Sauder & Stoltzfus Blog

Preface: “Since 1984, the proportion of beneficiary families whose benefits are taxed has risen over time from less than one in 10 to more than half” – Income Taxes on Social Security Benefits from Social Security Administration: Research, Statistics & Policy Analysis

Social Security – How Your Social Security Benefits Are Taxed

The following is the fourth in a series of blog posts on the subject of Social Security. The first three installments, which can be found here, here, and here:

• • • Reviewed the history of the Social Security program
    • Explained how to claim Social Security retirement benefits
    • Explained how to claim Social Security survivor and family member benefits

This fourth installment will discuss:

• • • How Social Security benefits are taxed

Future posts in this series will address:

• • • How earned income is taxed to fund Social Security
    • Estimating Social Security’s returns on investment

Tax on Social Security Benefits

For almost the first 50 years of Social Security, Social Security retirement benefits were not subject to income tax. It was only with the Social Security Amendments of 1983 that they became partially taxable for some recipients. This taxation of benefits went into effect in 1984 and has been with us ever since. In fact, it has expanded apace.

The 1983 law set up dollar thresholds above which 50% of Social Security benefits become taxable. These thresholds are $32,000 for married taxpayers filing jointly and $25,000 for all other filers with one exception: for married taxpayers filing separately who lived together at any time during the year, the threshold is zero.

For purposes of applying this threshold, only half of the Social Security benefits themselves are considered. Also, tax-exempt interest income is added back.

Note that 50% of benefits being taxable does not mean that your benefits are subject to a 50% tax rate. It means that half of those benefits are taxed at your ordinary rate. The other half remains tax-free.

Amazingly, the dollar amounts of these thresholds have not been adjusted for inflation since they were first introduced in 1983. It is interesting to speculate whether this legislation would have received the support it did at the time if people had realized it would eventually apply to a majority of benefit recipients.

While most of this expansion was accomplished through inflation, a change was made a decade later that subjected some portions of benefits to an even higher degree of taxability. The Omnibus Budget Reconciliation Act (OBRA) of 1993 defined a second set of thresholds above which 85% of Social Security benefits are subject to income tax. This higher threshold is $44,000 for married filing jointly and $34,000 for other filers. These thresholds have likewise never been adjusted for inflation.

If income as computed for Social Security purposes falls above the upper threshold, then 85% of that amount of Social Security benefits is subject to tax. Any amount of benefits that falls between the thresholds is 50% taxable, but not if that would make the total taxable portion more than 85% of the benefit received.

If you would like SSA to figure the taxable amount for you, they provide their own calculator here. Many other websites provide unauthorized versions of a similar calculator.

“No Tax on Social Security”

While there was talk in the presidential campaign of 2024 about eliminating tax on Social Security benefits, what the One Big Beautiful Bill Act of 2025 (OBBBA) ended up doing was introducing an entirely new tax deduction for taxpayers over 65.

Beginning in tax year 2025, this new deduction is worth $6,000 per individual. It begins to phase out for married filers with adjusted gross income over $150,000 and fully phases out at $250,000. For single filers, these phaseout thresholds are $75,000 and $125,000. The deduction is available to anyone within these income thresholds who is of age without regard to the amount of Social Security benefits being received. In fact, you don’t have to be receiving any Social Security benefits at all to take this deduction.

The deduction will expire after tax year 2028 if it is not renewed by an act of Congress.

There has still been no change in the law governing taxation of Social Security benefits since OBRA of 1993.

Treatment of Lump Sum Benefits

If a Social Security benefit is for any reason delayed beyond the year it originated and is paid instead in a later year, it is treated for tax purposes as received in the year it was actually paid. Prior year tax returns cannot be amended to include benefits that were not received until a later year. This can result in an unusually large payment in the current year know as a “lump sum” benefit.

The only relief available to recipients of lump sum benefits is an election to figure the taxable amount of the lump sum based on the year the payment originated. The taxable amount of payments that originated in a prior year can be calculated as if they had been received in the prior year. The amount that would have been taxable in the prior year can then be considered the amount taxable in the current year, if this is more beneficial to the taxpayer.

