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IRS Clarifies Reporting Rules for Overtime Deduction

IRS Clarifies Reporting Rules for Overtime Deduction

The IRS recently updated its guidance on the federal deduction for qualified overtime compensation, providing new reporting requirements that take effect beginning in tax year 2026. The updated guidance includes additional details on eligibility, reporting obligations, and how employees claim the deduction.

Under the updated guidance, employers must separately report qualified overtime compensation on employees’ Forms W-2 using Box 12, Code TT. The IRS also clarified that employees generally can claim the deduction only for overtime amounts reported on their W-2. If the amount is incorrect, a corrected Form W-2c may be required before an employee can claim a larger deduction.

Who Qualifies?

Not all overtime compensation qualifies for the deduction. The deduction generally applies only to certain overtime compensation required under the federal Fair Labor Standards Act (FLSA). In most cases, employees may deduct only the overtime premium portion of their pay, not their entire overtime wages. For most FLSA overtime-eligible employees, qualified overtime compensation for a workweek can be calculated as follows:

FLSA hours worked over 40 × 0.5 × employee’s FLSA regular rate of pay = qualified overtime compensation for the workweek

Eligibility depends on whether an employee is covered by the FLSA’s overtime rules, and many employees classified as exempt from those rules generally will not qualify. The IRS’s updated guidance also includes additional information regarding FLSA coverage and exemptions.

What Employers Should Do

Employers should review payroll, timekeeping, and year-end reporting processes to ensure qualifying overtime pay is properly identified, tracked, and reported for the 2026 tax year. Businesses should also work with payroll providers to confirm systems can separately report qualified overtime compensation as required. Employers that report incorrect amounts may need to issue corrected forms and could face reporting penalties.

The IRS also reminded taxpayers that overtime pay remains subject to federal income tax withholding and payroll taxes. The provision allows eligible workers to claim a deduction on their tax return; it does not make overtime earnings tax-free.

Bottom Line

While the deduction itself remains largely unchanged, the IRS has established new reporting requirements that place greater responsibility on employers to accurately identify and report qualified overtime compensation. Employers should review their processes now to avoid reporting issues and ensure employees receive accurate information when claiming the deduction.

How HTB Can Help

If you have questions about how these reporting requirements may affect your business, our team can help evaluate your payroll and reporting processes and assist with compliance planning for the 2026 tax year. Contact us today to start the conversation.

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Tax Mistakes New Business Owners Make in Their First Profitable Year

Tax Mistakes New Business Owners Make in Their First Profitable Year

Your first profitable year in business is worth celebrating, but it is also a milestone that often brings new tax, financial, and planning considerations.

The strategies that worked when revenue was lower may no longer be sufficient as your business grows and becomes more profitable.

With increased profitability often comes a more complex tax picture. Business owners may be responsible for estimated tax payments, self-employment taxes, pass-through income reporting, and payroll tax compliance. Understanding these obligations early can help minimize surprises and support long-term success.

The following are some of the most common tax mistakes new business owners make during their first profitable year and steps that can help avoid them.

Not Preparing for Estimated Taxes

One of the first adjustments many business owners face is realizing that taxes are no longer a year-end obligation.

When you were an employee, taxes were withheld from each paycheck. As a business owner, some or all of your income may not be subject to withholding. However, federal tax obligations generally must be satisfied throughout the year through estimated tax payments or other withholding arrangements.

If you expect to owe at least $1,000 in federal tax, quarterly estimated tax payments are generally required. These payments should reflect your complete tax picture, including income taxes and any additional taxes that may apply to your business structure.

For example, self-employed individuals are generally responsible for self-employment tax, which helps fund Social Security and Medicare. Unlike employees, who share these payroll tax costs with their employers, self-employed individuals are responsible for both portions.

Pass-Through Income May Affect Estimated Taxes

Business owners operating as LLCs, partnerships, S corporations, or other pass-through entities may also be taxed on their share of business profits, regardless of how much cash is distributed.

Depending on the entity structure, this income may be reported through a Schedule K-1 or another reporting mechanism.

For example, if a business allocates $100,000 of taxable income to an owner but distributes only $40,000 in cash, the owner’s tax liability is generally based on the full $100,000. Without proper planning, this can result in a significant tax obligation that exceeds available cash distributions.

Understanding the relationship between taxable income and cash flow is essential for effective tax planning.

The Safe Harbor Rule Is Not a Substitute for Planning

The IRS safe harbor rules can help taxpayers avoid underpayment penalties in certain situations. Generally, penalties may be avoided if taxpayers pay at least 90% of the current year’s tax liability or 100% of the prior year’s tax liability, subject to certain limitations.

While these rules can provide flexibility, they should not replace proactive tax planning.

A business’s first profitable year is an ideal time to work with a trusted advisor to project taxable income and estimate tax obligations. Reviewing income taxes, self-employment taxes, and pass-through income throughout the year can help reduce unexpected liabilities and improve cash-flow management.

