Sauder & Stoltzfus Blog

Preface “In the United States, a program that deals only with the poor will end up being a poor program.” – Wilbur J. Cohen

Social Security – An Introduction

The following is the first in a series of blog posts on Social Security. This first installment:

• • • Reviews the history of the Social Security program
    • Lists the different types of Social Security benefits

Future posts in this series will address:

• • • Claiming retirement benefits
    • Claiming survivor and family member benefits
    • How earned income is taxed to fund Social Security
    • How Social Security benefits are taxed
    • Estimating Social Security’s returns on investment

A Brief History of Social Security in the United States

Social Security was established with the Social Security Act of 1935. Its goal is to provide government insurance of income to the elderly and disabled and their dependents. It is administered by the Social Security Administration (SSA), an independent agency of the federal government created by the same 1935 act. It is the most significant and enduing of president Franklin Roosevelt’s New Deal programs.

The Social Security program was modeled on an earlier program designed to provide benefits for railroad workers under the Railroad Retirement Act of 1934. A year later, the federal government decided to create a similar system that would be mandatory on all types of employers.

When we speak of receiving “Social Security”, we are usually thinking of what is technically Old Age, Survivors, and Disability Insurance (OASDI). OASDI is funded by a special kind of income tax called Federal Insurance Contributions Act (FICA) tax.

The original Social Security Act established FICA tax so that Social Security would not be seen as government assistance for the indigent, but instead as an insurance program for all. Seen this way, FICA is not really a tax, but a mandatory insurance premium. This unusual feature of what would otherwise be just another government spending program continues to play a role in all discussion of possible changes to Social Security as it approaches the end of its first century of existence.

The Social Security Amendments of 1965 created Medicare, a government health insurance program run along similar lines to Social Security. Medicare is administered by the Department of Health and Human Services. These same 1965 amendments also expanded FICA taxes to include funding for Medicare.

By 1972, it was clear that FICA was not sufficient to fund Social Security needs. The Social Security Amendments of 1972 established a second program under SSA called Supplemental Security Income (SSI). Unlike OASDI, SSI is funded by U.S. Treasury general funds. These are the same general funds that fund other government programs. There is no pretense that SSI is a form of insurance.

A Brief Explanation of How FICA Works

At first, Social Security applied only to employees and not to the self-employed. The 1935 act established payroll withholding for the first time in history. This was done so FICA could be deducted from employees’ wages. The act also required, for the first time in history, that employers report and remit the withholding on a quarterly basis. Both the withholding and quarterly filing requirements for employers remain in place today and have expanded beyond their original purposes.

Within a decade, the federal government realized that with these new powers, they could collect and track withholding on regular income tax in addition to FICA. Income tax withholding and employers’ obligation to include it with quarterly payroll returns were codified in law with the Current Tax Payment Act of 1943.

Within another decade, mandatory participation in Social Security was extended to the self-employed with the Self-Employment Contributions Act of 1954. Since the self-employed have no wages to withhold, this act created a new kind of tax just for them. It was originally called SECA tax after the name of the act. It is now usually just called “self-employment tax”. This tax on the self-employed is figured in the same way as FICA and all FICA rate increases and other modifications over the years apply to the self-employed as well.

FICA was originally set at 2% but is now 15.3% of wages and self-employed income. Of this, 12.4% is due to Social Security and 2.9% to Medicare. The Affordable Care Act of 2010 (ACA or “Obamacare”) increased the Medicare portion to 3.8% on income above $200,000 ($250,000 for married filing jointly).

In a later post, we will discuss the nuts and bolts of FICA in more detail.

In general, FICA is a parallel income tax system collected by the IRS using the same processes as regular income tax (withholding, estimated tax payments, etc.). This is unusual in that the federal government has many, many different programs, probably more than anyone could ever count, that all require funding, and yet none besides OASDI and Medicare have their own special income tax that is collected and tracked separately.

We often hear in the news that Social Security will run out of funds by a certain year. This may well be true. Yet we never hear this said about the Air Force, the Small Business Administration, the Environmental Protection Agency, the Smithsonian, the National Endowment for the Arts, SNAP, NASA, etc., etc. Are all these other programs perfectly solvent? Hardly. There is just no pretense that they are to be self-funded, each through a special tax designed specifically for that program.

If you look at your W-2, you will see boxes for Social Security and Medicare deductions. You will not see a Navy deduction, an FBI deduction, a National Park Service deduction, etc. If any of those agencies need more money, the federal government will simply put itself further into debt to give it to them. Are we to believe that if Social Security needs more money, the government will just shrug and say: Sorry, dear senior citizens, you’re on your own…?

On the other hand, maybe it would be a good idea if every government program had to be funded through its own special line item income tax and could expect no additional funding. It would certainly make very transparent to taxpayers how much out of each paycheck was going to what program. At present, 15.3% is going to OASDI and Medicare, and apparently even that is not enough to keep them running for much longer.