Claim of Right

Occasionally, Social Security benefits must be repaid. For tax purposes, any amount repaid in the current year can be deducted from the amount received in the current year. However, if for any reason a benefit received in one year is not repaid until a later year, tax relief is only available as “claim of right” under Internal Revenue Code Section 1341.

Claim of right is a doctrine that applies to cases where income that was taxed in a prior year is repaid by the taxpayer in a later year. This same doctrine applies to wages or bonus repaid to an employer and also to repayment of unemployment benefits.

If the amount is less than $3,000, no relief is available.

Any claim of right amount greater than $3,000 can either be deducted as an itemized deduction on Schedule A or figured as a refundable credit on Schedule 3, whichever is more beneficial to the taxpayer. The credit is figured in the following way:

• • • Tax is refigured for the year in which the amount was originally reported in income, but as if that amount had never been received.
    • The difference between the refigured tax on the prior year and the actual tax in that prior year is then the credit that may be claimed in the current year.

Preface: “The will to win is not worth much unless you have the will to prepare to win.” – Fielding H. Yost, University of Michigan football coach

Why Great Businesses Are Built During Slow Seasons

Every successful athlete understands a truth that business owners would be wise to embrace: the most important work rarely happens when everyone is watching. When spectators watch the World Cup, Olympics, the Super Bowl, or the World Series, they witness incredible performances. They see athletes competing at the highest level, often making extraordinary accomplishments appear effortless.

What they don’t see are the thousands of hours spent preparing long before the competition began. They don’t see the early mornings in the weight room, the countless practice sessions, the film study, the conditioning, or the recovery that made those performances possible. Championships are won long before game day. The same principle applies to successful businesses.

Many business owners become uneasy when activity slows. Orders decrease, the phones become quieter, and calendars suddenly have a little more white space than usual. The natural tendency is to hope business picks up quickly and simply wait for the busy season to return. However, the most successful companies think differently. Rather than viewing slower periods as lost opportunities, they recognize them as some of the most valuable opportunities they will have all year. They understand that while revenue may temporarily slow, progress doesn’t have to.

In fact, many champion businesses are quietly built during their slowest seasons. Just as athletes use the offseason to improve their skills, business owners should use slower periods to strengthen the foundation of their companies. This is the ideal time to improve internal processes, document procedures, train employees, evaluate technology, review profitability, strengthen customer relationships, and develop future leaders. These activities may not immediately increase revenue, but they often determine how successful the business becomes over the next several years.

One of the greatest mistakes business owners can make is believing that productivity only occurs when serving customers. In reality, some of the highest-return work happens behind the scenes.

A slower season provides an opportunity to ask important questions that are often overlooked during the rush of daily operations. Are our systems efficient? Are we pricing our services appropriately? Is our team receiving the training they need? Are we preparing future leaders? Could technology improve our workflow? What processes create unnecessary frustration for our employees and customers?

These are the questions that move a business from simply operating to continuously improving.

Professional athletes also understand another important principle that applies directly to business: recovery is part of peak performance. No athlete expects to compete at the highest level every day without allowing time for rest, reflection, and rebuilding. Muscles grow stronger during recovery. Minds become sharper after stepping back. Performance improves because intentional time was invested in preparation rather than constant activity. Business owners are no different.

Many entrepreneurs spend months operating at an exhausting pace. Tax season, construction season, harvest season, or holiday demand often requires extraordinary effort. Slower periods provide an opportunity not only to strengthen the business but also to strengthen the leader. Reading a leadership book, attending a business peer group, meeting with trusted advisors, improving strategic planning, or simply spending uninterrupted time thinking about the future of the company can produce tremendous long-term returns. Another lesson athletes teach us is that success yesterday does not guarantee success tomorrow.

Every season begins with learning anew. Businesses face the same reality. Markets change. Customer expectations age. Technology advances. Competitors improve. Businesses that stop learning eventually stop growing. The organizations that consistently outperform their competition are often those that view every slower season as an investment rather than an inconvenience.

As CPAs and business advisors, we have the unique opportunity to work alongside companies across many industries. One observation consistently stands out. The businesses that experience sustained long-term growth are rarely the ones that simply work harder than everyone else. More often, they are the businesses that intentionally improve, they build seasons, sharpen skills, and practice and prepare while others are waiting for business to get busy again.

