Month: May 2025

This January, the Social Security Fairness Act (SSFA) was signed into law, repealing the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO). These repealed provisions had previously reduced Social Security benefits for some public-sector employees. The WEP reduced benefits by applying a modified Social Security benefit formula for individuals who also received pensions from employment not covered by Social Security. The GPO reduced spousal or survivor benefits for those receiving government pensions.

With the removal of the WEP and GPO, the retired public-sector employees who were impacted will see their monthly Social Security benefits increase going forward. Additionally, the SSFA also included a provision to permit a one-time retroactive payment of benefits for the prior 15 months, allowing eligible individuals to receive compensation for past reductions in their benefits. The Social Security Administration began issuing these payments in January 2025 and is currently working through the cases of approximately 3 million eligible individuals.

Tax Implications of Lump-Sum Payments

If you receive a lump-sum payment in addition to your monthly Social Security payment, your annual Form SSA-1099 will contain a breakdown of the payout by tax year. Please include this portion with the SSA-1099 when you provide us with your tax documents for 2025.

Depending on your individual circumstances, there may be tax implications to these payouts. For most recipients, the income will be at least partially taxable and may represent a significant increase in annual income, potentially impacting your tax liability. If you would like us to recalculate your estimated tax payments or discuss the tax implications, our team is available to assist you. Services are billed at our regular hourly rates.

Avoiding Scams and Fraudulent Activity

As with any major law change or benefit adjustment, there are heightened risks of fraud targeting beneficiaries. We urge you to be vigilant and not respond to unsolicited calls, emails, or letters requesting information, payment, or offering to expedite benefits associated with the SSFA. The Social Security Administration does not require additional information or payment to process these retroactive payments or adjust monthly benefits.

To stay informed and protect yourself, visit the official SSA website and access their FAQ page for updates and detailed information at https://www.ssa.gov/benefits/retirement/social-security-fairness-act.html?

If you have further questions or require tax planning assistance, please do not hesitate to contact us at our Leesburg or Warrenton office.

Choosing the right business entity is a critical decision for entrepreneurs and business owners. The type of entity you select can have significant implications for liability, taxation, and the overall management of your business. In this article, we will explore the pros and cons of various business entities, including sole proprietorships, partnerships, limited partnerships, limited liability companies (LLCs), C corporations, and S corporations which are the most common business structures. We will also discuss liability issues, self-employment taxes, owner limitations, taxation, formation, and dissolution for each entity type.

The business structure one chooses influences everything from day-to-day operations to taxes and how much of their personal assets are at risk. One should choose a business structure that provides the right balance of legal protections and benefits.

Compare general traits of these business structures, but remember that ownership rules, liability, taxes and filing requirements for each business structure can vary by state. The following material is a general overview of these business structures and it is best practice to consult with your legal counsel and this office before making a final decision.

SOLE PROPRIETORSHIP – A business is automatically considered to be a sole proprietorship if it is not registered as any other kind of business. Thus, the sole proprietor’s business assets and liabilities are not separate from personal assets and liabilities. As a result, sole proprietors can be held personally liable for the debts and obligations of the business. A sole proprietor may also find it difficult to raise money since banks are hesitant to lend to sole proprietorships.

NOTE: If the business owner is the sole member of a domestic limited liability company (LLC) and elects to treat the LLC as a corporation, then it is not a sole proprietorship.

Pros:
Simplicity and Cost-Effectiveness: Sole proprietorships are the simplest and least expensive business entities to establish. They require minimal paperwork and are easy to manage.
Complete Control: A sole proprietor has full control over all business decisions and operations.
Tax Benefits: Income and expenses are reported on the individual’s personal tax return, simplifying the tax process. The sole proprietor may also qualify for certain tax deductions available to small businesses.

Cons:
Unlimited Liability: Sole proprietors are personally liable for all business debts and obligations, which means personal assets are at risk if the business incurs debt or is sued.
Limited Growth Potential: Raising capital can be challenging, as a sole proprietorship cannot sell stock or bring in partners.
Self-Employment Taxes: Sole proprietors are responsible for paying self-employment taxes, which cover Social Security and Medicare contributions.