Types of Social Security Benefits

There are two basic types of OASDI benefits:

• • • Disability (DI) –  A person of any income level found disabled by the SSA can claim benefits.
    • Retirement (OASI) – This is what we usually mean when we think of “Social Security”.

Benefits can also be claimed by:

• • • Survivors – This is the “S” in “OASI”. Surviving spouses and dependents of deceased OASI recipients can continue to claim the deceased recipient’s benefits.
    • Family members –family members of living OASI and DI recipients can claim benefits. Family member benefits are computed as a percentage of the primary recipient’s benefits.

The next post will explain who can claim retirement benefits and how they are figured.

Preface: “Myth is the mountain whence all the different streams arise which become truths down here in the valley.” – C.S. Lewis

Claiming Dependents: Myths and Facts 

Myth: Once my kid turns 18 (or some other age), I can’t claim him anymore.

Fact: You can only claim the full amount of child tax credit ($2,200 in 2025) for qualifying children who were under 17 at the end of the calendar year. However, you can still claim the lesser amount of $500 for qualifying children who were under 19.

If your child was a full-time student, you can continue claiming him until the year he turns 24.

If your child is permanently and totally disabled, there is no age limit. How do you know if your child qualifies as permanently and totally disabled? Ask a doctor.

A child who meets the requirements of a qualifying relative can still be claimed as a dependent regardless of age. The credit for a qualifying relative is $500.

Myth: If you are married and are the primary earner, you can claim your spouse as a dependent.

Fact: If you are married at the end of the calendar year, you must choose between married filing jointly (MFJ) and married filing separately (MFS) for that year. The MFJ status offers lower tax rates and a higher standard deduction. That is a tax break available to married couples. You cannot claim your spouse as a dependent regardless of who earns the income.

Myth: If my child earned more than $5,000 (or some other amount), I can’t claim him anymore.

Fact: There is no dollar threshold on the income of children who can be claimed as dependents. The support requirement for qualifying children says that a qualifying child must not have provided more than half of his own support. It doesn’t even say that you must have provided more than half, just that the child can’t have provided more than half. And it says nothing of any dollar limit.

What you are probably thinking of is the gross income requirement that applies to qualifying relatives. This was $5,200 in 2025. There is no gross income requirement for qualifying children.

Myth: If my kid had a job and I am claiming him as a dependent, then I report his income on my tax return.

Fact: If your child earned enough to meet filing requirements, he must file his own return and pay his own tax. If he does not meet filing requirements, then his income is tax-free.

If your child had withholding through his paycheck, he may want to file even when not required to in order to claim a refund.

If you are claiming a child as a dependent and that child is filing a tax return, the child’s return must check the box that says “Someone can claim you as a dependent”. If the boxes are mismatched, processing of the returns may be delayed.

In the event that your child had more than $2,700 in unearned income (bank interest, investment income, etc.), then the amount of unearned income above the limit will be taxed at your tax rate. This is known as the “kiddie tax”. It is intended to stop rich parents from avoiding tax by shifting their investments to their children.

Myth: If two people try to claim the same child in the same year, the one with court-ordered legal custody of the child gets the credit.

Fact: Assuming both parties to the dispute meet all requirements for claiming the child, the tie-breaker rules favor the claimant as follows:

1. 1. 1. The parents, if they file a joint return;
      2. The parent, if only one of the persons is the child’s parent;
      3. The parent with whom the child lived the longest during the tax year, if two of the persons are the child’s parent and they do not file a joint return together;
      4. The parent with the highest AGI if the child lived with each parent for the same amount of time during the tax years, and they do not file a joint return together;
      5. The person with the highest AGI, if no parent can claim the child as a qualifying child.

Court-ordered custody doesn’t enter into it.

Preface: “You cannot do everything alone—especially when you get to a certain level. It is impossible.” — Hamdi Ulukaya

Why Business Owners Should Be Part of a Peer Group—Even When They’re Too Busy

As business owners, time is often your most limited and valuable resource. Between managing operations, leading your team, serving clients, and making key decisions, it can feel nearly impossible to step away from the day-to-day demands of running your business. Because of this, many owners view participation in a business peer group as helpful—but not essential.

In reality, the opposite is often true. For many successful business owners, joining a peer group is not optional—it is one of the most impactful investments they make in both their business and their leadership development.

A business peer group brings together a select group of owners or executives who meet regularly to share experiences, discuss challenges, and provide insight into one another’s businesses. Unlike internal team discussions, these conversations are not limited by company culture, hierarchy, or internal bias. Instead, they offer objective perspectives from individuals who understand the pressures and responsibilities of ownership.

One of the greatest benefits of participating in a peer group is gaining perspective. Business ownership can be isolating. Many of the most important decisions you make cannot be easily shared with employees, and even trusted advisors may not fully appreciate the day-to-day realities of your business. A peer group provides a forum for discussing those challenges openly with individuals who have faced similar situations. Often, what feels like a unique problem is something another member has already experienced and successfully navigated.