It is also important to establish a strategy for setting aside funds for future tax payments. Depending on the business structure and financial circumstances, those reserves may be maintained at either the business or individual level. The key is ensuring adequate funds are available when tax payments become due.

Running Out of Cash Despite Showing a Profit

Another common misconception is that profitability automatically means a business has strong cash flow.

While an income statement may show a profit, cash may still be tied up in accounts receivable, inventory, equipment purchases, or prepaid expenses. In some cases, expenditures that reduce available cash may not immediately appear as expenses for tax or financial reporting purposes.

As a result, a profitable business can still experience cash-flow challenges.

To help avoid these issues, business owners should evaluate cash flow separately from profitability. Monitoring receivables, managing inventory levels, and understanding the tax treatment of major purchases can provide greater visibility into the business’s financial position.

Maintaining adequate liquidity can help businesses meet tax obligations, navigate seasonal fluctuations, and address unexpected expenses without disrupting operations.

Mishandling Payroll Taxes

Payroll tax compliance is another area that requires careful attention.

Whether you have employees or operate as an S corporation and pay yourself a salary, payroll obligations generally include withholding taxes, making timely deposits, filing required reports, and maintaining supporting documentation.

One common mistake occurs when payroll withholdings are viewed as available operating cash. These amounts are collected on behalf of employees and must be remitted to the appropriate taxing authorities.

Failure to meet payroll tax obligations can result in significant penalties, interest, and other compliance concerns.

Because payroll requirements can be complex, many business owners benefit from working with an experienced payroll provider, CPA, or accounting professional who can help ensure requirements are met accurately and on time.

Waiting Too Long to Start Retirement Planning

Retirement planning is often one of the most overlooked opportunities available to profitable business owners.

Becoming profitable does not necessarily mean maximizing retirement contributions immediately. Many owners are focused on reinvesting in their businesses, strengthening cash reserves, or pursuing growth opportunities.

However, profitability often creates new opportunities to incorporate retirement planning into an overall tax strategy.

Depending on your circumstances, contributions to a SEP-IRA, Solo 401(k), or other qualified retirement plan may provide tax advantages while helping you build long-term wealth. Starting early can provide greater flexibility as profitability and retirement savings goals evolve.

Waiting until tax season to explore retirement options may limit available choices. Discussing these strategies with an advisor before year-end can help ensure you understand available opportunities and related deadlines.

What to Do Now

Your first profitable year should create momentum, not unexpected tax challenges.

By projecting tax liabilities, building appropriate reserves, monitoring cash flow, maintaining payroll compliance, and evaluating retirement planning opportunities, business owners can position themselves for continued success.

Turning Profit Into Long-Term Success

As businesses grow, so do the tax and financial considerations that come with success. Navigating estimated tax payments, cash flow management, payroll compliance, and retirement planning often requires a more proactive approach than in a company’s earlier stages.

At HTB, our advisors help business owners understand the tax and financial implications of growth and identify strategies that support both short-term needs and long-term objectives. Whether you’re making estimated tax payments for the first time, evaluating cash flow needs, addressing payroll tax requirements, or exploring retirement planning opportunities, our team can help you develop a tailored approach aligned with your goals. As your business continues to evolve, we’re here to provide the guidance and insight needed to help you make informed decisions with confidence. Contact us today to start the conversation.

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Construction Accounting That Reveals Problems Early: Job Costing, Change Orders and WIP Reporting

Construction Accounting That Reveals Problems Early: Job Costing, Change Orders and WIP Reporting

A contractor can have a strong backlog, busy crews and plenty of invoices going out while profitability is quietly moving in the wrong direction.

That is one of the challenges of running a construction business. Costs may be incurred weeks before they can be billed. Additional work may begin while a customer is still reviewing a change order. And a project that looked profitable at the start can lose margin before the issue becomes obvious.

Strong construction accounting processes can help identify those problems earlier. Three areas are particularly important: job costing, change-order management and work-in-progress (WIP) reporting. When these processes work together, they can give management a clearer picture of project performance and help identify potential issues while there is still time to respond.

Start With Reliable Job Costing

Accurate job costing is the foundation of useful construction reporting. Tracking costs by project helps contractors understand where project dollars are going, but additional detail can provide even greater insight.

Depending on the business, contractors may track field labor, materials, subcontractors, equipment and other direct costs separately, with additional detail by project phase or cost code. This can help management understand not only that a project is over budget, but why.

For example, if labor is significantly over budget while material and subcontractor costs remain close to expectations, management can focus its attention on potential productivity, overtime or estimating issues.

Timing matters too. A project may appear more profitable than it actually is if vendor invoices, payroll or subcontractor commitments have not yet been captured in the accounting system.

Regularly reviewing job costs with project managers can help ensure the information is complete, timely and reflective of what is actually happening in the field.

