XQ CPA

If you and your spouse operate a profitable, unincorporated small business, you face some unique tax issues. The IRS will generally classify your business as a partnership for federal tax purposes. So, you’ll have to file an annual partnership return and both you and your spouse must receive Schedules K-1, which allocate taxable income, deductions and credits between the two of you. You must also pay self-employment (SE) tax on your share of the net SE income passed through to you by the spousal partnership. Your spouse must do the same. The bottom line: Turn to us to keep your business in compliance with the IRS while you and your spouse keep the business running smoothly.

If you want to transfer some of your wealth to your adult children or other family members, one of the simplest tools available is the gift tax annual exclusion. For 2026, the exclusion is $19,000 per recipient. If you’re married and your spouse consents to a joint gift, also called a “split gift,” the exclusion is effectively doubled to $38,000 per recipient. If you make gifts in excess of the annual exclusion (or gifts ineligible for the exclusion), you can tap your lifetime gift and estate tax exemption ($15 million for 2026). Gifts must be of a “present interest” to be eligible for the annual exclusion and, to be covered by your 2026 exclusion, be made by Dec. 31. Contact us for details.

Selling investment or commercial real estate can trigger a hefty tax bill, but an installment sale may help soften the impact. If you’ve owned the property for more than one year, your gain may qualify for favorable long-term capital gains tax rates of 15% or 20%, depending on your taxable income. Receiving payments over multiple years instead of all at once can spread out your taxable gain and may keep you below the 20% capital gains rate threshold in one or more years. It might also help you avoid the 3.8% net investment income tax. But installment sales can be complex. Before selling, contact us to discuss whether one makes sense for your situation.

Are you eligible for refunds of COVID-era IRS penalties and interest? The IRS made it easier to file a protective claim by the July 10, 2026, deadline. Eligible individuals with an IRS Online Account can now electronically submit Form 843, “Claim for Refund and Request for Abatement,” through IRS.gov. Currently, only claims involving fully paid penalties and interest that cite Kwong v. United States can be e-filed. Business taxpayers, as well as individual taxpayers who prefer not to file online, can mail a paper Form 843 — but be sure it will be postmarked by the deadline. When completing a paper form, write “Kwong vs. United States” across the top. Contact us to review your eligibility.

Qualified charitable distributions (QCDs) let traditional IRA owners age 70½ and older make tax-free distributions directly to eligible charities. QCDs also can count toward required minimum distributions (RMDs). Because QCDs don’t increase reportable income, they can reduce or eliminate the risk that RMDs will trigger income-based reductions of various tax breaks. For example, the $6,000 “senior” deduction is subject to income-based phaseouts. So is the auto loan interest deduction. With the 2026 QCD limit of $111,000 per person, QCDs can be a tax-smart way for seniors to satisfy their RMDs this year. Contact us to learn more.

Tax identity theft can victimize businesses as well as individuals. Perpetrators might file fraudulent returns using your organization’s employer identification number. Or they may impersonate your executives to steal employee W-2 data and create new, “synthetic” identities to file returns and apply for credit. To help prevent financial losses and the inconvenience of repairing your business’s reputation, safeguard data with robust cybersecurity software, complex passwords and comprehensive employee antifraud training. If you receive an IRS notice saying your return has been rejected, investigate immediately. Or ask for our help.

If you rent out your primary or secondary residence for no more than 14 days this year, you may be eligible for a tax break known as the “Augusta rule.” The rule allows eligible homeowners to temporarily rent out their homes without reporting the rental income on their personal tax returns. Homeowners typically take advantage of the rule when renting their homes to tourists. Business owners who rent their homes to their businesses for short, event-driven occasions can potentially deduct the rent paid as a business expense while excluding the rental payments from their individual taxable income. But strict compliance with IRS rules is essential. Contact us to learn the details.