For example, a business owner considering a significant hire, expansion, or pricing adjustment may benefit from hearing how others approached similar decisions. Instead of relying solely on internal assumptions, the owner gains access to real-world insights that can improve decision-making and reduce risk. In many cases, a single conversation can prevent costly mistakes or uncover opportunities that would not have been considered otherwise.

Another key advantage of peer groups is accountability. Strategic initiatives are often pushed aside when daily operations demand attention. Peer groups create a structure for discussing goals, reviewing progress, and revisiting commitments. This level of accountability helps ensure that important initiatives—such as improving profitability, developing leadership teams, or refining processes—do not get lost amid the demands of daily business.

Beyond business strategy, peer groups also contribute to personal and leadership development. The most effective business owners are continually evolving in how they lead, communicate, and make decisions. Being surrounded by other growth-minded individuals creates an environment where ideas are challenged, assumptions are tested, and better approaches are developed. Over time, this leads not only to stronger businesses but to more confident and capable leaders.

One of the most common objections to joining a peer group is the time commitment. Many business owners feel they are too busy to commit to regular meetings. However, this perspective often overlooks the return on that investment of time. The hours spent in a peer group are not lost—they are leveraged. The clarity gained, mistakes avoided, and opportunities identified often far outweigh the time commitment required. In fact, many owners find that participation in a peer group ultimately saves time by helping them make better decisions more efficiently.

It is also worth noting that the most successful and disciplined business owners are often those who prioritize these commitments. They recognize that stepping away from the day-to-day operations, even briefly, allows them to work on the business rather than simply in it. This shift in perspective is often what enables long-term growth and sustainability.

At our firm, we frequently see the difference between business owners who operate in isolation and those who intentionally surround themselves with strong peers. The latter group tends to make more informed decisions, adapt more quickly to challenges, and maintain a clearer vision for their business’s future.

If you are currently navigating growth, facing complex decisions, or simply looking to become a more effective leader, it may be worth considering whether a business peer group could provide value. While the time commitment may seem difficult to justify initially, the long-term benefits often prove to be well worth the investment.

In many cases, the question is not whether you have time to participate—it is whether you can afford not to.

Preface: “Price is what you pay. Value is what you get.” — Warren Buffett

Growing Businesses Need a Strong CFO – And They Are Worth the Investment

As businesses grow beyond a few million dollars in revenue, the financial complexity of the enterprise increases significantly. What once could be managed through basic bookkeeping and periodic accounting oversight begins to require forward-looking insight, disciplined financial management, and strategic decision-making. At this stage, many business owners reach an important inflection point, and one of the most valuable steps they can take is bringing in a strong Chief Financial Officer (CFO), whether in a full-time or fractional capacity.

A common misconception is that a CFO is simply an added expense. In reality, a skilled CFO is often one of the highest-return investments a business can make. The distinction lies in understanding that while accounting focuses on reporting what has already happened, a CFO focuses on what is going to happen and how the business should respond. This forward-looking perspective becomes critical as the stakes of financial decisions increase.

For example, consider a construction company generating $6–10 million in annual revenue. On the surface, the business may appear profitable, but without detailed job costing and cash flow forecasting, it may unknowingly take on projects with low margins or experience cash shortages during periods of heavy activity. A CFO can implement systems to track profitability by job, identify which types of projects produce the strongest margins, and ensure that cash flow is aligned with project timelines. In many cases, this level of visibility alone can significantly improve overall profitability.

Similarly, in a real estate partnership, a CFO adds value by evaluating major financial decisions such as whether to refinance a property, sell an asset, or hold for long-term appreciation. These decisions are often complex and influenced by interest rates, market conditions, and tax implications. Without proper financial analysis, owners may rely on intuition or incomplete information. A CFO provides a structured approach, analyzing projected returns, cash flow impacts, and risk factors to support more informed decision-making.

One of the most immediate benefits of a CFO is improved clarity around profitability. Many businesses at this stage struggle to clearly identify which areas of their operations are driving profit and which are underperforming. A CFO can break down financial results by service line, product, or customer segment, allowing leadership to focus on the most profitable areas of the business. For instance, a service-based company may discover that a particular offering generates significantly higher margins than others, leading to a shift in focus that improves overall financial performance.

A CFO also plays a critical role in planning and executing growth. As businesses consider hiring key personnel, expanding into new markets, or investing in equipment, these decisions carry meaningful financial implications. A CFO helps quantify those decisions by analyzing breakeven points, return on investment, and cash flow impact. For example, before hiring additional staff, a CFO may evaluate utilization rates and billing capacity to ensure that the hire will be accretive to the business rather than a strain on resources.

Beyond strategy, a strong CFO enhances the internal structure and discipline of the organization. This includes implementing consistent financial reporting, establishing key performance indicators, and creating accountability across departments. These improvements not only support better day-to-day operations but also position the business for future opportunities, whether that involves securing financing, bringing on investors, or preparing for a potential sale.