Keep Project Forecasts Current

Job costs tell you what has already happened. An updated estimate to complete helps show where a project is headed.

Project managers are often the first to know when productivity is slipping, material requirements have changed or subcontractor issues may increase costs. Establishing a regular process for communicating those changes to accounting can help keep financial reporting aligned with current project expectations.

For many contractors, a monthly review provides an opportunity to revisit estimated costs to complete, labor assumptions, subcontractor commitments, unrecorded costs and expected gross margin.

Contractors should also pay attention to margin fade. If a project’s expected margin continues to decline, understanding what is driving the change can help management determine whether the issue relates to estimating, execution, scope changes or a combination of factors.

Reviewing these changes regularly gives management an opportunity to address issues before they have a greater impact on project profitability.

Keep Change Orders Visible

Change orders sit between project operations, billing and accounting, making them a common source of financial surprises.

Additional work may begin before pricing or formal approval is finalized. In the meantime, labor, material and subcontractor costs continue to accumulate. Without a consistent process for tracking that work, contractors may not have a complete picture of the project’s costs, billing position or profitability.

A shared change-order log can help operations and accounting track additional work from the initial request through final approval and billing. It can also provide visibility into expected revenue and costs, outstanding approvals and items that may require follow-up.

This gives management a clearer picture of work being performed without final approval and whether unresolved changes are beginning to affect billing, cash flow or project profitability.

Use WIP Reporting to Bring It All Together

The WIP schedule brings together job costs, current estimates, revenue and billing to provide a broader view of project performance.

Underbillings and overbillings are an important part of that review, but the numbers alone do not tell the whole story.

An underbilling may simply reflect a timing difference between when work is performed and when it can be billed. In other cases, it could point to a missed billing milestone, unresolved change order or costs accumulating faster than anticipated. Sustained underbilling can also create cash-flow pressure when a contractor is funding work before collecting for it.

Overbilling, on the other hand, can benefit cash flow, but it should not be confused with profit. Some of that cash may still be needed to cover the remaining costs required to complete the project.

Understanding why a project is underbilled or overbilled can help management determine whether the position reflects normal timing or points to a billing, forecasting, change-order or cash-flow issue that deserves attention.

Make WIP Review a Team Effort

A meaningful WIP process involves more than the accounting department. Accounting knows what has been recorded and billed. Project managers understand what is happening in the field. Estimators know the assumptions behind the original budget. Leadership has insight into the company’s broader cash needs and project portfolio.

Bringing those perspectives together through regular WIP reviews can provide a more complete picture. Rather than giving every project the same level of attention, contractors may want to focus on projects with:

  • Significant changes in projected margin
  • Large underbilling or overbilling positions
  • Substantial unresolved change orders
  • Changes in estimated costs to complete

For those projects, management can consider what has changed, what is driving the current billing position and whether the financial forecast still aligns with what the project team is seeing in the field.

The goal is to make sure information from the field reaches the financial reporting process while there is still time to respond.

Make Sure the Numbers Tell the Same Story

Job costing, change-order management and WIP reporting each provide a different piece of the same picture.

Job costing shows where the money is going. Updated forecasts show where the project is headed. Change-order controls keep changes in scope and contract value visible. WIP reporting brings those pieces together to show their impact on revenue, billing, expected profit and cash flow.

When one area is incomplete or outdated, the others become less reliable.

One practical exercise is to compare the job-cost report, change-order log, current estimate to complete and WIP schedule for several of your largest active projects. Ideally, each should tell a consistent story about how the project is performing. If they do not, the differences may point to areas that deserve a closer look.

How HTB Can Help

Strong construction accounting goes beyond knowing where a project stands today. Having timely, reliable information can help contractors identify margin erosion, address billing issues and make more informed decisions throughout the life of a project.

At HTB, our construction professionals understand the unique financial and operational challenges contractors face. We work with clients to evaluate job costing, WIP reporting and other accounting processes to help provide a clearer picture of project performance. Whether you’re looking to strengthen your current processes or better understand what your numbers are telling you, we’re here to help. Contact us today to start the conversation.

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HTB Named to Accounting Today’s 2026 Best Firms to Work For List

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Hannis T. Bourgeois, LLP is proud to be recognized as one of Accounting Today’s 2026 Best Firms to Work For for the fifth consecutive year.

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August 2026 Construction Economic Report

Explore the latest economic trends shaping the construction industry.

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Form 990 Mistakes That Can Impact Your Nonprofit’s Credibility

Form 990 Mistakes That Can Impact Your Nonprofit’s Credibility

For many nonprofit organizations, Form 990 is one of many year-end compliance requirements competing for limited time and resources. Between advancing your mission, managing operations, fundraising, and overseeing governance responsibilities, the annual filing can easily become just another item on the checklist.

