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Bookkeeping and Tax Preparation Tips - 2023

Tips to Keep Your Personal & Business Financials on Track

We regularly share information on practices that support the best interest of our clients and optimize both their personal and professional financial health.

Tax Changes & Updates for 2025 and Beyond

Recent changes to the tax code could impact your 2025 filing. Schedule your in-person or virtual tax preparation appointment with us to get the largest return possible.

How Tax Changes for 2022 Could Change Your Tax Return

The One, Big Beautiful Bill

This is a summary of the 940-page final bill. It does not include, because it isn’t available yet, any IRS guidance on the bill. This is only a summary of the items that will affect the average taxpayer. It does not include every provision/change in the bill. I left out niche items that only pertain to very few companies/individuals.

Here are a couple of definitions that will help with the rest of this summary:

TCJA: The Tax Cuts and Jobs Act passed during Trump’s first term in office.

OBBB: One Big Beautiful Bill – this is the current legislation that was just passed.

“Permanent:” When we say permanent, we mean until the next politician gets into office and passes legislation to change it.

Phase out: The income at which a credit or deduction starts to be reduced. For example, once your income exceeds $100,000 then you cannot claim credit “X”.

Changes for personal tax returns

  1. Tax rates: The tax brackets established with the TCJA have been made permanent with some minor reductions in tax rates.
  2. Standard Deductions: The current standard deductions that were put in place with the TCJA have been made permanent and increased slightly.
  3. Personal Exemptions: These used to be a $4,100 deduction for each person claimed on the tax return. They were temporarily eliminated under the TCJA and have now been permanently eliminated. This clearly hurts the larger families.
  4. Child Tax Credit: Prior to OBBB, the child tax credit was set to be reduced back to its previous $1,000 amount in 2026. However beginning in 2025 the OBBB set the credit to $2,200 per child (up $200) and will be indexed upwards for inflation after 2026. A child is still defined as under the age of 17. For every dependent 17 years and over you may still qualify for the other dependent credit of $500. The Child Tax Credit still has income phase outs ($400k for Married, $200k for not married).
  5. Senior Deduction: While President Trump (and other politicians) said they want to eliminate the tax on Social Security, they were not able to do that. In its place they created the Senior deduction. This is $6,000 for seniors age 65 or older with adjusted gross income less than $75,000 for single filers of $150,000 for married filing jointly. This is $6,000 per spouse, so a married couple can get a $12,000 deduction. You do not need to itemize as this is a separate deduction. This is only for tax returns for the years 2025 through 2028.
  6. Mortgage Interest deduction: Mortgage interest is still deductible, only on the first $750,000 in mortgage value. It was supposed to increase to $1Million for 2026, but the $750,000 in debt is now permanent under the new bill.
  7. Miscellaneous Itemized Deductions (subject to 2% floor): These were deductions for unreimbursed expenses incurred as an employee. They have been permanently eliminated under the OBBB. This means NO deductions for UNION DUES, UNIFORMS, TOOLS, PARKING, TRAVEL. ETC ON THE FEDERAL TAX RETURN. This does not affect these types of deductions for self-employed people. They are still deductible on the Pennsylvania tax return (you must have documentation to attach to the state tax return).
  8. Gambling Losses: Under current law, taxpayers have been able to deduct gambling losses up to gambling winnings (if they were able to itemize their deductions). Under the OBBB it states that the deduction for gambling losses is limited to only 90% of such losses incurred during the year. For example, if you had $10,000 in winnings and $10,000 in losses, you would actually have taxable income of $1,000 (because you could only deduct 90% of the 10,000 in losses). So in order to have no taxable income you would have to have losses of $11,112 (because 90% of 11,112 is $10,000). Taxpayers that gamble NEED to make sure they are keeping accurate records of their winnings and their losses.
  9. NO tax on TIPS: under OBBB congress has determined that there will be a deduction on the tax return for tip income. This is effective for tax years 2025 through 2028. You do not need to itemize your deductions. Your income must be under $150,000 for single filers and $300,000 for Married. For employees, the tips must be listed on the w-2 in order to take the deduction (so you will only be allowed to deduct the tips that you actually report). For independent contractors that receive tips (for example, massage therapists or Uber drivers), the tips must be reported on form 1099-NEC or 1099-K (so those forms need to be redesigned and hopefully someone has been keeping track of those tips since January of this year).