For many businesses, a full-time CFO may not yet be necessary. In these cases, a fractional CFO can provide the same level of strategic insight on a more flexible basis. This allows companies in the $3 million to $20 million revenue range to benefit from experienced financial leadership without the full-time cost. A fractional CFO can focus on high-impact areas such as forecasting, strategic planning, and financial analysis while working alongside existing accounting staff.

Ultimately, the value of a CFO is not measured by their salary or fee, but by the results they have on a business’s financial performance. A strong CFO improves profitability, strengthens cash flow, reduces financial risk, and enables confident decision-making. In many cases, even modest improvements in margin or efficiency can more than offset the cost of the role.

Businesses that reach several million dollars in revenue often find that the systems and processes that supported early growth are no longer sufficient for the next stage. At this point, financial leadership becomes essential. A strong CFO—whether full-time or fractional—provides the clarity, structure, and strategic guidance needed to continue growing with confidence. Rather than viewing this role as an expense, it should be seen as a prudent investment in the long-term sustainable success and value of the business.

Preface: “Trust is the glue of life. It’s the most essential ingredient in effective communication. It’s the foundational principle that holds all relationships.” — Stephen R. Covey

Why a Recurring Business Valuation Is Advised for Multi-Owner Businesses

In many successful multi-owner businesses, the greatest risks are not operational—they are relational. Differences in expectations, assumptions about value, and long-term goals can create tension even in well-run companies. One of the most effective ways to prevent these issues is by establishing a recurring business valuation process.

Too often, business owners only consider valuation when a triggering event occurs, such as a partner buyout, retirement, dispute, or unexpected exit. At that point, the stakes are high and the timeline is compressed. Without a shared understanding of value, discussions can quickly become difficult and, in some cases, contentious. What could have been a straightforward transition instead becomes a negotiation shaped by emotion, uncertainty, and differing perspectives.

A more effective approach is to treat business valuation as an ongoing strategic tool rather than a one-time exercise. Establishing a recurring valuation—whether annually or every few years—provides a consistent, objective framework for understanding the company’s worth over time. This proactive approach helps business owners stay aligned and better prepared for the future.

One of the primary benefits of a recurring valuation is alignment among owners. When all owners have access to a recent, independent assessment of value, it creates a common reference point. This shared understanding reduces the likelihood of disagreements and supports more productive conversations about the direction of the business. For example, in a real estate partnership that owns multiple commercial properties, differing views on property values can lead to significant disagreement. One partner may believe the portfolio has appreciated substantially based on market trends, while another may focus on current cash flow and cap rates. A recurring valuation brings objectivity to the discussion and helps ensure all partners are working from the same set of assumptions.

Recurring valuations also make ownership transitions significantly smoother. In real estate partnerships, this is especially important, as liquidity is often limited and ownership interests are not easily transferred. Consider a scenario where one partner in a multi-property LLC wants to exit. If the last valuation was performed several years ago—before interest rates increased or market conditions shifted—the remaining partners and the exiting partner may have very different expectations. A current valuation that reflects updated cap rates, debt structures, and market conditions provides a defensible starting point and can prevent prolonged negotiations or disputes.

Beyond ownership transitions, a recurring valuation enhances strategic decision-making. A well-prepared valuation identifies the key drivers of value, including income stability, tenant quality, lease terms, financing structure, and market conditions. In a real estate context, this can be particularly valuable. For instance, a partnership may discover that shorter lease terms or tenant concentration in a single industry are negatively affecting value. With that insight, the partners can pursue longer-term leases or diversify their tenant base to strengthen the portfolio.

Another important advantage is risk management. Disputes among owners are often rooted in differing perceptions of value, and real estate partnerships are especially susceptible due to market volatility. Property values can fluctuate based on interest rates, local market conditions, and economic cycles. A recurring valuation process introduces consistency and objectivity, reducing the likelihood of surprises and misunderstandings. It also provides documentation that can be critical if disagreements arise.

Recurring valuations also serve as a meaningful benchmarking tool. While many real estate partnerships focus on cash flow and distributions, fewer track changes in overall equity value. A consistent valuation process allows partners to measure how the portfolio is performing over time. For example, a partnership may experience stable rental income but see a decline in overall value due to rising cap rates or increased vacancy risk. This type of insight allows partners to make proactive decisions, such as refinancing, repositioning properties, or adjusting their investment strategy.

It is important to recognize that a business valuation is not simply a report prepared for a specific transaction. When used effectively, it becomes a strategic resource that helps owners understand what is driving value, where risks exist, and how current decisions may impact future outcomes. In real estate partnerships, this perspective is especially valuable given the long-term nature of investments and the impact of external market forces.