However, Form 990 serves a much broader purpose than meeting an IRS requirement. Because it is publicly available, donors, grantmakers, board members, regulators, and other stakeholders often use it to evaluate an organization’s financial health, governance practices, and overall stewardship. Errors, inconsistencies, or incomplete disclosures can create compliance concerns and raise questions about organizational oversight.

As you prepare for your next filing, here are several common mistakes nonprofits should avoid.

Assuming Last Year’s Filing Still Applies

Many organizations take the same filing approach year after year without reconsidering whether circumstances have changed. While that may be appropriate, it should never be automatic.

The form your organization is required to file depends on several factors, including its tax-exempt classification, annual gross receipts, total assets, and activities. For example, smaller exempt organizations may qualify to file Form 990-N, while others may be eligible to file Form 990-EZ instead of the full Form 990.

Organizations should also remember that limited activity does not necessarily eliminate their filing obligation. Even if programs were reduced, revenue was minimal, or operations were largely inactive during the year, filing requirements may still apply.

The consequences of overlooking those requirements can be significant. An organization that fails to file a required annual return or notice for three consecutive years automatically loses its tax-exempt status. Restoring that status can be both time-consuming and costly, often requiring additional filings, IRS fees, and professional assistance.

A best practice is to review filing requirements annually, establish internal deadlines ahead of IRS due dates, and confirm that electronic submissions have been successfully accepted.

Submitting Financial Information Without Reconciliation

Form 990 relies on information from multiple sources, including accounting records, donor management systems, payroll reports, and audited financial statements. When those records are not reconciled, inconsistencies can easily find their way into the return.

Common issues include:

  • Contribution revenue that does not align with donor records
  • Grant revenue reported inconsistently throughout the return
  • Compensation figures that cannot be reconciled to Forms W-2 or 1099
  • Beginning net asset balances that do not match the prior year’s filing

Not every difference indicates an error, but every significant difference should be understood and documented before the return is finalized.

A clear reconciliation process improves reporting accuracy, provides support for reported amounts, and creates a stronger foundation if questions arise during a board review, audit, or regulatory inquiry.

Treating Narrative Disclosures as Boilerplate

Some of the most impactful sections of Form 990 are not financial at all.

Part III requires organizations to describe their mission and program accomplishments. Yet many nonprofits simply copy narrative descriptions from prior-year filings even when programs, priorities, or outcomes have changed.

Generic statements rarely tell stakeholders much about an organization’s impact. Instead, nonprofit leaders should use this opportunity to provide meaningful context around the services delivered, communities served, and measurable outcomes achieved during the year.

For example, rather than stating that the organization “provided educational services,” a stronger narrative might describe the number of workshops conducted, participants served, or certifications completed.

Annual review by program leadership can help ensure these disclosures accurately reflect current operations and are supported by organizational records.

Forgetting That the Return Is Public

Unlike many tax filings, Form 990 is intended for public inspection. As a result, the return should be reviewed not only for technical accuracy but also through the lens of an external stakeholder.

Financial information, governance disclosures, compensation reporting, and program descriptions all contribute to how an organization is perceived by donors, grantmakers, and community partners.

Before filing, organizations should compare Form 990 to other publicly available information, including:

  • Audited financial statements
  • Annual reports
  • Organizational websites
  • Board minutes
  • Approved compensation documentation

Differences may be completely appropriate, but they should be understood and, when necessary, documented or explained. Schedule O often provides a valuable opportunity to add context and enhance transparency.

Organizations should also exercise caution when preparing public-inspection copies to ensure sensitive information is handled appropriately and disclosure requirements are followed.

Creating a Filing Process That Relies on One Person

Many Form 990 issues stem from a lack of communication rather than a lack of technical knowledge. Important information often resides with multiple individuals across finance, development, operations, and leadership teams.

Even organizations with limited resources can benefit from a formal, repeatable filing process.

Consider developing a process that includes:

  • Reconciling key financial records after year-end close
  • Gathering information from accounting, payroll, development, and program teams
  • Reviewing narrative disclosures for accuracy
  • Completing internal leadership and board review procedures
  • Verifying IRS acceptance of the electronic filing

A consistent process helps reduce errors, improve efficiency, and ensure the preparer has complete and accurate information.

How HTB Can Help

Form 990 is more than a compliance requirement. It is an opportunity to demonstrate transparency, accountability, and sound financial stewardship. HTB’s nonprofit professionals can help you navigate filing requirements, review reporting and disclosure considerations, identify potential issues before filing, and implement processes that support accurate, consistent reporting year after year. With the right guidance, your organization can strengthen compliance while staying focused on advancing its mission. Contact us today to start the conversation.

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Cash Flow Forecasting: Turning Financial Data Into Better Decisions

Cash Flow Forecasting: Turning Financial Data Into Better Decisions

Imagine reviewing a profitable month, seeing a healthy bank balance, and feeling confident about the road ahead, only to face a cash crunch a few weeks later.

