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Roger Harris: Hello again everyone. It's time for another Federal Tax Update podcast. This is Roger Harris and I'm joined as always by my friend and colleague Andy Schwab. Andy, how are we doing today?

Annie Schwab: I don't know, Roger. I'm a little tired. We're recording this the the day after the midterm. So I usually have a very firm bedtime, but I did stay up a little bit later last night to watch the [00:00:30] final results.

Roger Harris: I'll have to admit I did the same thing, but it was kind of nice in one way, not picking a side here to to have the. It was kind of like watching a football team. And at night one team gets way ahead and you can go ahead and go to bed because the the outcome is known. So I wasn't up as late as I because it's I mean, I don't plan to stay up late, but then I get hooked in it and stay up late. And so yeah, it's, it's, you know, this coming right after daylight savings time, you know, it's starting to get a little a little tough on the [00:01:00] old guy here, but and we're going to talk about the impact of the midterms and what it means to us, uh, in our profession, you know, as part of the podcast today. But we're not going to start there. Uh, we're actually going to start by kind of going over some things we might have covered before. But, you know, I guess any, the other thing that's kind of depressing is October 15th. We used to think April 15th was the end of tax season. Then then we said, all right, it's not April 15th, it's October [00:01:30] 15th. And you you get through that, you wake up and catch your breath and it's time to start planning for next year already.

Annie Schwab: I know, and you're November and December just flies by. You know you're trying to get all your CPE in. You're trying to, you know, get catch up from what you didn't do. But when you were preparing for October, the holidays, the traveling and all this stuff, and the next thing you know, you're kicking off tax season again.

Roger Harris: Yeah, it's a new year. And it's like, Wow. Where did the year go?

Annie Schwab: Yeah, [00:02:00] I definitely feel that. Um, but there's never it's never too early to start getting, getting organized. I mean, there's plenty of things that you can do well in advance to just kind of check off your list. Um, so that, you know, it's just one less thing to do. Uh, obviously there are things that you have to wait on, you know, the release of your new software. Um, you know, those kinds of things. Uh, the opening of tax season. You know, we always wait for that announcement. I haven't seen anything yet.

Roger Harris: It's too early for that, you know?

Annie Schwab: So, um, yeah, but but, [00:02:30] you know, we'll start with some maybe just year end reminders of things that you can do. Most of these we have talked, um, or mentioned before, but it's always just a good reminder. Um, so we'll go through them pretty quickly and then we'll move on to some other topics. Yeah. Um, always good idea. Renew your PTEN. Um, it's open the, the renewal process is open. Same if you're getting a, you have someone getting a PTEN for the first time. Um, we do suggest that anyone who is involved in the preparation of the [00:03:00] tax return, even if they're not signing, you know, get a P10. It's under 20 bucks. Can't hurt to have kind of just, you know, just do it. Be safe. Get one. Um, two other things that we've talked about in previous podcasts, um, update your wisp, your written information security plan. Um, if you have one, go review it. If you sort of have one meaning like you just printed a template off of someplace so you could check the box when you got your pizza in, maybe [00:03:30] study it a little bit more. Definitely if you're going to make changes to it. Um, involve the staff, um, make sure that they know what the policies are. I feel like these scammers are getting so much smarter.

Roger Harris: They're getting a lot better. And you mentioned the PTEN. Remember when you go to renew your PTEN, you're going to acknowledge you're going to have to check a box, that you have a viable PTEN and you following all the rules. So that's not just there again. And I know you've heard us say this [00:04:00] a thousand times. It's not just there for you to check the box. You're really supposed to actually be checking a box that you have done and, and have everything that the state says. Yeah. So that is important because the scammers are getting better. And with AI, they're just going to continue to get better and God forbid something happens to you. Um, you need that wisp to guide you through it. It's not going to be fun if you have one, but it's going to be a whole lot worse if you don't.

Annie Schwab: Exactly. [00:04:30] And speaking of, you know, having cybersecurity review your, you know, policy, make sure it's still, you know, you've got the coverage you want, you've got the policies that you need. You, I strongly suggest having cybersecurity coverage. Um, but this would be the time to kind of make any changes with that. And then also related to cybersecurity. If, you know, if you get hacked and you need a new Ethan. Um, you know, make sure you know the steps to get that so you can continue running your [00:05:00] office. And we always recommend having two people listed on an Ethan. You know, if something happens to you, you want there to be someone who can step in. It doesn't have to be a CPA or an E or even a member of your staff. Um, just another person that can step in in case of an emergency. It doesn't take long to, to update. You can just it's called a principal or responsible official. Those are the two terms you can, you know, and maybe you need to remove somebody, you know, maybe you had a previous employer [00:05:30] employee. Um, so just, you know, some housekeeping in the office while you have a little bit of time to breathe.

Roger Harris: Yeah. Make sure your policy is up to date for the world we're in right now. Um, I was in DC and went, you know, was in there, um, technology group. And one of the things was about cybersecurity and making sure that you have the kind of insurance that will help, you know, little things. Well, not little things or big things that, you know, if you get hacked, that your [00:06:00] customers will be given some sort of monitoring service. That's part of the insurance because. And the biggest thing that I want, just as you know, again, we've you've heard us say this a thousand times, but having just come back from listening to that and, um, you know, as soon as you get hacked, don't try to hide it. Don't try to think through. What can I do to make it go? Call the stakeholder liaison at the IRS. Follow and you know the procedures there and get engaged with your, you know, coverage and tell [00:06:30] your clients keeping it a secret is just going to make it worse.

Annie Schwab: Make it worse.

Roger Harris: Yeah.

Annie Schwab: So and hopefully this won't happen to anybody this year.