Formation and Dissolution:
Formation: Establishing a sole proprietorship is straightforward, often requiring only a business license or permit.
Dissolution: Dissolving a sole proprietorship is equally simple, involving the cessation of business activities and settling any outstanding debts.

PARTNERSHIP – A partnership is the relationship between two or more people in a trade or business together. Each person contributes money, property, labor or skill, and shares in the profits and losses of the business. Partnerships represent the simplest structure for two or more people to be in business together. Two of the most common types of partnerships include:

Limited Partnerships (LP): Which have one general partner with unlimited liability. The other partners have limited liability and generally have limited control over the business.
Partnerships are pass-though entities, meaning the partnership does not pay taxes. Instead, income, losses, credits and other tax issues are passed through to the partners in proportion to their partnership ownership and reported on their individual returns.

Limited Liability Partnerships (LLP): A limited liability partnership is also a pass-through entity. The only difference is all the partners have limited liability from debts of the partnership, and the actions of other partners.

Pros:
Shared Responsibility: Partnerships allow for shared management and financial responsibility, which can ease the burden on individual partners.
Flexibility: Partnerships can be structured to suit the needs of the partners, with varying levels of involvement and profit-sharing.
Tax Advantages: Partnerships are pass-through entities, meaning profits and losses are reported on the partners’ personal tax returns, avoiding double taxation.

Cons:
Joint Liability: In a general partnership, each partner is personally liable for the debts and obligations of the business, including those incurred by other partners.
Potential for Conflict: Disagreements between partners can arise, potentially leading to business disruption.
Self-Employment Taxes: Partners who aren’t limited partners must pay self-employment taxes on their share of the profits.

Formation and Dissolution:
Formation: Partnerships are formed through a partnership agreement, which outlines the terms of the partnership, including profit-sharing and management responsibilities.
Dissolution: Dissolving a partnership requires settling debts, distributing assets, and notifying relevant authorities.

LIMITED LIABILITY COMPANY (LLC) – A Limited Liability Company (LLC) is a business structure allowed by state statute. Each state may use different regulations, and those considering an LLC should check with the state before starting a Limited Liability Company. A business must register with the state and pay LLC fees to become an LLC.

Owners of an LLC are called members. Most states do not restrict ownership, so members may include individuals, corporations, other LLCs and foreign entities. There is no maximum number of members. Most states also permit “single member” LLCs, those having only one owner. Generally, banks and insurance companies cannot be an LLC, and generally there are special rules for foreign LLCs.

Pros:
Limited Liability: LLC owners, known as members, are protected from personal liability for business debts and obligations.
Flexible Taxation: LLCs can choose to be taxed as a sole proprietorship, partnership, or corporation, providing flexibility in tax planning.
Operational Flexibility: LLCs have fewer formalities and regulations compared to corporations, allowing for flexible management structures.

Cons:
Regulations: LLCs are subject to varying state laws, which can complicate operations if the business operates in multiple states.
Self-Employment Taxes: Members may be subject to self-employment taxes on their share of the profits.
Cost: Forming and maintaining an LLC can be more expensive than a sole proprietorship or partnership due to state filing fees and annual reports.

Formation and Dissolution:
Formation: LLCs are formed by filing articles of organization with the state and creating an operating agreement.
Dissolution: Dissolving an LLC involves filing dissolution documents with the state and settling any outstanding obligations.

C CORPORATION – A corporation is a legal entity that’s separate from its owners. Corporations can make a profit, be taxed, and held legally liable.

Corporations provide strong protection to its owners from personal liability, but the cost to form a corporation is higher than other structures.

Unlike sole proprietors, partnerships, and LLCs that are pass-through entities, corporations pay income tax on their profits. In some cases, corporate profits are taxed twice. This happens when the corporation distributes profits to its shareholders in the form of dividends which are taxable to shareholders on their personal tax returns.

Corporations have a separate life from its shareholders. Corporate ownership is in the form corporate stock which can be purchased and sold without disturbing the corporation.

Ownership in the form of stock gives corporations the advantage of being able to raise capital through the sale of stock, and employee stock options can be a benefit in attracting employees.