Situations like this are more common than many business leaders realize. While financial statements provide valuable insight into past performance, they don’t always reveal what’s coming next. That’s where cash flow forecasting comes in.

By providing visibility into future cash inflows and outflows, cash flow forecasting helps business leaders make more informed decisions around hiring, capital investments, financing, and growth initiatives. When used effectively, it becomes more than a financial exercise. It becomes a strategic planning tool.

Financial Reporting vs. Financial Foresight

Most organizations rely on financial statements to evaluate performance. Profit and loss statements measure profitability, balance sheets provide a snapshot of assets and liabilities, and cash flow statements show how cash moved through the business during a specific period.

These reports are critical, but they share one common characteristic: they are largely focused on historical activity.

While financial statements can tell you what happened last month or last quarter, they cannot tell you whether you’ll have sufficient cash to fund a major purchase, support planned growth, or navigate a slower-than-expected season six months from now.

Relying solely on historical financial information can make it difficult to anticipate future cash needs and respond proactively to changing circumstances. By the time a cash flow issue appears in a financial report, the opportunity to address it may be limited.

Why Timing Matters More Than Profit

One of the most common misconceptions among business owners is that profitability automatically translates into cash availability.

In reality, profit and cash flow are not the same thing.

A business can be profitable on paper while still experiencing cash flow challenges if the timing of cash inflows and outflows doesn’t align. Customer payments may not arrive for weeks or months after revenue is recognized, while payroll, rent, inventory purchases, and other operating expenses continue on schedule.

Consider a business that secures a significant new contract. The project may increase profitability, but if customer payments are delayed while expenses must be paid immediately, the organization could face cash constraints despite reporting strong financial results.

Cash flow forecasting helps identify these timing gaps before they create operational challenges, giving leadership teams time to evaluate options and plan accordingly.

Using Forecasts to Make Better Decisions

Many organizations create a budget at the beginning of the year and periodically compare actual results to those expectations. A forecast serves a different purpose.

Rather than focusing on what was originally planned, a forecast answers an important question: Based on what we know today, where is the business headed?

Unlike a static budget, a forecast is updated regularly as new information becomes available. It evolves alongside the business and provides leadership with a current view of future cash needs.

Effective forecasting often requires input from multiple areas of the organization. Sales teams can provide insight into customer demand and expected revenue timing. Operations teams can identify upcoming equipment purchases, inventory needs, or vendor commitments. Finance teams can monitor collections, payment schedules, and financing requirements.

When those perspectives come together, forecasting becomes a powerful tool for decision-making rather than simply another financial report.

Signs Your Business Could Benefit From Better Forecasting

Many organizations would benefit from a more structured forecasting process, particularly if they experience any of the following challenges:

  • Cash balances fluctuate significantly from month to month.
  • Growth plans are delayed because future cash availability is uncertain.
  • Customer payment timing regularly creates operational challenges.
  • Major financial decisions are based primarily on current bank balances.
  • Financing conversations tend to be reactive rather than proactive.
  • Leadership teams spend significant time responding to cash flow issues rather than planning ahead.

A forecast cannot eliminate uncertainty, but it can help identify potential challenges early enough to evaluate solutions before they become urgent.

Scenario Planning and Working Capital Management

One of the greatest advantages of forecasting is the ability to evaluate multiple scenarios before making important decisions.

Rather than relying on a single projection, many organizations maintain a base-case forecast along with alternative scenarios that reflect potential opportunities and risks.

For example:

  • What happens if a major customer pays 30 days later than expected?
  • What happens if a large contract is delayed?
  • What happens if hiring needs accelerate faster than anticipated?
  • What happens if a new growth opportunity materializes sooner than expected?

Considering these possibilities in advance allows leadership teams to make decisions with greater confidence and flexibility.

Forecasting can also help improve working capital management.

In many cases, cash flow improvements can be achieved without increasing revenue or reducing expenses. Accelerating collections, improving invoicing processes, negotiating customer deposit requirements, or extending vendor payment terms can all have a meaningful impact on cash availability.

Similarly, establishing a business line of credit before it is needed can create additional flexibility when short-term timing gaps arise.

A well-maintained forecast helps leaders understand when these strategies may be appropriate and what impact they are likely to have.

Building a Sustainable Forecasting Process

Creating an effective forecasting process does not necessarily require sophisticated software or complex financial models.

Many organizations begin with a straightforward framework that identifies recurring cash outflows, expected cash receipts, and major upcoming expenditures. The most important factor is consistency.

Regularly updating assumptions and monitoring results against projections often provides greater value than a complex forecasting model that is reviewed infrequently.

As organizations grow, forecasting can become more closely tied to broader strategic decisions, including expansion plans, hiring initiatives, pricing adjustments, capital investments, and financing strategies.

When forecasting becomes part of the organization’s decision-making process, it evolves from a reporting exercise into a valuable leadership tool.