Roger Harris: Yeah. But just, and as a reminder, and I don't know if we've said this, we're going to have the stakeholder liaison people on some kind of a semi-regular basis, uh, talking about the security threats because they're still going up. There's more and more hacks every time we get a briefing, it's gone up, so, uh, they've been kind enough to agree to. Come on on a quarterly basis and kind of update us. And we should have a. That podcast [00:07:00] you've probably heard us interview Glenn Gizzy before. Uh, we expect to have him back soon and, uh, we'll get a lot more detail. But yeah, now's a good time to make sure all that stuff's in place before you. The busy season, uh, engulfs you.

Annie Schwab: Yeah, exactly. Yeah. Um, and always the pro accounts, you know, we've talked about the individual accounts, the tax pro accounts, the business accounts. Um, we are definitely pushing those. Um, they've made several enhancements to them. Um, it's getting easier. They've even added some [00:07:30] sort of like help desk help support type thing. If you have a question, you know, you can type it in there and see what you can find. But um, those are going to, those are going to help streamline tax season for sure. Encourage your clients. Um, we've recommended before, you know, maybe you have somebody in your office who sits down at a computer and helps helps some of these clients walk through it. And get their online account. I do highly recommend that.

Roger Harris: Yeah. And there and to the service IRS credit, um, they're [00:08:00] putting a lot of emphasis on making those. You know, there's the tax pro account, there's the business account now and the individual account, they're trying to make them all better and individual accounts pretty doggone good right now.

Annie Schwab: I mean yeah, they've added a lot of things you can do. I mean I feel like they're adding tools and you know, bells and whistles all the time.

Roger Harris: And that's the direction where you're going to get more information and be able to deal with more things. So, um, you know, I know, you know, elderly people particularly have trouble sometimes [00:08:30] getting these accounts set up. And some people, I mean, they don't qualify, they don't have a cell phone in their name or whatever the issue is. But, but yeah, make an effort to, to really figure out how to get these online accounts up and running, because they're going to become really a great resource during tax season. Just the fact that you could go and get someone's transcript and verify that you have everything. It's going to make life, particularly with new clients that you've never seen before. You know, you can go look at a history. So again, they're [00:09:00] coming. They're here to stay. They're going to be just like your online bank accounts that we all have now. Or, um, you know, we have accounts with airlines, we have accounts with grocery stores. I mean, we got everybody, we might as well have them with everything. We might as well have it with the IRS.

Annie Schwab: True. Um, all right, a couple of other things here. Uh, review what your staffing needs. Are you thinking about hiring? Do you need to shift employees around what worked? What didn't work? Again, evaluate your clients. You know, not every client's [00:09:30] the best client. Um, and good client for you may be a poor client for somebody else. So go through your client list. Um, if you need to, you know, fire somebody, do it now so that they have time to go find a new preparer. Um, if you're, you know, marketing for new clients, think about ways you can get their attention, ways you can get them to, you know, click on your book appointment or schedule a phone call type thing. This is going to be the time that if somebody was unhappy with perhaps their previous CPA or tax [00:10:00] preparer, you know, they may start looking. So if you're looking for clients, make sure that you're out there so that they can find you. Um, pricing is another big thing. Um, if you're going to raise prices or maybe change your pricing structure or strategy, you know, maybe you're going to bundle price or set up packages or, or however you, you know, you plan to move forward, especially if it's a change from a previous year, um, notifying the clients of any adjustments or different procedures or if you're changing, you know, how [00:10:30] you intake client information or how you deliver client information, maybe now you're taking deposits, maybe, you know, fees have changed. All of that stuff is, you know, it's the sooner you can communicate it, you can sort of, uh, figure out if it's, you know, maybe they're going to leave, maybe they're, you know, going to want to schedule a call and come in to discuss. You know what this means for them. Um, sooner than better, I think, on all of these. Yeah.

Roger Harris: Yeah. All of this the tech evaluate your technology for sure. [00:11:00]

Annie Schwab: Ai. Man, you got to think about it now. You got to really think about, you know, what's going to be your, um, policy for your office, for you and your employees. Are you going to allow AI or is it, you know, which ones, how secure is it? Um, you know, how, how are you going to, if, if and maybe how would you, you know, disclose to your clients that you're using AI? Um, it's definitely powerful and it's not going anywhere, but it's not just something you can, you [00:11:30] know, take without reviewing their circular 230 now has a, an area for artificial intelligence and what our due diligence is about relying on some of this. So if you haven't given it some thought, I know, Roger, we've done at least two podcasts regarding AI and what's safe and what's not. And you know, you got to put the good stuff in to get the good stuff out and how to prompt and all those types of things. Um, if you're new to this world, um, take a look at one [00:12:00] of some of our previous podcasts. I think they're pretty interesting.

Roger Harris: Because I hear it's, you know, it's not going anywhere and it's just a matter also take, you know, particularly, you know, sometimes we use the engagement letters that come in our software. Sometimes we have our own. I mean, we have our own, you know, that we have make sure somebody looks at those things because the world changes. And you mentioned it a minute ago. What are we supposed to do about disclosing, you know, how we utilize AI and what what do the clients have a right to know about our use of AI? Yeah. [00:12:30] So, you know, it's a good time. You know, I'm sure if you have an engagement letter that you developed yourself, at least I hope what I'm saying is true. You had the assistance of an attorney who understands how to do all this. It's a good time to look over it and get with them and make sure that your engagement letter is ready for 2027, not from 1997. You know, the last time anybody looked at it, because those things can become, you know, none of you ever have to go to court or ever have to defend yourself. But those engagement letters sometimes [00:13:00] can be critically important if you ever find yourself in that position.

Annie Schwab: Yeah. Um, let's see a few reminders here on kind of payroll stuff. Um, the fire system, um, which has been around for a while, it is actually retiring. They're, they're shutting it down. So if you are using the fire system, um, you'll be now need to use what's called Iris. Iris um, and that is a new program that's launched [00:13:30] and that is how you will now um, transmit returns to the last day to um test. This was actually November 1st. And then it looks like in mid November is going to be the last day to file information returns using the fire system. And then beginning January, it's gone. Iris will be the only IRS electronic filing system for informational returns, including current year and prior year and all that kind of stuff. So, uh, evaluate what you're going to do if your fire system user, [00:14:00] um, and, you know, get training, get, get everything converted, get ready so that you're not caught in January with something new that you need to, to focus on.