  10. NO tax on Overtime (sort of): While President Trump and other politicians say “no tax on overtime,” that is not exactly the case. Under OBBB congress created a deduction for up to$12,500 ($25,000 for married) for overtime pay premium. This is effective for tax years 2025 through 2028. You do not need to itemize your deductions. Your income must be under $150,000 for single filers and $300,000 for Married. If married, you MUST file a joint tax return. The deduction is only for the “overtime premium.” This would be the .5 if you are paid 1.5 times your regular rate for overtime. For example, if you are paid $20 per hour and time and a half per hour for overtime ($30/hr), your deduction is only for $10/hr for each hour of overtime. It is NOT the full $30/hour that you earn each hour of overtime (so this is clearly not “NO tax on overtime”). This must be reported by your employer, on your w-2, so the w-2 will need to be redesigned for this for the current year.
  11. Car Loan Interest: OBBB offers a deduction for up to $10,000 for auto loan interest on a QUALIFIED passenger vehicle loan. FYI, the law is vague, and it does not indicate if that is $10k per return or $10k per person (so we do not know if it could be $20k for a husband and wife). We are awaiting clarification on that issue. The income phase out for this deduction is $100,000 for single and $200,000 for married. You do not need to itemize your deductions. Vehicle must be purchased after12/31/2024. You must provide the vehicle identification number (VIN) on the tax return. This is available for tax years 2025-2028. What is a Qualified Vehicle:
    1. Taxpayer must be the original user (in other words it must be a NEW car).
    2. Car, minivan, sport utility, pickup truck or motorcycle
    3. Gross vehicle weight is less than 14,000 pounds.
    4. Not purchased from a related party.
    5. Final assembly occurs in the United States.
    6. The lenders will be required to issue a form to the purchaser (and the IRS) by January 31st of the following year reporting the interest paid. This is a new form and will probably be similar to a mortgage interest statement.
  12. Expansion of the 529 accounts (education savings accounts):
    1. Under pre OBBB law, taxpayers could use up to $10,000 per year for k-12th grade private school. The OBBB has increased that to $20,000 per year after 12/31/2025.
    2. Under OBBB, beginning 7/5/2025, 529 accounts can be used to pay for Post Secondary Credential expenses (for example the CPA exam) and fees associated with continuing education to maintain any occupation or professional license issued by a state or the federal government.
  13. Monetary Contributions to Charity:
    1. Under the OBBB for years beginning after 12/31/2025, there is permanent deduction for up to $1,000 for single filers ($2,000 for Married filing jointly) for “cash” charitable contributions. You do not need to itemize your deductions for this, but you do need to track your contributions.
    2. For taxpayers that itemize their deductions, there is a new 0.5% charitable contribution floor. This means that only the charitable contributions that exceed 0.5% of your income will be deductible. As an example, lets say you had an income of $100,000 and made contributions of $2,000. Your .5% floor would be 0.5% x $100,000 =$500. So, your deduction would be $2,000 - $500 = $1,500.
  14. Employer Education Assistance Programs: Under current law an employer is allowed to pay (or reimburse) an employee for up to $5,250 in education costs, tax free. This included student loan payments under the TCJA that was set to expire on 12/31/2025. The OBBB has made the reimbursement for student loans permanent. It has also now made this benefit index for inflation after 2026 (the $5,250 limit has been in effect since 1986).
  15. “Trump Accounts:”
    1. The OBBB has created what is known as Trump Accounts. These retirement savings accounts are like Traditional IRA accounts (TAX DEFERRED) set up for individuals under the age of 18. However, there is no deduction for these contributions. Contributions up to $5,000. Up to $2,500 of that limit can be a tax-free contribution from a Parents employer. For example, your employer could contribute up to a total of $2,500 into your child’s account per year, and it is not included in your taxable wages.
    2. Newborn Pilot Program – for children born between 1/1/2025 and 12/31/2028, the federal government will contribute $1,000 per child into their eligible account.
    3. MY OPINION: You should consult with your financial advisor to discuss how/IF these accounts fit into your financial (and estate) plan. While these accounts sound great, the 529 education savings accounts offer a lot more flexibility, and TAX-FREE growth. The 529 accounts also offer the ability to convert up to $35,000 from the 529 into a Roth retirement account for the beneficiary. However, if you qualify for the newborn Pilot program you should definitely look into it, even if it’s just to get your free $1,000 (I read that the $1,000 could grow to $570,000 in 60 years!). Also, if your employer is going to offer you the $2,500 contribution into the Trump account as a tax-free benefit, then I can’t see any reason not to open it and at least get the free $1,000 from the government and any employer contributions.