How HTB Can Help

Financial statements remain an essential part of managing a business, but they only tell part of the story. Cash flow forecasting provides the visibility leaders need to anticipate challenges, evaluate opportunities, and make informed decisions with greater confidence.

At HTB, we help business owners and leadership teams move beyond historical reporting and use financial information as a strategic planning tool. Whether you’re evaluating growth opportunities, strengthening working capital, preparing for financing discussions, or building a more robust forecasting process, our advisors can help you develop an approach tailored to your organization’s goals.

By combining financial insight with practical business guidance, we help clients turn financial data into better decisions that support sustainable growth and long-term success. Contact us today to start the conversation.

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Prepare Now for a Smoother W-2 Season

Prepare Now for a Smoother W-2 Season

As year-end approaches, now is an ideal time for employers to take a proactive look at payroll records before W-2 reporting begins. With only a few months remaining in the calendar year, addressing potential issues now can help reduce administrative burdens during W-2 season and give employees time to make any necessary withholding adjustments.

Review Employee Information

Employers should verify that employee names, addresses, and Social Security numbers are accurate and up to date. Even minor discrepancies can create delays or require corrections during the W-2 filing process. It’s also a good time to confirm that former employees have current mailing addresses on file, as W-2s must be provided to all employees who received wages during the year.

Encourage Employees to Review Form W-4

Life events such as marriage, divorce, the birth of a child, or significant changes in household income can affect an employee’s tax withholding needs. Encouraging employees to review their Form W-4 now allows them to adjust withholding before the end of the year and helps reduce the likelihood of unexpected tax bills or large refunds when they file their returns.

Employees may also find the IRS Tax Withholding Estimator at IRS.gov helpful when evaluating their current withholding elections. For additional information on 2026 Form W-2 and W-4 updates, click here.

Review Benefit and Deduction Reporting

Before year-end, employers should review payroll deductions to ensure employee benefits, insurance premiums, retirement plan contributions, and other withholdings have been deducted and remitted correctly throughout the year. Addressing discrepancies now can help avoid reporting issues, employee concerns, and time-consuming corrections during W-2 preparation.

Businesses should also confirm that employer contributions to retirement plans and other benefit programs have been properly recorded and funded.

Evaluate Taxable Fringe Benefits

Employers that provide fringe benefits should begin gathering the information needed for year-end reporting. Common taxable fringe benefits include:

  • Personal use of a company vehicle
  • Group-term life insurance coverage exceeding $50,000
  • Employer-paid moving expenses (with limited exceptions)
  • Gift cards and other cash-equivalent awards
  • Greater-than-2% S corporation shareholder health insurance premiums
  • Cell phone allowances exceeding $100 per month

Reviewing these items now helps ensure the appropriate amounts are included in employee wages before W-2s are prepared.

Consider Electronic W-2 Delivery

Many payroll systems offer secure electronic delivery of W-2 forms. In addition to providing employees with faster access to their tax documents, electronic delivery can help reduce the risk of forms being lost, delayed, or intercepted through the mail. Employers should review their payroll provider’s available options and ensure employees are properly enrolled if electronic delivery is offered. QuickBooks Payroll users can provide employees with electronic W-2 access through the Workforce platform.

Plan Ahead for Employee Bonuses

As businesses begin planning holiday and year-end bonuses, it’s important to remember that bonus payments are taxable wages and should be processed through payroll. Rather than issuing separate checks outside the payroll system, employers should ensure bonus payments are properly reported and subject to the appropriate tax withholding requirements.

Start the Fourth Quarter Strong

A little preparation now can go a long way toward creating a smoother year-end reporting process. By reviewing employee information, evaluating withholding elections, confirming benefit and deduction reporting, planning for employee bonuses, and identifying taxable fringe benefits, employers can reduce last-minute stress and be better prepared for W-2 season.

At HTB, we understand that payroll compliance and year-end reporting can be time-consuming and complex. Our team works with businesses of all sizes to address payroll, tax, and accounting considerations throughout the year. If you have questions about payroll reporting, employee withholding, or year-end tax planning, contact us to learn how we can help support your business goals.

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State Tax Nexus in 2026: Understanding Your Multi-State Tax Obligations

State Tax Nexus in 2026: Understanding Your Multi-State Tax Obligations

As businesses expand beyond their home state, many owners are surprised to learn that their tax obligations may expand as well.

Hiring remote employees, selling products online, working with contractors in other states, or using third-party fulfillment providers can all create tax responsibilities in jurisdictions where a business has never opened an office or established a physical location.

The concept that determines when these obligations arise is known as nexus. While the rules vary by state and tax type, nexus generally refers to the level of connection a business has with a state that allows it to impose tax, registration, or filing requirements.

Understanding where nexus may exist can help businesses minimize compliance risk and avoid unexpected obligations as they grow.

