<![CDATA[MONARCH ACCOUNTING GROUP - Blog]]>Thu, 29 Jan 2026 10:33:04 -0600EditMySite<![CDATA[Don't Run the Risk of a High Tax Bill!]]>Tue, 30 Sep 2025 19:07:25 GMThttps://www.monarchaccountinggroup.com/blog/dont-run-the-risk-of-a-high-tax-billKnow when you should ask for professional help.
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Before taking action, talk to your tax adviser.
How many times have you seen this legal disclaimer? Unfortunately, all too often taxpayers do not follow this advice and then must pay the price with an unnecessarily high tax bill.​

Here are some of the most common situations that can save you money by seeking advice before you act:

  • Getting married
  • Selling a home
  • Donating stocks and investments
  • Getting divorced
  • Change in dependent status
  • Approaching retirement
  • Starting a business
  • Managing participation in tax-advantaged retirement accounts like 401(k)s, 403(b)s, and various IRAs
  • Death and birth of loved ones
  • Donating high-value items
  • Selling stocks, bonds, mutual funds, or business property (rentals)
  • An audit
  • Tax-efficient transfer of your estate
  • Selling or buying high value assets (art, collectibles, real estate, and small business assets)
  • Determining your Social Security benefit strategy

In advance of any of these events, or when in doubt, please ask for assistance. There are too many stories that include the words “If only they had talked to someone first!”

"Tax Tips" are published to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
 
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.  
 
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at info@monarchaccountinggroup.com. 
 
For more free resources, such as Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Mia Verc, CPA;  Janice Papais, CPA
]]><![CDATA[Understanding Tax Terms: Applicable Federal Rates]]>Wed, 24 Sep 2025 17:46:12 GMThttps://www.monarchaccountinggroup.com/blog/understanding-tax-terms-applicable-federal-rates
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Your grandson needs a car, but cannot afford the payments. As a favor, you provide the $25,000 to purchase the car. You tell your grandson to pay you back when he can, but there is no loan document. The IRS sees this payment during an audit and asks where your interest income is for this loan. Should this happen, you will quickly understand the meaning of AFRs.​

AFRs Defined
AFRs stand for Applicable Federal Rates. They are minimum interest rates that the IRS applies to a transaction when no rate is stated or implied. In other words, you may have a transaction that the IRS believes has an interest income/expense element to it, but none has been claimed by you. These minimum interest rates are published each month by the IRS for three different loan terms: Short-term (0 to 3 years); Mid-term (4 to 9 years); and Long-term (over 9 years).

When does the AFR apply?
You may think that money you gave to a friend or that car sale to your cousin with repayment over time has no interest rate, but the IRS may see it differently. If no interest rate is stated, the IRS will apply the applicable AFR. This means you might be in for a tax surprise. Here are some common examples when the AFR rates can come into play:
  • Loans to family and friends.
  • Buying anything over time. If you take possession of an item, but can pay for it over a length of time, imputed interest is involved.
  • Employee advances. This can include giving an employee the rights of stock ownership, but not expecting payment for the stock right away.


How to use the AFR knowledge to your advantage

  1. Create a loan document. Whenever you establish a transaction that has the expectation of repayment, write up a simple loan agreement. Not only will it clarify your repayment expectation, it also establishes the repayment terms. Ensure both parties sign and date the document.
  2. Establish a safe interest rate. Use the AFR tables to establish an audit-safe interest rate. Remember, AFRs are also used if the IRS believes your stated interest rate is too low.
  3. Leverage gift rules. Remember, you (and your spouse) can each gift up to $19,000 to an individual in 2025. If you stay under this threshold, you could defend your money transfer as a non-interest bearing gift and not a loan.
  4. Caution with housing transactions. Banks are asking buyers to document where they receive their money for their down payment. If the money comes from you, it could establish a potential implied loan document that you might need to defend. If you plan to help with a down payment in the future, try to understand the bank’s look-back rules for this disclosure reporting and use this knowledge in conjunction with the IRS gift rules to avoid creating implied interest.