Financial statements tell the story of yesterday’s decisions. The investments you make today—in your employees, your systems, your leadership, your technology, and your customer experience—will eventually appear as tomorrow’s revenue growth, improved profitability, stronger cash flow, and increased business value. Perhaps that is why the slow season should not be viewed as an interruption to success.

It should be viewed as preparation for it.

The next time your business enters a quieter period, resist the temptation to raise concerns. And wait for activity to return. Instead, ask yourself:

• • • How can we stay focused on our mission?
    • What skills can our team develop to fulfill our vision more aptly?
    • What systems can we strengthen?
    • When we get where we are going where will we be?
    • What decisions today will position us for greater success next year?

The answers to great questions may become the foundation for your company’s next season of growth. Just as athletes prepare long before the competition begins, great businesses prepare long before opportunity arrives. Because when the next busy season comes—and it will—you won’t simply want to be busy. You’ll want to be ready.

Great businesses are not built only during seasons of abundance. They are built during seasons of preparation. Use your slower seasons wisely. Improve your people. Strengthen your systems. Refine your strategy. Invest in your culture. Build your leadership. Listen to you coach. The work you do when few people are watching often becomes the reason everyone notices your success later. Preparation – it’s the champions edge to a great business.

Preface: “What is a farm but a mute gospel?”– Ralph Waldo Emerson

The Best Business Lessons Are Still Found on the Farm: What Every Business Owner Can Learn from Seedtime and Harvest

What do successful businesses and successful farms have in common?

At first glance, not much. One is filled with tractors, fields, and grain bins. The other has conference rooms, computers, financial statements, and customer meetings. Yet beneath the surface, they operate according to the same timeless principle: you cannot harvest what you have not first planted.

Thousands of years ago, long before MBA programs, strategic planning retreats, or business consultants, God established one of the greatest business principles ever recorded. In Genesis 8:22, He declared, “While the earth remains, seedtime and harvest… shall not cease.” Although spoken in the context of agriculture, the principle has remarkable application to every business owner, entrepreneur, and leader. Every thriving business is simply the result of good seeds planted consistently over time.

Perhaps that’s why farming has always fascinated me. Farmers never wake up in October surprised by what grows in their fields. They understand that the harvest is determined months earlier, when they decide what seeds to plant, how well to prepare the soil, and how faithfully they care for the crop. Business works exactly the same way.

Unfortunately, many business owners spend far more time dreaming about the harvest than thinking about the seeds. We want growing revenue, loyal employees, delighted customers, stronger cash flow, and higher profits. Those are wonderful goals—but harvests never appear simply because we wish for them. They are the natural result of decisions made months and often years before.

Every decision you make is planting something.

When you invest in training your employees, you’re planting a future leadership team. When you consistently provide exceptional customer service, you’re planting referrals and long-term relationships. When you improve your systems and technology, you’re planting efficiency. When you communicate honestly with your clients, you’re planting trust. Even your company culture didn’t happen by accident—it grew from seeds that leadership intentionally, or unintentionally, planted over many years.

The opposite is also true. Poor decisions produce harvests as well.

Ignoring employee development eventually produces high turnover. Neglecting customer relationships often results in declining referrals. Delaying necessary investments in technology creates inefficiencies that slowly erode profitability. Cutting ethical corners may create a short-term gain, but almost always produces a painful long-term harvest.

Nature never plays favorites. It simply multiplies whatever is planted.

One of my favorite observations about farmers is that they never become impatient with the growing season. Imagine a farmer planting corn on Monday and digging it up on Friday to see whether it’s growing. We would question his judgment. Farmers understand that healthy growth takes time. They faithfully prepare the soil, plant quality seed, remove weeds, and trust the process.

Business owners, however, often struggle with this principle. We attend one leadership conference and expect our culture to change overnight. We install new software and wonder why efficiency hasn’t immediately improved. We hire a talented employee and become discouraged when they aren’t fully productive after a few weeks. We expect harvests before the growing season has had time to do its work.

