Walter Shuffain

What Business Owners Need to Know About Charitable Giving Tax Changes in 2026

wsadvisors — Tue, 02 Jun 2026 16:39:47 +0000

Key Takeaways

New charitable giving rules in 2026 affect both itemizers and non-itemizers, making documentation and planning more important than ever.
Higher income taxpayers may face reduced deduction benefits due to new AGI floors and itemized deduction phaseouts.
Strategic planning can help business owners maximize both the financial and philanthropic impact of their charitable contributions.

Charitable giving remains an important part of many business owners’ financial and legacy planning strategies. However, new tax law changes taking effect in 2026 will reshape how charitable deductions are calculated and claimed. Understanding these updates can help taxpayers make more informed giving decisions while maximizing potential tax benefits.

How Will the 2026 Tax Law Changes Impact Charitable Giving?

The 2026 tax law updates introduce several significant changes that directly affect charitable deduction strategies. Business owners and high-income taxpayers may need to reevaluate how and when they give.

The updated rules introduce several planning considerations for business owners and higher-income taxpayers. Key changes include:

A new charitable deduction opportunity for non-itemizers
A 0.5% AGI floor for itemized charitable deductions
New deduction benefit caps for taxpayers in the top income brackets

Taxpayers who previously relied on straightforward annual donations may now benefit from reevaluating the timing, structure, and documentation of their contributions.

New Rules for Non-Itemizers

Non-itemizers can now claim limited deductions for qualifying cash charitable contributions in 2026. This may provide an additional tax benefit for taxpayers who typically claim the standard deduction.

Under the updated rules, joint filers may deduct up to $2,000 in qualifying cash charitable contributions, while other taxpayers may deduct up to $1,000. Donations must be made to qualified charitable organizations; contributions to donor-advised funds or supporting organizations do not qualify.

Documentation requirements also remain critical. Taxpayers must retain bank records, written acknowledgments, or other supporting documentation from the charitable organization.

For business owners who consistently support charities throughout the year, these changes reinforce the importance of organized recordkeeping.

What Is the New AGI Floor for Itemized Deductions?

Beginning in 2026, only charitable contributions exceeding 0.5% of adjusted gross income will qualify for an itemized deduction. This change may reduce the tax benefit of smaller annual donations.

For example, a taxpayer with $200,000 in AGI would only receive a deduction for charitable contributions above $1,000. A taxpayer with $500,000 in AGI would not receive a deduction on the first $2,500 donated.

This threshold may encourage taxpayers to rethink the timing and structure of their giving. Potential planning strategies may include:

Consolidating charitable contributions into fewer tax years
Coordinating donations with other tax planning strategies
Coordinating larger contributions during higher income years

For business owners with fluctuating income, charitable planning may become even more important during higher income years.

Strategic Giving Opportunities

While the new rules create additional complexity, they also create opportunities for more strategic charitable planning.

Qualifying cash contributions remain deductible up to 60% of AGI, which may provide greater flexibility than certain non-cash gifts. Non-cash contributions and gifts of appreciated property may be subject to lower AGI limitation thresholds depending on the type of organization receiving the gift.

Business owners may also benefit from multi-year giving strategies. Coordinating larger donations during higher income years may help offset the impact of deduction phaseouts and improve overall tax efficiency.

How Do the New Deduction Benefit Limits Affect High-Income Taxpayers?

High-income taxpayers may see the value of certain itemized deductions reduced once income reaches projected high-income thresholds. These rules effectively limit the overall tax benefit associated with charitable deductions and other itemized deductions.

Beginning in 2026, these limitation rules are projected to apply at higher income levels, although the final thresholds remain subject to annual inflation adjustments and future IRS guidance. For taxpayers above these projected levels, charitable deduction planning may become significantly more nuanced.

Owners anticipating liquidity events, retirement transitions, or unusually high-income years may need to reevaluate how charitable giving fits into their broader tax strategy.

As charitable giving rules continue to evolve, proactive planning becomes increasingly important. Business owners who regularly make charitable contributions should consider reviewing their giving strategies with a CPA or tax advisor to ensure they remain aligned with both philanthropic goals and long-term tax efficiency.

Why Is Documentation So Important for Charitable Contributions?

Accurate documentation remains essential for claiming charitable deductions and avoiding IRS scrutiny. For cash contributions of $250 or less, taxpayers generally need reliable bank records or written communication from the charitable organization. Donations of $250 or more require a contemporaneous written acknowledgment.

Non-cash contributions may require additional valuation records and supporting documentation, depending on the value of the donated property. Contributions exceeding $5,000 generally require a qualified appraisal and Form 8283.

Business owners who make regular charitable gifts should maintain organized records throughout the year rather than waiting until tax season.

Planning for Smarter Charitable Giving

Charitable giving in 2026 presents both new opportunities and additional planning complexities for business owners and higher-income taxpayers. Understanding how AGI thresholds, deduction limitations, and documentation requirements interact can help taxpayers make more informed giving decisions while maximizing potential tax benefits.

While several of these provisions are scheduled to take effect beginning in 2026, additional IRS guidance and future inflation adjustments may further clarify how certain thresholds, deduction limitations, and implementation details will apply. As charitable giving strategies become more nuanced, working closely with a CPA or tax advisor can help ensure your philanthropic goals remain aligned with your overall financial and tax planning objectives.

Frequently Asked Questions (FAQ’s)

Can non-itemizers deduct charitable donations in 2026?

Yes. Non-itemizers may deduct qualifying cash charitable contributions up to certain limits, provided the documentation requirements are met.

What is the new AGI floor for charitable deductions?

Itemizers can only deduct charitable contributions that exceed 0.5% of adjusted gross income.

Are cash donations treated differently from non-cash donations?

Yes. Cash contributions generally receive more favorable AGI limitation treatment than many non-cash contributions.

Why is charitable documentation so important?

Without proper documentation, taxpayers risk losing otherwise valid charitable deductions during an IRS review.

The post What Business Owners Need to Know About Charitable Giving Tax Changes in 2026 appeared first on Walter Shuffain.

How Strategic Real Estate Owners Forecast After Tax Cash Flow on Upcoming Projects

wsadvisors — Thu, 28 May 2026 18:18:17 +0000

Written By: Michael Cooper, CPA

Key Takeaways

After-tax cash flow provides a more accurate view of investment performance than pre-tax projections
Tax strategy, financing structure, and depreciation interact to influence outcomes
Effective forecasting supports more informed decisions around structuring, timing, and long-term value creation

Many real estate projects appear attractive when evaluated on a pre-tax basis. However, once taxes and financing are incorporated, the projected performance can change materially.

If you are evaluating opportunities based only on pre-tax projections, you may not have a clear view of what the investment will actually produce. After-tax cash flow provides that clarity and allows you to assess whether the deal aligns with your financial and strategic objectives.

Why Is After-Tax Cash Flow Important When Evaluating Real Estate Projects?

After-tax cash flow reflects what you retain after meeting tax obligations. This is ultimately what supports liquidity, reinvestment, and long-term returns.

In practice, we often see investors rely on pre-tax projections that do not fully account for how structure, depreciation, and financing interact. Even small changes in those assumptions can materially affect outcomes.

Evaluating investments on an after-tax basis provides a more reliable foundation for comparing opportunities and making decisions.

