We’d be happy to help you identify and calculate relevant metrics, analyze them in the context of your financial statements, and use the knowledge gained to make better business decisions.

5 Ways to Streamline Your Billing Process

When your business is growing, billing can easily fade into the background. After all, once invoices go out and payments come in, it may seem like everything’s running smoothly. But small inefficiencies and overlooked errors can quietly chip away at cash flow.

Regularly reviewing and improving your billing systems can help you collect faster, reduce errors and strengthen customer relationships. Here are five tips to help make your billing process more efficient and effective.

1. Identify and fix issues promptly

Billing errors delay payments and erode customer trust. Invoices with incorrect amounts, missed discounts or incomplete details can lead to disputes and slow down collections. The following steps can help reduce billing issues:

• Review invoices for accuracy before sending them,

• Confirm that customer contact and account information is current, and

• Track billing errors and complaints to identify recurring issues.

It’s equally important to address service or product issues quickly. Late deliveries, incomplete work or miscommunication can give customers an excuse not to pay on time. Encourage your team to resolve any billing or service concerns promptly — and request payment for any undisputed balances while settling disputed items.

2. Invoice faster and more consistently

Delays in billing lead directly to delays in cash inflows. If you’re waiting until the end of the month to send invoices, you’re giving up valuable days of cash flow. Consider tightening your invoicing cycle by:

• Sending invoices as soon as work is completed or products are shipped,

• Establishing clear payment terms that reflect industry standards and shortening them if appropriate, and

• Leveraging technology to automate recurring invoices, reminders and follow-ups.

If you haven’t already, move to electronic invoicing and online payment options. Digital systems make it easier for customers to pay and for you to track payments in real time.

3. Use automation to your advantage

Modern accounting and billing software can do more than send invoices — it can alert you to overdue accounts and apply late fees. Your software can also generate cash flow reports to help you identify trends and trouble spots.

Make sure your billing system integrates smoothly with your accounting platform. Schedule periodic reviews to ensure your software is still meeting your organization’s needs and is compliant with current tax and reporting requirements. Also, confirm that your systems maintain proper data security, user permissions and backup procedures, especially when storing customers’ financial information.

4. Establish clear policies and communication

Strong billing practices start with clear communication. Provide customers with written documentation about your pricing, payment terms, late-fee policies and credit arrangements. Internally, train your finance and accounting team to consistently enforce these policies.

When billing disputes arise, handle them quickly and professionally. Maintaining goodwill while enforcing your terms is a balancing act — but it’s essential for predictable cash flow. Consistent enforcement also supports audit readiness and strengthens your internal controls.

5. Focus on what you can control

Economic shifts, customer demand and market disruptions are beyond your control. But your billing process isn’t. By proactively monitoring how invoices are issued, tracked and collected, you can protect your cash flow and reduce stress on your operations.

We can help you review your current billing systems, identify inefficiencies and implement stronger accounting practices that support steady cash flow. Contact FMD to schedule a review and discover practical ways to simplify and accelerate your billing process.

4 Year-end Planning Steps to Trim Your 2025 Taxes

Now is the time of year when taxpayers search for last-minute moves to reduce their federal income tax liability. Adding to the complexity this year is the One Big Beautiful Bill Act (OBBBA), which significantly changes various tax laws. Here are some of the measures you can take now to reduce your 2025 taxes in light of the OBBBA.

1. Reevaluate the standard deduction

Taxpayers can choose to itemize certain deductions or take the standard deduction based on their filing status. Itemizing deductions saves tax if the total exceeds the standard deduction. The number of taxpayers who itemize dropped dramatically after the Tax Cuts and Jobs Act (TCJA) nearly doubled the standard deduction. The OBBBA increases it further. The standard deduction for 2025 is:

• $15,750 for single filers and married individuals filing separately,

• $23,625 for heads of households, and

• $31,500 for married couples filing jointly.

Taxpayers age 65 or older or blind are eligible for an additional standard deduction of $2,000 or, for joint filers, $1,600 per spouse age 65 or older or blind. (For taxpayers both 65 or older and blind, the additional deduction is doubled.)