The waiting season isn’t wasted time. It’s where the roots are growing.

Every successful company has experienced seasons where progress wasn’t immediately visible. Systems were being developed. Employees were learning. Customer trust was being earned. Brand reputation was slowly taking shape. From the outside, it may have appeared that very little was happening. Underneath the surface, however, something important was taking place. The roots were growing strong enough to support a future harvest.

Another lesson farmers understand exceptionally well is that they never eat all of their seed.

They know that consuming today’s seed means sacrificing tomorrow’s harvest. That’s a lesson many businesses would do well to remember.

Every profitable year brings temptation. Do we distribute every dollar? Do we postpone investments because they reduce this year’s earnings? Or do we intentionally reinvest part of today’s success into tomorrow’s opportunities?

Sometimes your “seed” looks like upgrading technology before it’s absolutely necessary. Sometimes it means investing in leadership development, improving manufacturing space, refining processes, hiring ahead of growth, or strengthening your marketing efforts. None of these investments produce immediate results, but they often become the very reason a business thrives five years later.

Great leaders think like farmers because they understand that today’s decisions shape tomorrow’s opportunities.

As CPAs, we have a unique perspective. Every year we review financial statements that tell the story of a business. Revenue either increased or declined. Gross margins improved or slipped. Cash flow strengthened or weakened. But financial statements don’t just report numbers—they reveal the harvest of thousands of decisions made over many years.

Healthy businesses rarely become healthy by unintentional effort. Behind every balance sheet is a story of seeds planted faithfully—or neglected.

Perhaps that’s why some of the most successful business owners I’ve met possess remarkable patience. They understand that sustainable growth cannot be rushed. They know there are no shortcuts to trust, leadership, culture, or reputation. They are willing to plant today for a harvest they may not fully enjoy until years into the future.

Imagine how different our businesses might look if we evaluated every major decision through a farmer’s perspective.

Instead of asking, “What will this cost me today?” we might ask, “What harvest could this produce five years from now?”

Instead of asking, “How quickly will I see a return?” we might ask, “Is this the right seed to plant?”

Instead of focusing exclusively on quarterly results, we might spend more time cultivating the conditions that create long-term success.

The beauty of the principle of seedtime and harvest is that it offers both encouragement and responsibility. If today’s harvest is disappointing, tomorrow’s harvest can be different because today’s seeds can be different. Every sunrise offers another opportunity to plant wisely — experienced farmers also know that only God knows what will be gathered in at harvesttime.

The next time you walk past a farm, remember that you’re looking at more than fields of corn or soybeans. You’re seeing one of God’s greatest illustrations of how success works—not only in agriculture, but in business and in life. “Do not be deceived: God is not mocked, for whatever one sows, that will he also reap.” — Galatians 6:7

The harvest never comes first. It never has. It never will. Great businesses, like great farms, are built one faithful harvest season at a time.

Preface: “Customers pay only for what is of use to them and gives them value. Nothing else constitutes quality.” —Peter F. Drucker

The Price Is More Than a Number: Why Smart Pricing Determines the Long-Term Success of a Retail Business

Walk into two retail stores selling nearly identical products, and you’ll often notice something intriguing: their prices can be remarkably different. One retailer competes aggressively to offer the lowest price, while the other confidently charges 10%, 20%, or even 30% more for what appears to be the same item. At first glance, the lower-priced retailer seems destined to win. Yet over time, the opposite is often true. The retailer with higher prices frequently enjoys stronger profits, better employees, superior customer service, healthier cash flow, and greater opportunities to invest in growth. The difference isn’t simply the product on the shelf—it’s the pricing strategy behind it.

Many business owners think of pricing as a simple math equation: determine the cost of a product, add a markup, and arrive at the selling price. While that approach is straightforward, it overlooks one of the most important principles of business. Pricing is not merely a financial calculation; it is a strategic decision that influences profitability, customer perception, employee opportunities, and the long-term health of the business. Legendary investor Warren Buffett captured this idea perfectly when he said, “Price is what you pay. Value is what you get.” Successful retailers understand that customers are purchasing far more than a product. They are buying convenience, trust, expertise, reliability, and an overall experience.