Should you wish to see the published AFR rates, they are available on the IRS website at www.irs.gov/AFRs.


"Tax Tips" are published to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
 
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.  
 
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at info@monarchaccountinggroup.com. 
 
For more free resources, such as Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Mia Verc, CPA;  Janice Papais, CPA
]]><![CDATA[Reminder: Third Quarter Estimated Taxes are Due]]>Mon, 08 Sep 2025 14:48:59 GMThttps://www.monarchaccountinggroup.com/blog/reminder-third-quarter-estimated-taxes-are-due8528055Now is the time to make your estimated tax payment
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If you have not already done so, now is the time to review your tax situation and make an estimated quarterly tax payment using Form 1040-ES. With the passage of the One Big Beautiful Bill Act (OBBBA), forecasting your tax obligation is now more important than ever. You have two quarterly estimated tax payments due dates available to you after the passage of the bill in July: one payment due by September 15th and another due in January 2026. Spend some time adjusting your tax obligation and reforecasting your estimated tax obligation.​

3rd Quarter Due Date: Monday, Sept. 15, 2025
You are required to withhold at least 90 percent of your 2025 tax obligation or 100 percent of your 2024 obligation.* A quick look at last year’s tax return and a projection of this year’s obligation can help determine if a payment is necessary. Here are some other things to consider:

  • Underpayment penalty. If you do not have proper tax withholdings during the year, you could be subject to an underpayment penalty. The penalty can occur if you do not have proper withholdings throughout the year. A quick payment at the end of the year may not help avoid an underpayment penalty.
  • W-2 withholdings have special treatment. A W-2 withholding payment can be made at any time during the year and be treated as if it was made throughout the year. If you do not have enough funds to pay the estimated quarterly payment now, you may be able to adjust your W-2 withholdings to make up the difference.
  • Self-employed workers. Remember to pay your Social Security and Medicare taxes in addition to your income taxes. Creating and funding a savings account for this purpose can help avoid the cash flow hit each quarter when you pay your estimated taxes.
  • Don't forget state obligations. You are also normally required to make estimated state tax payments if you're required to do so for your federal taxes. Consider conducting a review of your state obligations to ensure you meet these quarterly estimated tax payments as well.
  • Take law changes into account. Here are key law changes to consider as you forecast your estimated tax liability:
  • Tax-free tips
  • Tax-free overtime
  • The new $6,000 senior deduction
  • Higher standard deduction
  • Child tax credit increase to $2,200 per child
  • Increase of tax deductions from $10,000 to $40,000 (a.k.a. SALT limitation)
  • New bonus depreciation rules and section 179 business capital expensing options

So spend some time now to calculate your estimated tax liability. And remember that to avoid any underpayment penalties, simply use last year's tax as a baseline.

*If your income is more than $150,000 ($75,000 if married filing separately), you must pay 110 percent of your 2024 tax obligation to be safe from an underpayment penalty.


"Tax Tips" are published to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
 
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.  
 
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at info@monarchaccountinggroup.com. 
 
For more free resources, such as Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Mia Verc, CPA;  Janice Papais, CPA
]]><![CDATA[Using Losers to Make Winners]]>Wed, 03 Sep 2025 18:36:18 GMThttps://www.monarchaccountinggroup.com/blog/using-losers-to-make-winners2827116
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With the uncertainty in the marketplace, now is a good time to review the rules surrounding investment losses. This knowledge can help minimize your tax obligation next year. This is because investment gains and income can be subject to a variety of federal tax rates as high as 37%. This, plus the 3.8% net investment income tax, makes planning around when to take investment losses an important tax subject this year.​

Know the meaningful rules

What makes investment losses such an important tax planning subject? Here are the relevant tax ramifications surrounding investment losses.