But other OBBBA changes could make itemizing more beneficial. For example, if you’ve been claiming the standard deduction recently, the expanded state and local tax (SALT) deduction might cause your total itemized deductions to exceed your standard deduction for 2025. (See No. 2 below.) If it does, you might benefit from accelerating other itemized deductions into 2025. In addition to SALT, potential itemized deductions include:

• Qualified medical and dental expenses (to the extent that they exceed 7.5% of your adjusted gross income),

• Home mortgage interest (generally on up to $750,000 of home mortgage debt on a principal residence and a second residence),

• Casualty losses (from a federally declared disaster), and

• Charitable contributions (see No. 3 below).

Note, too, that higher earners will face a limit on their itemized deductions in 2026. The OBBBA effectively caps the value of itemized deductions for taxpayers in the highest tax bracket (37%) at 35 cents per dollar, compared with 37 cents per dollar this year. If you’re among that group, you may want to accelerate itemized deductions into 2025 to leverage the full value.

2. Maximize your SALT deduction

The OBBBA temporarily quadruples the so-called “SALT cap.” For 2025 through 2029, taxpayers who itemize can deduct up to $40,000 ($20,000 for separate filers), with 1% increases each subsequent year, meaning $40,400 in 2026 and so on. Deductible SALT expenses include property taxes (for homes, vehicles and boats) and either income tax or sales tax, but not both. The SALT cap is scheduled to return to the TCJA’s $10,000 cap ($5,000 for separate filers) beginning in 2030.

In the meantime, the temporary limit increase could substantially boost your tax savings, depending on your SALT expenses and your modified adjusted gross income (MAGI). The allowable deduction drops by 30% of the amount by which your MAGI exceeds a threshold of $500,000 ($250,000 for separate filers). When MAGI reaches $600,000 ($300,000 for separate filers), the $10,000 (or $5,000) cap applies.

If your 2025 SALT deductions exceed the old $10,000 cap but your total itemized deductions would still be under the standard deduction, “bunching” could help you make the most of the higher SALT cap. For example, if you receive your 2026 property tax bill before year end, you can pay it this year and deduct both your 2025 and 2026 property taxes in 2025. You might increase the deduction further by accelerating estimated state or local income tax payments into this year, if applicable. You could bunch other itemized deductions into 2025 as well. (See No. 1 above.)

In 2026, you’d go back to claiming the standard deduction. And then you’d repeat the bunching for the 2027 tax year and itemize that year.

3. Prepare for changes to charitable giving rules

Donating to charity is a valuable and flexible year-end tax planning tool. You can give as much or as little as you like. As long as the recipient is a qualified charity, you can properly substantiate the donation and you itemize, you’ll likely be able to claim a tax deduction. But beginning in 2026, the OBBBA imposes a 0.5% of adjusted gross income (AGI) “floor” on charitable contribution deductions.

The floor generally means that only charitable donations in excess of 0.5% of your AGI can be claimed as an itemized deduction. In other words, if your AGI for a tax year is $100,000, you can’t deduct the first $500 ($100,000 × 0.5%) of donations made that year.

So if you can afford it, you might want to bunch donations you’d normally make in 2026 into 2025 instead, so that you can avoid the new floor. (Bear in mind that a charitable deduction might nonetheless be more valuable next year if you’ll be in a higher tax bracket.)

One way to save even more taxes with your charitable donations is to give appreciated stock instead of cash. You can avoid the long-term capital gains tax you’d owe if you sold the stock and also claim a charitable deduction for the fair market value (FMV) of the shares.

On the other hand, if you don’t itemize, you may want to delay your 2025 charitable contributions until next year. Beginning in 2026, the OBBBA creates a permanent deduction for nonitemizers’ cash contributions, up to $1,000 for individuals and $2,000 for married couples filing jointly. Donations must be made to public charities, not foundations or donor-advised funds.

4. Manage your MAGI

MAGI is the trigger for certain additional taxes and the phaseouts of many tax breaks, including some of the newest deductions. For example, the OBBBA establishes a temporary “senior” deduction of $6,000 for taxpayers age 65 or older. This can be claimed in addition to either the standard deduction or itemized deductions. But the senior deduction begins to phase out when MAGI exceeds $75,000 ($150,000 for joint filers).

As discussed in No. 2, the enhanced SALT deduction is also subject to MAGI phaseouts. So, too, are the Child Tax Credit and the new temporary deductions for qualified tips, overtime pay and car loan interest. In terms of being a tax trigger, your MAGI plays a role in determining your liability for the 3.8% net investment income tax.

