Author: Service2Client

Reasons to Consider Out-of-State Municipal Bonds

4 min read

Out-of-State Municipal BondsMunicipal bonds (also known as munis) are issued by a state or local government. Interest income is typically paid out twice a year and is not subject to federal taxes. When an investor purchases a bond issued from his own state, the income is generally not subject to state income taxes.

However, there are a few good reasons to consider buying out-of-state municipal bonds. The first reason is to consider bond quality. Each muni bond is given a quality rating based on the municipality’s ability to make the regular interest payments to investors and return their principal when the term matures. To make this determination, agencies like Moody’s and S&P evaluate the issuer’s debt structure, financial stability and long-term economic prospects.

Credit Quality

The highest Moody’s rating is Aaa (the lowest is C); a rating of Baa3 or higher is considered investment grade. The highest S&P rating is AAA (the lowest is D), and a rating of BBB or higher is considered investment grade. While it’s a good idea to invest in highly rated bonds, note that their yields are inversely related to their quality. In other words, the lower the rating, the higher the interest income. Just be sure to consider that with that higher yield comes a higher risk of the bond issuer defaulting. In today’s economic landscape, an average credit rating of AA/Aa is considered a good balance of risk and bond yield.

Diversification

Second, if the investor holds a portfolio of municipal bonds, owning some from other states can help diversify his bond portfolio. If the investor’s home state has lower-rated bonds, investing in higher-rated bonds from other states can lower his bond portfolio’s quality risk. On the other hand, if the investor’s home state has highly rated bonds, purchasing bonds from states with lower-rated bonds can increase the amount of income his portfolio pays out. Remember, too, that it’s important to consider both the bond yield (also known as its coupon rate) and its issuing state’s taxes in order to come out ahead.

More Choices

Note that both California and New York are high-tax states, so it’s particularly important to consider the tax situation before buying there. With that said, there are also good reasons to buy bonds in these two states because they offer a range of quality municipal bonds. On the flip side, some states have fewer bond options to choose from and a lower risk profile, leaving resident investors with few options regardless of the state tax benefit. Be aware that the majority of muni bonds are rated lower than AA in Illinois, Pennsylvania, and New Jersey.

Tax Considerations

There are seven states that do not impose state income taxes: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming. New Hampshire recently phased out its tax on investment and interest income. If a muni bond investor lives in a state with no taxes on income, there is no benefit to limiting his purchases to in-state bonds. In this scenario, it’s a good idea to compare muni bonds from states with high-rated and high-yield bonds to build a diversified bond portfolio while also considering the annual tax bill in each of those states.

If a muni bond investor lives in a high-tax state, such as California with a 12.3 percent tax rate for residents with income in the top bracket (effectively 13.3 percent if you include the additional 1 percent surcharge on individuals earning over $1 million), then it makes sense to buy out-of-state munis to help reduce their tax burden.

Despite these general guidelines, investors should check on the muni bond tax status in their home state before making a purchase. Some states, such as Illinois, require residents to pay taxes on in-state muni bond yields. In this situation, the resident may find better deals with out-of-state munis by comparing coupon rates against the income taxes in those states.

Building Deeper Customer Connections: Leveraging Web3 for Loyalty, Community, and Engagement

4 min read

Web3 for Loyalty, Community, and EngagementCompetition in business today has become fierce. Each organization is constantly looking for innovative ways to form strong relationships with its customers. Loyalty programs have been used for a long time to build a devoted customer base. As technology advances, new technologies like Web3 are emerging, offering more opportunities to revolutionize loyalty programs, build vibrant communities, and deepen customer engagement.

Transforming loyalty programs through Web3

Loyalty programs help boost customer spending and drive long-term business success. Loyalty program members also generate more revenue than non-members. In the United States alone, the average consumer belonged to more than 15 programs in 2024. However, traditional loyalty programs have encountered problems that include customer disengagement and unclaimed rewards.

Web3-based loyalty programs address these problems by leveraging blockchain technology to create a more engaging, transparent, and valuable experience for customers. With the global Web3 market having a valuation of $4.62 billion by January 2025, there is enormous potential for businesses to innovate in this space. Web3 is the next iteration of the internet, which will help businesses create deeper customer connections through decentralized technologies like blockchain, non-fungible tokens (NFTs), and decentralized autonomous organizations (DAOs).

