Newsletter

What's New for Retirement Catch-Up Contributions in 2026

Beginning in 2026, a significant change to retirement plan catch-up contributions takes effect. Part of the 2022 Setting Every Community Up for Retirement Enhancement (SECURE) 2.0 Act, the change affects higher-income taxpayers age 50 and older who contribute to certain types of employer-sponsored retirement plans.

Catch-Up Contribution Basics

For years, taxpayers age 50 or older have been able to make catch-up contributions to certain employer-sponsored retirement plans, up to annual inflation-adjusted limits. For 2026, eligible individuals can contribute an additional $8,000 above the $24,500 regular 401(k), 403(b) or 457(b) plan limit, for a total of $32,500.

Under SECURE 2.0, beginning in 2025, participants age 60 to 63 can make up to $11,250 in catch-up contributions to these plans, bringing the maximum to $35,750 for 2026.

Before 2026, employees could make catch-up contributions pretax to traditional plans or, if their employer offered the option, after-tax to Roth plans. Pretax contributions reduce taxable income for the year contributed, but distributions are generally taxable. Roth contributions don’t reduce current-year taxable income, but distributions are generally tax-free.

Mandatory Roth Treatment for High Earners

SECURE 2.0 requires that, beginning in 2026, any catch-up contributions made by higher-income participants to 401(k), 403(b) or 457(b) plans be designated as Roth contributions.

The Roth requirement was originally scheduled to take effect for 2024. In 2023, the IRS extended the effective date to January 1, 2026.

For 2026, the Roth requirement applies to participants whose 2025 Social Security wages from the employer exceeded $150,000 as reflected in Box 3 of Form W-2, “Wage and Tax Statement.” The $150,000 threshold will be adjusted annually for inflation.

Are You Affected?

Plans that didn’t offer a Roth option in 2025 had to either add one for 2026 or eliminate higher-income participants’ ability to make catch-up contributions. So if the Roth requirement applies to you and your retirement plan doesn’t offer a Roth option, you won’t be able to make catch-up contributions in 2026.

Check with your employer about your options. It may have implemented a “deemed election” approach for employees subject to the new rules. This automatically treats catch-up contributions as Roth unless the employee opts out of catch-up contributions.

Also, keep in mind that making Roth catch-up contributions instead of traditional ones (or not making catch-up contributions) will increase your taxable income for 2026. This may reduce or eliminate the tax benefits of breaks that are subject to phaseouts, floors or other income-based limits and even push you into a higher tax bracket.

Professional Guidance Can Help

If you’re affected, you should review your retirement and tax strategies in light of the changes. Contact the office with any questions.

Businesses Regain Immediate Deduction for R&E Expenses

If your business conducts research or product development, a significant tax law change could unlock tax savings. The 2025 tax legislation, commonly known as the One Big Beautiful Bill Act (OBBBA), reinstated the ability to immediately deduct domestic research and experimental (R&E) expenses.

This change reversed a key provision of the Tax Cuts and Jobs Act (TCJA) that required businesses to capitalize and amortize domestic R&E expenses over five years and foreign R&E expenses over 15 years. As a result, you may have new tax-saving opportunities as you prepare your 2025 tax return and plan for 2026.

What the Change Means for Your 2025 Filing

Beginning with eligible 2025 expenses, businesses can once again deduct U.S.-based R&E costs in full in the year they're incurred. This can significantly reduce taxable income and improve cash flow.

The law also provides flexibility for prior-year R&E expenses. You can potentially accelerate deductions that previously you would have had to spread over multiple years.

Strategies to Maximize R&E Tax Benefits

Businesses should consider the following when assessing R&E expenditures:

Amend returns for prior years. Small businesses (generally those with average annual gross receipts of $31 million or less over the past three years) may be able to apply the rule retroactively. If eligible, you can file amended returns for 2022, 2023 and/or 2024 to claim immediate deductions for domestic R&E expenses previously amortized and, potentially, receive a tax refund for those years. You must file the amended return(s) by July 4, 2026.

More quickly claim remaining deductions. Businesses of any size that capitalized and began amortizing R&E expenses in 2022, 2023 and/or 2024 can accelerate their deductions for the remaining unamortized balance. You can deduct it entirely on your 2025 return or split it ratably between your 2025 and 2026 returns, rather than continuing amortization over the original five-year period.