It can pay, therefore, to take steps to reduce your MAGI. For example, you might spread a Roth conversion over multiple years, rather than completing it in a single year. You can also max out your contributions to traditional retirement accounts and Health Savings Accounts.

If you’re age 70½ or older, qualified charitable distributions (QCDs) from your traditional IRA are another avenue for reducing your MAGI. While a charitable deduction can’t be claimed for QCDs, the amounts aren’t included in your MAGI and can be used to satisfy an IRA owner’s required minimum distribution (RMD), if applicable. This can be beneficial because charitable donation deductions (and other itemized deductions) don’t reduce MAGI and RMDs typically are included in MAGI.

Begin planning now

Don’t miss out on both new and traditional planning opportunities to reduce your 2025 taxes. The best strategies for you depend on your specific situation. FMD would be pleased to help you with your year-end tax planning.

Your Family Needs to know How to Access your Estate Planning Documents

Making sure your family will be able to locate your estate planning documents when needed is one of the most important parts of the estate planning process. Your carefully prepared will, trust or power of attorney will be useless if no one knows where to find it.

When loved ones are grieving or faced with urgent financial and medical decisions, not being able to locate key documents can create unnecessary stress, confusion and even legal complications. Here are some tips on how and where to store your estate planning documents.

Your signed, original will

There’s a common misconception that a photocopy of your signed last will and testament is sufficient. In fact, when it comes time to implement your plan, your family and representatives will need your signed original will. Typically, upon a person’s death, the original document must be filed with the county clerk and, if probate is required, with the probate court as well.

What happens if your original will isn’t found? It doesn’t necessarily mean that it won’t be given effect, but it can be a major — and costly — obstacle.

In many states, if your original will can’t be produced, there’s a presumption that you destroyed it with the intent to revoke it. Your family may be able to obtain a court order admitting a signed photocopy, especially if all interested parties agree that it reflects your wishes. But this can be a costly, time-consuming process. And if the copy isn’t accepted, the probate court will administer your estate as if you died without a will.

To avoid these issues, store your original will in a safe place and tell your family how to access it.

Storage options include:

• Leaving your original will with your accountant or attorney, or

• Storing your original will at home (or at the home of a family member) in a waterproof, fire-resistant safe, lockbox or file cabinet.

What about safe deposit boxes? Although this can be an option, you should check state law and bank policy to be sure that your family will be able to gain access without a court order. In many states, it can be difficult for loved ones to open your safe deposit box, even with a valid power of attorney. It may be preferable, therefore, to keep your original will at home or with a trusted advisor or family member.

If you do opt for a safe deposit box, it may be a good idea to open one jointly with your spouse or another family member. That way, the joint owner can immediately access the box in the event of your death or incapacity.

Other documents

Original trust documents should be kept in the same place as your original will. It’s also a good idea to make several copies. Unlike a will, it’s possible to use a photocopy of a trust. Plus, it’s useful to provide a copy to the person who’ll become trustee and to keep a copy to consult periodically to ensure that the trust continues to meet your needs.

For powers of attorney, living wills or health care directives, originals should be stored safely. But it’s also critical for these documents to be readily accessible in the event you become incapacitated.

Consider giving copies or duplicate originals to the people authorized to make decisions on your behalf. Also consider providing copies or duplicate originals of health care documents to your physicians to keep with your medical records.

Clear communication is key

Clearly communicating the location of your estate planning documents can help ensure your wishes are carried out promptly and accurately. Let your family, executor or trustee know where originals are stored and how to access them. Contact FMD for help ensuring your estate plan will achieve your goals.

Businesses should Review their Key Payroll Tax Responsibilities

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

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

Federal, state and local

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

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

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

FICA and FUTA

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

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

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

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

Additional Medicare tax

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

• $200,000 for single filers,

• $250,000 for married couples filing jointly, and

• $125,000 for married couples filing separately.

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

State unemployment insurance

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

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

Get stronger

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

Business Owners: You Don’t Need a Crystal Ball to see the Future, just Your CPA

Financial statements report historical financial performance. But sometimes management or external stakeholders want to evaluate how a business will perform in the future. Forward-looking estimates are critical when evaluating strategic decisions, such as debt and equity financing, capital improvement projects, shareholder buyouts, mergers, and reorganization plans. While company insiders may see the business through rose-colored glasses, external accountants can prepare prospective financial reports that are grounded in realistic, market-based assumptions.