  1. Offsetting gains. Investment losses can be used to offset investment gains every year.
  2. Short-term versus long-term. Short-term investment gains (from assets owned by you for less than one year) can be subject to ordinary income tax rates up to 37% while long-term capital gains have a maximum tax rate of 20%.
  3. Netting rules. You first net investment losses against investment gains prior to applying losses against your ordinary income. Where possible, you must net short-term losses against short-term gains and long-term losses against long-term gains.
  4. Excess losses. Up to $3,000 of excess investment losses can be used to offset your ordinary income in any one year.
  5. Unused losses. Unused losses can be carried forward to offset income in future tax years.


So given these rules, here are some tips.

Maximizing the impact of investment losses

  1. Net losses against short-term gains whenever possible. If you are in a high income tax bracket, try to sell stocks with a loss to offset any profitable investments you wish to sell that you have owned less than one year.
  2. Defer taking losses if they will be used to offset lower-taxed gains.
  3. Time taking an investment loss to take advantage of the annual $3,000 reduction of income it provides.
  4. Transfer stock from a low tax rate family member to a higher taxed individual.
  5. Take full advantage of the loss carryforward rules. If you sold an investment that has a huge loss in a prior year, you can only take $3,000 against your regular income each year. If this applies to you, conduct an annual review of your portfolio and consider selling investments with a gain to offset more of this loss carryforward.

Remember, investment losses can be used to offset investment gains and a limited amount of your ordinary income. Since the tax rates vary so greatly, proper planning to match losses against higher taxed items can make these losers a real winner on next year's tax return.


"Tax Tips" are published to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
 
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.  
 
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at info@monarchaccountinggroup.com. 
 
For more free resources, such as Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Mia Verc, CPA;  Janice Papais, CPA
]]><![CDATA[Time to Forecast Your Business Tax Obligation]]>Wed, 03 Sep 2025 18:32:12 GMThttps://www.monarchaccountinggroup.com/blog/time-to-forecast-your-business-tax-obligationMultiple changes make this more important than ever
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]]><![CDATA[Overtime Tax Break Requires Your Attention]]>Wed, 03 Sep 2025 18:29:18 GMThttps://www.monarchaccountinggroup.com/blog/overtime-tax-break-requires-your-attention
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With the passage of the One Big Beautiful Bill Act (OBBBA) of 2025, there's the ability to receive a deduction for overtime pay from your federal tax obligation. Here's a recap of the rule and several tax tips to ensure you receive the full benefit of the deduction.


The Tax Law Change
From 2025 through 2028, there is a new above-the-line tax deduction of up to $12,500 ($25,000 for joint filers) for qualified overtime compensation. Overtime is the half portion of being paid time-and-a-half as defined by the Fair Labor Standards Act. The benefit begins to phase out when your modified adjusted gross income exceeds $150,000 ($300,000 for joint filers). It phases out by $100 for every $1,000 you exceed the amount. So the phaseout ranges are:


Single: $150,000 – $275,000
Joint filer: $300,000 – $550,000
Example: Ima Working, a single taxpayer with $10,000 of overtime pay and MAGI of $170,000 can deduct $8,000 of her overtime pay. $10,000 overtime pay minus $2,000 or ($170,000 – $150,000)/1,000*$100).


To receive the benefit:
  • You must have a valid, work eligible, Social Security number
  • The overtime is to be designated on a W-2 (or a 1099 in the case of contract labor overtime)
  • If married, you must file a joint tax return

Some tips
  • Track your overtime hours. This mid-year's law change requires some historic research back to the beginning of the year. Get your payroll records and add up your historic overtime hours and pay. You will need this to ensure you are getting credit for all your overtime pay.
  • Employers are in a jam. They are required to report these overtime hours on a W-2 or similar form. But the form does not yet have the overtime reporting mechanism. So what to do? Congress has established a reporting transition rule for 2025 and the IRS will come out with approved alternative reporting. This makes tracking your own overtime pay even more important, as this could be messy in 2025.
  • Keep overtime, overtime. Congress is tasking the IRS and Treasury to put controls in place to ensure work is not reclassified as overtime. You'll want to ensure your overtime work is properly paid and recorded given the additional tax benefit.
  • Review your withholdings. With this additional deduction, you may be over-withholding your federal tax. Now is a great time for a review.
  • Pay attention to your state. Every state will need to determine whether they follow the new federal rules. Some will, some won’t, so stay alert.