Why Web3 Loyalty Programs

  1. Enhanced personalization and security
    Web3 loyalty programs provide enhanced customer engagement through hyper-personalization. Businesses can utilize blockchain technology to analyze customer preferences, behaviors, and interactions to customize rewards. This makes every customer feel valued. Using this approach, it becomes easy to focus on those customers who drive the majority of engagement and revenue. The decentralized nature of blockchain also ensures that data remains encrypted, secure, and only accessible with explicit consent.
  2. True ownership of rewards
    In traditional programs, loyalty points exist only within a company’s database. However, Web3 platforms create unique tokens that a customer can own and control. When customers have this kind of authentic ownership, it changes how they perceive and engage with loyalty programs that allow greater flexibility in how they use their rewards.
  3. Interoperability and expanded value
    Traditional loyalty programs, in most cases, limit rewards to a single brand or ecosystem. On the other hand, Web3 loyalty tokens function as universal currencies. This enables global redemption networks — permissionless collaboration through smart contracts and cross-sector partnerships.
  4. NTF-based loyalty rewards
    Instead of receiving generic points, a customer is issued an NFT token. The uniqueness of NFTs adds a layer of desirability and collectability, making the loyalty program more engaging and valuable. The NFTs can be potentially traded or sold on secondary marketplaces, adding more value to customers who can turn their loyalty tokens into liquid assets.
  5. Community driven engagement
    Web3 loyalty programs offer a community-centered approach through shared goals, collective rewards, and member governance through DAOs. By encouraging peer interaction it creates a sense of belonging, shifting focus from individual transactions to collective engagement.
  6. Transparency and trust
    Blockchain infrastructure provides immutable transaction records and enhanced security. Real-time reward tracking is also possible through blockchain technology. This addresses consumer concerns about traditional programs’ security risks. It also builds trust and encourages more engagement.
  7. Reduced unused rewards
    Web3 programs can implement “tokenomics” to prevent the devaluation of rewards and encourage active participation.

Navigating the Web3 landscape

While there is immense potential to build deeper customer connections with Web3, there are some considerations to help businesses approach this landscape strategically.

  • Understand your customers
    Before adopting the Web3 loyalty programs, a business must understand its customers. It is important to find out if they are receptive to these technologies, as well as their digital habits and preferences.
  • Start small
    Beginning with a pilot project and gradually integrating Web3 elements allows for learning and proper adaptation.
  • Focus on value creation
    The key to success when adopting any new technology is providing genuine value to customers. The technology should enhance the customer experience.
  • Educate customers
    Educate customers about the new adoption and provide clear guidance on how to interact with the technology.
  • Stay informed
    The Web3 landscape is rapidly evolving; therefore, it is crucial to stay informed on the latest trends and best practices.

Conclusion

Web3 presents a unique opportunity for businesses to revolutionize loyalty programs through blockchain, NFTs, and decentralized engagement. The ability to prioritize personalization, security, and true ownership will help businesses develop deeper customer connections. Although Web3 might seem complex, the potential benefits for businesses that embrace this evolving technology are significant.

Dissecting the Half-Year Convention for Depreciation

3 min read

Half-Year Convention for DepreciationDepreciation can help a business realize tax benefits, maintain compliance with financial reporting requirements, and project asset replacement. The half-year convention for depreciation is an important practice to understand.

For fixed assets, depreciation is recognized and recorded on a 50 percent basis for the initial and concluding years over its schedule. This supposes that fixed assets have been in service for 50 percent of their initial calendar service year upon acquisition. It’s normally implemented by taxation agencies to limit the upper limits for depreciation attestations to 50 percent of the yearly figures.

The balance of the annual 50 percent depreciation amount is recognized/recorded during the depreciation schedule’s last year, as the fixed asset will be removed from service mid-year. Regardless of the type of depreciation – straight-line, double-declining, etc. – the half-year convention applies equally.