Roger Harris: Right? And this is if you're doing it yourself, there are obviously services and companies that can do all this for you, and I'm sure they'll take care of it. But if you're trying to do this internally. Yeah. And if you haven't paid attention to this, you're going to be in for a surprise when you try to file those things, uh, next year.

Annie Schwab: Yeah. And then as you know, we're [00:14:30] coming up on a little bit more information on the information returns and payroll. But, uh, you know, that neck 1099 neck and the 1099 miscellaneous, um, I know we've mentioned before, but those thresholds for preparing those was increased from $600 to 2000. So you may not see as many of those. We'll have to. Just because you don't get one doesn't mean it's not taxable. Right. Um it's still reportable income. It's just not required to be presented on a 1099. Um, so make sure that, you know, [00:15:00] you might not see as many, but hopefully your organizer, your intake question will, you know, say, you know, did you receive have any income that was not reported on, you know, such forms? Yeah. Um, and, you know, the W-2 is going to look a little different this year. We've been talking about this for two years now, but we've got some extra boxes and codes and stuff for the Trump accounts for tips for overtime. Uh, just a reminder though, that 2025 sort of get out of jail free card. Do your best to figure it out. Transition [00:15:30] relief is gone. Um, if it's not on the W-2 for tips and overtime, you can't report it. So, um, you know, if you have, if you have clients that you know, are working in, you know, those types of industries. Um, maybe you can, you know, send them a reminder to make sure that their employer is tracking this and reporting it on, on the correct lines and forms with codes and all those kinds of things.

Roger Harris: Yeah. I mean, it's, and it's going to be interesting this year is, you know, the rules have changed with regard to the ebays of [00:16:00] the world where we.

Annie Schwab: Were.

Roger Harris: Having to deal with that. So last year we had to pound everybody to bring us those statements.

Annie Schwab: Yeah.

Roger Harris: Now the threshold has gone back up. So they're not going to bring them because they're not going to get them.

Annie Schwab: But they're not going away. You'll still get the 1099 case. Yeah.

Roger Harris: Um but the threshold the threshold has gone up for like the grandma who had a yard sale. So they brought the stuff to you last year and all of a sudden this year they don't get one. They don't bring it to you. And to Andy's point, that doesn't [00:16:30] mean they didn't do it right. We have the statement, but something tells me they probably did it before we got the statements, and they'll do it afterwards.

Annie Schwab: But that could happen to.

Roger Harris: Track somebody who showed up last year and disappeared this year. Probably not enough money, but it's.

Annie Schwab: Who knows what kind of comparison they'll they'll do. Yeah. Um. Let's see. Okay. Lastly, kind of on the payroll, um, scheme of things, you know, if you've got clients who make those estimated tax payments, maybe just take a look. Anybody you need to talk to about updating [00:17:00] or changing or, or doing an extra estimated tax payment or adjusting withholdings. The best part about having your withholdings adjusted in December is it's considered to be paid equally or randomly throughout the year. So, um, you know, if you have somebody who maybe gets big bonuses or something at year end, um, and tends to owe money when they file, maybe see if they would prefer to just go ahead and withhold additional monies from, from, you know, the last two paychecks or something. Yeah. Um, that's, [00:17:30] that's smart.

Roger Harris: And even, you know, if you know, you can do this, if you, it works better if you're in a small company or your company, because it's easier to deal with HR. But let's say you need to make. You've skipped all your payroll. Estimated tax payments, and you get to the end of the year and you're ready to make one. Instead of making one, go to your employer and say, take 100% of my paycheck to taxes and use the estimated tax money you were going to pay to live on. And because [00:18:00] that withholding that they did will be, as you said, treated as if it were spread out all over the year. So you don't.

Annie Schwab: Get those penalties.

Roger Harris: There's ways to catch up. And then, um, I saw something the other day and, and we probably talked about this before because it's come and gone, uh, a new emphasis on reasonable compensation.

Annie Schwab: Uh, there is, um, and, and it's always been sort of, you know, the S Corp shareholder, you know, what is a reasonable comp? What, how does that affect distributions and loans to shareholders? But, um, there was, there [00:18:30] was an IRS exam and audit division that kind of put out a memo proposing more of a reasonable comp comp program for S corpse. Um, so that way they'll they'll look and see if the salaries look too low. You may now start getting a notice that I'll actually have a QR code on it that will provide information about the business industry and their roles, and kind of encourage people to take a second look at what they're doing. And, and this report was about reasonable comp, but it's a similar [00:19:00] thing with guaranteed payments for partners. So, you know, you need to, you need to look and see, you know, did they provide services? Are they getting guaranteed payments for their services or are they taking distributions? Um, I honestly, I, I feel like this was like really popular seven, several years ago, a lot of, um, audits related to it. And then it kind of went quiet. So I wonder if this is like a new beginning of, of we're back on this, uh, kind of stretch of making sure that we're not, you [00:19:30] know.

Roger Harris: Beating the system. Yeah. Well, they've always said it was important because I mean, what's always amazed me is particularly in the S Corp world. I mean, on the return you have to state how much the officer's salary are and how much the distributions were. And in many instances they're just admitting you. They've got no salary and $100,000 of distributions. I mean, don't you think you ought to send them a notice and ask them, you know something. So it's something that [00:20:00] they could almost do without a lot of people.

Annie Schwab: Yeah.

Roger Harris: Yeah yeah. And but I think they're, they, they seem to be putting another emphasis on it. You know, as you said, it's always they've always said it's a priority item, but sometimes they don't seem to be. I guess they get deflected to something else, but they seem like they're coming back with it. So, uh, it's a good time to have that discussion while you still have the payroll open for the right.

Annie Schwab: You can make adjustments if you need to.