Bring research activities back onshore. The immediate deduction makes domestic research activities significantly more attractive from a tax perspective. While under prior law, U.S.-based R&E already benefited from shorter amortization periods, the difference between an immediate deduction and a 15-year amortization schedule for foreign research further strengthens the incentive to locate R&E activities in the United States.

Consider the research credit. A tax deduction reduces your taxable income, while a tax credit reduces your tax bill dollar-for-dollar and is generally more valuable. You may be eligible for the credit for "increasing research activities," but fewer types of expenses qualify for the credit than for the R&E deduction. While you can benefit from both, you can't receive a double tax benefit for the same costs.

Seek Guidance

The return of the immediate deduction for R&E expenses can bring planning opportunities for businesses. Contact the office for help determining what applies to your situation.

IRS Expands Digital Asset Reporting with New Form 1099-DA

If you buy, sell or trade digital assets, such as cryptocurrency or certain nonfungible tokens (NFTs), new reporting requirements will likely affect how your transactions are reported to and reviewed by the IRS. While these rules don’t change how digital assets are taxed, they significantly impact information reporting, increasing transparency and scrutiny.

Tax Treatment

For federal tax purposes, digital assets continue to be treated as property, not currency. This means you must recognize a capital gain or loss when you sell, exchange or otherwise dispose of a digital asset.

The gain or loss is generally the difference between your cost basis (what you paid for the asset) and the amount you receive upon disposal. Depending on whether you held the asset more than one year, the gain or loss may be short-term or long-term.

What Investors Should Know

To facilitate reporting, the IRS created Form 1099-DA, “Digital Asset Proceeds From Broker Transactions.” This form is designed specifically for digital assets and is now used by brokers — including many cryptocurrency exchanges and digital asset platforms — to report transaction activity directly to investors and the IRS.

Initially, Form 1099-DA is being used by brokers to report gross proceeds from the sale or exchange of digital assets occurring on or after January 1, 2025. Beginning with transactions on or after January 1, 2026, Form 1099-DA will also require brokers to report the adjusted basis of certain digital assets.

For investors, this means a couple of things:

• Starting with the 2025 tax year, you’re likely to receive Form 1099-DA for reportable digital asset transactions.
• The IRS will receive the same information, making mismatches between reported income and tax returns more likely to trigger IRS notices.

Accurate recordkeeping remains essential, particularly for tracking cost basis. Decentralized Finance (DeFi) brokers and some foreign brokers aren’t required to issue Form 1099-DA or report transactions to the IRS. As a result, you’re responsible for understanding and reporting your digital asset tax obligations, even if you don’t receive a reporting statement covering all activity.

Enforcement Shift

Digital asset taxation has been in place for years, but the new reporting rules mark a notable shift in enforcement. Contact the office for help understanding your reporting obligations and staying in compliance.

Don't Let the AMT Catch You Off Guard

Are you subject to the alternative minimum tax (AMT)? In general, this tax applies if your “tentative minimum tax” exceeds your regular income tax liability. Significant long-term capital gains and dividend income or recently exercised incentive stock options can trigger the AMT. Although the 2025 tax legislation, commonly known as the One Big Beautiful Bill Act, makes higher AMT exemptions permanent, it phases them out twice as fast beginning in 2026.

Also, the legislation quadrupled the limit for the state and local tax deduction, which isn’t deductible for AMT purposes. So that item may become an AMT Achilles’ heel for more taxpayers. If you’re concerned about the AMT, contact the office. Good planning may help you avoid it.

2025 IRA Contribution Deadline Is Coming Up

It’s not too late to boost your IRA for 2025. You have until April 15, 2026, to make contributions for the 2025 tax year. This deadline applies to both traditional and Roth IRAs and includes catch-up contributions for eligible individuals.

You must indicate that the contribution is for the 2025 tax year, not 2026. This is important because contributions made from January 1 through April 15 can be designated for either the prior year or the current year. Contact the office if you have questions about IRA contributions or need assistance filing your 2025 return.

Understand the Tax Details When Starting a Business

If you’re thinking about starting a business, make sure you understand your federal tax responsibilities before opening your doors. IRS Publication 583, Starting a Business and Keeping Records, covers the basics. Your business structure (such as a sole proprietorship, partnership, limited liability company or corporation) determines which forms you must file and which taxes apply, including income, self-employment, employment and excise taxes.

You may also need an Employer Identification Number for tax purposes, and you should be aware of your recordkeeping requirements. Starting a business is exciting, and getting the tax details right is important. Contact the office for assistance.