This has been instituted because businesses were tempted to buy fixed assets in the third or fourth quarter of a fiscal year and try to deduct it fully via complete depreciation deduction. However, this convention is explicit in that fixed assets in service on or after July 1 may only deduct half of otherwise normal depreciation schedules.

How It Works

In this example, Production Equipment is purchased for $50,000 on April 1, 2022, with a useful life of 7 years. Using the half-year convention, depreciation is as follows:

Straight-line Depreciations = Cost of Asset / Useful Life = $50,000 / 7 = $7,142.86

Half-Year Convention: $7,142.86 / 2 = $3,571.43

This also assumes that there’s no scrap of salvage value. Although there are 7 years for the item’s useful life, with the half-year convention, it’s treated as 8 years for the depreciation schedule:

Year 1: $3,571.43

Year 2: $7,142.86

Year 3: $7,142.86

Year 4: $7,142.86

Year 5: $7,142.86

Year 6: $7,142.86

Year 7: $7,142.86

Year 8: $3,571.43

Context for Depreciation Convention

A depreciation convention gives context on how depreciation is performed by the company. It guides the company on available depreciation methods based on the asset’s useful life, how much the asset can be depreciated once it’s removed from service, and how depreciation is accounted/claimed in the initial and final year during the asset’s recovery period.

Depending on the situation and the type of depreciation convention involved, the following are some different conventions and how they vary:

  • Full Month permits a business to get a complete month of depreciation for the month when the asset has been put in service. There’s no depreciation taken for the month of disposal.
  • Next Month permits a business to start recording depreciation for the fixed assets the following month and being able to record one month of depreciation “when disposed of.”
  • Actual Days permits depreciation to be recorded for every single day an asset is in service during its fiscal year.
  • Mid-Quarter permits depreciation for half of the 3-month business period whenever the asset’s been put in place and disposed of (for both quarters).

Conclusion

While this is illustrative of financial reporting requirements, it’s an important consideration for business owners and their accounting professionals. Optimizing fixed asset depreciation leads to more accurate books, which will help in tax planning.

Understanding IRS Forms 1099 for Lawsuit Settlements

3 min read

Understanding IRS Forms 1099 for Lawsuit SettlementsThe Basics of Tax Reporting in Legal Settlements

When you collect a settlement for a lawsuit, you’ll likely also receive a Form 1099 from the IRS. This form serves as a reminder to pay taxes on your settlement; copies are sent to both you and the IRS. These forms match reported income for income tax purposes, making them critical for accurate tax filing.

In lawsuit contexts, two common forms 1099 are issued:

  • Form 1099-MISC: This version can include various types of settlement payments, often termed other income
  • Form 1099-NEC: Used specifically for non-employee compensation

Understanding the Difference Between Forms

The distinction between these forms is significant. A Form 1099-NEC informs the IRS that taxes for self-employment should be collected in addition to income taxes. This form is appropriate if you were a non-employee contractor suing for unpaid compensation.

However, in cases like wrongful termination or emotional distress claims, you’ll want the non-wage portion reported on Form 1099-MISC instead of Form 1099-NEC to avoid unnecessary self-employment taxes. Pay close attention because filing an incorrect form can be difficult to correct later.

Double Reporting: When 100% Becomes 200%

A surprising aspect of legal settlement tax reporting is that defendants often issue forms 1099 totaling 200% of the actual settlement amount.

  • The plaintiff receives a 1099 for 100% of the settlement
  • The plaintiff’s attorney receives a 1099 for 100% of the settlement

This duplicate reporting occurs because the IRS requires defendants to report the full settlement amount to both parties when payments are made jointly or through the attorney’s trust account. This is done because the defendant may not be aware of how the money is ultimately divided between client and attorney.

Legal Fees and Tax Treatment

The U.S. Supreme Court decided in the case Commissioner v. Banks that gross income for a plaintiff typically includes the part of the settlement paid to their attorney as legal fees. This means you might be taxed on money you never actually received.