Roger Harris: Yeah. Before you hand out [00:20:30] W-2s and then you get into doing the tax return and go, oh, I should have done something.

Annie Schwab: So Yeah.

Roger Harris: Yeah.

Annie Schwab: All right. Well, just a few tips there. Maybe it's a good reminder every now and then just to go over some items that can help tax season. Um, this is also a great time to have, you know, proactive communication with your clients. I don't know, Roger. If you send out holiday cards anymore. I feel like I haven't gotten a holiday card in a while. I'm not going to lie.

Roger Harris: You know, I don't even get them from family [00:21:00] members anymore. You know, but no, I don't I hate to be in that business. I guess hallmark still getting by okay, though.

Annie Schwab: Yeah, I guess so. But, you know, this is a good time to reach out to, to clients. Um, we send, we encourage our offices to send year end planning letters and we'll talk about some year end planning ideas, but, you know, maybe some letters or maybe it's just a, you know, welcome to the new year email. You know, if you're still interested, reach out to me. Um, and definitely if you have like, you know, maybe you moved or your [00:21:30] contact information has changed or maybe you want to ask for some reviews or referrals if you're trying to grow. Like I said earlier, you know, any kind of communication that gives them a heads up on price adjustments or changes to, you know, how your, your processes are going to work. Um, reminds them of deadlines. Uh, we like a lot of our offices use like a calendar link. So they'll send an email or a letter and then they can click on it and schedule 15 minutes here or here or here. And [00:22:00] that just avoids somebody calling in and you take in ten minutes. Oh, does Tuesday work. Does Wednesday work. You know like trying to figure that out. So some tips on that. But I think it's always good to sort of have some sort of feeler out there towards your end, um, that, you know, kind of reminds them, okay, there he is. It's that time of year again. Um.

Roger Harris: And you mentioned it's a great time for referrals because they're going, friends are going to ask them who does your know, I'm assuming you have capacity, right to take on new work. But if you do your, your [00:22:30] client should know that because as people, you know, it happens. Who do you use to get your taxes done? They know that they can refer them to you. Um, even if you don't have as much capacity as you would like. It doesn't hurt because we've all I think you mentioned it earlier. You know, we probably have clients we wish we didn't have. Um, and if I can get rid of a client that I don't want and replace it with one that will follow my rules and pay my fees. Yeah. Um, my capacity [00:23:00] actually grows and my life gets a little better because I've replaced a bad client with a good one. So yeah. I don't think you should ever just say, I don't ever want to hear from anybody. I think you may have a very tough set of rules for someone to come on if you're near capacity, but it doesn't ever hurt to to listen and see if, um, that person looking for somebody new would be a great replacement for somebody that.

Annie Schwab: You don't love. Let's say you just don't love.

Roger Harris: You know, you [00:23:30] don't, you don't love them. You don't even like them.

Annie Schwab: Yeah, exactly. All right. So Roger, let's move on to just a few year end planning stuff, and then we'll talk about the election or the midterms. Um, you know, traditional sort of bunching of deductions, right. Uh, that's been around forever. Um, you know, the standard deduction for joint filers is at 32.2. So it has significantly increased over the last two years I guess. Um, and [00:24:00] there are some phaseouts going on for itemizers, especially as it relates to charitable contributions. There's a couple of changes there. So I mean, it's a worthy of a discussion, especially if maybe you have some clients that are, you know, people who donate lots of money. Um.

Roger Harris: And they're right at that age, you know, as the standard deduction has gotten more, higher, um, fewer and fewer people have enough to itemize though the salt tax, uh, change solves [00:24:30] some of that. But, um, yeah, maybe it makes sense to bunch one year and take the standard the next year. Now we do have a little, um, ability to deduct charitable contributions and still take the standard deduction, right. So, you know, you may not need to play that game, but it's, you know, it's a good time to, to, you know, this is where you can justify the fact that your fees are what they are is if you remind people before the end of the year, again, hopefully your software can help [00:25:00] you identify these people that are right at that standard deduction threshold. But you know, they own a home and, you know, they make charitable donations. And obviously you would assume they have some sort of state tax and, um, at least talking to them about thinking about accelerating some things so that this year you can itemize and next year you'll take advantage of the standard deduction, but you'll be better off for the two years.

Annie Schwab: Yeah. And that's I mean you know, we heard [00:25:30] so much about the salt cap and I mean, it has I mean, it's at 40,000, a little over 40,000. Um and there's a phase out, but you know, we've, we've heard from lots of, you know, depending on what state you live in and your, your state and local tax rate, um, there's a lot of discussion over, you know, how that works and when you should pay your, your, um, your taxes.

Roger Harris: So yeah, so, you know, and again, we don't have a lot of new stuff this year on the individual side. Um, I mean, [00:26:00] I guess, you know, make sure your people are aware of the Trump accounts, you know, that's just kind of free money. I'm wondering if the election, if they'll still be the Trump accounts a couple of years. Yeah. There may be the Schwab accounts, I don't know. Right, right, right. But, you know, um, there's money there. And, uh, if you have eligible child and I think the government's going to try to auto enroll a lot of people.

Annie Schwab: And I heard that, and there have been a lot of states that sort of recruiting, you know, billionaires to, to provide [00:26:30] funds to, to some types of funds to, for the kids. Like, I don't know, there's like, you know.

Roger Harris: Well, just yeah, I mean, this was just, I think it was in the news this week. Frank Bisignano, who is the CEO at the IRS, is he's from Brooklyn, and he's going to put $250 in every child eligible child in Brooklyn from. I'm sure he's got some foundation or trust or something. But but it's basically he's, he's going to contribute and there's companies that are doing that. So there's. [00:27:00]

Annie Schwab: Yeah.

Roger Harris: You know, it's, I mean, look, I take the politics out of it and the name out of it, it's it's a good idea to start putting money aside for children. And of course, if the government and, and private sector people are going to contribute to it, why not? Um, so, uh, again.