Understanding Nexus

Nexus is not a single rule that applies uniformly across all taxes. Sales tax, income tax, payroll withholding, unemployment taxes, business registration requirements, and gross receipts taxes may each have different standards. Those standards can also vary significantly from state to state.

Generally, nexus is established in one of two ways:

  • Physical presence within a state
  • Economic activity within a state

Both can create significant tax and compliance obligations.

Physical Presence: It’s More Than Just an Office

Historically, nexus was most commonly associated with maintaining an office, storefront, warehouse, or other physical location within a state. Today, the definition is much broader.

Remote Employees and Contractors

One of the most common ways businesses create nexus is through remote workers.

In many states, having an employee working remotely may create payroll tax, unemployment insurance, registration, or business tax filing obligations. Depending on the state and circumstances, a single employee may be enough to establish nexus.

Independent contractors can create similar concerns. Whether providing sales support, consulting services, installation work, or customer assistance, individuals working on behalf of a business in another state may create filing or registration requirements.

Remote work can also create payroll complexities. Certain states, most notably New York, apply a “convenience of the employer” rule under specific circumstances. Depending on the facts, employers may be required to withhold tax even when employees perform services outside the state.

Even when the initial obligation is primarily administrative, failing to identify requirements early can create compliance issues later.

Inventory Held by Third-Party Fulfillment Providers

Businesses selling products online should also consider where inventory is stored.

Companies that use Amazon FBA or other fulfillment networks may have inventory distributed across multiple states, often without actively selecting those locations.

In many states, inventory stored within a state’s borders may create nexus, potentially resulting in registration, reporting, or tax obligations. Even where marketplace facilitators collect and remit sales tax, businesses may still have additional compliance responsibilities to evaluate.

Economic Nexus: When Sales Activity Creates an Obligation

Nexus is not limited to physical presence.

Following the Supreme Court’s decision in South Dakota v. Wayfair, states gained authority to require remote sellers to collect and remit sales tax based on economic activity alone.

Today, every state that imposes a statewide sales tax has adopted some form of economic nexus standard.

The most common threshold is $100,000 in annual sales into a state, although some states use higher thresholds. For example, California and Texas currently apply a $500,000 threshold.

Once a business exceeds a state’s threshold, registration and sales tax collection obligations may arise, even if the business has no employees, property, or physical location in that state.

Important Considerations

When evaluating economic nexus exposure, businesses should keep several factors in mind:

  • Not all sales are treated the same. Some states measure thresholds using gross sales rather than taxable sales, meaning exempt transactions may still count toward the threshold.
  • Marketplace sales may be included. Sales made through platforms such as Amazon, Etsy, or similar marketplaces may count toward nexus thresholds, even if the platform handles sales tax collection.
  • Transaction-count thresholds are becoming less common. Many states have moved away from thresholds based on the number of transactions and now focus primarily on sales volume.

Common Nexus Triggers

Several business activities frequently warrant a closer look, including:

  • Hiring employees in states where the business has never operated before
  • Expanding online sales into new markets and approaching economic nexus thresholds
  • Storing inventory in multiple states through marketplace or fulfillment providers
  • Using contractors or employees to perform services across state lines

If any of these situations apply to your business, a nexus review can help determine whether additional compliance obligations may exist.

Taking a Proactive Approach

A nexus review can help identify where obligations may exist and whether action is needed. Areas to review often include:

  • The location of employees and contractors
  • Inventory locations, including third-party fulfillment providers
  • Sales activity by state
  • Potential economic nexus thresholds
  • The specific products or services being sold

Even when historical exposure exists, businesses often have options available. Many states offer voluntary disclosure programs that may help limit penalties and reduce lookback periods for businesses seeking to come into compliance.

Because nexus rules continue to evolve, periodic reviews are often more effective than a one-time assessment. Businesses should revisit their state tax footprint whenever they expand into new markets, hire employees in new locations, add fulfillment arrangements, or experience significant revenue growth.

How HTB Can Help

As businesses grow, state tax obligations can become increasingly complex. Activities that seem routine, such as hiring a remote employee, expanding online sales, or using a third-party fulfillment provider, may create filing and compliance requirements in states where a business has never operated before.

At HTB, we help businesses evaluate their state tax footprint, identify potential nexus exposures, assess compliance requirements, and develop practical strategies that support continued growth. Whether you’re expanding into new markets, managing a remote workforce, or simply looking to better understand your multi-state tax obligations, our team can help you evaluate your situation and determine the most appropriate path forward.

By taking a proactive approach, businesses can reduce risk, avoid unexpected surprises, and focus on growth with greater confidence. Contact us today to start the conversation.

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How New Tax Regulations Are Reshaping Bank Lending and Investment Strategy

How New Tax Regulations Are Reshaping Bank Lending and Investment Strategy

The banking industry is entering a period of significant transformation as sweeping federal tax changes begin influencing how financial institutions approach lending, investments, and client advisory services. These developments are about more than compliance. They are reshaping the economics behind commercial lending decisions, altering investment strategies, and creating new opportunities for banks to add value for their customers.