To address this issue, plaintiffs should understand when they can deduct legal fees:

  • Plaintiffs in employment cases, civil rights cases, and most whistleblower cases qualify for deductions
  • Legal fees must typically be paid in the same year as the settlement (as in contingent fee arrangements)
  • Outside these case types, deducting legal fees becomes much more difficult
  • Even in personal physical injury cases, complications arise if punitive damages or interest are awarded

Tax Planning Before Settlement

It’s best to deal with tax reporting before finalizing your settlement agreement. Consider these strategies:

  1. Include specific provisions about which forms 1099 are to be issued
  2. Specify the recipients, amounts, and even which boxes should be completed on the forms
  3. For physical injury cases that should be tax-free, get written commitments about tax reporting
  4. Consider separate checks to lawyer and client when appropriate (though this may not fully prevent attribution of legal fees to plaintiffs)

Without express provisions in your settlement agreement regarding tax forms, correcting any errors later becomes extremely difficult.

Tax-Free Settlements

Some settlements can be totally free of taxation, such as cases where compensation is granted as damages for physical injury. In typical injury cases like auto accidents, damages should be tax-free, but only if there are no punitive damages and no interest as part of the settlement.

Even when you believe your settlement qualifies as tax-free, securing written confirmation about tax reporting in your settlement agreement provides important protection.

Conclusion

Understanding the tax implications of your lawsuit settlement before signing an agreement can save significant headaches and potentially reduce your tax burden. Consulting with a tax professional who specializes in legal settlements is advisable for complex cases.

Treasury Declares New Beneficial Ownership Reporting Law Will Apply Only to Foreign Companies

3 min read

BOI Law Will Apply Only to Foreign CompaniesThe Trump Administration announced it will no longer apply the beneficial ownership information (BOI) requirements of the Corporate Transparency Act (CTA) to domestic companies. This declaration came first via social media, marking a significant shift in policy.

Under this new directive, U.S. businesses are exempt from the BOI reporting requirements of the CTA. The Treasury Department made the initial announcement on social media, followed by an official press release and a Truth Social post from President Donald Trump, who described the requirement as “outrageous and invasive.”

The bipartisan CTA was originally designed to combat illegal activities like drug trafficking and money laundering by limiting the use of anonymous shell companies. While the ownership information would have been available to law enforcement agencies, it would not have been publicly accessible.

In its March 3 website statement, the Treasury Department clarified that it will not enforce penalties or fines related to the BOI reporting rule under current regulatory deadlines established during the Biden Administration. Furthermore, it will not impose penalties against U.S. citizens, domestic reporting companies or their beneficial owners after new rule changes are implemented.

Treasury’s proposed rules will limit required reporting to foreign companies only, though the precise scope remains unclear – whether this applies exclusively to foreign companies registered in the United States or extends to U.S. companies with foreign ownership.

Previously, reporting requirements covered all businesses formed in the United States and foreign companies registered to operate in any U.S. state or tribal territory.

The Financial Crimes Enforcement Network (FinCEN), which oversees CTA enforcement, appears to have been surprised by this policy change. Days earlier, following court decisions that permitted BOI reporting requirements to proceed, FinCEN had announced plans to extend reporting deadlines to March 21. As of the most recent update, FinCEN’s website has not reflected the Treasury’s announcement, and requests for comment went unanswered.

What Happens Now?

This unexpected announcement has created uncertainty for businesses, particularly regarding already-submitted data.

The law required detailed information from “beneficial owners,” including names, birthdates, addresses, and identification documents. Similar information was required from company applicants – typically individuals who helped establish the company.

Millions of companies had already complied before this announcement, raising questions about the handling of submitted information. Inquiries to FinCEN about the fate of this data have not received responses.

The status of pending legal cases also remains uncertain. Cases continue through at least four federal appellate courts, and additional litigation may emerge to compel administration compliance with the law.

Crucially, the Corporate Transparency Act itself remains valid legislation. Despite the Treasury’s position, the executive branch cannot overturn the laws passed by Congress. It can, however, choose selective enforcement – similar to approaches seen with cannabis legislation. This creates potential complications, as future administrations could reinstate full enforcement.