Some business owners hesitate to implement a recurring valuation process due to perceived cost or complexity. However, when compared to the potential cost of disputes, delayed transactions, or poorly structured buyouts, the investment is often modest. In real estate partnerships or operating businesses, where ownership interests can represent significant wealth, the clarity provided by regular valuations is particularly valuable.

From a governance standpoint, recurring valuations are a hallmark of well-managed multi-owner businesses. They introduce discipline, transparency, and consistency—qualities that are essential for long-term success. In real estate partnerships, this can also support better communication with lenders, investors, and advisors by providing a clear and updated picture of portfolio value.

In our experience, the most successful multi-owner businesses do not wait for an event to define value. They benchmark it consistently over time. By implementing a recurring business valuation process, owners can reduce uncertainty, strengthen relationships, and position their business for smoother transitions and sustained growth.

If your business or partnership has multiple owners, now is an appropriate time to consider whether a recurring valuation should be part of your long-term strategy.

Preface: “A good job is more than just a paycheck. A good job fosters independence and discipline, and contributes to the health of the community.” -James H. Douglas

What Teenagers Need to Know About Summer Jobs and Taxes — A Guide for Families

For many teenagers, a summer job represents an important first step toward financial independence. Whether working in retail, food service, lifeguarding, or providing services such as babysitting or lawn care, earning income introduces not only responsibility, but also tax considerations. While the rules are generally straightforward, understanding the basics can help both teenagers and their parents avoid confusion and, in many cases, refund money that has been withheld.

When a teenager receives their first paycheck, it is common to notice that the net amount is lower than expected. This is due to required withholdings, which typically include federal income tax, Social Security tax, Medicare tax, and potentially state and local taxes. It is important to understand that these withholdings are estimates of tax liability, not necessarily the final amount owed. In fact, many teenagers have more tax withheld than they ultimately owe.

In most cases, teenagers will not owe federal income tax if their earnings fall below the standard deduction threshold. However, Social Security and Medicare taxes are still withheld and are generally not refundable. As a result, filing a tax return often allows teenagers to recover any federal income tax that was withheld during the year.

For example, a student who earns $5,000 working at a grocery store may have several hundred dollars withheld for federal income tax. Upon filing a return, that student may find that no federal income tax is owed, resulting in a full refund of the withheld amount. This is one of the most common outcomes for first-time earners.

It is also important to understand the distinction between being paid as an employee versus an independent contractor. Teenagers who receive a Form W-2 from an employer will generally have taxes withheld and experience a relatively simple filing process. In contrast, those who are paid directly for services—such as babysitting, tutoring, or lawn care—may be treated as independent contractors. In these situations, no taxes are withheld, and the individual may be responsible for reporting the income and potentially paying self-employment taxes.

For instance, two teenagers may each earn $4,000 over the summer, but their tax outcomes can differ significantly. One who works as an employee may receive a refund of withheld taxes, while another who earns the same amount through direct payments may have a filing obligation and potential tax liability. Understanding this distinction is critical.

From a family perspective, it is also important to note that a teenager’s employment does not typically affect a parent’s ability to claim the child as a dependent. The student may still file their own return and receive a refund, while the parent retains the dependency claim, provided the applicable requirements are met. Coordination in reporting is essential to avoid errors.

For parents, a teenager’s first job presents a valuable opportunity to introduce foundational financial concepts. Reviewing a pay stub together, explaining the difference between gross and net income, and walking through a basic tax return can help build confidence and understanding. In cases where the teenager has independent contractor income, it is particularly important to track earnings and set aside funds for potential tax obligations.

Ultimately, a summer job is more than just a source of income—it is an introduction to financial responsibility. While tax rules may initially seem complex, they are manageable with proper guidance. For many teenagers, filing a return will result in a refund, reinforcing the importance of understanding how the system works.

If you have questions regarding your child’s specific situation, including filing requirements or how different types of income are treated, we would be happy to provide guidance to ensure everything is handled accurately and efficiently.

Preface: “The care of the Earth is our most ancient and most worthy and, after all, our most pleasing responsibility.” — Wendell Berry

Understanding Tax Deduction Opportunities for Garden Equipment and Structures

Gardening is a rewarding and often productive activity, but when it comes to taxes, most garden-related expenses are not automatically deductible. Many taxpayers assume that items such as garden sheds, greenhouses, tools, or small tractors and implements can be written off, but the tax treatment depends entirely on how those items are used. The key distinction is whether the activity is personal or tied to a legitimate business or income-producing purpose.

In general, personal gardening expenses are not deductible. If a homeowner purchases a rototiller, builds a garden shed, or installs a greenhouse for personal use, those costs are considered personal living expenses. The IRS does not allow deductions for hobbies or activities that are primarily for personal enjoyment, even if they involve significant effort or expense. However, the situation changes when gardening activities rise to the level of a business or are directly connected to generating income.