What Factors Should Real Estate Owners Include in Cash Flow Forecasts?

Forecasting should reflect how key variables interact, not just how they perform individually.

Your model should account for revenue, operating expenses, financing costs, capital expenditures, and ownership structure. More importantly, it should show how decisions in one area affect the others.

For example, financing decisions influence both cash flow timing and tax exposure. Ownership structure determines how tax attributes flow through to you and other investors. Without modeling those relationships together, projections can be misleading.

Understanding the Impact of Depreciation

Depreciation has a direct impact on after-tax cash flow by reducing taxable income. While it does not affect operating performance, it can significantly improve near-term cash flow.

If you are considering strategies such as cost segregation, it is important to evaluate how accelerated depreciation fits within your broader plan. Increasing deductions in the early years may improve liquidity, but it can also affect tax exposure later, particularly at exit.

Depreciation strategy should be aligned with both your current cash flow needs and your long-term objectives.

How Do Financing and Leverage Affect After-Tax Cash Flow?

Financing decisions influence more than borrowing costs. They determine how cash flows through the investment and how tax deductions are generated.

Higher leverage may increase short-term returns, but it can also reduce flexibility if market conditions change or if refinancing becomes necessary. Lenders will also evaluate projected cash flow and coverage ratios, making accurate forecasting essential.

When evaluating financing, you should consider how the structure of the debt aligns with your long-term plans, including potential exit or recapitalization.

Tax Considerations That Influence Investment Outcomes

Tax strategy should be incorporated into the investment decision early. If it is addressed after the deal is structured, your ability to optimize outcomes is limited.

Decisions related to depreciation, entity structure, and income timing all influence after-tax performance. These factors also intersect with broader financial and estate planning considerations.

Integrating tax strategy at the outset allows you to structure the investment more intentionally and avoid adjustments later.

What Financial Modeling Should Owners Use for Forecasting?

Financial models should help you understand how changes in assumptions affect outcomes. The goal is not to produce a single projection, but to evaluate a range of scenarios.

A well-structured model allows you to assess how variations in tax rates, financing terms, or exit timing impact returns. This type of analysis provides greater insight into risk and supports more informed decision-making.

Planning Real Estate Investments with Integrated Strategy

After-tax cash flow is the result of how tax, financing, and investment decisions come together. When those elements are aligned, forecasting becomes a practical tool for evaluating opportunities and planning ahead.

Walter Shuffain works with real estate owners to integrate these components into a cohesive framework. This approach allows you to evaluate investments based on how they are expected to perform in practice, not just how they appear on paper.

Frequently Asked Questions (FAQ’s)

What Is After-Tax Cash Flow in Real Estate Investing?
After-tax cash flow is the actual cash investors receive from an investment after accounting for taxes, operating expenses, and debt service.
Why Is Depreciation Important in Real Estate Forecasting?
Depreciation reduces taxable income and can increase after-tax cash flow. Accelerated strategies can enhance early returns but should be evaluated alongside long-term tax implications.
How Does Financing Affect Cash Flow Forecasts?
Financing influences both cash flow timing and tax deductions through interest expense. Loan structure and leverage levels directly impact projected outcomes.
When Should Investors Build After-Tax Cash Flow Projections?
Projections should be developed early in underwriting, before acquisition or development decisions are finalized, to ensure alignment across tax strategy and investment goals.

The post How Strategic Real Estate Owners Forecast After Tax Cash Flow on Upcoming Projects appeared first on Walter Shuffain.

How Sophisticated Real Estate Owners Should Evaluate Selling, Refinancing, or Recapitalizing a Property

wsadvisors — Sun, 10 May 2026 12:53:00 +0000

Written By: Jon Nelson, CPA, MST

Key Takeaways

Strategic real estate decisions should be evaluated through tax impact, capital priorities, and overall portfolio alignment.
Selling, refinancing, and recapitalizing each serve distinct roles depending on timing, liquidity needs, and risk tolerance.
The right path is determined less by the asset alone and more by how it fits into long-term investment and capital strategy.

Real estate owners regularly face decisions around selling, refinancing, or recapitalizing assets. Each option can unlock value, but the right path depends on how tax impact, leverage, and long-term strategy come together in your specific situation.

If you evaluate these decisions solely on market timing or property performance, you risk moving in a direction that does not align with your broader objectives. The more effective approach is to evaluate each option in the context of your portfolio, your capital priorities, and what you are trying to accomplish over time.

What Factors Should Real Estate Owners Analyze Before Making a Major Strategic Decision?

Before making a decision, you should evaluate not only how the property is performing, but also how it is financed and how it fits within your broader portfolio.

These factors do not operate independently. In many cases, your loan structure will have more influence on your available options than the asset itself. Debt terms, interest rate exposure, and maturity timelines all affect your flexibility, particularly in a higher-rate environment.

If your financing limits your ability to refinance or hold, that constraint will shape your decision regardless of performance. Understanding those limitations early allows you to evaluate options more realistically.

Aligning Strategic Decisions with Investment Objectives

Your decision should reflect whether the asset continues to support your original investment thesis and your current capital priorities.

A property can perform well operationally and still no longer represent the best use of capital. Holding it simply because it continues to generate income may prevent you from reallocating capital more effectively.

Instead of reacting solely to market conditions, you should evaluate how each option supports your broader goals. This includes liquidity planning, risk exposure management, and preparation for future capital events. The right decision strengthens your overall portfolio, not just the outcome of a single asset.

When Does Selling a Real Estate Property Make the Most Financial Sense?

Selling becomes the right decision when the asset has fulfilled its role and the capital can be deployed more effectively elsewhere.

A sale provides liquidity and the ability to reposition capital, but it also introduces tax exposure and eliminates future upside. The key question is whether the after-tax proceeds will create a stronger outcome in your next investment.

In practice, we often see owners delay selling in pursuit of incremental gains or move too quickly without a clear reinvestment plan. Both approaches create misalignment with the long-term strategy.

A disciplined evaluation focuses on after-tax proceeds, available opportunities, and how the sale supports your broader objectives.

Understanding the Role of Refinancing

Refinancing allows you to access equity without triggering a taxable event, making it an effective way to generate liquidity while maintaining ownership.

However, the decision should not be driven solely by access to capital. You also need to evaluate how the new debt structure affects your future flexibility.

In the current environment, refinancing is shaped by interest rates, lender requirements, and coverage expectations. Increasing leverage may improve near-term cash flow, but it can also reduce your ability to respond to market changes.

Refinancing should be evaluated within your broader capital strategy, including its impact on risk, future financing options, and your ability to execute on longer-term plans.

How Should Owners Evaluate a Real Estate Recapitalization Strategy?

Recapitalization can be an effective way to generate liquidity, reduce exposure, and retain a portion of future upside.

This approach is often appropriate when you want to reposition capital without fully exiting an asset. It can also support broader portfolio rebalancing.

At the same time, recapitalization introduces additional complexity. Governance, control, and alignment with new partners become central considerations. If those elements are not clearly defined upfront, they can create challenges later.

When evaluating recapitalization, you should consider not only the financial outcome, but also how ownership structure, decision-making authority, and exit expectations will function over time.

Tax Considerations That Influence Strategic Decisions

Tax implications will directly influence both the timing of your decision and the value you ultimately retain.