Annie Schwab: They've got an app now there's a, I mean, it's, they've made it so much easier since when they were first introduced to, to set these up. And, um, so it's, there's, I think there's an app, there's an online [00:27:30] this or that, and you can monitor, you can actually handle some of these through the on online program. You can change how it gets invested and, and all types of things. So, um, yeah, definitely worth considering.

Roger Harris: Yeah. Good thing to talk to your clients about that. At least know that that's, that's an option. Again, assuming they have young children, I mean.

Annie Schwab: Yeah. Right. Yeah. Um, some kind of ones that always stand out, you know, look at your portfolio, you know, watch out for wash sales. If you it's still 3000 [00:28:00] of ordinary income is what losses, you know, the losses you can take up to 3000 a year. Um, and then, you know, if you've got some big gains, maybe sell some stuff at a loss to offset. Um, if you've got some winners and you're thinking of selling, maybe wait, if you can get past the one year mark so that you have long term rates, um, those are always good sort of year end things to do with your investment accounts and um.

Roger Harris: And, you know, the clients that have big activity [00:28:30] in those accounts. And I guess what's always shocked me, some people know everything that's going on in there, but I'm amazed how many people have no idea what's happening in their account. And they bring you that statement when they bring their taxes. And you look at their and they've got 150,000 of gain on stock sales, and they know nothing about it because all they did was sell them and reinvest it in something else. So they never got any money and, uh, taking, you know, getting [00:29:00] one of their interim statements or getting access to their online account, however you do it. And taking a glance at that in October or November, even December, while you have time to get that January estimated tax payment made, or to your point, if there's some losses in there that they've been thinking about selling to offset some of it, because, again, I think the people either know everything that's going on that account or absolutely nothing.

Annie Schwab: Or they just put blinders on and they, you know, kind of.

Roger Harris: And all they know is, yeah, it went up. My my guy's doing a good job. [00:29:30] Well, there's two things you should look at. See how much money that guy is getting paid? Because that's sometimes is shocking. And particularly if there's we've all seen them where the people that seem to be trading every day. Um, and sometimes that's a lot of transactions that make nothing. And sometimes there's a lot of transactions that make a lot, but the fees sometimes go up. So it's just help your clients understand those are important things to look at and see if you've got those heavy investors that can come by and [00:30:00] get a meeting. Uh, again, continue to validate why your service is important because at some point it may be that we get to a full AI environment where they don't need you to put the numbers on the return. They need you to help them influence what those numbers are.

Annie Schwab: Mhm. Good point. All right. What else do we have?

Roger Harris: Um um business clients. What do we what do we need to be thinking?

Annie Schwab: I mean, we certainly do. Oh, something else that I wanted to remind you of on the individual [00:30:30] stuff, um, required minimum distributions, especially if you have clients that are getting to that age that they're required or they're thinking of retiring and they're sort of in that kind of awkward period, um, of needing required required minimum distributions and the 529 plans, those are always, um, you know, encourage clients if they have or want to donate to. Um, 529 contribute to 529 plans. Um, that's, that's also great. And don't forget, if [00:31:00] you funded, you know, flex savings account, sometimes the money doesn't roll over. It depends on the plan. So, you know, if you have clients.

Roger Harris: There's a limit to how much you'll roll over. Even if it rolls over and you lose it if you don't.

Annie Schwab: Yeah, it's kind of tricky. I know dependent care is a little different, but depending on what sort of employee sponsored accounts, um, that you participate in, some of those are are hard. You get a grace period or you get nothing or you forfeit. Or you can roll it all or, you know, there's all specific. [00:31:30] So just a little bit of, I don't know, HR there, um, can be helpful.

Roger Harris: Oh yeah. Yeah, watch the flexibility. I think one year I ended up buying like three years worth of contact solution because.

Annie Schwab: Just, just to use.

Roger Harris: It. Yeah. If I'm going to lose the money, I'm going to stock up on something.

Annie Schwab: That's.

Roger Harris: Smart. And there's a lot of stuff that's, you know, qualifies that you don't think about, you know?

Annie Schwab: Yeah. True.

Roger Harris: And also you'll have to be making your decision on how much for next year, right? So if you have way more put going in that you are [00:32:00] wasting at the end of the year, you know, you may not want to have as much put in the following year. So it's just something that, um, I don't know, we don't think about it as something.

Annie Schwab: And then then you realize that you lost it or you lost, you didn't waited too long or this or that and then you know, right?

Roger Harris: So if you're working somewhere and you get your employer benefit form at the end of the year, You know, pay attention to it, advise your clients to pay attention to it. And if they need to call you, they can. But, you know, don't, don't just always repeat what you did last year. If you're [00:32:30] over contributing, if you will, to your, uh, flexible spending account, put it towards your 401 K or whatever instead. Yeah, you know, that stays with you.

Annie Schwab: Yeah. Okay. Now I'm ready for.

Roger Harris: All right. Now we've got two businesses.

Annie Schwab: I'll let you start. What are you what are you thinking of? First off, what's at the top of your head?

Roger Harris: The I mean, the first thing you always do is people want to, you know, look, about buying some equipment, you know, at the end of the year because you get that 179 deduction or bonus depreciation, whatever it [00:33:00] is, that's, you know, for most of our small business clients is massive. Now, you know, telling someone to go buy a piece of equipment they don't need to save on taxes isn't, you know, isn't great advice. But if they're looking to do something and they're on that edge of deciding whether to or not to, um, you know, make sure they're aware of how it's going to could impact their taxes. And again, that's where is it better to do it at the end of 26 or wait and do it at the [00:33:30] beginning of 27. How is our year looking? But for clients that are heavily in that kind of business where they're buying a lot of equipment, um, it doesn't hurt to have a discussion and make sure that you get it in the year. You need it to, um, to get the most maximum tax benefit. So that's the first thing. I think it's the easiest thing. But again, yeah, that's not great tax advice for somebody that doesn't need anything. If someone says, well, how can I save taxes? Well, you can go buy this $50,000 [00:34:00] printer. Yep. I don't need one. Well, it saves taxes.