Navigating the New QuickBooks Online User Interface

Are you struggling with QuickBooks Online’s new user interface (UI)? You’re not alone. The upgrade that debuted late last fall includes some significant interface and navigation changes, and many savvy users are still getting used to the new version.

Although the site’s core accounting pages were relatively untouched by the overhaul, the opening page looks very different. This article explores some of the prominent changes and offers helpful tips.

The Toolbar

What used to be the New button in the upper left is now labeled Create. Hover your cursor over it, and it opens a list of transactions that you can click to create. There are also some links to housekeeping chores here, such as Task and Add contractor.

You can now “bookmark” individual pages so you can find them easily without clicking multiple times. You can do so either by scrolling through the list provided when you click the Bookmarks icon in the toolbar or by designating them on some pages themselves. Below that is an icon that will open the Home page. This is a busy screen, so you may miss some of your options. Read everything and click links so you know how much work you can do from this screen.

Clicking Feed opens your Business Feed, which also appears at the top of the Home page. This is a list of actions you can take (such as reviewing and sending certain reminders) and insights provided by the site’s AI tools (such as an automatic calculation of your recent profit or loss).

Click the Reports icon to open the list of QuickBooks Online’s pre-formatted, customizable reports. Hover your cursor over All apps to open a directory of the site’s Apps (this is explained below). The final icon in the new toolbar (Customize) opens a window containing your App menu. You can reorder them here and pin your favorites to the top. Don’t want to see the toolbar? Click Ctrl+period (.).

Apps

Apps are the navigation tools you used to see in the left vertical toolbar. They’re multi-level menus that contain your different tasks, transactions and dashboards in specific areas, such as Time, Accounting and Projects. They’re sometimes referred to as hubs or modules. Some of them appear at the top of the Home page, but you can see the complete list by hovering your cursor over All apps in the left vertical toolbar.

QuickBooks Online offers more than one way to do the same thing. That hasn’t changed with this upgrade. Some people like this flexibility, but it’s confusing to others - especially when everything has been moved around on the site’s pages.

The Apps links at the top of the Home page may not be as helpful as those in the All apps menu. You often have to scroll down the page to find what you’re looking for when you use the Home page links. But if you hover over All apps and scroll to the hub you want, you’ll see a list of all the sub-pages, rather than a lot of content you don’t necessarily want to see when, say, you just want a list of customers. Each hub is different, though. Some have action icons at the top of the page or activity shortcuts.

More Navigation Tools

If you’re looking for your old Integrations link, you’ll find it in the upper-right corner. In the same row of icons, you’ll find other links that used to be elsewhere, including Tasks, Notifications, Settings and Help.

Tips for Mastering the New User Interface

You’ve probably already found your way to your most-used screens. However, there may be ways you can make better use of the new QuickBooks Online UI and take full advantage of the built-in AI help. Here are some tips:

• Customize the Home page. Click Customize in the upper right and select/deselect “widgets” from the menu that opens. Click one to grab it and move it around if you’d like to rearrange the page.

• Use “Insights” in reports. Once you’ve customized a report, click Insights to see what the Accounting Agent recommends.
• Look for AI-driven help in bank transactions. QuickBooks Online may make suggestions in your bank transactions register.
• Use keyboard shortcuts. Hold down Ctr+Alt+? to see the list.
• Define custom fields. They’ve replaced Tags. Click the gear icon in the upper right and select Custom fields under Lists.
• Find the audit log. It’s hidden. Open the Home page and scroll down. In the lower-right corner is See all activity.

A new UI can be confusing to navigate. Contact the office if you need assistance or have questions about how the site handles your accounting.

Upcoming Tax Due Dates

March 16

Employers: Deposit nonpayroll withheld income tax for February if the monthly deposit rule applies.

Deposit Social Security, Medicare and withheld income taxes for February if the monthly deposit rule applies.

Calendar-year partnerships: File a 2025 income tax return (Form 1065 or Form 1065-B) and provide each partner with a copy of Schedule K1 (Form 1065) or a substitute Schedule K1 — or request an automatic six-month extension (Form 7004).

Calendar-year S corporations: File a 2025 income tax return (Form 1120-S) and provide each shareholder with a copy of Schedule K-1 (Form 1120S) or a substitute Schedule K-1 — or file for an automatic six-month extension (Form 7004). Pay any tax due.

March 31

Employers: Electronically file 2025 Form 1097, Form 1098, Form 1099 (other than those with an earlier deadline) and Form W-2G.

April 10

Individuals: Report March tip income of $20 or more to employers (Form 4070).

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