"Tax Tips" are published to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
 
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.  
 
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at info@monarchaccountinggroup.com. 
 
For more free resources, such as Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Mia Verc, CPA;  Janice Papais, CPA
]]><![CDATA[Make Your Child a Tax-Free Millionaire!]]>Mon, 11 Aug 2025 17:35:26 GMThttps://www.monarchaccountinggroup.com/blog/make-your-child-a-tax-free-millionaire5903065
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Want to jump start your child's retirement with a million dollar tax-free account? Consider this:​

The million dollar idea
As soon as your child begins to earn income, open a Roth IRA and set a contribution goal to reach before they graduate from high school. Assuming an 8% expected rate of return, the investments made by age 19 will grow to FORTY times its value by the time they reach 67 (current full retirement age). For example, $2,500 invested before graduation will be $100,000 at retirement. If you can bump that up to a $25,000 investment before graduation, at retirement it will be worth $1 million!

Why it works
Compounding interest occurs when interest is earned on the interest generated from the initial contribution. The more time the investment has to grow, the more exponential growth will occur. By starting to save prior to graduating from high school, the investment will have almost fifty years of compounding growth.
Even better, while contributions to Roth IRA's must be after-tax contributions, any earnings are TAX-FREE as long as the rules are followed! Simple to say, but how do you get $25,000 into a child's Roth IRA? Here are some ideas.

Tips to achieve the goal

  • Hire your child. Roth IRA contributions are limited to the amount of income your child earns, so earned income is key. If you own a business or even make some money on the side, consider hiring your child to help with cleaning the office, filing or other tasks they can handle.
  • Look for acceptable young-age work ideas. Babysitting, yard work, walking pets, shoveling, and lawn work are all good ideas to get your child earning income at a younger age. Cash-based income is harder to prove, so don't forget to keep track of the income and consider filing a tax return, even if not required.
  • Leverage high school years. Ages 15 through 18 will be when your child has their highest earning potential before graduation. Summer jobs, internships and part-time jobs during the school year can produce a consistent income flow to contribute to their Roth IRA and still provide spending money.
  • Parent or grandparent matching idea. The income earned by your child doesn't have to be directly contributed by them to the Roth IRA – it simply sets the contribution limit. Make a deal that for every dollar of income your child saves for college, a parent or grandparent contributes a matching amount to their Roth account. It can be a college and retirement savings in one!

By helping your child get a head start on saving, it should ease any anxiety regarding retirement and help them focus on school, starting their career, and other personal development goals


"Tax Tips" are published to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
 
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.  
 
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at info@monarchaccountinggroup.com. 
 
For more free resources, such as Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Mia Verc, CPA;  Janice Papais, CPA
]]><![CDATA[Income & Spending Details]]>Mon, 11 Aug 2025 17:31:26 GMThttps://www.monarchaccountinggroup.com/blog/income-spending-detailsThe IRS lays it all out
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As required by law, in every Form 1040 instruction booklet there's a section that shows where our federal government gets its money and where it is spent. As taxpayers it makes sense to know this information. Here is the data for the government's fiscal year ending September 30, 2023, as reported by the IRS in the 2024 instruction booklet for Form 1040:
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Observations​