Annie Schwab: And I mean, there's, there's, there's still 100% bonus depreciation, which is permanent on certain qualifying properties. And the definition of qualifying properties has been updated and tweaked for several years. Um, and the limit for 179 has, you know, gets indexed for inflation. So there are a few tweaks, but I wouldn't say there's anything horribly new this year. Um, but it's still worth the conversation, especially if you know of somebody, you know, expanding [00:34:30] their, their business, um, and could benefit by, you know, kind of accelerating deduction strategies, so to say, you know, you've got income deferral, um, strategies, you can have a deduction acceleration strategy. Um, and a lot of that can be around purchase of equipment. Um, that. Yeah.

Roger Harris: And you'll, you'll tend to know the clients that are heavily capital intensive that are always buying things and, you know, taking a look to see whether it makes [00:35:00] sense to, to rush it up, kind of like this bunching of deductions we talked about for individuals. Does it make sense to, to move stuff up into the current year, or is the year such that we need to say, just wait. You know, if you wait till, wait till January. Um, the other thing, and this is somewhat similar, you mentioned someone who started a business and you're working your way through, um, looking at their method of accounting, you know, because who knows how they picked, how they started. They could be cash or accrual based [00:35:30] on what somebody told them. And, and maybe that's not the right kind of, um, a system for them to be under and getting that changed and understanding the ramifications of that and those sorts of things could, you know, it's a good time if you have anybody that fits under that to go ahead and kind of get that out of the way and understand the tax ramifications of that change, it could be a beneficial change.

Annie Schwab: Yeah, it could be. And there is, um, you know, she is still there, 20% [00:36:00] of pass through income, um, still there, meaning it's been actually made permanent. Um, there are some phaseouts and limitations and stuff, but there's a new $400 minimum deduction. Um, and there's the way that that is calculated could be affected by big depreciation write offs. So, you know, if you're talking to your clients about making large purchases and expensing equipment, you know, be sure to keep qbi deduction in, [00:36:30] you know, in the conversation too.

Roger Harris: And then there's that. There's all that kind of, I call it irritating stuff you have to think about at the end of the year, the, you know, records for vehicles, you know, if we're going to do office in the home, is it something there? Even the, you know, the de minimis deductions, you know, making sure that, you know, your people are aware of that.

Annie Schwab: Yeah.

Roger Harris: Might be time to this, I guess this is business or non-business to make the decision whether they they qualify as [00:37:00] a real estate professional. Do they have the hours put in? You know, there's, there's just all of that stuff that's probably more specialized. But dealing with that now and getting a good handle on where, where this client is and what options. And there may be no options, but at least if there is an option there that they need to be presented with, this is the time to make sure they understand it. Without the rush and the pressure of just getting taxes done and failing [00:37:30] to tell them something that might be substantial might make a big difference in their tax bill.

Annie Schwab: Yeah for sure. So, you know, these are all good conversation starters. Um, you know, again another touch point with your clients. I think, you know, getting in front of them with ideas, thoughts, reminders, you know, whatever, giving them an opportunity to, to reach out to you, schedule an appointment type of thing before you're in can only help. It'll, you know, prove [00:38:00] that you're, you know, the services that you're providing are, are worthy.

Roger Harris: And remember, this doesn't always, I'm hoping, you know, we talk about staffing. And so each of you are in different positions. Some of you have a big staff. And that doesn't mean you have to do it. Your staff can do a lot of these things we've talked about, uh, and maybe it's a good way to, to invest in your staff by bringing them up to speed on some of these things and say, all right, I want you to handle all the people that are looking at change of accounting or whatever, right? Or [00:38:30] grouping deductions. It's a good way to, to bring your staff into, you know, meeting with your clients, getting some of the work off of you. Um, making makes them feel important, you know, that you trust them and they become better employees if you train them. Now, if you're a one person shop, it's going to be you, you know? Yeah. But again, it's still better to do it now than do it in the midst of, uh, a busy season for sure.

Annie Schwab: All right. Shall we talk about the midterm elections? I know, um, we [00:39:00] we kind of teased it in the beginning and I don't want to run out of time.

Roger Harris: Um, yeah.

Annie Schwab: Let's I'm going to let you take the lead on this one.

Roger Harris: All right. Well, I'm going to give you something interesting. We you know, we're sitting here. This is the day after the election. I mean, what what is known is that the Democrats are going to take over both the House and the Senate. Now, there are still unknowns in terms of the size of the majorities, both in the House and the Senate. There are races that are still yet to be called, and in some instances, [00:39:30] it's surprising how long it takes. I've got to. This is Manny. I haven't even told you this. I found this very interesting. I was looking this morning about there's some Senate races that I think there's two that are still uncalled. There's the. Yeah. Wait till you hear this. There is a Senate race still outstanding in Mississippi. Now, as of an hour ago, 96% of the vote is in. And that represents 945 almost 46,000 votes. [00:40:00]

Annie Schwab: Okay.

Roger Harris: The Democrat leads the Republican by guess how many votes? 65.

Annie Schwab: But how many? I've missed the. I'm trying to do the calculation in my head. So 60 votes are still unaccounted for.

Roger Harris: So there's 96% in, but 950 946,000 roughly, have already been cast, and they're within 65 votes of each other.

Annie Schwab: I mean, I'm glad they're not calling it. They're going to have to count [00:40:30] those by hand.

Roger Harris: I mean, you can go, I don't know. I mean, I just that's I'm shocked that any race is that close. But that's one of them. And I think the other ones Alaska that just takes forever. And they've got some weird. But but but again, uh, we do know that the Democrats are going to take over the majority in the House and majority in the Senate. Now, they don't take over till January. So the first thing is going to happen is once all the dust settles and the election is behind us, the [00:41:00] current Congress, the lame duck Congress, as they're called, is going to come back and they're going to have in theory, though, they've got holidays and they don't work every day of the week and all that.

