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  • Noelle Merwin
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The Financial Triple Play: 3 Reports Every Business Leader Should Watch
The Financial Triple Play: 3 Reports Every Business Leader Should Watch 1200 1200 Noelle Merwin

In baseball, the triple play is a high-impact defensive feat that knocks the competition out of the inning. In business, you have your own version — three key financial statements that can give you a competitive edge by monitoring profitability, liquidity and solvency.

First base: The income statement

The income statement (also known as the profit and loss statement) shows revenue, expenses and earnings over a given period. It’s like an inning-by-inning scoreboard of your operations. While many people focus on the bottom line (profits or losses), it pays to dig into the details.

A common term used when discussing income statements is “gross profit,” or the income earned after subtracting the cost of goods sold from revenue. Cost of goods sold includes the cost of labor, materials and overhead required to produce or acquire a product. Another important term is “net income.” This is the income remaining after all expenses (including taxes) have been paid.

Also, investigate income statement trends. Is revenue growing or declining? Are variable expenses (such as materials costs, direct labor and shipping costs) changing in proportion to revenue? Are you overwhelmed by fixed selling, general and administrative expenses (such as rent and marketing costs)? Are some products or service offerings more profitable than others? Evaluating these questions can help you brainstorm ways to boost profitability going forward.

Second base: The balance sheet

The balance sheet (also known as the statement of financial position) provides a snapshot of the company’s financial health. This report tallies assets, liabilities and equity at a specific point in time. It provides insight into liquidity (whether your company has enough short-term assets to cover short-term obligations) and solvency (whether your company has sufficient resources to succeed over the long term).

Under U.S. Generally Accepted Accounting Principles (GAAP), assets are usually reported at the lower of cost or market value. Current assets (such as accounts receivable and inventory) are reasonably expected to be converted to cash within a year, while long-term assets (such as plant and equipment) have longer lives. Similarly, current liabilities (such as accounts payable) come due within a year, while long-term liabilities are payment obligations that extend beyond the current year or operating cycle.

Intangible assets (such as patents, customer lists and goodwill) can provide significant value to a business. But internally developed intangibles aren’t reported on the balance sheet; instead, their costs are expensed as incurred. Intangible assets are only reported when they’ve been acquired externally.

Owners’ equity (or net worth) is the extent to which the book value of assets exceeds liabilities. If liabilities exceed assets, net worth will be negative. However, book value may not necessarily reflect market value. Some companies may provide the details of owners’ equity in a separate statement called the statement of retained earnings. It details sales or repurchases of stock, dividend payments and changes caused by reported profits or losses.

Third base: The statement of cash flows

The cash flow statement shows all the cash flowing in and out of your company. For example, your company may have cash inflows from selling products or services, borrowing money, and selling stock. Outflows may result from paying expenses, investing in capital equipment and repaying debt.

Typically, cash flows are organized on this report under three categories: operating, investing and financing activities. The bottom of the statement shows the net change in cash during the period. Watch your statement of cash flows closely to gauge your business’s liquidity. To remain in business, companies must continually generate cash to pay creditors, vendors and employees — and they must remain nimble to respond to unexpected changes in the marketplace.

What’s your game plan?

Financial reporting is more than an exercise in compliance with accounting rules. Financial statements can be a valuable management tool. However, many business owners focus solely on the income statement without monitoring the other bases. That makes operational errors more likely.

Play smart by keeping your eye on all three financial statements. We can help — not only by keeping score — but also by analyzing your company’s results and devising strategic plays to put you ahead of the competition. To learn more contact your Smolin representative.

 

  • Noelle Merwin
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Age-Based Tax Triggers: What You Need to Know
Age-Based Tax Triggers: What You Need to Know 1200 1200 Noelle Merwin

They say age is just a number — but in the world of tax law, it’s much more than that. As you move through your life, the IRS treats you differently because key tax rules kick in at specific ages. Here are some important age-related tax milestones for you and loved ones to keep in mind as the years fly by.

Ages 0–23: The kiddie tax

The kiddie tax can potentially apply to your child, grandchild or other loved one until age 24. Specifically, a child or young adult’s unearned income (typically from investments) in excess of the annual threshold is taxed at the parent’s higher marginal federal income tax rates instead of the more favorable rates that would otherwise apply to the young person in question. For 2025, the unearned income threshold is $2,700.