3 reporting options

There are three types of reports to choose from when predicting future performance:

1. Forecasts. These prospective statements present an entity’s expected financial position, results of operations and cash flows. They’re based on assumptions about expected conditions and courses of action.

2. Projections. These statements are based on assumptions about conditions expected to exist and the course of action expected to be taken, given one or more hypothetical assumptions. Financial projections may test investment proposals or demonstrate a best-case scenario.

3. Budgets. Operating budgets are prepared in-house for internal purposes. They allocate money — usually revenue and expenses — for particular purposes over specified periods.

Although the terms “forecast” and “projection” are sometimes used interchangeably, there are important distinctions under the attestation standards set forth by the American Institute of Certified Public Accountants (AICPA).

Leverage your financials

Historical financial statements are often used to generate forecasts, projections and budgets. But accurate predictions usually require more work than simply multiplying last year’s operating results by a projected growth rate — especially over the long term.

For example, a start-up business may be growing 30% annually, but that rate is likely unsustainable over time. Plus, the business’s facilities and fixed assets may lack sufficient capacity to handle growth expectations. If so, management may need to add assets or fixed expenses to take the company to the next level.

Similarly, it may not make sense to assume that annual depreciation expense will reasonably approximate the need for future capital expenditures. Consider a tax-basis entity that has taken advantage of the expanded Section 179 and bonus depreciation deductions, which permit immediate expensing in the year qualifying fixed assets are purchased and placed in service. Because depreciation is so boosted by these tax incentives, this assumption may overstate depreciation and capital expenditures going forward.

Various external factors, such as changes in competition, product obsolescence and economic conditions, can affect future operations. So can events within a company. For example, new or divested product lines, recent asset purchases, in-process research and development, and outstanding litigation could all materially affect future financial results.

We can help

When preparing prospective financial statements, the underlying assumptions must be realistic and well thought out. Contact FMD for objective insights based on industry and market trends, rather than simplistic formulas, gut instinct and wishful thinking.

Don’t Forget to Include a Residuary Clause in Your Will

When creating a will, most people focus on the big-ticket items — including who gets the house, the car and specific family heirlooms. But one element that’s often overlooked is the residuary clause. This clause determines what happens to the remainder of your estate — the assets not specifically mentioned in your will. Without one, even a carefully planned estate can end up in legal limbo, causing unnecessary stress, expense and conflict for your loved ones.

Defining a residuary clause

A residuary clause is the part of your will that distributes the “residue” of your estate. This residue includes any assets left after specific bequests, debts, taxes and administrative costs have been paid. It might include forgotten bank accounts, newly acquired property or investments you didn’t specifically name in your will.

For example, if your will leaves your car to your son and your jewelry to your daughter but doesn’t mention your savings account, the funds in that account would fall into your estate’s residue. The residuary clause ensures those funds are distributed according to your wishes — often to a named individual, group of heirs or charitable organization.

Omitting a residuary clause

Failing to include a residuary clause can create serious problems. When assets aren’t covered by specific instructions in a will, they’re considered “intestate property.” This means those assets will be distributed according to state intestacy laws rather than your personal wishes. In some cases, this could result in distant relatives inheriting part of your estate or assets going to individuals you never intended to benefit.

Without a residuary clause, your executor or family members may also need to seek court intervention to determine how to handle the leftover property. This adds time, legal costs and emotional strain to an already difficult process.

Moreover, the absence of a residuary clause can lead to family disputes. When the law, rather than your will, determines who gets what, heirs may disagree over how to interpret your intentions. A simple clause could prevent these misunderstandings and preserve family harmony.

Adding flexibility to your plan

A key advantage of a residuary clause is added flexibility. Life circumstances change — new assets are acquired, accounts are opened or closed, and property values fluctuate.

If your will doesn’t specifically list every asset (and most don’t), a residuary clause acts as a safety net to ensure nothing is left out. It can even account for unexpected windfalls or proceeds from insurance or lawsuits that arise after your passing.

Providing extra peace of mind

Including a residuary clause in your will is one of the simplest ways to make sure your entire estate is handled according to your wishes. It helps avoid gaps in your estate plan, minimizes legal complications and ensures your executor can distribute your assets smoothly. Contact FMD for additional details. Ask your estate planning attorney to add a residuary clause to your will.