Pros:
Limited Liability: Shareholders are protected from personal liability for corporate debts and obligations.
Unlimited Growth Potential: C corporations can raise capital by issuing stock, making them attractive to investors.
Tax Advantages: Corporations can benefit from various tax deductions and credits not available to other entities.

Cons:
Double Taxation: C corporations face double taxation, where profits are taxed at the corporate level and again as dividends to shareholders.
Complexity and Cost: Corporations require more formalities, including a board of directors, bylaws, and regular meetings, which can be costly and time-consuming.
Regulatory Requirements: Corporations are subject to stringent regulatory requirements and reporting obligations.

Formation and Dissolution:
Formation: C corporations are formed by filing articles of incorporation with the state and creating corporate bylaws.
Dissolution: Dissolving a corporation involves a formal process of liquidating assets, settling debts, and filing dissolution documents with the state.

S CORPORATION – S corporations are corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates. This allows S corporations to avoid double taxation on the corporate income. S corporations are responsible for tax on certain built-in gains and passive income at the entity level.

To qualify for S corporation status, the corporation must meet the following requirements:

Be a domestic corporation
Have only allowable shareholders
May be individuals, certain trusts, and estates and
May not be partnerships, corporations or non-resident alien shareholders
Have no more than 100 shareholders
Have only one class of stock
Not be an ineligible corporation (i.e. certain financial institutions, insurance companies, and domestic international sales corporations)

To become an S corporation, the corporation must submit Form 2553, Election by a Small Business Corporation signed by all the shareholders.

Pros:
Limited Liability: Like C corporations, S corporation shareholders are protected from personal liability.
Pass-Through Taxation: S corporations avoid double taxation by allowing income, deductions, and credits to pass through to shareholders’ personal tax returns.
Tax Savings on Self-Employment: Shareholders can receive a salary and dividends, potentially reducing self-employment taxes.

Cons:
Ownership Restrictions: S corporations are limited to 100 shareholders, and all must be U.S. citizens or residents.
Complex Formation and Maintenance: S corporations require adherence to strict IRS requirements and ongoing compliance with corporate formalities.
Limited Flexibility in Profit Sharing: Profits and losses must be distributed according to share ownership, limiting flexibility in profit-sharing arrangements.

Formation and Dissolution:
Formation: S corporations are formed by filing articles of incorporation and electing S corporation status with the IRS.
Dissolution: Dissolving an S corporation involves liquidating assets, settling debts, and filing dissolution documents with the state and IRS.

Choosing the right business entity is a crucial decision that can impact your business’s success and your personal financial security. Each entity type offers distinct advantages and disadvantages, and the best choice depends on your specific business goals, risk tolerance, and financial situation. It’s essential to consult with legal and financial professionals to ensure you select the entity that aligns with your long-term objectives and provides the most benefits for your business. It most likely is appropriate to consult with our Leesburg (703-771-1818) or Warrenton (540-347-5681) office to go over other relevant issues before making the choice.

We’ve seen firsthand how optimizing your tax deductions can create real, measurable benefits for your business. With inflation driving up expenses and economic uncertainty still lingering, small business owners need every strategic advantage they can get. That includes knowing what deductions you’re entitled to and taking steps throughout the year to claim them. The good news? You don’t have to navigate this alone—and you might be surprised at what qualifies.

What is a Tax Deduction?

Tax deductions allow you to subtract qualified expenses from your gross income, effectively lowering the amount of income that is subject to federal and state taxes. These deductions aren’t just about tax savings—they’re about cash flow, reinvestment, and long-term growth. Smart tax planning can help you preserve more of your profits so you can scale faster and worry less.

How to Use the Tax Code to Minimize Your Tax Liability

The tax code is complex, yes—but it’s also full of opportunities for savvy business owners who know how to navigate it. Here’s how to make the most of it:

1. Understand What Qualifies: To be deductible, expenses must be ordinary and necessary for your business. The more familiar you are with what counts, the easier it is to plan accordingly.
2. Implement Year-Round Planning: Don’t wait until tax season to think about deductions. A mid-year strategy session can unlock deductions you may otherwise miss.
3. Track Everything: Use accounting software or apps to capture expenses in real time. Documentation is your best defense—and your biggest opportunity.
4. Work with a Trusted Advisor: A tax advisor who understands your business and industry can help uncover hidden savings and ensure you’re fully compliant.