Capital gains, depreciation recapture, and deferral strategies such as 1031 exchanges all affect the outcome. These should not be evaluated in isolation. They need to be considered alongside your investment strategy and long-term objectives.

If tax planning is addressed too late, your ability to structure the decision efficiently is limited. Incorporating tax considerations early allows you to align timing, structure, and reinvestment strategy more effectively.

This is particularly important if your decisions are tied to long-term wealth planning or generational transfer.

What Financial Modeling Should Owners Use When Comparing These Options?

You should evaluate selling, refinancing, and recapitalization using financial models that compare after-tax outcomes across each scenario.

The goal is to understand how different assumptions affect long-term results, not to rely on a single projection.

Your analysis should account for projected cash flow, tax impact, financing structure, and how each option affects your overall portfolio. Sensitivity analysis is especially valuable, as it highlights how changes in interest rates, valuation, or timing can shift the preferred strategy.

This approach allows you to evaluate decisions based on how they perform under different conditions, rather than relying on a single set of assumptions.

Making the Right Strategic Decision for Your Real Estate Investment

Each option serves a different purpose, and the right choice depends on your liquidity needs, risk tolerance, and long-term strategy. The challenge is not understanding the options, but evaluating how each one impacts your broader portfolio and plans.

That is where we typically work with clients. We help you step back from the individual transaction and assess how selling, refinancing, or recapitalizing fits into your overall capital strategy. This includes evaluating after-tax outcomes, financing implications, and how each path supports your long-term objectives.

At Walter Shuffain, our role is to bring clarity to that process. By aligning tax planning, financing considerations, and investment strategy, we help you move forward with a clear understanding of both the immediate decision and its long-term impact.

For more information on this topic, please reach out to a member of our Real Estate Team.

Ask Our Real Estate Team

Frequently Asked Questions (FAQ’s)

How Often Should Real Estate Owners Reevaluate These Decisions?
Owners should review these options regularly, particularly as market conditions shift or loan maturities approach. Periodic evaluation ensures decisions remain aligned with evolving financial and portfolio objectives.
Is Refinancing Always Better Because It Avoids Taxes?
Refinancing can provide tax-efficient liquidity, but it also increases leverage and exposure to market conditions. The right decision depends on risk tolerance, loan structure, and long-term strategy.
Why Is Financial Modeling Important?
Modeling enables investors to compare after-tax outcomes across strategies and understand how assumptions affect results. It provides clarity on both risks and opportunities.
When Should Owners Begin Planning a Sale or Recapitalization?
Planning should begin well before a transaction is executed. Early analysis allows time to evaluate tax strategies, financing options, and alignment with broader investment goals.

The post How Sophisticated Real Estate Owners Should Evaluate Selling, Refinancing, or Recapitalizing a Property appeared first on Walter Shuffain.

Cost Segregation Strategy: Balancing Immediate Tax Savings with Long-Term Impact

wsadvisors — Fri, 17 Apr 2026 18:37:29 +0000

Key Takeaways

Accelerated depreciation can improve short-term cash flow, but it often increases future tax exposure through recapture.
The One Big Beautiful Bill Act restored 100% bonus depreciation, creating powerful but complex planning opportunities.
Smart planning aligns tax strategy with pricing, investment timing, and long-term profitability goals.

Business owners and investors often ask a simple question: Can I deduct everything now? The answer is more nuanced. While certain qualifying assets, or components identified through cost segregation, may be deducted more quickly, most capital property must still be depreciated over time. The better question is whether accelerating those deductions supports long-term profitability.

With changes introduced under the One Big Beautiful Bill Act, the opportunity to accelerate deductions is stronger than ever. That makes strategic planning more important, not less.

What Is Cost Segregation and Why Does It Matter for Profitability?

Cost segregation accelerates depreciation by identifying shorter-life assets within a property, allowing for larger deductions earlier in the asset’s life. This improves near-term cash flow, which can be reinvested in operations, hiring, or growth initiatives.

With 100% bonus depreciation now permanently available under the One Big Beautiful Bill Act for qualifying property that is both acquired and placed in service after January 19, 2025, the opportunity is even more compelling.

However, this is not simply a tax strategy. It is a profitability decision that influences how capital is deployed and how the business competes in the market.

Immediate Tax Savings Versus Long-Term Tax Exposure

Accelerating deductions today often means paying more later. The IRS treats depreciation as a timing benefit, not a permanent savings.

When a property is sold, depreciation recapture taxes prior deductions as income. Depending on how assets were classified, that income may be taxed at rates as high as 37%, rather than capital gains rates.

This creates a critical tradeoff. While deductions improve cash flow today, they can increase tax liability at exit, reducing overall return on investment if not properly planned.

How Does Bonus Depreciation Change the Equation?

Bonus depreciation allows business owners and investors to deduct a significant portion of qualifying assets in the first year. Under current law, that deduction can reach 100%.

The One Big Beautiful Bill Act made this provision permanent, eliminating the previous phased-down schedule and shifting the focus toward strategic timing and application.

Larger upfront deductions improve short-term cash flow
Faster cost recovery supports expansion and reinvestment
Contract and placed in service dates directly affect eligibility

These benefits are meaningful, but they come with increased exposure to future recapture. The decision to accelerate deductions should always be evaluated alongside the long-term tax impact.

Aligning Tax Strategy with Pricing Decisions

Tax strategy plays a direct role in pricing because it impacts both cost structure and cash flow. When tax liability is reduced in the short term, businesses gain greater flexibility in how they set prices in the market.

That flexibility can be used strategically, but it should not be mistaken for a permanent advantage. Temporary tax savings can create the illusion of stronger margins, which may lead to pricing decisions that are difficult to sustain once those benefits reverse.

The most effective business owners and investors use this window to strengthen long-term profitability. That includes evaluating whether improved cash flow should support reinvestment, operational efficiency, or more disciplined pricing strategies that can withstand future tax obligations.

A forward-looking approach ensures that pricing decisions are grounded in sustainable economics rather than short-term tax positioning.

Strategic Timing Considerations

Timing plays a critical role in maximizing benefits while managing risk. Even small differences in contract signing dates and placed in service timing can significantly impact eligibility for 100% bonus depreciation.

Business owners and investors should evaluate acquisition timing, improvement schedules, and how these decisions align with broader financial goals. Coordinating these factors ensures that tax benefits support long-term profitability rather than short-term gains.

Building A Balanced Cost Segregation Strategy

A balanced approach focuses on both immediate gains and long-term outcomes. The objective is not to maximize deductions in isolation, but to optimize overall financial performance.

This requires integrating tax planning with operational strategy, pricing decisions, and exit planning. Without that alignment, accelerated depreciation can create unintended consequences that reduce long-term value.

What Should Business Owners and Investors Do Next?

Start by evaluating whether accelerated depreciation aligns with your long-term goals. The permanence of 100% bonus depreciation under the One Big Beautiful Bill Act removes urgency but increases the need for thoughtful planning.

A disciplined approach considers how deductions today will affect future tax liability, pricing flexibility, and overall return on investment. The most successful business owners and investors treat cost segregation as part of a broader financial strategy rather than a standalone tax tactic.

Work closely with your CPA to model different scenarios, evaluate timing decisions, and quantify both the benefits and risks. A proactive advisor can help you align tax strategy with pricing, cash flow, and long-term growth so you can make informed decisions that strengthen profitability.