Peter Drucker, often referred to as the father of modern management, famously wrote, “The purpose of business is to create and keep a customer.” Pricing plays a central role in accomplishing both objectives. It communicates the value of a product and sends a message about the business itself. A price tag is more than a number—it reflects the confidence a company has in its products, services, and ability to meet customer expectations. Instead of asking, “What does this product cost me?” successful retailers ask a much more powerful question: “What value does this product create for my customer?” That subtle shift in thinking can transform an entire business.

There are several pricing models that retailers commonly use, and each has its strengths and weaknesses. The most familiar is cost-plus pricing, where a retailer calculates the cost of an item and adds a desired profit margin. It is simple, consistent, and easy to manage. However, cost-plus pricing has one significant limitation—it ignores the customer’s perception of value. Two businesses may have identical costs, yet one can command significantly higher prices because of its reputation, exceptional service, product expertise, or customer experience. Cost should influence pricing, but it should not be the only factor.

Many of the world’s most successful companies rely on value-based pricing rather than cost-based pricing. Apple provides one of the best examples. Consumers rarely purchase Apple products because they are the least expensive option. They willingly pay premium prices because they value innovation, design, reliability, customer support, and the seamless integration of Apple’s ecosystem. The lesson for retailers is clear: customers do not always buy the lowest price—they often buy the greatest confidence. Businesses that consistently create exceptional value often discover that customers are willing to reward that value with greater loyalty and higher prices.

Competitive pricing is another common strategy, particularly in industries where customers can easily compare prices. While it is important to understand what competitors are charging, competing solely on price often becomes a race to the bottom. Every discount reduces the resources available to hire talented employees, improve customer service, invest in technology, or renovate a store. Jeff Bezos once observed, “Your margin is my opportunity.” When businesses sacrifice their margins in pursuit of volume, they frequently sacrifice their ability to build a stronger company.

Technology has also introduced dynamic pricing, where prices fluctuate based on demand, inventory levels, seasonality, and customer behavior. Airlines, hotels, online retailers, and even entertainment venues adjust prices regularly to maximize profitability. While not every retailer requires sophisticated pricing software, business owners should recognize that pricing does not always have to remain static. Thoughtful adjustments based on market conditions can improve both sales and profitability.

Another effective strategy is premium pricing. Luxury brands intentionally charge more because price itself communicates quality, exclusivity, and prestige. Consumers often associate higher prices with better craftsmanship, superior service, or greater reliability. Of course, premium pricing requires businesses to consistently deliver an experience that justifies the higher price. Customers will gladly pay more when they believe they are receiving more.

Pricing is also deeply rooted in psychology. Retailers have long understood that consumers do not always make purchasing decisions based purely on logic. A price of $19.99 often feels significantly different than $20.00, despite the one-cent difference. Businesses use techniques such as bundling products, offering limited-time promotions, creating loyalty programs, and strategically positioning premium products alongside standard offerings to influence purchasing decisions. These strategies are not about deceiving customers; they are about helping customers recognize value in different ways.

One of the most common mistakes I observe as a CPA working with business owners is chronic underpricing. Many entrepreneurs believe that lowering prices will automatically generate more sales and greater success. Sometimes it does increase sales volume, but it often produces unintended consequences. Lower margins reduce cash flow, limit investments in technology, delay facility improvements, restrict employee development, and create unnecessary financial stress. Businesses simply cannot discount themselves into long-term prosperity. Jim Collins, author of Good to Great, reminds us that “Greatness is not a function of circumstance. Greatness is largely a matter of conscious choice.” Pricing is one of those choices.

Over the years, I have also noticed several recurring pricing mistakes. Some businesses compete almost exclusively on price instead of communicating their unique value. Others fail to analyze profitability by product line, allowing high sales to mask poor margins. Many underestimate the lifetime value of loyal customers and focus too heavily on attracting new ones through discounts. Others reduce prices before exploring ways to enhance the customer experience through better service, stronger warranties, or greater convenience. Finally, many business owners pursue higher sales volume without considering whether those additional sales actually improve profitability. Growth without healthy margins is difficult to sustain.