Expanded List of Key Small Business Tax Deductions

1. Business Operating Expenses
   Everything from rent to internet service to office cleaning fees falls under this category. These everyday costs of running your business are often 100% deductible.
2. Vehicle and Travel Expenses
   If you use a car for business, you’re eligible for deductions using either the standard mileage rate or actual expense method. Travel for conferences, client meetings, or vendor visits? Flights, hotels, and meals can also be partially deductible.
3. Employee and Contractor Costs
   Wages, bonuses, retirement contributions, and even hiring freelancers or gig workers can reduce your taxable income. Don’t forget employer-paid payroll taxes and benefits—they count, too.
4. Marketing and Advertising
   Your website, SEO services, Google Ads, social media promotions, business cards, and even sponsoring a local event all qualify as deductible marketing expenses.
5. Professional Services
   Legal, tax, accounting, and consulting fees are often overlooked but fully deductible. Outsourcing critical business functions can pay off twice—through both operational efficiency and tax savings.
6. Office Supplies and Technology
   Office chairs, cloud storage subscriptions, printer paper, and even your Zoom account are all potentially deductible. Keep records and receipts—even small expenses add up.
7. Equipment and Depreciation
   If you purchase new computers, office furniture, or machinery, you can deduct part or all of the cost. Section 179 allows you to write off the full cost of qualifying assets up to a certain limit in the year purchased.
8. Home Office Deduction
   If you work from home, a portion of your home expenses—like utilities, rent, internet, and repairs—may be deductible. To qualify, the space must be used regularly and exclusively for business.
9. Utilities and Communication
   Phone bills, internet service, and electricity—if they power your business, they’re likely deductible. Just make sure to separate personal use from business use when applicable.
10. Education and Training
    Courses, webinars, books, and certifications that help you run your business better are typically deductible. Keeping your skills sharp isn’t just smart—it’s a tax strategy.
11. Business Insurance
    Premiums for general liability, workers’ comp, cyber liability, and property insurance are all considered legitimate deductions.
12. Retirement Contributions
    If you set up a SEP IRA, SIMPLE IRA, or solo 401(k), you can contribute as both the employer and employee—lowering your tax liability while building your future.
13. Charitable Contributions (If Structured Correctly)
    While businesses can’t always deduct charitable donations like individuals, there are options. Sponsoring charitable events or donating inventory might qualify—especially if there’s a promotional or branding component.
14. Tax Credits
    The tax code provides a variety of tax credits; take advantage of those that benefit your business.
15. Business Meals
    Entertaining clients or grabbing lunch during a business meeting? You can generally deduct 50% of qualifying meal expenses, provided proper documentation is maintained.

Real-Life Application: Turn Deductions Into Real Savings

Let’s say you’re a small business owner who outsources your bookkeeping, advertises on Facebook, drives 6,000 miles a year for business, attends one industry conference, pays employees via a cloud-based payroll platform, and works from home. That’s tens of thousands of dollars in potential deductions—just sitting there. But without the right tracking and guidance, they could easily go unclaimed.

Why Work with a Tax Advisor?

You didn’t start your business to become a tax expert. That’s why working with a trusted advisor can save you more than just time—it can save you money and stress, too.

Here’s how we help:

Tailored Advice for Your Business Model
Ongoing Tax Planning (Not Just Year-End Scrambles)
Audit-Ready Documentation Strategies
Stress-Free Filing and Maximum Savings

Let Your Tax Strategy Fuel Your Growth

Every deduction is an opportunity. And while it’s important to understand the basics, the real value comes from applying those insights consistently, proactively, and with professional guidance. Small business tax deductions are more than just line items—they’re levers for better cash flow and business growth.

Don’t leave money on the table. Contact our Leesburg or Warrenton office today to create a proactive tax strategy that helps your business thrive, 703-771-1818 or 540-347-5681.