Writing an AI Governance Policy for Your Business

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

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

Few in place

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

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

7 steps to consider

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

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

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

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

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

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

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

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

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

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

Financial impact

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

What’s the Right Inventory Accounting Method for your Business?

Inventory is one of the most significant assets on a balance sheet for many businesses. If your business owns inventory, you have some flexibility in how it’s tracked and expensed under U.S. Generally Accepted Accounting Principles (GAAP). The method you use to report inventory can have a dramatic impact on your bottom line, tax obligations and financial ratios. Let’s review the rules and explore your options.

The basics

Inventory varies depending on a business’s operations. Retailers may have merchandise available for sale, while manufacturers and contractors may have materials, work in progress and finished goods.

Under Accounting Standards Codification Topic 330, you must generally record inventory when it’s received and the title (or the risks and rewards of ownership) transfers to your company. Then, it moves to cost of goods sold when the product ships and the title (or the risks and rewards of ownership) transfers to the customer.

4 key methods

While inventory is in your possession, you can apply different accounting methods that will affect its value on your company’s balance sheet. When inventory is sold, your reporting method also impacts the costs of goods sold reported on your income statement. Four common methods for reporting inventory under GAAP are:

1. First-in, first-out (FIFO). Under this method, the first items entered into inventory are the first ones presumed sold. In an inflationary environment, units purchased earlier are generally less expensive than items purchased later. As a result, applying the FIFO method will generally cause a company to report lower expenses for items sold, leaving higher-cost items on the balance sheet. In short, this method enhances pretax profits and balance sheet values, but it can have adverse tax consequences (because you report higher taxable income).

2. Last-in, first-out method (LIFO). Here, the last items entered are the first presumed sold. In an inflationary environment, units purchased later are generally more expensive than items purchased earlier. As a result, applying the LIFO method will generally cause a company to report higher expenses for items sold, leaving lower-cost items on the balance sheet. In short, this method may defer tax obligations, but its effects on pretax profits and balance sheet values may raise a red flag to lenders and investors.

Under the LIFO conformity rule, if you use this method for tax purposes, you must also use it for financial reporting. It’s also important to note that the tax benefits of using this method may diminish if the company reduces its inventory levels. When that happens, the company may start expensing older, less expensive cost layers.

3. Weighted-average cost. Some companies use this method to smooth cost fluctuations associated with LIFO and FIFO. It assigns a weighted-average cost to all units available for sale during a period, producing a consistent per-unit cost. It’s common not only for commodities but also for manufacturers, distributors and retailers that handle large volumes of similar or interchangeable products.

4. Specific identification. When a company’s inventory is one of a kind, such as artwork, luxury automobiles or custom homes, it may be appropriate to use the specific identification method. Here, each item is reported at historic cost, and that amount is generally carried on the books until the specific item is sold. However, a write-off may be required if an item’s market value falls below its carrying value. And once inventory has been written down, GAAP prohibits reversal of the adjustment.

Under GAAP, inventory is valued at the lower of 1) cost, or 2) net realizable value or market value, depending on the method you choose.

Choosing a method for your business

Each inventory reporting method has pros and cons. Factors to consider include the type of inventory you carry, cost volatility, industry accounting conventions, and the sophistication of your bookkeeping personnel and software.

Also evaluate how each method will affect your financial ratios. Lenders and investors often monitor performance based on profitability, liquidity and asset management ratios. For instance, if you’re comparing LIFO to FIFO, the latter will boost your pretax profits and make your balance sheet appear stronger — but you’ll lose out on the tax benefits, which could strain your cash flow. The weighted-average cost method might smooth out your profitability, but it might not be appropriate for the types of products you sell. The specific identification method may provide the most accurate insight into a company’s profitability, but it’s reserved primarily for easily identifiable inventory.

Whatever inventory accounting method you select must be applied consistently and disclosed in your financial statements. A change in method is treated as a change in accounting principle under GAAP, requiring justification, disclosure and, if material, retrospective application.

We can help

Choosing the optimal inventory accounting method affects more than bookkeeping — it influences tax obligations, cash flow and stakeholders’ perception of your business. Contact FMD for help evaluating your options strategically and ensuring your methods are clearly disclosed.