Frequently Asked Questions (FAQ’s)

Does Cost Segregation Always Improve Profitability?
No. It improves short-term cash flow, but future tax liabilities can reduce overall returns if not planned properly.
What Is Depreciation Recapture?
It is the IRS mechanism that taxes previously claimed depreciation as income when a property is sold.
How Does The One Big Beautiful Bill Act Impact Strategy?
It permanently restored 100% bonus depreciation, increasing both immediate tax benefits and future recapture considerations.
Should I Use Cost Segregation for Every Property?
No. Each investment should be evaluated based on cash flow needs, holding period, and exit strategy.

The post Cost Segregation Strategy: Balancing Immediate Tax Savings with Long-Term Impact appeared first on Walter Shuffain.

Understanding R&D Tax Credits and Section 174 in 2026

wsadvisors — Thu, 16 Apr 2026 18:33:20 +0000

Key Takeaways

The R&D tax credit remains a valuable incentive for companies investing in innovation, but stronger documentation and project tracking are now essential.
Section 174 capitalization rules require research expenses to be amortized, increasing the importance of strategic tax planning.
Businesses that align innovation investments with strong financial tracking can capture tax benefits while protecting profitability.

Innovation drives growth for many businesses, but it also carries high costs. Research and development spending often represents a major investment in improving products, refining processes, or building new technologies. While the R&D tax credit was created to reward that investment, recent regulatory changes and documentation expectations have made claiming the credit more complex.

In 2026, companies must navigate both the R&D tax credit under Section 41 and the capitalization requirements under Section 174. Understanding how these rules work together can help business owners capture available tax benefits while maintaining better visibility into the true cost of innovation.

Should Businesses Still Claim the R&D Tax Credit in 2026?

For companies investing in innovation, the R&D tax credit continues to provide meaningful financial value, even as compliance expectations have increased.

The IRS has placed greater emphasis on transparency and detailed disclosures when businesses claim the credit. Updates to Form 6765 now encourage companies to clearly explain what they developed, why the work qualifies as research, and how much the research cost.

These expectations mean businesses must approach the credit with stronger documentation and clearer project-level reporting. However, the underlying incentive remains important. For many companies, the credit helps offset the cost of developing new products, improving processes, or advancing technology within their operations.

What Qualifies as Research and Development for Tax Purposes?

Research qualifies for the R&D tax credit when it satisfies the four-part test established under Section 41. In general, the work must involve technological research aimed at eliminating uncertainty in the development or improvement of a product, process, software application, or other business component.

To determine eligibility, the IRS evaluates whether research activities meet several key criteria:

The activity must relate to expenditures that qualify as research under Section 174
The work must rely on scientific or technological principles, such as engineering or computer science
The research must aim to develop or improve a product, process, or software component
The activity must involve a process of experimentation designed to resolve technical uncertainty

Examples of qualifying activities often include developing prototypes, testing new manufacturing methods, or designing new software functionality. However, certain activities are excluded from qualification. Market research, advertising efforts, quality control testing after commercial production begins, research funded by another party without retained rights, and research conducted outside the United States generally do not qualify.

Understanding these boundaries allows businesses to evaluate better which projects may support a credit claim and which activities should be excluded from consideration.

What Documentation Do I Need to Support R&D Credits?

Supporting an R&D credit claim requires businesses to maintain clear documentation that explains what research was conducted, why the work qualifies, and how much it cost.

When filing a refund claim related to the research credit, such as on an amended return, the IRS expects taxpayers to provide specific information describing the claim. Companies generally must identify the business components related to the research, describe the research activities performed, and report the total qualified expenses tied to wages, supplies, and contract research.

While certain detailed elements may not always be required at the time of filing, the IRS may request additional information during an examination. As a result, businesses should be prepared to document who performed the research activities and what technical uncertainties the work was intended to resolve.

Effective documentation often includes project descriptions outlining the technical challenges addressed, employee time tracking that connects labor hours to specific research activities, and financial records linking wages and materials to those projects. When companies establish systems to consistently capture this information, they strengthen their ability to support credit claims and reduce compliance risk.

The Impact of Section 174 Capitalization

Section 174 of the Tax Cuts and Jobs Act changed how businesses account for research costs. Beginning with tax years after 2021, companies were required to capitalize and amortize research and experimental expenditures rather than deduct them immediately. More recent legislation restored the ability for businesses to immediately deduct certain domestic research expenses beginning in 2025, while foreign research costs generally remain subject to amortization.

Under the current rules, companies must:

Deduct domestic research expenses in the year they are incurred
Amortize foreign research expenses over fifteen years
Track research costs across departments and projects with greater precision

Although the restoration of immediate expensing for domestic research provides relief for many companies, accurate cost tracking remains essential. Businesses still need strong systems to document research activities and properly calculate the R&D tax credit.

Turning Tax Strategy into Profitability

For business owners, the most effective approach is to treat R&D tax planning as an integrated part of financial management. When companies align innovation investments with strong documentation practices, tax planning, and cost tracking, they gain a clearer understanding of how research spending affects profitability.

In 2026, the businesses that benefit most from the R&D credit will be those that treat it as an ongoing process supported by collaboration between finance, engineering, and operations teams. With the right systems in place, companies can continue investing in innovation while capturing valuable tax incentives and maintaining stronger financial visibility.

Frequently Asked Questions (FAQ's)

Why Has Claiming the R&D Tax Credit Become More Complex?
The IRS now expects more detailed information about research activities and project- or business-component-level costs, particularly when businesses file refund claims related to the credit.
How Does Section 174 Affect R&D Expenses?
Section 174 previously required companies to amortize research costs over several years. Recent legislative changes restored the ability to immediately deduct many domestic research expenses beginning in 2025, while foreign research costs generally must still be amortized over fifteen years.
Do Software Companies Qualify for R&D Tax Credits?
Yes. Software development may qualify if the work involves technological uncertainty and experimentation to develop or improve functionality.
What Industries Receive the Most Scrutiny for R&D Credits?
Manufacturing, architecture and engineering, and software development often receive additional scrutiny because their activities can include both qualifying research and routine operational work.

The post Understanding R&D Tax Credits and Section 174 in 2026 appeared first on Walter Shuffain.

Looking Ahead: Accounting Standards on the Horizon in 2026 for Nonpublic Entities

wscpa — Mon, 16 Mar 2026 13:24:28 +0000

Written By: Danielle MacKenzie, CPA, MSA

Key Points

Several additional Accounting Standards Updates will affect nonpublic entities in 2026 and beyond
Upcoming changes include updates related to credit losses, internal use software, and tax disclosures
Early planning and evaluation can help reduce implementation challenges

Preparing for What Is Next in Financial Reporting

With 2025 reporting underway, nonpublic entities should begin preparing for additional Accounting Standards Updates that will take effect in 2026 and beyond. While broad accounting overhauls have slowed, targeted amendments continue to refine recognition, measurement, and disclosure under U.S. GAAP.

These updates address share-based considerations payable to customers, credit losses, refinements to the derivative scope, and purchased loans. Though narrower than prior major standards, they may affect earnings patterns, transaction price estimates, capitalization timing, and financial statement presentation.