Every retailer should periodically step back and ask several important questions. Why do customers choose our business? What unique value do we provide that competitors cannot easily replicate? Are we pricing for today’s survival or tomorrow’s growth? Which products truly generate profit, and which simply drive traffic? Are we measuring sales, or are we measuring profitability? These questions often uncover opportunities that no spreadsheet alone can reveal.

Ultimately, pricing is far more than an accounting exercise. It reflects how business owners value their products, their employees, their customers, and their future. Healthy profit margins provide the resources necessary to hire exceptional people, invest in technology, improve customer experiences, and withstand economic uncertainty. Peter Drucker wisely observed, “Efficiency is doing things right; effectiveness is doing the right things.” Pricing is one of those “right things.” It deserves the same thoughtful attention as leadership, strategic planning, and customer service.

The next time you review your pricing strategy, resist the temptation to ask only, “What should we charge?” Instead, ask the more meaningful question: “How can we create greater value for our customers?” Businesses that focus on delivering exceptional value, rather than simply offering the lowest price, position themselves for sustainable growth and long-term success. In the end, the price attached to your products communicates much more than their cost—it tells customers what kind of business you are and what kind of future you intend to build.

Preface: “We can never insure one hundred percent of the population against one hundred percent of the hazards and vicissitudes of life, but we have tried to frame a law which will give some measure of protection to the average citizen and to his family against the loss of a job and against poverty-ridden old age.” –– Franklin D. Roosevelt, Statement on Signing the Social Security Act

Social Security – Claiming Family Member and Survivor Benefits

The following is the third in a series of blog posts on the subject of Social Security. The first two installments, which can be found here and here:

• • • Reviewed the history of the Social Security program
    • Listed the different types of Social Security benefits
    • Explained how to claim Social Security retirement benefits

This third installment will discuss:

• • • Claiming family member benefits
    • Claiming survivor benefits

Future posts in this series will address:

• • • How earned income is taxed to fund Social Security
    • How Social Security benefits are taxed
    • Estimating Social Security’s return on investment

Social Security is known as a sort of a pension plan, as the retirement benefits do provide partial income replacement for retirees. But Social Security boasts a generous number of other types of benefits. Survivor benefits function as a sort of a life insurance for the benefit of dependents whose providers have passed away. And family member benefits, in particular spousal benefits, provide supplemental income to family members of living retirees.

Family Member Benefits

Family members of people who are receiving Social Security retirement benefits can, if certain conditions are met, receive their own benefits that are computed as a percentage of the benefit received by the recipient of the retirement benefit. Before we delve into the details of which family members are eligible and what percentage they receive, it is important to understand that family member benefits do not come at the expense of the retirement benefits.

EXAMPLE:

I am retired and eligible to receive a $2,000 per month Social Security retirement benefit. My wife is entitled to a spousal benefit worth 50% of mine. She will receive $1,000 per month in addition to my $2,000 per month. Her benefit will not be deducted out of my benefit.

And so for all family member benefits (but see The Family Maximum at the end of this article).

Another important principle of family member benefits is that anyone who is eligible for his or her own retirement benefit cannot claim both that retirement benefit and a family member benefit. Generally, you will choose the benefit that is larger.

EXAMPLE:

I am retired and eligible to receive a $2,000 per month Social Security retirement benefit. My wife is entitled to a spousal benefit worth 50% of mine. However, she is also entitled to a retirement benefit in her own right.

If her retirement benefit is larger than $1,000, she is better off taking that and foregoing the family member benefit.

If her retirement benefit is larger than $4,000, then I am better off foregoing my own retirement benefit as I can instead claim a family member benefit worth 50% of hers.

Both spouses and dependent children may receive family member benefits. Neither type of benefit can be more than 50% of the value of the retirement benefit. For this purpose, the base amount is the retirement benefit as claimed by the retired individual at full retirement age (FRA). Current law defines (FRA) for people born in 1960 and after as 67. As covered in a previous blog post, a retiree can claim a larger amount by waiting until past FRA to claim. However, family member benefits are in any case based on the FRA benefit.

A spouse must be 62 years or older to receive the family member benefit, or any age if taking care of a child who is younger than age 16 or has a qualifying disability.