  16. Estate and Gift Tax: The OBBB has increased and made the Estate and Gift Tax exclusion permanent. The 2026 estate and gift tax threshold is $15M ($30M total for spouse with the election to “port” the first spouse’s unused exemption).
  17. State and local Taxes (aka SALT deduction): Many taxpayers have the misunderstanding that their real estate tax deduction is capped at $10,000. This is FALSE! It’s much worse than that. It’s your State and local taxes that are capped at $10,000. Your State and Local Taxes are your real estate taxes plus the income tax you paid to your state, plus the income tax you paid to your city/town. I have some clients that say “I live in Philadelphia, so my real estate taxes are low, they are only $6,000, so that cap does not affect me.” But if they also paid $3,000 in state tax and $3,000 in Philadelphia tax, then their SALT total is $12,000, but they only get to deduct $10,000. This $10,000 cap was set to expire on 12/31/2025. The OBBB has increased the SALT cap to $40,000 ($20,000 for married filing separately), for years 2025-2028. However, it also added a phase out that begins at $500,000 ($250,000 for married separately) and it is completely phased out at $600,000. Once you reach $600,000 your Salt deduction is reduced to $10,000. In the year 2029+ we are back to the $10,000 limit for all payers.
  18. Clean Energy credits:
    1. Previously Owned Clean Vehicle Credit: was set to expire on 12/31/32, is now set to expire on 09/30/2025. This is the credit for USED electric/hybrid cars.
    2. New Clean Vehicle Credit: was set to expire on 12/31/32, is now set to expire on 09/30/2025. This is the credit for NEW electric/hybrid cars.
    3. Qualified Commercial Clean Vehicle Credit: was set to expire on 12/31/32, is now set to expire on 09/30/2025. This is the credit for NEW Commercial electric/hybrid cars.
    4. Energy Efficient Home Improvement Credits: This credit was for heaters, windows, insulation, energy audits, HVAC systems etc. It was set to expire on 12/31/32, is now set to expire on 12/31/2025.
    5. Residential Clean Energy Credit (Solar): It was set to expire on 12/31/34, is now set to expire on 12/31/2025.
  19. Health Savings Accounts (HSA): Under current law your health insurance plan had to meet certain limits to be declared a high-deductible plan that was eligible to qualify for HSA savings accounts. Almost all of the plans offered on the heath exchange did not meet those requirements. Beginning after 12/31/2025 all bronze and catastrophic plans on the exchange will be considered eligible plans for the purpose of making HSA contributions.
  20. Premium Tax Credit Changes: The Premium Tax credit is a credit that helps subsidize health insurance purchased through the health care exchange/marketplace. This credit reduces the monthly health insurance premiums paid by taxpayers based on their income. So, the less income you earn, the higher the subsidy, and the less you pay out of pocket for your health insurance. This credit is reconciled each year when the tax return is filed. Under previous law, if your income had increased, and you did not qualify for the subsidy, you had to pay it back, subject to a maximum payback amount. The OBBB eliminates that maximum cap for years beginning after 12/31/2025. So, if your income increases from the time you apply for the subsidized healthcare to the end of the year, when you reconcile the subsidy, you could be stuck paying back a significant portion of that subsidy.
Changes for Businesses
  1. The Qualified Business Income Deduction was set to expire 12/31/2025 but has now been made permanent. The phaseout range had been expanded giving middle income taxpayers a larger deduction.
  2. Bonus Depreciation (section 168(k)): Under the TCJA this deduction was phasing out. In 2025 businesses were only able to deduct 40% of the cost of qualified property in year one and then depreciate the remaining balance over the useful life of the property. In 2026 that was to reduce to 20%. The OBBB puts that back to 100% of the cost of qualified property in year one. This is now permanent. However, it is only effective for property purchased on or after 1/20/2025. ***It is interesting to note, that property purchased from 1/1/2025-1/19/2025 are still subject to the 40% cap for 2025 (I am trying to figure out who they are trying to punish for that 19-day gap). This deduction has NO dollar limit.
  3. Section 179 expense election: Under the TCJA businesses were allowed to deduct 100% of the cost of qualifying property in year one, up to $1M. However, this $1M deduction was reduced if the total equipment purchases were over $2.5 M for the year. The OBBB increases the deduction to $2.5M with the reduction starting if equipment purchases exceed $4M. This goes into effect 1/1/2025. These amounts are now indexed for inflation starting in 2026.
  4. 1099-NEC forms: The threshold for issuing 1099-Nec forms has increased from $600 to $2,000 beginning in 2026.