Early evaluation allows management to determine scope applicability, assess policy elections, and plan implementation before the year of adoption.

ASU 2025-04: Clarifications to Share-Based Consideration Payable to a Customer

Summary

ASU 2025-04 clarifies the accounting for share-based consideration payable to a customer under Topics 718 and 606 to provide more consistent outcomes. The ASU revises the definition of a performance condition to include purchase-based metrics and eliminates the policy election that permits forfeitures to be recognized as they occur (unless granted in exchange for a distinct good or service). The update also clarifies that the constraint guidance in Topic 606 does not apply to share-based consideration payable to a customer.

Effective Date for Nonpublic Entities

Fiscal years beginning after December 15, 2026. Early adoption is permitted.

What Changed

The revised definition of performance conditions broadens the definition to explicitly include conditions based on volume or monetary amount of purchases, which may result in fewer awards being classified as having service conditions. The ASU eliminates the policy election to recognize forfeitures as incurred for share-based consideration granted to customers with service conditions and requires nonpublic entities to estimate forfeitures as a reduction of revenue. The ASU also clarifies that Topic 718 applies when assessing vesting probability rather than the variable consideration constraint guidance in Topic 606. The share-based consideration is measured and classified under Topic 718 and then recognized as a reduction of revenue in the same manner as if the payment were made in cash.

Financial Statement Presentation Impact

Income statement: Changes in forfeiture estimates and vesting assessments may affect revenue.
Footnotes: Additional disclosure may be required to explain significant judgments, as it will still require judgment to determine whether share-based consideration to a customer has a performance or a service condition.

Transition

The ASU may be applied using either a modified retrospective or full retrospective approach. Nonpublic entities must use the actual outcomes of a performance or service condition, if known as of the beginning of the annual period of adoption, for all prior-period estimates when electing full retrospective adoption.

ASU 2025-05: Measurement of Credit Losses for Accounts Receivable and Contract Assets

Summary

ASU 2025-05 simplifies the application of the current expected credit losses model for accounts receivable and contract assets arising from revenue transactions. The ASU provides a practical expedient and accounting policy election related to the estimation of expected credit losses. The practical expedient permits a nonpublic entity to assume that current conditions as of the balance sheet date do not change the asset's remaining life when developing reasonable and supportable forecasts used to estimate expected credit losses. A nonpublic entity that elects the practical expedient is permitted to make an accounting policy election to consider collection activity occurring after the balance sheet date when estimating expected credit losses.

Effective Date for Nonpublic Entities

Fiscal years beginning after December 15, 2025.

What Changed

The amendments reduce the need for detailed forward-looking forecasts for current accounts receivable and contract assets. Nonpublic entities electing the policy option may consider collections received after the balance sheet date but before issuance of the financial statements when estimating the allowance for credit losses.

Financial Statement Presentation Impact

Balance sheet: The allowance for credit losses will allow a nonpublic entity to reflect its actual collection experience in its estimate of the allowance for credit losses at year-end.
Income statement: Credit loss expense may fluctuate depending on the estimation approach
Footnotes: Disclosure is required if a nonpublic entity has applied the practical expedient and the accounting policy election. The date through which subsequent cash collections were evaluated must also be disclosed.

Transition

The amendments are applied prospectively. Nonpublic entities should document policy elections and consistently apply the selected approach.

ASU 2025-07: Derivatives Scope Refinements and Scope Clarification for Share-Based Noncash Consideration from a Customer in a Revenue Contract

Summary

ASU 2025-07 refines derivative scope guidance under Topic 815 and clarifies accounting for share-based noncash consideration received from a customer under Topic 606. Particular non-exchange-traded contracts based on operations and activities specific to one of the parties to the contract may now qualify for a scope exception from derivative accounting. Contracts based on certain underlyings would not qualify for the scope exception. The amendments also clarify how share-based noncash consideration should be measured in a revenue contract.

Effective Date for Nonpublic Entities

Fiscal years beginning after December 15, 2026. Early adoption is permitted.

What Changed

The derivative scope refinements expand the existing exception, potentially excluding additional contracts and embedded features from derivative accounting. For share-based noncash consideration, entities must apply the measurement guidance in Topic 606. Other advice, including Topic 815 and Topic 321, is not applied unless and until the right to receive or retain the share-based noncash consideration becomes unconditional under Topic 606.

Financial Statement Presentation Impact

Balance sheet: Certain contracts may no longer be recorded as derivatives
Income statement: Revenue patterns may change for contracts involving share-based noncash consideration
Footnotes: Disclosure of scope judgments may be necessary

Transition

The ASU may be applied prospectively or on a modified retrospective basis. It is permitted to elect different transition methods for the derivatives scope refinement and scope clarification for share-based noncash consideration. Nonpublic entities should evaluate existing contracts and determine the most practical approach.

ASU 2025-08: Financial Instruments – Credit Losses (Purchased Loans)

Summary

ASU 2025-08 improves accounting for purchased loans by expanding the population of acquired financial assets subject to the gross-up approach in Topic 326. Loans acquired without credit deterioration, other than credit cards, debt securities, or trade receivables arising from transactions accounted for under Topic 606, are treated as purchased seasoned loans and accounted for using the gross-up approach at acquisition.

Effective Date for Nonpublic Entities

Annual reporting periods beginning after December 15, 2026. Early adoption is permitted.

What Changed

The amendments require a consistent gross-up approach for qualifying purchased loans, eliminating prior differences in accounting treatment. This reduces subjectivity and improves comparability in recognizing expected credit losses at acquisition.

Financial Statement Presentation Impact

Balance sheet: Acquired loans may reflect grossed-up balances at acquisition
Income statement: Subsequent credit loss expense may differ due to the revised initial measurement
Footnotes: Additional disclosures may be required

Transition

The amendments are applied prospectively to loans acquired on or after the initial application date. Nonpublic entities should evaluate anticipated acquisition activity before adoption.

Bringing These Standards into Your Future Reporting Process

With additional standards scheduled to take effect in the coming years, now is an appropriate time for nonpublic entities to assess applicability and prepare for implementation. Even targeted amendments can influence earnings patterns, capitalization timing, and disclosure requirements.

If questions arise as you evaluate these upcoming requirements, our team can help you assess what applies to your organization and guide you on how to address the changes within your reporting timeline. Our goal is to help you navigate these updates with clarity and confidence, so your financial statements continue to reflect accurate and compliant reporting.

Frequently Asked Questions (FAQ’s)

How do I know if ASU 2025-05 will significantly impact my organization?

If you maintain material accounts receivable or contract assets, and your current method to estimate expected credit losses is complex and time-consuming, evaluate whether the available practical expedient and policy election simplifies your estimation process.

2) Will the internal use software update allow more costs to be capitalized?

Not necessarily. While timing may change under the revised threshold, eligible costs remain largely consistent with existing guidance.

3) What steps should nonpublic entities take now?

Review effective dates, evaluate scope applicability, discuss potential impacts with your advisors, and confirm that systems and processes can support new requirements.

The post Looking Ahead: Accounting Standards on the Horizon in 2026 for Nonpublic Entities appeared first on Walter Shuffain.