The percentage value of a spousal benefit depends on the spouse’s own age when claiming the benefit. At full retirement age (FRA), the spouse can claim the maximum 50%. For each year before FRA, the percentage is reduced slightly, down to a minimum of 32.5% if claiming at age 62.

A dependent child must be younger than 18 to receive the family member benefit, or younger than 20 if a full-time student, or any age if having a disability that began before age 22.

Dependent child benefits are generally not less than 50% of the retirement benefit. But see The Family Maximum at the end of this article

Employing a Spouse as a Social Security Strategy

There is no legal impediment to employing your spouse. A spouse-employee should be paid a wage comparable to what you would pay a non-related employee for doing the same work. If you decide to do this, you should understand that you are making your spouse an employee who must be paid for work that is actually performed, the same as any other employee. You cannot just pay part of your salary to your spouse and then expect that your spouse can claim Social Security credit on it. If you both perform work for the business, you must each receive a salary based on your respective roles. As your spouse’s employer, you will be paying the employer share of Social Security and Medicare taxes (FICA) based on your spouse’s wages. The only special dispensation you have as a spouse-employer is that you do not have to pay FUTA (federal unemployment) taxes on a spouse’s wages.

If the only reason for employing your spouse is to build eligibility for future Social Security benefits, consider that a spouse is in any case entitled to family member benefits when you retire based on your earnings.

Survivor Benefits

Three types of dependents may qualify for Social Security survivor benefits based on a deceased family member’s Social Security retirement benefits:

• • • Spouses and ex-spouses who were married to the deceased at least 9 months, have not remarried, and are age 60 or older (age 50 or older if with a disability)
    • Children age 17 and younger, or aged 18-19 and in K-12 education, or any age if with a disability acquired at age 21 or younger
    • Dependent parents age 62 or older who have not remarried and who are not receiving Social Security benefits in their own right that would be greater than the survivor benefit.

Survivor benefits are paid as a percentage of the benefits that would have been paid to the deceased at full retirement age (FRA).

Children receive payments at 75%.

The value of a payments for a spouse or ex-spouse depends on the spouse’s or ex-spouse’s own age when claiming the benefit. At full retirement age (FRA), the spouse or ex-spouse can claim 100%. For each year before FRA, the percentage is reduced slightly, down to a minimum of 71.5% if claiming at age 60.

A lone dependent parent receives 82.5% percent and two dependent parents receive 75% each.

Lump-sum Death Payment

SSA also offers a one-time payment, currently $255, to a surviving spouse. Or, if there is no spouse, to children according to the same age limits as would be eligible for survivor benefits.

This payment must be applied for within 2 years of the family member’s death.

The Family Maximum

While these benefits are generous, the SSA does impose a limit on the total benefits payable to the family of a beneficiary. This restriction was introduced in 1980 as one of Congress’s many attempts to control the costs of Social Security by reducing payments to families they suspected were relatively well off.

Note that this is a limitation on benefits paid to members of the same family based on the monthly amount paid to one recipient of Social Security retirement benefits. If two spouses each receive their own retirement benefits, they are not subject to limits based on the other’s benefits.

The monthly maximum is calculated as follows:

• • • Start with the baseline monthly retirement benefit of the individual beneficiary as computed at FRA.
    • This monthly amount is divided into four segments. For 2026, these segments occur at $1,643, $2,371 and $3,093. These are known as “bend points”.
    • Income up to the first bend point is multiplied by 150%, above the first and up to the second by 272%, above the second and up to the third by 134%, and above that by 175%.
    • Add these four amounts together, and that is the maximum monthly benefit for that beneficiary’s family.

Benefits received by ex-spouses aren’t counted toward the family maximum.

The concluding graph shows the monthly maximum family benefit as a function of baseline recipient benefit value at Full Retirement age (FRA). Note that for 2026, the maximum retirement benefit at FRA is $4,152 per month.

As we pause for Independence Day, we are grateful for the blessings we enjoy in this country — for freedom, peace, and the opportunity to live and serve according to conscience.

We are also grateful for the privilege of serving our clients, and we do not take lightly the trust you place in us.