Tax Tips

Union Dues (for PA residents)
Just a reminder that union dues are still deductible on the Pennsylvania state tax return. In order to make the deduction, PA requires that support be attached to the tax return. This support can be a copy of a statement from the union hall (preferred) or a copy of the last paystub of the year (from each employer if more than one) that clearly identifies the year-to-date union dues. Please make sure you have this at the time of your appointment. If needed, you can have the union hall fax the statements to us at 610-627-0932.

Parents of College Students
Many parents of college student are unaware that there are education tax credits that can be claimed on their tax return. These credits could be worth up to $2,500. Your college student will receive a form 1098-T from the college. While this form is in the name and social security number of the student, it is most often reported on the parents' tax return where it will generate the biggest credit. Most schools make them available on the student portal for the students to print out.

While we would prefer to prepare your college student's tax return (in order to run the numbers and maximize the tax credit), we understand that your college "kids" are now "adults" and may want to take responsibility in handling their own taxes. In that case, please tell your student not to file their return until we have determined if you will be claiming them.


Top Five Bookkeeping Mistakes

Top Five Bookkeeping Mistakes Made by Small Businesses

Starting your own business is an exciting endeavor. You're working hard to get things off the ground and putting the right systems in place to ensure your company's success. Unfortunately, this is also the time that bad bookkeeping habits start to take hold that in the long run, can cost you time, money, and unnecessary stress. Making sure your bookkeeping is set up the right way is crucial to ensuring your company's future success. Being aware of common pitfalls to avoid helps you better navigate your finances and protect your business for the long-term.

Here are top bookkeeping mistakes made by small businesses:

Failing to track reimbursable expenses.
Neglecting to keep track of your reimbursable expenses is simply leaving money on the table. You may very well be missing out on deductions that directly impact your bottom line. It's important to create a system that allows you to track expenses as you go along otherwise, it will most likely get pushed back to the last minute and eligible reimbursements may get missed.

Recording large ticket items as immediate expenses instead of assets.
Choosing to expense an item rather than depreciate it as an asset may help your immediate cash flow but it might also prevent you from receiving a more valuable benefit down the road. Expensing it right away means you won't be able to expense it later when your profits most likely have increased and you're paying a higher tax rate on your income. It's important to make a decision that takes future expectations into account.

Sole proprietors putting themselves on the payroll.
Small business owners have personal expenses just like everyone else but that doesn't necessarily mean they receive a company paycheck. Depending on how your business is set up, putting yourself on the payroll may be illegal. The IRS has specific rules on how you should pay yourself based on the structure of your business. It is important that your bookkeeping is set up the right way to make sure your payment procedures are in line with the law.

Not backing up your data.
Technology saves us both time and money but in the case of an IRS audit, it could be a liability if you're financial systems are not set up correctly. It is important to have an effective organizational system in place so you can access information quickly and avoid a major disruption in the case of a technological compromise or mishap.

Not giving your bookkeeping the attention it deserves.
Your main role as a business owner is to oversee your company's core business. When it comes to bookkeeping, even including setting up your QuickBooks, you should be working with an experienced professional who has the training and knowledge to keep your business's financial health in check while you focus on managing your company's overall performance.

Set your business up for success by learning how we can maximize your bookkeeping services. Call us at 610-565-8009 or fill out our contact form.

Learn about how our Bookkeeping Services can help your business.