Mastering Cash Flow Cycles: How to Predict and Smooth Cash Flow Fluctuations

wsadvisors — Mon, 02 Mar 2026 20:42:26 +0000

Written by: Courtney Fraser, CPA, MBA

Key Takeaways

Use cash flow analysis and forecasting together to identify pressure points early.
Maintain both short-term and long-term forecasts to support payroll and operating decisions.
Strengthen predictability by updating assumptions and reviewing actual results regularly.

Cash flow problems often come from timing gaps between when income is earned and when cash is available to pay employees, vendors, and lenders. For business owners, understanding cash flow cycles is one of the most effective ways to reduce uncertainty, protect liquidity, and make more confident decisions year-round.

What Are Cash Flow Cycles and Why Do They Matter?

Cash flow cycles describe how money consistently moves into and out of your business. Managing a company’s cash flow is important because profitability does not guarantee liquidity. A company can be growing and still struggle to meet short-term obligations if cash inflows and outflows are misaligned.

When you analyze cash movement over time, patterns begin to surface. These patterns are often tied to seasonality, customer payment behavior, inventory timing, or investment activity. Recognizing them lets you plan rather than react when cash is already tight.

How Does Cash Flow Analysis Improve Decision Making?

A cash flow analysis shows whether your operations are generating enough cash to sustain the business. It organizes activity into operating, investing, and financing categories so owners can understand what is driving changes in cash.

This view helps clarify whether a cash dip is operational, strategic, or temporary. When owners understand the source, they can make informed decisions about spending, pricing, and financing rather than relying solely on bank balances.

Metrics That Make Cash Flow Easier to Manage

Below are a few measures which can turn cash flow analysis into a practical management tool. These measures help translate financial statements into operational insight.

Free cash flow shows how much cash remains after investments.
Operating cash flow margin shows how efficiently sales generate cash.
Cash coverage measures indicate how comfortably obligations can be met.

An example of a tool used is a 13-week cash flow that is used when projecting a cash flow over a period of time because tracking trends across multiple periods is far more helpful than focusing on a single month.

How Does Forecasting Help Predict Cash Fluctuations?

Forecasting helps you anticipate shortfalls before they disrupt operations. By using historical cash patterns alongside expected activity, forecasts estimate where your cash position is heading.

When forecasting is paired with regular cash flow analysis, owners gain visibility into upcoming risks and fluctuations. This gives you time to adjust collections, delay discretionary spending, or reconsider investment timing before liquidity becomes a concern.

Forecasting Methods That Work for Business Owners In 2026

Different planning horizons require different approaches. Short-term needs, such as payroll and vendor payments, benefit from detailed forecasts, while longer-range planning benefits from broader projections tied to financial statements.

Most businesses rely on a mix of methods, including direct forecasting for near-term cash needs, indirect forecasting for longer-term planning, and rolling forecasts that update as new results come in. Scenario planning adds resilience by helping owners prepare for delayed payments or rising costs.

Internal Controls That Improve Cash Predictability

Strong internal controls support forecasting accuracy by improving consistency and accountability. Forecasts lose value when assumptions are outdated or when departments operate in silos.

One of the most effective controls is reviewing the forecast against the actual results. This comparison highlights where assumptions need refinement and which parts of the business introduce volatility. Coordination between sales, operations, and finance further improves reliability because each team sees timing risks differently.

It is also important that the business has updated and accurate financial statements to use in analyzing patterns and forecasting the cash flow. Performing a monthly close strengthens internal controls over financial reporting.

How Can Forecasts Be Used to Smooth Cash Flow Year-Round?

Forecasts create value only when they drive action. If projections show a dip coming, owners can respond early by adjusting spending, accelerating collections, or rethinking the timing of major purchases before cash pressure builds.

Over time, forecasting becomes part of normal operations rather than a reactive exercise. This supports steadier payroll planning, stronger vendor relationships, and better risk decisions throughout the year. For many business owners, the most significant gains come from reviewing cash flow trends and forecasts with their CPA, who can help perform analysis, interpret results, challenge assumptions, and align cash planning with broader business goals. That collaboration turns forecasting into a strategic tool rather than just a financial report.

Frequently Asked Questions (FAQ’s)

How Often Should Business Owners Review Cash Flow?
Monthly reviews are a strong baseline for most businesses, with more frequent reviews during periods of change. Reviewing cash flow regularly helps keep assumptions current and forecasts useful.
Can Cash Flow Analysis Predict Financial Trouble?
Cash flow analysis reflects past activity, but when using the patterns from the past to forecast future cash flow, it can surface warning signs. Declining operating cash flow or shrinking free cash flow often signals the need for closer review.
Is Cash Flow Forecasting Only Useful for Larger Businesses?
No. Smaller businesses often benefit even more because they have less margin for error with the timing of their cash flows.
Do Forecasting Tools Replace Professional Guidance?
Tools improve visibility, but interpretation remains critical. A CPA or outsourced accounting provider helps translate forecasts to decisions around pricing, spending, and risk management. They also ensure forecasts stay accurate and relevant by updating models and analyses as part of the monthly close process.

The post Mastering Cash Flow Cycles: How to Predict and Smooth Cash Flow Fluctuations appeared first on Walter Shuffain.

How Plan Sponsors Can Address Roth Catch-up Regulations

wsadvisors — Sun, 01 Mar 2026 21:13:44 +0000

Written By: Jon Hitter, CPA, MST, CGMA

Highlights From the Roth Catch-up Contribution Regulations

Key Dates
9/16/2025	IRS released the final regulations on Roth catch-up contributions under SECURE 2.0. Note: SIMPLE IRA plans are not subject to the Roth catch-up regulations.
1/1/2026	New SECURE 2.0 catch-up rules took effect on January 1, 2024, but the IRS delayed compliance until January 1, 2026.
12/31/2026	Plan amendment deadline for qualified plans.
12/31/2028	Plan amendment deadline for union plans and those under collective bargaining agreements.
12/31/2029	Plan amendment deadline for governmental plans and 403(b) plans sponsored by public schools.

Eligible Plans and Participants
401(k), 403(b), governmental 457(b)	New Roth catch-up regulations affect these retirement plans.
50+	Participants age 50 or older can contribute more than the plan limits.
60, 61, 62, 63	Ages at which participants are eligible to make super catch-up contributions
$150,000	Employees age 50 or older that earn $150,000 or more in 2025 Social Security wages (Box 3 of Form W-2) (i.e., “highly paid participants” or HPPs) are required to make any catch-up contributions as Roth contributions (after-tax instead of pre-tax).

Contribution Limits
$24,500 (2026)	General limit on salary deferrals for 2026.
$72,000 (2026)	Annual defined contribution limit.
$8,000 (2026)	Standard catch-up contribution limit.
$11,250 (2026)	Contribution limit for super catch-up contributions.

The final Roth catch-up regulations the IRS issued on Sept. 16 are in effect, detailing SECURE 2.0’s requirements and deadlines for most ERISA-based retirement plans. However, it is important to note that SIMPLE IRA plans and self-employed individuals are not subject to these regulations. Plan sponsors should act now to determine how the new regulations affect their plans and take steps to comply.

The IRS will allow 2026 to be a “gap year,” allowing plan sponsors time to adjust to the new catch-up requirements, since the IRS did not extend the non-enforcement transition period that ends on December 31, 2025. During 2026, plan sponsors will be required to demonstrate a reasonable, good faith interpretation of the SECURE 2.0 changes, but stricter compliance enforcement begins on January 1, 2027.