  • Annual deficit spending remains a consistent problem. No matter where you fall on the political spectrum, annual deficits cannot be sustained. Fortunately the annual deficit of $1.694 trillion is lower than the pandemic deficit of $3.129 trillion in fy 2020, but it must all still be paid back. The largest spending bucket continues to be social programs that includes Social Security, Medicare and Retirement benefits (62% of all outlays).
  • Government borrowing costs more. With interest rates going up the past couple of years, a couple of things is happening. First, those who save are now being rewarded for this financial behavior with higher interest rates on their savings. But this interest rate increase is now costing borrowers more and the government is one of the biggest borrowers out there. Fully 11% of outflows is used to pay interest on the debt. This is up from 5% in 2020. That means an additional 6% of government spending is not available to work to solve current needs versus a short three years ago.
  • Solutions to money problems are the same for everyone. When you have a money problem, you either bring in more money, spend less, or some combination of the two. The same is true for our federal government.
More to come

With recent tax changes the impact on the deficit is sure to become more problematic, especially if interest rates remain high. None of this situation is set to improve until the will to reduce the debt is on everyone's mind. And that is why it is a legal mandate for the IRS to publish this chart in the Form 1040 instructions in order for all taxpayers to receive an update on the situation at least once every year.


"Tax Tips" are published to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
 
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.  
 
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at info@monarchaccountinggroup.com. 
 
For more free resources, such as Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Mia Verc, CPA;  Janice Papais, CPA
]]><![CDATA[Personal Exemptions gone plus $6,000 new Deduction]]>Mon, 28 Jul 2025 18:18:20 GMThttps://www.monarchaccountinggroup.com/blog/personal-exemptions-gone-plus-6000-new-deductionWhat everyone should know
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The recently passed One Big Beautiful Bill Act (OBBBA) addresses some tax law uncertainty while creating several benefits impacting your 2025 tax return. One of these benefits is a new $6,000 deduction for seniors. Here is what you need to know.


The Changes
Personal exemptions are gone! First and foremost, the law permanently eliminates personal exemptions. Without the change, exemptions were scheduled to be reintroduced in 2026.
New senior benefit. But the law also introduces a new senior deduction of $6,000 per individual with these requirements:
  • You must be 65 years or older during the tax year.
  • The $6,000 benefit is only available for years 2025 thru 2028.
  • It is per taxpayer, but if married you must file a joint tax return.
  • You must have a valid Social Security Number.
  • The benefit phases out when your modified adjusted gross income exceeds $75,000 (single) or $150,000 (married couples, assuming both are 65 or older during the tax year).
  • The $6,000 is reduced by 6% of the excess over this amount. This makes the phaseout ranges:
Single: $75,000 to $175,000
Joint filers: $150,000 to $350,000
Example: Mickey and Minnie Mouse, both 96 years old, file a joint tax return and have $200,000 in modified adjusted gross income. Their new senior exemption will be $9,000. It is reduced by $3,000 [6% times ($200,000 - $150,000)].


Tips you can use
  • Get the word out. Everyone knows someone who will receive this benefit. So inform anyone who may be impacted by this new deduction.
  • Planning occurs now. If you're over 65 and working, know this new deduction and its phaseouts. Consider the following:
  • Work fewer hours if you think you'll be approaching the phaseout
  • Understand what the IRS means by modified adjusted gross income. A link is provided here.
  • Consider adjusting your withholdings if appropriate for your situation.
  • Social Security is taxable. Remember, your Social Security benefits are still subject to federal income tax. Earlier press about excluding this income from tax is not law.
  • Other standard deductions still apply. This $6,000 senior deduction is IN ADDITION to your standard deduction, including the normal age-related deductions and benefits. It does not replace any of them.

There are a lot of details in OBBBA that impact you or someone you know. With a quick review you can see if you will need some assistance. When this happens, call for help.




"Tax Tips" are published to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
 
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.  
 
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at info@monarchaccountinggroup.com. 
 
For more free resources, such as Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Mia Verc, CPA;  Janice Papais, CPA
]]><![CDATA[Tax-Free Tips are Here]]>Mon, 28 Jul 2025 18:17:00 GMThttps://www.monarchaccountinggroup.com/blog/tax-free-tips-are-hereYou need tip tracking NOW!
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The One Big Beautiful Bill Act (OBBBA) makes tip income tax-free. But as with any new tax law, the fine print matters, and some of these details still need clarification.