Annie Schwab: I think they said like two weeks in November and two weeks in December.

Roger Harris: Technically, technically. And that's, you know, how they can decide to go home tomorrow if they want to. But so there's some unknowns in what they're going to do because the Republicans are still in charge for these, I will say two months. So they're not going to be in business [00:41:30] for, I mean, in session for two full months. Um, and there's some interesting dynamics there. What is the feeling of a lot of those people who aren't going to come back in January? Or do they care? Are they mad at anybody? Do they want to ram things through while they can?

Annie Schwab: What's their goal for the next you know?

Roger Harris: Yeah.

Annie Schwab: Remainder of their time.

Roger Harris: The Democrats are not going to want anything to happen that they don't like. Because when the calendar flips over, they're in charge. Now a [00:42:00] couple of things that that I know. One we're watching and one I'm watching is we've talked a lot about the tax act that, uh, got through the Senate. So it's just sitting at the house. And if the house were to pass it, then all it would go to President Trump and it would become law. And that's where you get a lot of the IRS improvements. You get the minimum standards for tax preparers. And that was an interesting study by Tigta today about all the I think it was yesterday, actually, all the damage that Non-credentialed preparers are doing, IRS [00:42:30] inability to, to track preparers. So you would hope that since this has already gotten out of the Senate. Because if you're trying to get something out of the Senate in the next two months, you've still got the filibuster to overcome. The Democrats aren't going to let anything out that they don't want out. So it's unlikely you're going to get anything other than maybe something that it's going to have to be something Republicans and Democrats agree on to get out of the Senate. But this is already out of the Senate. It sits over at the House. But you've got a lot of Republicans that lost their jobs yesterday. [00:43:00]

Annie Schwab: Yeah, yeah.

Roger Harris: And, um, so I'm hoping that that bill, since it's already passed out of the Senate, will be able to.

Annie Schwab: And it had bipartisan support.

Roger Harris: It was passed on unanimous consent. No one objected to it. So it's got it's got as much I mean, you got in theory, you got 100 people that said yes. But really what matters is nobody said no, that's.

Annie Schwab: All.

Roger Harris: Right. But but so it's sitting there. So hopefully that. Because the other thing and again, we probably covered this. If this doesn't happen in this Congress, when we roll [00:43:30] over to January, you got to start over so it doesn't carry over. So that's one bill that we're going to be watching in the lame duck to see. Can they take that across the bill personally, there's a Protect College Sports act that's in the same position that I would like. I would like to see get through much new I you know, who knows? You can now the Republicans try to come in and say, let's throw a Hail Mary here at the last minute. Let's get everything we've ever [00:44:00] wanted and try to figure out some how to get it passed in the next two, two weeks, two months. But if it has to go through the Senate and it's going to require and it's got to pass a filibuster, that ain't happening. Now, there's a thing called reconciliation, which is usually, if it's got a tax partial to it or it's money, sometimes you can get by with just the party line vote, but it's going to be hard to get much done. So I think there's going to be a lot of picking, which kind of leads into the next [00:44:30] Congress picking leadership in the new. Now the Democrats are in charge picking leadership. The Republicans are going to have to pick their leadership. There's going to be committee fights over who gets to chair what committee. And that's I think that's where most of the energy is going to be in this lame duck. But this Congress has one more bite at the apple, and they've got a couple of months to do it.

Annie Schwab: Yeah. But then what? What's I mean.

Roger Harris: Even in the whole world changes.

Annie Schwab: Yeah. But it's like, is, is anything going to happen? Because technically Trump can [00:45:00] veto.

Roger Harris: He can veto anything. Well, here's, here's, here's what's going to be interesting from our perspective in the in the world the Democrats are going to take over. So they also take over the chairs of all the committees. So the two main committees that generate tax legislation is Ways and Means and Senate Finance. So those have been under Republican control, and they've had the majority of the members on those committees. Well, in the next Congress now, we're going to have a Democratic chairman and the Democrats are going to have [00:45:30] their, um, the majority of their members in those committees. So any changes in taxes are now going to be driven, for the most part, unless we all of a sudden have this bipartisan takeover in Washington by the Democrats priority. So would they, for instance, go after any of the big, beautiful bill provisions because, you know, none of them voted for it when it passed?

Annie Schwab: Right.

Roger Harris: So in theory.

Annie Schwab: Funding the IRS, like.

Roger Harris: Funding the IRS.

Annie Schwab: There's [00:46:00] so much money that was clawed back. Generally, the Democrats are a little bit more gracious.

Roger Harris: They want to spend it. Yeah, they they want to give the IRS more money. Now, what's interesting there is typically when an if we have a presidential change and a congressional change, we're probably getting ready right now. We don't technically have an IRS commissioner. We have a CEO. Right. The Democrats could challenge that as being legal. You know, that we're supposed to have a commissioner. So would. But now do they want to push that because then Trump would appoint [00:46:30] the commissioner. I mean, they're right. Right. So I mean, there's just going to be some really interesting dynamics going on back and forth. And you you touched on it a minute ago. The Democrats can pass every bill they want. They can they could repeal the big, beautiful bill. They could get all their votes in the Senate and all their votes in the House, and they send to Trump, and he vetoes it. Yeah. Which means nothing happens. And they don't have a two thirds majority. And they want and they're not going to have one to to override [00:47:00] a veto. So. But the next two years we're going to be seeing what the Democrats vision for taxes are more than we've seen the Republicans vision for the most part. Now we're going to see the Democrats vision. And you mentioned IRS funding. You know, are we going to give the IRS more funding? Would Trump let that go? Um, and then what's really interesting, a lot of these provisions, if you remember the old in the big beautiful bill expire in three years.

Annie Schwab: Yep. They do.

Roger Harris: And now you're going to have [00:47:30] a Democratic Congress, most likely dealing with the expirations instead of the Republicans who passed it. So would things like no tax on tips, the senior deduction, would all those things survive? Uh, in in our new I don't know, exactly the third year, but I mean, you can start working on it now and say when it expires, this or that.

