Tax

If your business sells merchandise, there may be a valuable year-end tax planning opportunity that many small-business owners overlook.

Under today’s tax rules, many qualifying small businesses can deduct the cost of inventory when it is purchased and paid for—even if the goods remain on the shelf at year-end. But there is one critical requirement: your bookkeeping must support that treatment.

The tax law allows businesses with average annual gross receipts of less than $32 million to use simplified inventory accounting methods. If your accounting records consistently expense merchandise purchases when they are made, your tax deduction can generally follow those books. That can produce a substantial deduction before year-end.

On the other hand, if your accounting system records purchases in an inventory asset account and deducts them only when the goods are sold, your tax deduction generally must wait until the sale occurs.

The key is consistency. You cannot change your accounting method in December simply to create a larger deduction. In fact, changing inventory accounting methods usually requires IRS approval. Likewise, purchases must be genuine business transactions—not simply exist to generate a tax deduction. The merchandise must be received and paid for before year-end, and the purchase must make business sense.

If your business expects a profitable year, reviewing your inventory accounting method before year-end could produce meaningful tax deferrals. While this strategy generally postpones taxes rather than permanently eliminate them, improving cash flow by delaying taxes can still provide a significant financial advantage.

If you want to discuss inventory accounting, please call me directly at 408-778-9651.

• By Leon Clinton
• August 30, 2026

If you successfully challenge the IRS, you may be able to recover your attorney fees and other professional costs—but only if you meet several strict requirements.

One of the biggest hurdles is your net worth. Individuals generally qualify only if their net worth does not exceed $2 million. Married couples filing jointly have a $4 million limit. Businesses, including corporations, partnerships, and LLCs, generally qualify only if their net worth is $7 million or less and they have no more than 500 employees.

Meeting the net worth test is only the beginning. You also must substantially prevail in your dispute with the IRS, and the IRS’s position generally must not have been “substantially justified.” In addition, you must cooperate throughout the examination by providing requested records, pursuing available IRS appeals, and avoiding unnecessary delays.

One of the best ways to improve your chances of recovering fees is to build a strong record from the start. By providing complete documentation and the legal authority supporting your position during the audit or appeals process, you not only strengthen your tax case but also improve your claim that the IRS should reimburse your professional fees. In some situations, making a properly drafted qualified settlement offer can further strengthen your position.

Even when you qualify, reimbursement is limited to reasonable fees actually paid, and the law caps the hourly rate at $260 an hour, unless a narrow exception applies. If you want to discuss collecting fees from the IRS, please call me directly at 408-778-9651

• By Leon Clinton
• August 27, 2026

The death of a spouse is one of life’s most difficult experiences. Unfortunately, it can also bring unexpected tax and Medicare consequences that catch many surviving spouses by surprise.

One of the biggest changes is your filing status. After the year of your spouse’s death, you will generally file as a single taxpayer unless you remarry. Because the tax brackets for single filers are much narrower than those for married couples filing jointly, you may pay significantly more federal income tax—even if your income stays about the same.

You may also lose valuable tax benefits. Your standard deduction can be cut in half, certain senior tax deductions may shrink, and higher tax brackets can make strategies such as Roth IRA conversions much more expensive. For higher-income taxpayers, additional limits on itemized deductions may also come into play.

Many surviving spouses are also surprised to learn that Medicare premiums can increase. Medicare looks back two years when determining your premiums, and the income thresholds for single taxpayers are much lower than those for married couples. As a result, you could face higher Medicare Part B and Part D premiums even if your household income has declined.

The good news is that many of these financial consequences can be managed with planning. Reviewing the timing of Roth conversions, capital gains, retirement account withdrawals, charitable gifts, and other tax strategies can help reduce the long-term impact.

While no tax strategy can lessen the emotional loss of a spouse, careful planning can help protect your financial security during a difficult transition.

If you want to discuss what happens to taxes when a spouse dies, please call me directly at 408-778-9651.

• By Leon Clinton
• August 25, 2026