Age 30: Coverdell accounts

If you set up a tax-favored Coverdell Education Savings Account (CESA) for a child or grandchild, the account must be liquidated within 30 days after the individual turns 30 years old. To the extent earnings included in a distribution aren’t used for qualified education expenses, the earnings are subject to tax plus a 10% penalty tax. To avoid that, you can roll over the CESA balance into another CESA set up for a younger loved one.

Age 50: Catch-up contributions

If you’re age 50 or older at end of 2025, you can make an additional catch-up contribution of up to $7,500 to your 401(k) plan, 403(b) plan or 457 plan for a total contribution of up to $31,000 ($23,500 regular contribution plus $7,500 catch-up contribution). This assumes that your plan allows catch-up contributions.

If you’re 50 or older at the end of 2025, you can make an additional catch-up contribution of up to $3,500 to your SIMPLE IRA for a total contribution of up to $20,000 ($16,500 regular contribution plus $3,500 catch-up contribution). If your company has 25 or fewer employees, the 2025 maximum catch-up contribution is $3,850.

If you’re 50 or older at the end of 2025, you can make an additional catch-up contribution of up to $1,000 to your traditional IRA or Roth IRA, for a total contribution of up to $8,000 ($7,000 regular contribution plus $1,000 catch-up contribution).

Age 55: Early withdrawal penalty from employer plan

If you permanently leave your job for any reason after reaching age 55, you may be able to receive distributions from your former employer’s tax-favored 401(k) plan or 403(b) plan without being socked with the 10% early distribution penalty tax that generally applies to the taxable portion of distributions received before age 59½. This rule doesn’t apply to IRAs.

Age 59½: Early withdrawal penalty from retirement plans

After age 59½, you can receive distributions from all types of tax-favored retirement plans and accounts (IRAs, 401(k) accounts and pensions) without being hit with the 10% early distribution penalty tax. The penalty generally applies to the taxable portion of distributions received before age 59½.

Ages 60–63: Larger catch-up contributions to some employer plans

If you’re age 60–63 at the end of 2025, you can make a larger catch-up contribution of up to $11,250 to your 401(k) plan, 403(b) plan, or 457 plan. This assumes your plan allows catch-up contributions.

If you’re age 60–63 at the end of 2025, you can make a larger catch-up contribution of up to $5,250 to your SIMPLE IRA.

Age 73: Required minimum withdrawals

After reaching age 73, you generally must begin taking annual required minimum distributions (RMDs) from tax-favored retirement accounts (traditional IRAs, SEP accounts and 401(k)s) and pay the resulting extra income tax. If you fail to withdraw at least the RMD amount for the year, you can be assessed a penalty tax of up to 25% of the shortfall. However, if you’re still working after reaching age 73 and you don’t own over 5% of your employer’s business, you can postpone taking RMDs from the employer’s plan(s) until after you retire.

Watch the calendar

Keep these important tax milestones in mind for yourself and your loved ones. Knowing these rules can mean the difference between a smart tax strategy and a costly oversight. If you have questions or want more detailed information, contact your Smolin representative.

 

  • Noelle Merwin
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Tax breaks in 2025 and how The One, Big, Beautiful Bill could change them
Tax breaks in 2025 and how The One, Big, Beautiful Bill could change them 1200 1200 Noelle Merwin

The U.S. House of Representatives passed The One, Big, Beautiful Bill Act on May 22, 2025, introducing possible significant changes to individual tax provisions. While the bill is now being considered by the Senate, it’s important to understand how the proposals could alter key tax breaks.

Curious about how the bill might affect you? Here are seven current tax provisions and how they could change under the bill.

  1. Standard deduction

The Tax Cuts and Jobs Act nearly doubled the standard deduction. For the 2025 tax year, the standard deduction has been adjusted for inflation as follows:

  • $15,000 for single filers,
  • $30,000 for married couples filing jointly, and
  • $22,500 for heads of household.

Under current law, the increased standard deduction is set to expire after 2025. The One, Big, Beautiful Bill would make it permanent. Additionally, for tax years 2025 through 2028, it proposes an increase of $1,000 for single filers, $2,000 for married couples filing jointly and $1,500 for heads of households.

  1. Child Tax Credit (CTC)

Currently, the CTC stands at $2,000 per qualifying child but it’s scheduled to drop to $1,000 after 2025. The bill increases the CTC to $2,500 for 2025 through 2028, after which it would revert to $2,000. In addition, the bill indexes the credit amount for inflation beginning in 2027 and requires the child and the taxpayer claiming the child to have Social Security numbers.