Most plans must be amended to comply with the new requirements by December 31, 2026, regardless of whether the plan operates on a fiscal year or calendar year basis. The 12-month runway to the new amendment date may seem long, but most plan sponsors will need to coordinate with third parties — such as payroll providers, advisors, legal counsel, or recordkeepers — each with their own priorities and timelines. Additionally, plan sponsors must not only understand how the rules affect their plans but also explain these changes effectively to plan participants.

This article offers five steps for plan sponsors to consider as they implement Roth catch-up contribution requirements. For more information about these regulations, please review IRS Final Catch-Up Contribution Regulations for Salary Deferrals in Retirement Plans: What Employers Need to Know.

Identifying Eligible Participants

Are any of the company’s employees eligible for Roth catch-ups or super catch-ups?

Eligibility may not be immediately apparent, and several considerations are at play:

Age: Employees age 50 or older can make additional deferrals to their retirement plans beyond the typical contribution limit. Super catch-ups are available to employees in the calendar year they reach age 60, 61, 62, or 63.
Prior-year wages: Employees whose 2025 Social Security wages exceed $150,000 are considered highly paid participants (HPPs). This is not simply another name for highly compensated employees (HCEs): it’s a completely new classification. In addition, the HPP prior-year Social Security wage limit is a new data point that employers never had to track before. The HPP Social Security wage limit ($150,000) is lower than the 2025 Social Security wage base ($176,100). Thus, employers cannot simply assume that everyone who hits the Social Security wage base cap is an HPP, because others below that level could also be HPPs.
Owners with self-employment income are exempt. The new mandatory Roth “age and wage” catch-up rules apply only to W-2 employees and do not apply to self-employed individuals, including partners and LLC profits or capital interest owners who receive K-1s instead of W-2s.

It’s important for employers to identify employees whose age and salary meet the IRS requirements for mandatory Roth (after-tax) deferrals. As employees reach these milestones, plan sponsors must direct deferrals to the appropriate pre-tax and after-tax funds.

Updating Payroll and Plan Systems

What steps should employers take to comply with the new Roth catch-up contribution regulations?

Employers should immediately discuss the new IRS guidance with payroll providers, recordkeepers, and any other critical stakeholders. To help verify compliance with SECURE 2.0 Roth catch-up deferral regulations, employers can take the following steps:

Evaluate the payroll system to determine if it can track employee eligibility.
Establish procedures to accurately process Roth catch-up contributions.
Monitor contribution limits, participant ages, and participant salaries continuously.
Communicate regularly with payroll providers and third-party administrators to assess the efficiency and accuracy of the new processes.

Plan participants may be unaware of changes to their retirement plans. It’s critical to inform participants about how the Roth catch-up provisions may affect them.

Communicating with Participants

Do employers need to notify participants of the new Roth catch-up regulations?

Employees who prefer to make pre-tax rather than after-tax contributions to their retirement plan may find the new SECURE 2.0 regulations an unwelcome surprise. Employers are strongly encouraged to inform participants that, based on their age and Social Security wages, their catch-up contributions may automatically be treated as Roth (after-tax) contributions. Communications to plan participants should provide them the opportunity to make an informed decision about their deferral elections.

Amending Plan Documents

When should employers amend plan documents?

Conversations about plan amendments should begin immediately. A thorough review of plan provisions will reveal the extent of any changes needed, including those related to the Roth catch-up regulations. For example, what if a company’s current plan doesn’t offer Roth contributions as an option? To allow HPPs to make catch-up contributions, the plan sponsor must amend the plan document to allow Roth contributions from all eligible employees.

Typically, amending an ERISA retirement plan may involve coordinating with other entities, including third-party administrators and payroll providers. Adapting to another organization’s timelines and priorities can extend the process — another good reason to start reviewing your company’s plan now. Doing so can help plan sponsors comply before deadlines approach and reduce errors that may occur if amendments are rushed at the last minute.

Remaining Up to Date

How can the company continue to maintain compliance with Roth catch-up regulations?

As these rules evolve, administrative burdens on employers and plan sponsors could shift. It’s important to monitor new guidance or updates from the IRS, as these may require employers and plan administrators to take additional action.

For guidance on navigating the Roth catch-up regulations, coordinating plan amendments, and strengthening compliance processes, Walter Shuffain can assist through our Benefit Plan Audit and Agreed Upon Procedures Services.

The post How Plan Sponsors Can Address Roth Catch-up Regulations appeared first on Walter Shuffain.

New IRS Digital Asset Reporting: What the First Year of Implementation Means for Businesses

wsadvisors — Sat, 28 Feb 2026 19:17:21 +0000

Key Takeaways

New IRS rules affect more businesses than many owners expect, even those that do not accept crypto
Digital asset exposure often comes from systems and platforms, not customer payments
Working with a CPA can help business owners understand risk and build a clear strategy

Digital asset reporting rules took effect in 2025, representing a significant shift in how the IRS tracks certain business activities. Many owners assume these rules apply only to businesses that accept cryptocurrency as a form of payment. In reality, many non-crypto companies are already exposed through the tools they use and the way transactions are handled behind the scenes.

What makes this first year different is not just new forms or paperwork. It is the level of detail the IRS now expects. Businesses that have never considered themselves connected to digital assets may now face reporting responsibilities without realizing it. This is where proactive planning becomes essential.

What Changed with IRS Digital Asset Reporting in 2025?

The most significant change is that the IRS now receives more detailed and more consistent information about digital asset activity. This data comes not only from taxpayers, but also from platforms and service providers.

From a business perspective, three changes matter most:

Certain transactions must now be tracked with more detail, even if crypto is not accepted as payment
Some platforms are required to issue Form 1099 DA reporting gross proceeds
Taxable activity still requires gain or loss reporting, including stablecoin-related transactions

These changes increase the IRS's visibility. Businesses that rely on third-party platforms may be affected even if they never intended to hold or use digital assets.

Compliance-Driven Cost Pressure on Profitability

For non-crypto business owners, the risk is often indirect. Reporting responsibilities can arise unexpectedly through longer reviews, new software requirements, or inquiries from accountants or advisors.

These costs do not usually appear all at once. They build over time as records are reviewed, reconciled, and corrected. When pricing and planning do not account for this work, profitability can slowly erode.

This is why understanding exposure early matters. It gives business owners time to plan rather than react.

How Does Cost Basis Tracking Affect Pricing Decisions?

More detailed tracking requirements create extra work, but they also provide valuable insights. Business owners can better see which activities create value and which introduce complexity without a clear return.

This information supports smarter decisions about pricing and service offerings. Instead of treating all transactions the same, businesses can align pricing with the effort and risk associated with each transaction. Your accountant can help interpret this information and translate it into a practical strategy.

Aligning Pricing with Reporting Risk and Audit Exposure

With improved data, the IRS can more easily identify inconsistencies. Even businesses that do not accept crypto can face questions if records do not align with platform reporting.

Pricing should reflect not just the work of tracking transactions, but also the systems and controls that reduce exposure. These include:

Time spent maintaining accurate records
The cost of fixing errors after filing
Controls that reduce the chance of audits or penalties

Support from a CPA can help ensure these risks are addressed before they become costly problems.