You did it, you worked hard, saved consistently, and now you’re either enjoying retirement—or it’s just around the corner.

You’ve been told for years to put money into retirement accounts, defer taxes, and wait for the golden years. But wait… no one told you?

Retirement might be your highest-taxed phase yet.

Between Social Security income, Required Minimum Distributions (RMDs), capital gains, Medicare premium adjustments, and even state taxes… it can feel like a financial ambush.

Let’s break down why this happens—and what you can do now to soften the blow.

RMDs: The Tax Bomb That Starts at Age 73

If you’ve saved in a traditional IRA or 401(k), you’ve been enjoying tax deferral for years. But the IRS eventually wants their cut.

That’s where RMDs come in.
Once you hit age 73, you’re forced to take money out of your retirement accounts—and those withdrawals are taxed as ordinary income.

Why it matters:

Your RMD could bump you into a higher tax bracket.
It could trigger higher Medicare premiums (thanks, IRMAA).
It might even impact how much of your Social Security is taxed.

What to do now:

Consider Roth conversions in your 60s to reduce your future RMDs. Yes, you’ll pay tax now, but it could save you significantly down the road.

Social Security Isn’t Always Tax-Free

Up to 85% of your Social Security benefits could be taxable depending on your total income—including investment income, part-time work, and yes, those RMDs.

Here’s the trap:

You think you’re getting $3,000/month from Social Security.
But add in just a few thousand from another source, and suddenly, a big chunk of that is taxable.

Solution:

Work with an advisor who can map out income sources before you trigger your benefits. Sometimes, waiting a year or two—or rebalancing your withdrawal strategy—can dramatically reduce taxes.

IRMAA: The Medicare Surcharge You Didn’t See Coming

You file your taxes, enjoy a good year, and then boom—two years later, your Medicare premiums go up.

That’s IRMAA (Income-Related Monthly Adjustment Amount).
If your income exceeds certain thresholds, you’ll pay more for Medicare Part B and D—even if the bump was from a one-time event like a Roth conversion or asset sale.

Proactive planning = lower premiums.

A well-timed income strategy can keep you just under IRMAA thresholds. And in some cases, you can file an appeal based on a “life-changing event” like retirement or loss of income.

Selling your long-held investments? Downsizing your home?
These capital gains could push your income higher than expected—and cause a domino effect with taxes, Medicare, and Social Security.

Even if you’re “living off savings,” your tax return may tell a different story.

Pro tip:
There’s a 0% capital gains bracket for certain income ranges. With the right strategy, you can sell appreciated assets without triggering taxes—but timing is everything.

State Taxes Still Matter—Even in Retirement

Not all states treat retirees the same.
Some tax Social Security, some don’t. Some offer pension exemptions, others tax everything.

If you’re thinking about relocating in retirement, don’t just compare housing costs. Compare tax policies. And if you’re staying put? Learn how your current state impacts your bottom line.

Your Filing Status Can Change Your Tax Life

A tough but important truth: Losing a spouse in retirement often means going from “Married Filing Jointly” to “Single.”

Which means:
Lower standard deductions
Tighter income thresholds
Bigger tax bills on the same income

If you’re newly widowed or preparing for that reality, it’s worth building a multi-year tax strategy now—not later.

You Don’t Have to Navigate This Alone

The retirement tax landscape is not DIY-friendly.
Rules change. Thresholds shift. And one wrong move (or missed opportunity) can cost you thousands.

But with the right guide, you can:
Smooth out income across years
Reduce your lifetime tax bill
Maximize your Social Security and Medicare benefits
And keep more of the money you worked so hard to earn

Let’s Build a Tax-Smart Retirement Plan—Together

You planned for retirement.
Now it’s time to plan for retirement taxes.

We’re here to help you make smart, proactive decisions that reduce surprises, minimize your tax burden, and give you the peace of mind to enjoy the years ahead.

Contact our Leesburg or Warrenton office today to schedule a retirement tax check-up, 703-771-1818 or 540-347-5681. You’ve done the saving—now let’s make sure you keep more of it.