  1. State and local tax (SALT) deduction cap

Under current law, the SALT deduction cap is set at $10,000 but the cap is scheduled to expire after 2025. The bill would raise this cap to $40,000 for taxpayers earning less than $500,000, starting in 2025. This change would be particularly beneficial for taxpayers in high-tax states, allowing them to deduct a larger portion of their state and local taxes.

  1. Tax treatment of tips and overtime pay

Currently, tips and overtime pay are considered taxable income. The proposed legislation seeks to exempt all tip income from federal income tax through 2029, provided the income is from occupations that traditionally receive tips. Additionally, it proposes to exempt overtime pay from federal income tax, which could increase take-home pay for hourly workers.

These were both campaign promises made by President Trump. He also made a pledge during the campaign to exempt Social Security benefits from taxes. However, that isn’t in the bill. Instead, the bill contains a $4,000 deduction for eligible seniors (age 65 or older) for 2025 through 2028. To qualify, a single taxpayer would have to have modified adjusted gross income (MAGI) under $75,000 ($150,000 for married couples filing jointly).

  1. Estate and gift tax exemption

As of 2025, the federal estate and gift tax exemption is $13.99 million per individual. The bill proposes to increase this exemption to $15 million per individual ($30 million per married couple) starting in 2026, with adjustments for inflation thereafter.

This change would allow individuals to transfer more wealth without incurring federal estate or gift taxes.

  1. Auto loan interest

Currently, there’s no deduction for auto loan interest. Under the bill, an above-the-line deduction would be created for up to $10,000 of eligible vehicle loan interest paid during the taxable year. The deduction begins to phase out when a single taxpayer’s MAGI exceeds $100,000 ($200,000 for married couples filing jointly).

There are a number of rules to meet eligibility, including that the final assembly of the vehicle must occur in the United States. If enacted, the deduction is allowed for tax years 2025 through 2028.

  1. Electric vehicles

Currently, eligible taxpayers can claim a tax credit of up to $7,500 for a new “clean vehicle.” There’s a separate credit of up to $4,000 for a used clean vehicle. Income and price limits apply as well as requirements for the battery. These credits were scheduled to expire in 2032. The bill would generally end the credits for purchases made after December 31, 2025.

Next steps

These are only some of the proposals being considered. While The One, Big, Beautiful Bill narrowly passed the House, it faces scrutiny and potential changes in the Senate. Taxpayers should stay informed about these developments, as the proposals could significantly impact individual tax liabilities in the coming years. Contact your Smolin representative with any questions about your situation.

  • Noelle Merwin
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Digital assets and taxes: What you need to know
Digital assets and taxes: What you need to know 1200 1200 Noelle Merwin

As the use of digital assets like cryptocurrencies continues to grow, so does the IRS’s scrutiny of how taxpayers report these transactions on their federal income tax returns. The IRS has flagged this area as a key focus. To help you stay compliant and avoid tax-related complications, here are the basics of digital asset reporting.

The definition of digital assets

Digital assets are defined by the IRS as any digital representation of value that’s recorded on a cryptographically secured distributed ledger (also known as blockchain) or any similar technology. Common examples include:

  • Cryptocurrencies, such as Bitcoin and Ethereum,
  • Stablecoins, which are digital currencies tied to the value of a fiat currency like the U.S. dollar, and
  • Non-fungible tokens (NFTs), which represent ownership of unique digital or physical items.

If an asset meets any of these criteria, the IRS classifies it as a digital asset.

Related question on your tax return

Near the top of your federal income tax return, there’s a question asking whether you received or disposed of any digital assets during the year. You must answer either “yes” or “no.”

When we prepare your return, we’ll check “yes” if, during the year, you:

  • Received digital assets as compensation, rewards or awards,
  • Acquired new digital assets through mining, staking or a blockchain fork,
  • Sold or exchanged digital assets for other digital assets, property or services, or
  • Disposed of digital assets in any way, including converting them to U.S. dollars.

We’ll answer “no” if you:

  • Held digital assets in a wallet or exchange,
  • Transferred digital assets between wallets or accounts you own, or
  • Purchased digital assets with U.S. dollars.

Reporting the tax consequences of digital asset transactions

To determine the tax impact of your digital asset activity, you need to calculate the fair market value (FMV) of the asset in U.S. dollars at the time of each transaction. For example, if you purchased one Bitcoin at $93,429 on May 21, 2025, your cost basis for that Bitcoin would be $93,429.

Any transaction involving the sale or exchange of a digital asset may result in a taxable gain or loss. A gain occurs when the asset’s FMV at the time of sale exceeds your cost basis. A loss occurs when the FMV is lower than your basis. Gains are classified as either short-term or long-term, depending on whether you held the asset for more than a year.