Copyright and AI-Generated Images and Videos:

4 min read

Copyright and AI-Generated Images and Videos

What Businesses Need to Know to Stay Legal

Artificial intelligence (AI) tools are reshaping content creation. It is now easier for businesses to produce images and videos for use on websites, social media, and other digital outlets. All this is possible without the traditional hurdles of expensive photoshoots, special design skills, or complex video production. However, as exciting as it is, business owners must pose and confront the question of whether these AI-generated images and videos are legally safe for commercial use from a copyright perspective.

Understanding AI-Generated Content and Copyright

AI-generated content is created by training algorithms with massive datasets of existing images, videos, and text. The AI models then analyze patterns from the training data to generate new content. However, issues arise concerning the ownership of the generated content. Without clear legal guidelines, the ownership of AI-generated images and videos remains a gray area that leaves businesses and individuals vulnerable to potential disputes.

Most jurisdictions, including the United States and the EU, deny copyright protection to work purely generated by AI as it lacks human authorship. The U.S. Copyright Office stated that only content with human creative input can be eligible for protection. In its January 2025 report, the U.S. Copyright Office also states that copyrightability must be assessed on a case-by-case basis.

Laws differ globally. For instance, while the U.S. copyright office has rejected applications for AI-generated content, the U.K. allows copyright when a significant human intellectual effort guides the output.

Copyright laws do agree that a business risks infringement claims if AI-generated content resembles existing copyrighted material. So far, there has been a surge in the number of copyright lawsuits because of generative AI. A good example is Getty Images sued Stability AI, alleging its Stable Diffusion model copied millions of Getty’s photos without permission.

Generally, despite the efforts made to develop copyright laws for AI output, unlike content created by humans, there still lacks a clear legal framework for ownership and usage rights. For one, laws and legal frameworks struggle to keep up with the speed at which AI technology advances. This means that currently, no definitive, globally recognized legal standards firmly establish the copyright status of AI creations. For a business, although using AI visuals is not inherently legal or forbidden, it is best to be cautious and take due diligence.

Best Practices Every Business Owner Must Keep in Mind

  1. Read the terms of service (TOS)
    Every AI image and video generator has its own unique terms of service. Therefore, it is crucial to examine these terms carefully. Specifically, look for clauses that address issues such as commercial usage, ownership, indemnification, and TOS change policies.
  2. Understand model releases
    This especially applies where the AI-generated images may include recognizable human faces. In the same way that there are rights of publicity and privacy in traditional photography of human models, consider if this also applies to AI-generated faces.
  3. Documentation
    It is crucial to keep a record of each generated AI visual asset. Keep information such as AI platform used, prompts used, date of creation, TOS at the time of creation, and modifications made to the generated visual.
  4. Consider using well-established platforms.
    Although there is no AI platform that offers a 100 percent guarantee of copyright safety, it is safer to lean toward well-established and respected AI generators. Also, platforms trained using licensed or public domain data should be considered.
  5. Adopt the “human-in-the-loop” approach.
    This involves edits such as text overlays, color adjustments, or storyboarding. AI-generated content can be used as a starting point or for inspiration, but it is modified and refined by human designers. This results in a blend of AI assistant and human creative input to potentially mitigate copyright concerns.
  6. Seek expert legal counsel.
    When dealing with content that is central to a business identity, such as branding or major marketing campaigns, it is critical to seek guidance from an attorney specializing in intellectual property law.
  7. Stay informed
    Copyright law in the age of AI is not static; it is actively evolving. It is important, therefore, to commit to staying informed about legal developments, court rulings, and evolving practices. Business content strategies and practices also should be adjusted as the legal landscape changes.

Embrace the Future of Visuals Responsibly and Legally

The transformative power of AI to generate stunning visuals is promising to revolutionize business marketing and communication. However, business owners must approach this technology with a balanced perspective. That is, embracing its potential while avoiding copyright infringement, ensuring ethical content creation, and effectively safeguarding intellectual property assets.

Understanding the Differences Between FCFF and NOPAT

3 min read

What is NOPATWhen it comes to financial analysis, there are two metrics that internal stakeholders and external users, such as investors and analysts, can use to assist with analyzing a business’s operations.

Free cash flow to the firm (FCFF) is used as part of a discount cash flow (DCF) calculation that aids in determining a company’s intrinsic value, helping investors make better informed decisions. This metric provides insight into how much cash flow is available to all funding claimants of the business (be it convertible bond investors, debt holders, and preferred and common stockholders). This is compared to free cash flow to equity (FCFE), which is how much cash flow a business can use if it has zero debt.