One of the most common scenarios where deductions may apply is in a farming or agricultural business. If an individual operates a small farm, sells produce, or runs a nursery, garden-related assets may qualify as business property. In this case, equipment such as small tractors, attachments,  and garden tools can be depreciated or expensed under applicable tax rules. Structures like greenhouses and sheds used for production or storage may also qualify for depreciation. The key requirement is that the activity must be conducted with a profit motive and supported by proper records.

For example, consider a taxpayer who grows vegetables and sells them regularly at a local farmers market. If this activity is organized, consistent, and intended to generate profit, the cost of tools, soil preparation equipment, and even a small greenhouse may be deductible as business expenses. However, if the same individual grows vegetables only for personal consumption or occasional sharing, those same costs would not qualify.

Garden-related deductions may also apply in the context of rental properties. If a landlord maintains landscaping or uses equipment to care for rental property grounds, those expenses may be deductible as part of property maintenance. For instance, a garden tractor used to maintain common areas or a shed used to store maintenance equipment for a rental property may qualify as legitimate business expenses. Again, the connection to income-producing activity is essential.

It is also important to distinguish between repairs and improvements. Routine maintenance of landscaping may be deductible in a business or rental context, but constructing a new greenhouse or installing permanent structures may need to be capitalized and depreciated over time rather than deducted immediately. Understanding this distinction can significantly impact tax reporting.

Another important consideration is the hobby loss rule. If gardening activities generate some income but are not conducted with a clear intent to make a profit, the IRS may classify the activity as a hobby. In that case, expenses are generally not deductible against other income. To support business treatment, taxpayers should maintain records, track income and expenses, and demonstrate efforts to operate profitably.

Documentation plays a critical role in supporting any deductions. Taxpayers should keep receipts, maintain logs of equipment use, and clearly separate personal and business activities. If an asset is used partially for business and partially for personal use, only the business-use portion is deductible.

In conclusion, while most garden-related purchases are considered personal and not deductible, there are legitimate opportunities for deductions when the activity is tied to a business or income-producing purpose. Whether operating a small agricultural venture or maintaining rental property, the key is demonstrating a clear connection between the expense and the generation of income. Careful tax planning, accurate recordkeeping, and an understanding of the tax rules can help taxpayers take advantage of available tax deductions while avoiding unnecessary risk.

Preface: “Leaders create culture by what they say and do.” – Mark Miller,  Culture Rules

Building Culture That Lasts: Leadership Lessons from Culture Rules by Mark Miller

In today’s business park, culture is often discussed but rarely built with intention. Many organizations speak about values, teamwork, and purpose, yet struggle to translate those ideas into consistent daily behavior. In Culture Rules, Mark Miller provides a clear and practical framework for leaders who recognize that culture is not accidental—it is designed, reinforced, and lived out through everyday actions. His central message is both simple and challenging: culture is the ultimate competitive advantage, and leaders are responsible for shaping it deliberately.

Mark Miller, a leadership expert and long-time executive at Chick-fil-A, draws from decades of experience in an organization widely respected for its culture. Throughout the book, he emphasizes that culture is not defined by what a company says, but by what people consistently experience. As Miller explains, “Culture is always created—either intentionally or accidentally.” This insight alone carries significant weight. If leaders are not actively shaping culture, then culture is still forming—but without direction, clarity, or alignment.

At the heart of Culture Rules are three essential principles: aspirational culture, leadership culture, and actual culture. Together, these form a framework that helps leaders move from good intentions to meaningful execution.

The first principle, aspirational culture, focuses on defining the culture an organization desires—not merely accepting the one it currently has. Miller challenges leaders to be intentional in articulating the values and behaviors that should define their organization. Too often, businesses assume culture will naturally develop as they grow. In reality, without clarity, culture becomes inconsistent and tarnished. Leaders must answer critical questions: What do we stand for? How do we expect people to behave? What hills are sacred? What kind of reputation are we developing?

For example, an engineering firm may say it values excellence and client service. However, unless those values are clearly defined and reinforced, they remain abstract ideas rather than operational realities. Does excellence mean meeting deadlines consistently? Does it mean proactive communication with clients? Without clear definition, even well-meaning teams will interpret values differently. Aspirational culture provides the blueprint.

The second principle, leadership culture, underscores a powerful truth: culture is shaped primarily by leadership behavior. Miller writes, “Leaders create culture by what they say and do.” This means culture is not formed through mission statements alone, but through the daily actions of those in leadership. Employees watch what leaders prioritize, what they tolerate, and how they respond under pressure. Over time, these patterns become the true culture of the organization.

This principle carries both responsibility and opportunity. If leaders model integrity, accountability, and respect, those behaviors will cascade throughout the organization. Conversely, if leaders tolerate poor communication, inconsistency, or lack of accountability, those behaviors will also spread. In practical terms, this means leaders must constantly evaluate whether their actions align with the culture they claim to value.

Consider a situation where a firm emphasizes work-life balance but consistently rewards overwork and burnout. The stated culture and the lived culture are not aligned. Employees quickly recognize this inconsistency, and trust begins to erode. Leadership culture requires alignment between words and actions—without it, culture cannot be sustained.