Annie Schwab: But yeah, I, yeah, I mean, I, I don't know, maybe it's good if nothing happens, maybe it's, I don't know, maybe maybe. Yeah. You [00:48:00] know, I don't, I don't know how to predict, you know, if all.

Roger Harris: Well, none of us do.

Annie Schwab: Nothing gets through and everything stays the same. Is. I don't know if that's. I think.

Roger Harris: And this is my personal opinion, I'm not a political expert. I think some of the votes that the Democrats got is I think a lot of people like a divided government. So there's a check and balance. They don't want to give either party 100% control so that they can pass the law and sign the laws. I mean, this way you're going to have the Democrats vision most likely coming out [00:48:30] of Congress, but it has to meet with the president's vision or he'll veto it. So that, in theory, should lead to more compromise of working on certain things together so that they're not wasting time trying to pass something they know.

Annie Schwab: And Trump doesn't want his reputation to, you know, for the next two years to just, you know, be blah. You know, I feel like he likes to be in the spotlight. He wants to get stuff done. He wants to.

Roger Harris: He likes to be in the spotlight, [00:49:00] that's for sure.

Annie Schwab: Yeah. Uh.

Roger Harris: Uh.

Annie Schwab: Okay.

Roger Harris: But I think so. I think, you know, we're gonna have to watch tax policy because we're going to have new people in charge. I think we probably know, you know, who the chair committees are going to be. But now your people are also lobbying for getting on certain committees, you know, um, so, you know, we'll have new members of all the relevant committees. Uh, we'll have new chairman in some. That's a lot of what's going on now.

Annie Schwab: Mhm.

Roger Harris: Um, and we'll get a sense of what, what the tax policy is. I mean, you know what they say in the campaign, [00:49:30] but that doesn't always mean that's how they're going to govern, you know. But so we'll get an idea of what the tax policy is going to be. And if there's going to be any changes and maybe we'll get a sense of, um, what's going to happen when some of these provisions of the big beautiful bill. But I mean, you hear the Democrats saying they want to raise taxes. They thought the big, beautiful bill went overboard on tax breaks for the wealthy. So does that mean we get a change in rates at the top end? They want to restore a lot of the money that, you know, when [00:50:00] you hear cuts out of Washington, that's it's like, all right, is it really a cut or is it just a reduction in growth? But anyhow, they want to refund some, you know, replace some money to Medicare and health care. So it's going to be an interesting time. But we got to get through the lame duck, see if anything happens there. Then we'll move into the midterms. And then the presidential campaign will probably start January 1st. We'll start getting a sense from both parties who's there's no natural. Person, [00:50:30] you know, in either party, I guess, Vance. But, you know, as bad as this was, does does he have much of a chance when this whole when the administration just got, you know, rebuffed so badly in the midterms. So we'll see. So at least you won't get the stuff in the mail for a while.

Annie Schwab: I was just about to say like, there's always going to be winners and losers. And, you know, maybe your person won, maybe your person didn't. But I feel like I am a winner because my phone is not blowing up today with phone [00:51:00] calls from political campaigns or text messages reminding me to go vote even though I voted like three weeks ago. Yeah. You know, I mean, I do. I will take that as a win.

Roger Harris: Um, that is a definite win.

Annie Schwab: For an extra hour of sleep this weekend. So I mean, look.

Roger Harris: But I gave it back last night.

Annie Schwab: Yeah. That's true. I did say.

Roger Harris: I gave it back last night. Uh, it's gonna be interesting. It's going to be an interesting again. The rest of this year is going to be interesting to watch while we see what happens with our current Congress. And then we'll start [00:51:30] seeing get some sense next year of what the Democrats priorities are and what they're going to want to do. And again, is it there's gonna be a lot of things other than this, but the tax part of it is something we'll keep an eye on, you know, in IRS funding. Um, and you're going to give money to an agency that's run by people you don't like. Are you going to wait and give it to the agency? But they think that they need more money regardless of who's in charge. So that's going to be an interesting dynamic. Um, yeah. Because remember the Secretary of Treasury, who is the [00:52:00] boss of the CEO will change. Well, no, they won't change. They're not going to change any cabinet members. So you're going to have the Secretary of Treasury and the CEO of the Republicans going to the Congress for the Democrats for funding. So we'll see how they play.

Annie Schwab: Nice.

Roger Harris: Play nice. Be nice.

Annie Schwab: Yeah.

Roger Harris: Do your job.

Annie Schwab: This was fun. But this will probably air. And you know, it'll be two weeks from election day or whatever. But, um, at least maybe, maybe the at least Mississippi will be [00:52:30] able to claim.

Roger Harris: Maybe we'll have a senator from Mississippi by then. You know what? If they tie.

Annie Schwab: I that would be nearly impossible.

Roger Harris: Well, I would have thought 65 votes, but who knows. But I've never I've never seen an election that actually was a tie.

Annie Schwab: No, can't.

Roger Harris: Be a recount, but maybe a tie. But something something you never say. Never.

Annie Schwab: Yeah. True. Well, Roger, thanks for giving us your your opinion on sort of the next two months and then perhaps even into the future. So [00:53:00] I know it's going to be we'll be bringing back some more content. We'll have people come in and chat with us about, you know, what they think and what's the direction things are going. So continue to stay with us. Watch us invite your friends. Yeah. And I hope you everyone has a great holiday season ahead.

Roger Harris: Yeah. Get some rest. Enjoy the enjoy the special time of year, get a little work done. But you know, spend time with family and get ready. Because I hate to say it, but tax season is not that far away.

Annie Schwab: Yeah. 2027 [00:53:30] knocking.

Roger Harris: On 27. Yeah. Well thank you always. Thanks for everything. Always a pleasure. Thank you for for all you do. Thanks for being with us today. Thanks to everybody for listening. And, um, we'll be back in a couple of weeks. And thank you for joining us and bring a friend.