While there are many ways to arrive at FCFF, the following is one way to calculate it:

Step 1

Start with Net Operating Profit (NOPAT), which is determined by Earnings Before Interest and Taxes x (1 – Tax Rate)

Step 2

Add Depreciation and Amortization expenses to NOPAT

Step 3

Remove Capital Expenditures

Step 4

Remove Modifications in Net Working Capital

Further Considerations of FCFF Versus FCFE

FCFF assumes there are no payments for interest; nor have any changes in debt been factored in the company’s financial statements. FCFE factors in interest payments and any applicable changes in debt the company may have taken or paid off during the particular accounting time frame. FCFE provides analysts with the ability to determine how efficient a company is and how well (or not) it is at producing cash for equity holders.

Defining NOPAT

NOPAT is a way to see what the company’s operations produce, assuming it has no debt and, accordingly, no outstanding interest expense obligations. It gives analysts and investors an opportunity to look at potential investments with a standardized metric because companies can be seen as having debt and not having debt. It provides easier ability to see if companies can obtain and/or manage debt levels, along with other financial metrics used by investors and analysts.

Along with the already established formula to calculate NOPAT, there’s an alternate formula:

(Net Income + Tax + Interest Expense + Any Non-Operating Gains/Losses] x (1 – Tax Rate)

Operating Earnings = the company’s profits pre interest and taxes (or what the company would earn if it had zero debt, and therefore zero interest expense).

Putting NOPAT in Context

Other important considerations for NOPAT are that it excludes changes in accounts receivable, inventory, accounts payable, and inventory. Additionally, it excludes capital expenditures but accounts for amortization and depreciation.

How NOPAT Assists Analysts and Investors

Businesses can use this data to see how this metric drills down on the business’s core functions. It’s a way to determine how profitable or not a business’ core functions are over shorter and longer time frames. It helps businesses determine how efficient a company is against its competitors since it removes debt and tax comparisons.

Analysis is easier for both businesses looking for acquisitions and for investors. NOPAT helps investors determine which companies are most efficient within their sector based on their main functions. It helps remove the “noise” of debt levels and tax situations.

Looking at these two metrics at face value can seem daunting, but after breaking them down and understanding the differences, it’s easier to see how they aid in financial analysis.

6 Tax Filing Tips & Important Info for 2025

4 min read

6 Tax Filing Tips & Important Info for 2025As Benjamin Franklin said, there’s only two certainties in life: death and taxes. With the former, you don’t have much control over; however, the latter can be affected. That’s why we’re here to give you some tips and info about filing in our changing landscape.

Remember Key Deadlines

Whether it’s scheduling an alarm on your phone or penning it old school-style on a notepad, it’s critical to keep track of when your taxes are due. Of course, you’ll want to start early. When you do this, you have enough time to gather your info and forms, and make sure you don’t make any mistakes. That said, here are some important dates you’ll want to keep in mind.

  • April 15, 2025: Unless you request an extension, this is the most important deadline for personal income taxes. It’s also the deadline to pay any taxes you owe so you can avoid late payment penalties and interest. If you make quarterly payments, this is also your deadline. Also, there is an exception for South Carolina residents due to Hurricane Helene; their deadline is extended to May 1, 2025.
  • June 17, 2025: If you’re a U.S. citizen living abroad, including military personnel stationed outside the country, this is your deadline. Even though you automatically receive an extra two months without filing an extension, interest still applies to any unpaid tax after April 15.
  • September 15, 2025: If you’re self-employed and earn significant non-wage income, this is the third quarter estimated tax payment deadline for the 2025 tax year. 
  • October 15, 2025: This is your deadline if you filed for an extension in April. If you don’t make this date, you could pay extra fees and penalties.

Child Tax Credits Have Changed

The maximum Additional Child Tax Credit (ACTC) amount has increased to $1,700 for each qualifying child. And good news if you live in Puerto Rico: You’ll no longer be required to have three or more qualifying children to claim ACTC. Now you just need one or more.