The third principle, actual culture, addresses the reality of what employees and clients truly experience. Miller emphasizes that culture must be operationalized. It is not enough to define values or model them at the leadership level; organizations must build systems that reinforce those values consistently. As Miller notes, “What gets recognized and rewarded gets repeated.”

This principle is where many organizations fall short. They articulate strong values but fail to embed them into hiring practices, performance evaluations, and daily operations. For example, if a company values teamwork, are team-oriented behaviors recognized and rewarded? If client service is a priority, are employees supported and equipped to deliver exceptional service? Actual culture is revealed through systems, not slogans.

The practical implications of these principles are significant. Hiring decisions become one of the most important cultural tools. Growth-focused organizations may hire quickly to meet demand, but culture-driven organizations hire carefully, ensuring alignment with values. While this approach may slow short-term growth, it protects long-term stability.

Client selection also reflects cultural priorities. Organizations that chase growth may accept every opportunity, even when clients are not a good fit. Culture-driven firms are more disciplined. They seek clients who align with their values and who can benefit most from their expertise. This not only improves service quality but also strengthens relationships over time.

Leadership decisions about growth follow the same pattern. It is tempting to pursue every opportunity in a competitive market. However, Miller’s framework suggests that growth should be aligned with cultural capacity. Expanding too quickly without reinforcing culture creates internal strain and weakens the organization. Sustainable growth requires both strategic discipline and cultural clarity.

One of the most valuable insights from Culture Rules is that culture is not a one-time initiative—it is an ongoing leadership responsibility. It must be reinforced through communication, accountability, and intentional decision-making. Leaders must continually ask: Are we living our values? Are we reinforcing the right behaviors? Are our systems aligned with our culture?

This approach to culture has a direct impact on long-term success. Organizations with strong cultures experience higher employee engagement, better retention, and more consistent client experiences. They are also more resilient during times of change. When challenges arise, a strong culture provides stability and direction.

Ultimately, Culture Rules reinforces a foundational truth: culture is not a byproduct of success—it is a driver of it. Businesses that invest in culture are not simply improving internal operations; they are building organizations capable of enduring turbulence. In a world that often prioritizes speed and growth, Miller reminds us that the most successful leaders are those who build with intention, clarity, and consistency.

For leaders, the takeaway is clear. Culture will exist whether it is designed or not. The question is whether it will be shaped with purpose. Those who take responsibility for thriving, vibrant culture are not only building better businesses—they are building better organizations and communities.

Preface: “[AI] is the most interesting, important, and potentially dangerous technology humanity has ever created.” — Sam Altman, co-founder and CEO of OpenAI

Understanding the QuickBooks Online AI Assistant

QuickBooks Online has introduced new artificial intelligence features designed to make accounting more efficient and accessible. The QBO AI assistant can answer financial questions, suggest transaction categorizations, and help users better understand their business data. While these tools offer meaningful benefits, it is important for business owners to recognize that automation does not replace judgment. Like any evolving technology, the AI assistant should be used thoughtfully and with appropriate oversight.

At its core, the QBO AI assistant is designed to interpret financial data and provide recommendations. It can help identify trends, generate summaries, and even suggest how transactions should be categorized. For business owners who are managing their own books, this can feel like having a virtual assistant available at all times. However, it is important to understand that the system relies on patterns and historical data—it does not fully understand the intent behind each transaction.

One of the most common risks is misclassification. The AI assistant may suggest categories that appear reasonable on the surface but are incorrect based on the actual nature of the transaction. For example, a loan deposit could be incorrectly categorized as income, which would overstate revenue and potentially lead to incorrect tax reporting. Similarly, owner distributions might be misclassified as expenses, distorting the financial picture of the business.

Another consideration is over-reliance on automation. As AI tools become more advanced, there is a natural tendency to trust their outputs without sufficient review. This can create a false sense of confidence in the accuracy of financial reports. While the AI assistant can speed up bookkeeping tasks, it does not replace the need for regular reconciliation, review of accounts, and an understanding of how transactions flow through the financial statements.

Context is another important limitation. The AI assistant works with the data it is given, but it does not have full visibility into business intent, contracts, or strategic decisions. For instance, it may not distinguish between a capital investment and an operating expense without proper input. These distinctions can have significant tax and reporting implications, and they require human judgment.

Data privacy and security are also worth noting. While QuickBooks maintains strong security protocols, businesses should remain aware that AI tools process financial data in new ways. Understanding how data is used and ensuring proper access controls within your organization remains an important part of financial management.

Top 5 Mistakes to Avoid When Using the QBO AI Assistant

1. Automatically Accepting AI Suggestions

It can be tempting to trust the system and accept recommendations without review. However, even small classification errors can compound over time and lead to inaccurate financial statements.