Here is what you should know.


The basic facts
From January 1, 2025 through December 31, 2028 you can deduct up to $25,000 as a deduction equal to the amount of qualified tips you receive during the year. These tips must be included on IRS approved statements furnished to the individual in order to take advantage of the deduction.
There is an income limit of $150,000 for single filers and $300,000 for joint filers. This income limit is modified adjusted gross income, including the tips. The deduction amount is reduced (but not lower than zero) by $100 for each $1,000 in excess of these amounts.
Example: Joanie Tipster, a single filer, with modified adjusted gross income of $155,000 is $5,000 in excess of the limit. So her tip deduction will be reduced by $500 which equals ($5,000/$1,000) x $100.


Qualified Tips
To qualify as a tip:
  • The tip must be given in the ordinary course of business
  • It must be paid voluntarily
  • Is not subject to negotiation
  • It is determined by the payer
What business and services qualify?
A list of qualifying business will be published on or before December 31, 2025, however the tax bill specifically mentions the following:
  • Food & beverage for consumption, if tips are customary
  • Barbering & hair care
  • Nail care
  • Esthetics (services like Body and Spa Treatments)
Of special note, if you work in a specified service trade or business (SSTB) you MAY NOT take the tip deduction. A SSTB is a type of business that provides services in fields such as health, law, accounting, consulting, and financial services,


The fine print matters
To receive the deduction:
  • It must be reported. This means this tip income will ultimately end up on a W-2. This means you must have a valid Social Security number.
  • They must be cash. The IRS defines cash to include cash, credit card, debit card, and digital payment tools. This then implies that any non-cash tips and receipt of cyber currencies would not qualify.
  • It will still be taxed (somewhat). While you will receive a tip deduction on your tax return, that tip income will still be subject to Social Security and Medicare taxes.
  • You must have income. The deduction will reduce your taxable income. But if your taxable income is already at or below zero (because of other tax breaks like the standard deduction) there really is minimal to no benefit for this new deduction.
  • If married, file jointly. The benefit does not exist for married filing separately.
  • Tip behavior cannot be created. If your employer did not customarily make tips prior to this law, they cannot suddenly start tip behavior to take advantage of the benefit.


What action to take
If you think you may qualify for this deduction, here are some tax tips to consider:
  • Get your reporting in order. Remember it's already mid-year. You'll need to prove your tips to get this deduction. So start getting your tip records in order, then you can reconcile your tip income with your employer’s reporting of your tips.
  • The large-party tip. Many restaurants add an automatic tip when a dinner party is larger. On the surface the bill seems to exclude these tips from the deduction because the tip is no longer voluntary. Until there is clarification, it might make sense to get your employer to consider an alternative practice or figure out how to confirm the voluntary nature of such a tip.
  • Your tips are not covered! There are a large number of jobs that regularly receive tips that are not mentioned in the bill. Bell hops, cabbies & uber drivers, and delivery jobs to name a few. Do not lose heart, as the IRS is tasked with figuring out which jobs should be included but won't have to do so until on or before the end of the year. Hopefully it will be completed within 90 days.
  • Cash not reported. If you receive cash but it's not reported, it can't be used as a deduction. So do the math for your situation and consider properly recording this tip income.
  • Patience is required. There will be clarification of these rules from the IRS within the next 90 days. So even if your tip income is not expressly included as of now, still keep track of it as it could easily make the IRS’s list.

Congress is very aware that there will be the temptation to reclassify taxable income into tip income to take advantage of this law change, so it's tasking the IRS to develop guidelines to keep this from happening. Stay tuned. There is more to come.



"Tax Tips" are published to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
 
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
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Mia Verc, CPA;  Janice Papais, CPA
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