Standard Deductions Have Increased

For 2024, here’s a snapshot:

  • Single or married filing separately – $14,600
  • Head of household – $21,900
  • Married filing jointly or qualifying surviving spouse – $29,200

For more information about the changes to 2024 taxes, go here to review.

Take Care of Name Changes Pronto

This is for those who have had a name change as a result of marriage or divorce. This also applies if you have people who work for you who have had these changes. Whether it’s you or your employees, contact the Social Security Administration as soon as possible. If names and numbers don’t align, the processing of taxes and refunds will be delayed.

Make Sure ITINS Are Current

That’s Individual Taxpayer Identification Numbers. People who have these generally don’t have a Social Security number. If this pertains to you or any of your employees, check the expiration dates; if necessary, renew them as soon as possible.

Create an IRS Online Account

When you create this account, you get secure access to your tax information, including payment history, all your tax records and other important tax data. When everything is digital, you can streamline your prep time, and it can help you identify overlooked deductions or credits.

Filling out your taxes the right way takes time. However, the smartest tactic to ensure your taxes are prepared correctly is to consult a professional tax advisor. No matter how you end up tackling your taxes, it makes good sense to start early and learn as much as you can about IRS tax changes. This way, you’ll have less chance of encountering any hiccups along the way.

Sources

Tax Tips for IRS Filing in 2025 (TY 2024) – The Boom Post

Tax season 2025: All the deadlines taxpayers should know – CBS News

Tax Time Guide 2025: Essentials needed for filing a 2024 tax return | Internal Revenue Service

Defining Net Revenue Retention (NRR)

3 min read

What is Net Revenue Retention (NRR)The subscription economy, according to Forbes, is expected to reach $1.5 trillion in revenue for businesses. With the potential likely realized this year, it’s vital to understand how it is tracked – and more importantly, how it’s able to be tracked on a separate basis.

Also known as net dollar retention (NDR), this metric calculates the proportion of recurring revenue kept from present clients, including upsells and churn, during a defined time frame. Net revenue retention (NRR) evaluates a business’s potential to keep and increase sales from their present clients.

It looks at how well a company leverages existing customer relationships to increase sales through add-ons, complimentary services, etc. It focuses on the long-term growth of recurring revenue from these relationships. It’s calculated as follows:

NRR = (Starting MRR + Expansion MRR – Churn MRR) ÷ Starting MRR

Based on the following assumptions:

Starting monthly recurring revenue: $200,000

Expansion monthly recurring revenue: $40,000

Churn monthly recurring revenue: $20,000

NRR = ($200,000 + $40,000 – $20,000) / $200,000 = 1.10 or 110%

Based on this result, the company is increasing its revenue from existing customers faster than it’s failing to keep revenue from customer churn, an important metric showing growth.

The following factors impact the formula:

Starting MRR is also referred to as the baseline recurring revenue.

Expansion MRR refers to the added sales from newly added clients, upselling, upgrades, and additions to existing customers’ services.

Churn MRR is the sales missed by customers who stopped or lowered their level and type of services with the company.

Defining a Healthy Revenue Retention Rate

Companies that have a score of more than 100 percent show they’re bringing in more revenue from the existing customer base versus what the company is losing from customer churn. If, however, it’s less than 100 percent, customer satisfaction might be lacking, and customers may either be lost or simply not interested in additional services. Since acquiring new customers is more expensive than keeping current ones, it can lead to reflection on how to improve retention rates.

Journal Entry for Recurring Revenue

Assuming there’s a 12-month contract signed for monthly services, the journal entry would be as follows for a $1,000/monthly payment for a total of $12,000.

  Debit Credit
Cash $12,000  
Unearned Recurring Subscription Income $12,000  

Once the $1,000 subscription income has been earned, the following journal entry would be entered.

  Debit Credit
Unearned Recurring Subscription Income $1,000  
Earned Recurring Subscription Income   $1,000

While each industry and business are different, using this metric can help companies determine if there’s a customer retention problem; then they can start the investigation on how to increase retention for the future.

Sources

https://www.forbes.com/councils/forbesfinancecouncil/2023/10/27/the-truth-about-recurring-revenue/

What’s New in Identity Theft?