Strategic Pricing Adjustments for 2025 and Beyond

The first year of implementation creates an opportunity to step back and reassess. Businesses that act now can make thoughtful adjustments instead of rushed changes later.

This is where a CPA can add value. They can help evaluate exposure, model costs, and build pricing or operational strategies that support long-term stability. Precise planning also makes it easier to explain changes to stakeholders.

Preparing for Long-Term Pricing Stability

Digital asset reporting will continue to evolve as the IRS gathers more data and increases its enforcement efforts. Many non-crypto businesses assume these rules do not apply to them, which can lead to unexpected compliance issues and added costs later.

Now is the right time to speak with an accountant or advisor. A CPA can help identify hidden exposure, assess reporting risk, and develop a strategy that aligns pricing, processes, and controls before problems arise. A proactive conversation today can help protect profitability and provide long-term stability.

Frequently Asked Questions (FAQ’s)

Do these rules apply if my business does not accept crypto?
Yes. Exposure can originate from various sources, including platforms, payment processors, or internal transaction handling procedures.
Do new IRS forms eliminate my reporting responsibility?
No. Third-party forms assist the IRS, but businesses remain responsible for accurate reporting.
Should I be concerned if my digital asset activity is limited?
Yes. Even limited activity can create reporting obligations, and a financial advisor can help assess the materiality and risk associated with these obligations.
What is the best first step for my business?
The best first step is speaking with a financial advisor who understands these rules and can help you develop a clear strategy.

The post New IRS Digital Asset Reporting: What the First Year of Implementation Means for Businesses appeared first on Walter Shuffain.

Strengthening Internal Controls for Small Businesses

wsadvisors — Fri, 27 Feb 2026 20:38:40 +0000

Key Takeaways

Internal controls help prevent errors, deter fraud, and improve the reliability of your financial reporting.
Focus first on cash, inventory, receivables, and disbursements because those areas carry the highest day-to-day risk.
Testing controls helps you confirm they’re working, so your cash flow decisions and forecasts are based on dependable numbers.

Small and mid-size businesses face many of the same financial risks as larger organizations, but with fewer layers of oversight and fewer specialized roles. That’s why internal controls matter. When controls are straightforward, documented, and consistently followed, they protect assets, support compliance, and reduce operational surprises while giving owners more confidence in the numbers they use to run the business.

Just as important, internal controls become more valuable as a company grows. The goal isn’t bureaucracy. It’s building enough structure that your financial processes remain consistent as you add staff, customers, vendors, and systems.

What Are Internal Controls in a Small and Mid-Size Business?

Internal controls are the policies and procedures that help you safeguard assets, produce reliable financial reporting, and operate within legal and regulatory requirements. In everyday terms, they’re the checks, approvals, and documentation standards that keep money moving through your business in a consistent, accountable way.

For many growing companies, controls are also what enable delegation. When the business no longer runs entirely through the owner, controls help ensure financial work is done correctly, even when responsibilities are shared.

Why Do Internal Controls Matter for Cash Flow and Forecasting?

Internal controls matter because better inputs lead to better decisions. If receivables are misstated, deposits aren’t reconciled, or disbursements aren’t reviewed, you can end up planning based on numbers that don’t reflect reality. Over time, that can affect staffing, purchasing, and pricing decisions.

As a business scales, even small process gaps can become expensive. Controls help you maintain stable, trustworthy numbers, which improves both forecasting and profitability planning.

The Core Elements Behind Effective Controls

A strong control framework is usually described in five categories, and small and mid-size businesses can apply them without creating unnecessary complexity.

These categories are:

Control environment: expectations, ethics, and accountability set by leadership
Risk assessment: identifying where error or fraud is most likely and most costly
Control activities: reconciliations, approvals, access limits, and documentation
Information and communication: getting the correct financial info to the right people
Monitoring: reviewing and testing controls so problems are caught early

What Internal Controls Should Owners Prioritize First?

Start with cash, inventory, receivables, and disbursements, since these areas directly affect liquidity and are vulnerable to both errors and misuse. A simple way to think about control design is to ensure no single person can initiate, approve, and record the same transaction without oversight.

This becomes more important as your business grows. When responsibilities expand across multiple people, precise controls reduce confusion and prevent minor errors from becoming recurring issues.

Standard high-impact controls include:

Segregation of duties, or owner review when staffing is limited
Regular bank reconciliations with documented review
Approval limits for larger purchases, refunds, and write-offs
Access controls for accounting systems, including audit trails and logs

How Do You Strengthen Controls Over Receivables?

You strengthen receivables controls by tightening the path from credit decisions to invoicing, collections, and reconciliation. Receivables represent cash you’re counting on, so weak controls can show up as slow collections, higher write-offs, or misleading revenue and cash flow projections.

Practical steps include setting clear credit policies, issuing invoices promptly, reviewing ageing reports regularly, and requiring approval and documentation for adjustments such as credit memos and write-offs. As your business grows, these controls also help you maintain consistent customer treatment and avoid collection issues that can damage relationships.

When billing, collections, and reconciliation are separated, it becomes harder for errors or manipulation to go unnoticed.

What Does Internal Control Testing Mean in Practice?

Internal control testing is how you confirm your controls are designed to address risk and are actually being performed. Testing generally looks at two things: whether a control makes sense on paper and whether it’s operating consistently in real life.

Typical testing methods include reviewing documentation, interviewing the person responsible, observing the process, and re-performing the control to confirm the results. For growing businesses, testing also helps demonstrate that processes remain effective as transaction volume increases.

How Can Small and Mid-Size Teams Test Controls Without Slowing Operations?

Small and mid-size teams can test controls by focusing on the highest risk processes and using compensating controls when complete segregation isn’t realistic. For example, an owner or senior leader can review bank reconciliations, approve vendor setup changes, and spot check receivables adjustments on a consistent cadence.

Many businesses use a rolling schedule, testing one area each quarter to keep controls current without overwhelming the team. This approach also helps controls evolve gradually as the company adds staff and complexity.

Keeping Controls Effective Over Time

Internal controls aren’t a one-time setup. As you add staff, vendors, customers, and technology, risks shift, and controls need to be updated, retrained, and tested. The most effective approach is to keep controls practical and scalable, so they support growth rather than slow it down.

If you’d like help strengthening controls or setting up a realistic testing approach, reach out to your CPA. With a few targeted improvements, you can improve financial accuracy, reduce avoidable risk, and support more confident decision-making.

Frequently Asked Questions (FAQ’s)

What’s the difference between internal controls and bookkeeping?
Bookkeeping records transactions, while internal controls help ensure those transactions are accurate, authorized, and complete. Controls make your bookkeeping more reliable and more useful for decision-making.
How often should a small and mid-size business test internal controls?
Testing works best on a rolling basis throughout the year. Higher-risk areas such as cash, receivables, and disbursements typically warrant more frequent review.
What if we can’t segregate duties because our team is small?
Use compensating controls such as owner review, documented approvals, and periodic spot checks. The goal is to prevent a single person from controlling a transaction end to end without oversight.
Where should owners start if they’re building controls from scratch?
Start with cash handling and bank reconciliations, then move to receivables and disbursements. Those areas most directly affect liquidity and fraud risk, and they scale well as the business grows.

The post Strengthening Internal Controls for Small Businesses appeared first on Walter Shuffain.