2. Misclassifying Key Transactions

Certain transactions require careful attention, including loans, owner distributions, and capital expenditures. Misclassifying these items can significantly impact both financial reporting and tax outcomes.

3. Skipping Regular Reconciliations

AI tools do not replace the need for monthly bank and credit card reconciliations. Reconciliation remains one of the most important controls for ensuring accuracy.

4. Relying on AI Without Understanding the Financials

The AI assistant can provide summaries, but it is still important for business owners to understand their financial reports. Without that understanding, it is difficult to identify when something is incorrect.

5. Assuming AI Understands Business Context

The system does not know your intentions, agreements, or long-term strategy. Decisions such as whether something is a repair or an improvement, or an expense versus an asset, still require professional judgment.

Despite these considerations, the QBO AI assistant can be a helpful tool when used correctly. It can improve efficiency, provide helpful insights, and reduce the time spent on routine tasks. The key is to treat it as a support tool rather than a decision-maker. Business owners should review AI-generated suggestions, maintain consistent reconciliation practices, and seek professional guidance when needed.

In conclusion, the QuickBooks Online AI assistant represents a meaningful step forward in accounting technology. However, accuracy in financial reporting still depends on careful review, sound judgment, and a clear understanding of your business. By combining the efficiency of AI with disciplined oversight, businesses can take advantage of these tools while maintaining confidence in their financial information.

Preface: “The culture of any organization is shaped by the worst behavior the leader is willing to tolerate.” — Gruenter & Whitaker 

Focusing on Culture: The Leadership Decision That Determines Long-Term Business Success (Part II)

While strong culture quietly strengthens an organization, the absence of culture quietly weakens it. Companies rarely decide outright to abandon culture. Instead, they slowly drift away from it. Growth accelerates, opportunities multiply, and leadership attention becomes consumed with operational demands. In the process, the values that once guided decisions are gradually pushed aside. What once defined the organization becomes something that is merely mentioned rather than practiced.

The early signs of cultural neglect are often subtle. Communication becomes less clear. Leaders begin making decisions based primarily on urgency rather than principles. Hiring decisions prioritize speed over alignment. Employees start to notice inconsistencies between what leadership says and what leadership does. Over time, these small fractures accumulate, and the shared sense of mission that once unified the team begins to erode.

Peter Drucker warned leaders about this drift when he observed, “Plans are only good intentions unless they immediately degenerate into hard work.” The same can be said of culture. Stated values, mission statements, and vision documents mean very little if they are not actively lived by leadership every day. When culture becomes something that is written rather than practiced, it slowly loses its influence.

As culture weakens, the effects ripple through the organization. Trust begins to decline. Employees who once felt ownership in the mission may begin to disengage, focusing only on completing their assigned tasks rather than contributing their best thinking. Collaboration becomes more difficult because individuals are no longer guided by shared principles. Without a strong cultural foundation, small problems escalate more quickly, and decision-making slows as people begin to protect their own interests rather than work toward the collective good.

Clients eventually feel the effects as well. When internal culture weakens, service quality becomes inconsistent. Communication may become less thoughtful, attention to detail may slip, and the genuine care that once defined the organization begins to fade. Customers may not always be able to identify exactly what has changed, but they can sense that something is different. The organization may still be growing, but the experience it provides is no longer exceptional.

Perhaps the most damaging effect of cultural neglect is the loss of leadership clarity. When an organization’s culture is strong, leaders can rely on shared values to guide decisions throughout the company. Employees understand the organization’s priorities and act accordingly. But when culture fades, leaders must increasingly rely on policies, procedures, and supervision to maintain order. The organization becomes more bureaucratic and less inspired.

Ironically, many companies lose their cultural focus precisely because they become successful. Early in a company’s life, culture often grows naturally from the founder’s vision and the close relationships within a small team. As the organization expands, however, complexity increases and leadership attention shifts toward operational challenges. If culture is not intentionally protected and reinforced, it slowly dissolves in the noise of growth.

Jim Collins captured this danger well when he wrote, “If you have the right people on the bus, the problem of how to motivate and manage people largely goes away.” But when organizations stop prioritizing the right people and the right values, motivation and alignment quickly become major challenges.

The tragedy of cultural neglect is that it often goes unnoticed until significant damage has already occurred. High employee turnover, declining engagement, inconsistent service, and internal conflict are all symptoms of a deeper problem. By the time leaders recognize these patterns, rebuilding trust and alignment can take years.

For this reason, culture cannot be treated as a secondary concern. It must remain a deliberate leadership priority. Culture is not something that maintains itself automatically; it must be reinforced through hiring decisions, leadership behavior, communication, and accountability. Every business decision either strengthens culture or weakens it.

In the end, culture is the force that determines whether success is temporary or enduring. Companies that neglect culture may grow quickly for a season, but their foundations eventually weaken. Organizations that protect culture, however, build something far more valuable than rapid expansion—they build enterprises capable of lasting legacy.