Example: If you accepted one Bitcoin worth $80,000 plus $10,000 in cash for a car with a basis of $55,000, you’d report a taxable gain of $35,000. The holding period of the car determines whether this gain is short-term or long-term.

How businesses handle crypto payments

Digital asset transactions have their own tax rules for businesses. If you’re an employee and are paid in crypto, the FMV at the time of payment is treated as wages and subject to standard payroll taxes. These wages must be reported on
Form W-2.

If you’re an independent contractor compensated with crypto, the FMV is reported as nonemployee compensation on Form 1099-NEC if payments exceed $600 for the year.

Crypto losses and the wash sale rule

Currently, the IRS treats digital assets as property, not securities. This distinction means the wash sale rule doesn’t apply to cryptocurrencies. If you sell a digital asset at a loss and buy it back soon after, you can still claim the loss on your taxes.

However, this rule does apply to crypto-related securities, such as stocks of cryptocurrency exchanges, which fall under the wash sale provisions.

Form 1099 for crypto transactions

Depending on how you interact with a digital asset, you may receive a:

  • Form 1099-MISC,
  • Form 1099-K,
  • Form 1099-B, or
  • Form 1099-DA.

These forms are also sent to the IRS, so it’s crucial that your reported figures match those on the form.

Evolving landscape

Digital asset tax rules can be complex and are evolving quickly. If you engage in digital asset transactions, maintain all related records — transaction dates, FMV data and cost basis. Contact your Smolin advisor with questions. This will help ensure accurate and compliant reporting, minimizing your risk of IRS penalties. 

  • Noelle Merwin
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Can you turn business losses into tax relief?
Can you turn business losses into tax relief? 1200 1200 Noelle Merwin

Even well-run companies experience down years. The federal tax code may allow a bright strategy to lighten the impact. Certain losses, within limits, may be used to reduce taxable income in later years.

Who qualifies?

The net operating loss (NOL) deduction levels the playing field between businesses with steady income and those with income that rises and falls. It lets businesses with fluctuating income to average their income and losses over the years and pay tax accordingly.

You may be eligible for the NOL deduction if your deductions for the tax year are greater than your income. The loss generally must be caused by deductions related to your:

  • Business (Schedules C and F losses, or Schedule K-1 losses from partnerships or S corporations),
  • Casualty and theft losses from a federally declared disaster, or
  • Rental property (Schedule E).

The following generally aren’t allowed when determining your NOL:

  • Capital losses that exceed capital gains,
  • The exclusion for gains from the sale or exchange of qualified small business stock,
  • Nonbusiness deductions that exceed nonbusiness income,
  • The NOL deduction itself, and
  • The Section 199A qualified business income deduction.

Individuals and C corporations are eligible to claim the NOL deduction. Partnerships and S corporations generally aren’t eligible, but partners and shareholders can use their separate shares of the business’s income and deductions to calculate individual NOLs.

What are the changes and limits?

Before the Tax Cuts and Jobs Act (TCJA), NOLs could be carried back two years, forward 20 years, and offset up to 100% of taxable income. The TCJA changed the landscape:

  • Carrybacks are eliminated (except certain farm losses).
  • Carryforwards are allowed indefinitely.
  • The deduction is capped at 80% of taxable income for the year.

If an NOL carryforward exceeds your taxable income of the target year, the unused balance may become an NOL carryover. Multiple NOLs must be applied in the order they were incurred.

What’s the excess business loss limitation?

The TCJA established an “excess business loss” limitation, which took effect in 2021. For partnerships and S corporations, this limitation is applied at the partner or shareholder level, after the outside basis, at-risk and passive activity loss limitations have been applied.

Under the rule, noncorporate taxpayers’ business losses can offset only business-related income or gain, plus an inflation-adjusted threshold. For 2025, that threshold is $313,000 ($626,000 if married filing jointly). Remaining losses are treated as an NOL carryforward to the next tax year. In other words, you can’t fully deduct them because they become subject to the 80% income limitation on NOLs, reducing their tax value.

Important: Under the Inflation Reduction Act, the excess business loss limitation applies to tax years through 2028. Under the TCJA, it had been scheduled to expire after December 31, 2026.

Plan proactively

Navigating NOLs and the related restrictions is complex, especially when coordinating with other deductions and credits. Thoughtful planning can maximize the benefit of past losses. Please consult with your Smolin advisor about how to proceed in your situation.

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