For financial institutions that can quickly assess and respond to these changes, the potential benefits extend well beyond the tax department. Institutions that understand the practical implications of new legislation will be better positioned to strengthen client relationships, identify growth opportunities, and navigate an increasingly complex regulatory environment.

Today’s banking tax professionals are working through a landscape that continues to evolve. Federal reforms are intersecting with changing state requirements, while audit expectations remain high. As a result, tax considerations are becoming more closely tied to broader business decisions, influencing everything from loan underwriting and portfolio strategy to capital allocation and long-term planning.

The Qualified Business Income Deduction and Commercial Lending

Among the most significant developments is the permanent extension of the Section 199A (§199A) qualified business income deduction, which preserves a deduction for eligible noncorporate taxpayers, including many owners of pass-through businesses. The basic deduction remains 20%, subject to income, wage, property, and specified-service-business limitations.

For banks, this change may meaningfully affect how commercial borrowers are evaluated. Reduced tax liabilities can improve after-tax cash flow and increase a borrower’s capacity to reinvest in operations, pursue growth opportunities, and service debt. As these benefits become more widespread, financial institutions may find it necessary to revisit assumptions that were developed under previous tax law.

The impact extends beyond underwriting considerations. Many business owners are also evaluating entity structures, compensation strategies, and investment timing to maximize available tax benefits. As a result, banks have an opportunity to deepen relationships by helping clients understand how tax changes may influence broader financial decisions.

New Opportunities in Agricultural and Rural Lending

Federal legislation has also introduced lender interest exclusions for qualifying rural and agricultural real estate loans, creating a potentially attractive incentive for financial institutions serving these markets. New Section 139L (§139L) allows qualified lenders, including FDIC-insured banks and savings associations, to exclude 25% of qualifying interest income from certain post-enactment loans secured by rural or agricultural real property.

As the after-tax economics of these loans improve, some banks may find opportunities to expand agricultural lending portfolios or strengthen their presence in rural communities. However, realizing these benefits requires thoughtful implementation.

Institutions should carefully evaluate the tax accounting, reporting, and documentation requirements associated with these provisions. Close coordination among lending, accounting, and tax teams will be essential to ensure compliance and support positions during future examinations.

Affordable Housing Tax Credits Gain Momentum

Recent changes to the Low-Income Housing Tax Credit (LIHTC) program are also creating new considerations for financial institutions.

Enhanced tax credit benefits are improving the financial profile of many affordable housing projects, making certain investments more attractive than they may have been under prior rules. For banks involved in community development initiatives, these changes may present opportunities to revisit investment strategies and evaluate projects that previously offered limited returns.

As affordable housing investments become increasingly competitive, institutions may need to reassess portfolio concentrations, underwriting assumptions, and long-term valuation models. Tax considerations will play an important role in determining the overall profitability and strategic fit of these investments.

Business Interest Deduction Changes May Influence Borrower Behavior

Modifications to business interest deduction limitations are similarly reshaping the financing landscape for many commercial borrowers. The Section 163(j) (§163(j)) can increase interest-deduction capacity for borrowers subject to the business-interest limitation by restoring the depreciation, amortization, and depletion addback in adjusted taxable income. That can reduce after-tax borrowing costs for affected borrowers.

By reducing the after-tax cost of debt, these changes may encourage businesses to pursue expansion projects, refinance existing obligations, or adjust capital structures. Increased borrowing activity could create new lending opportunities for financial institutions while also changing how borrower risk profiles are evaluated.

For banks, understanding the relationship between tax policy and capital structure decisions will become increasingly important. Credit analysis may require a more nuanced assessment of how borrowers are likely to respond to the evolving tax environment and how those decisions affect long-term financial performance.

Turning Regulatory Change into Strategic Opportunity

While each of these provisions presents unique considerations, they share a common theme: tax policy is becoming more closely connected to business strategy.

Financial institutions that view these developments solely through a compliance lens may overlook opportunities to enhance lending programs, strengthen investment performance, and provide greater value to clients. Conversely, banks that combine technical tax knowledge with strategic planning will be better positioned to adapt to changing market conditions and capitalize on emerging opportunities.

Success in this environment requires more than monitoring legislative developments. It requires the ability to evaluate how regulatory changes affect both the institution and its customers and to implement practical strategies with confidence.

How HTB Can Help

At HTB, we work with financial institutions to navigate complex tax and regulatory developments that affect lending strategies, investment decisions, financial reporting, and client advisory services.

Our team helps banks evaluate the practical implications of new legislation, implement tax-efficient strategies, and maintain positions that can withstand regulatory scrutiny. By combining technical tax knowledge with practical industry insight, we help financial institutions make informed decisions in an increasingly complex environment.

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