5 min read

What's New in Identity Theft?Identity theft is when someone steals your personal information and then uses it to commit fraud. They may access your Social Security or Medicare number, employee ID, utility, credit card or bank account numbers. Once the scammer has this information, he can conduct all kinds of crimes, such as withdraw assets from your accounts, open and close accounts in your name, take out loans or new lines of credit in your name, and even impersonate you if they get arrested – leaving you with a criminal record you may not even know about.

How Do Scammers Steal Your Identity?

Whereas scammers used to rummage through trash cans; today they can hack into your emails, social media, and personal accounts. That’s because we conduct so many of our transactions online now, they don’t even need to be physically present to take something from you.

Today, your data – contact information (e.g., phone number, email, address) and account numbers (e.g., financial, Social Security, employment ID) are all commodities that are bought and sold by both legitimate and illicit entities. Even the most harmless retail outlets solicit information, like your email and phone number in exchange for a 15 percent discount or free shipping. They can use this information for their own purposes and/or sell compiled lists to whoever will pay for it. The more you freely put your information out there, the higher your risk of identity theft or other forms of fraud.

Warning Signs

Paid Actors: Scammers may contact you directly via phone, email or text about a security breach or an offer you can’t refuse. They are professionals – they do this all day, every day, and know how to sound convincing. They may even trick you into giving out personal details (e.g., what’s your husband’s name? Are your parents still alive? How old is your daughter?) without you even realizing it.

Check Your Trust Instinct: Most people have an innate instinct to believe in the good of others, particularly those entrusted with our assets. That’s why when your bank calls, you become immediately concerned and receptive to their efforts to protect you. However, do not trust automatically and always verify.

Move Your Money: Let’s say someone from your bank calls and says they detected an unusually large transaction from your account. They may suggest you call your bank directly to stop the transaction and give you the local number to call. When you call, you may simply reach another scammer. They will often recommend you transfer your assets to a new account and close the old one to prevent fraudulent transactions by having a new account number – which the scammer will also have. If you are asked to move your funds to another account, this is a red flag.

SIM Swapping: If your phone stops working for no apparent reason, it’s possible your SIM card (or e-SIM) has been stolen. This is the memory chip found in phones, tablets, and smartwatches that stores your contact information, text messages, and passwords. It is incredibly valuable to scammers because it can enable them to log into your financial accounts. Even if you use two-factor authentication, he can intercept the code sent to your phone to verify your identity. He can then drain your assets, make unauthorized purchases on your debit and credit cards, and even lock you out of your own social media accounts by changing your passwords. Remember, immediately contact your carrier if your phone stops working. This may indicate that your phone number has been reassigned to another SIM.

How To Stop Today’s Scammers

The quicker you detect the problem, the faster you can shut it down and the less damage can be done to your personal and financial circumstances. Consider these tips:

  • Put a freeze on your credit report with each of the three (3) credit reporting agencies – Equifax, Experian and TransUnion. You can unfreeze them any time you apply for new credit.
  • Request fraud alerts from any of the three credit bureaus.
  • Check your three (3) credit reports and your credit score every year for any changes or unfamiliar accounts.
  • Never invest based on the advice of someone you’ve only encountered online.
  • Add a trusted contact to your financial accounts, whom your financial firm may contact if you appear to be making unusual transactions.
  • Passwords are the bane of modern-day technology. One way to minimize how many you have to keep changing is to add multifactor authentication – a two-step process that requires you to enter a unique code sent via email or text message each time you log in to an online account.
  • Monitor your account activity. If you still get statements by mail, be sure to read them every month. If you do all your transactions online, review them at least once a month to ensure there are no unexplained charges.

And finally, if you ever have an encounter with a scammer, share your experience with your friends, colleagues, and family members. This is particularly helpful for older folks, who are less familiar with how technology is used these days. We tend to live in a bubble and assume our assets and our identity are safe since no one we know has ever been victimized. But in fact, some people keep quiet because they are embarrassed. Don’t be. Share your story with friends; spread the word so others are more aware and more vigilant. Fraud and identity theft can happen to anyone.