Above all, we remember that every good gift comes from God, and our highest allegiance is to His kingdom. May we use the blessings we have been given with humility, gratitude, and love for our neighbors.

Wishing you a peaceful and blessed Fourth of July.

Preface: “The first responsibility of a leader is to define reality. The last is to say thank you. In between, the leader is a servant.” — Max De Pree

Building a Legacy That Lasts: Seven Decisions Every Business Owner Should Make Before It’s Too Late

In our previous blog article, we discussed why estate planning is far more than a legal exercise. It is one of the key final leadership decisions a business owner makes. It is an act of stewardship that protects a lifetime of diligent work, and the people who depend on the business.

Yet recognizing the importance of estate planning is only the first step.

The more difficult question asked less often is this: What does effective estate planning actually look like for a business owner?

After working with hundreds of entrepreneurs over the years, I have noticed something remarkable. The businesses that transition successfully are rarely the ones with the most assets. Instead, they are the ones whose owners made intentional decisions long before those decisions became urgent.

Benjamin Franklin wisely observed, “By failing to prepare, you are preparing to___________.” Few statements are more applicable to business succession.

Here are seven important decisions every business owner should thoughtfully consider.

Decision #1: Know What Your Business Is Worth

One of the most common questions I hear is, “What do you think my business is worth?”

Ironically, many owners have spent decades building their largest financial asset without ever determining its fair market value.

An objective business valuation provides much more than a number. It provides clarity.

It becomes the foundation for estate planning, gifting strategies, buy-sell agreements, succession planning, shareholder transactions, and retirement planning. More importantly, it helps owners make informed decisions instead of emotional ones.

As Peter Drucker famously said, “What gets measured gets managed.” Understanding the value of your business is one of the first steps toward protecting it.

Decision #2: Separate Ownership from Leadership

One of the greatest misconceptions in succession planning is believing that ownership automatically creates leadership. Business consultants and advisors know it does not.

Many children inherit businesses they have no desire to operate. Likewise, many outstanding leaders never become owners.

Great estate planning recognizes this distinction.

Ask yourself:

• • • Who should own the business? Then, who is best equipped to lead it? Are those the same people?

The answers may be different, and that is perfectly acceptable—provided they are intentional.

Decision #3: Prepare Leaders Before You Need Them

Merle Herr once wrote, “It’s the new, difficult, and inspiring that calls us forward.”

Businesses rarely survive because of one extraordinary individual. They thrive because leaders intentionally develop other leaders.

If something happened to you tomorrow, who could make difficult decisions?

Who understands your business? Who carries your values? Who would your employees naturally follow?

Succession planning begins years before succession occurs.

Decision #4: Put Agreements in Writing

Many business owners rely on verbal understandings.

“We’ve already talked about it.” “My children know what I want.” “My partner and I have an understanding.”

Unfortunately, difficult circumstances often reveal that memories differ.

Buy-sell agreements, shareholder agreements, operating agreements, and succession plans provide clarity during emotionally challenging times. They remove uncertainty and reduce the potential for conflict.

Clear agreements are not signs of mistrust. They are invaluable gifts to those who remain.

Decision #5: Build Liquidity into the Plan

One challenge many successful businesses face is that wealth is often tied up in the business itself.

A profitable company may have significant value while generating little liquidity for ownership transitions, estate obligations, or buyouts.

This is where thoughtful planning becomes essential.

Whether financing strategies, staged transitions, or other planning techniques, business owners should consider how future obligations will actually be funded—not merely hoped for.

Decision #6: Bring Your Advisors Together

One of the greatest mistakes I observe is that business owners often have excellent advisors working independently.

The attorney drafts legal documents. The CPA prepares tax returns. The financial advisor manages investments.

The banker provides financing. Each professional may perform exceptional work, yet no one is coordinating the overall strategy.

The strongest estate plans emerge when advisors work together with one shared objective: protecting the owner’s family, business, and legacy.

Decision #7: Communicate Your Vision

Perhaps the most overlooked element of estate planning is communication.

An estate plan should never become a surprise discovered in a filing cabinet.

Family members should understand your intentions.

Business partners should understand the transition process.

Key employees should understand their future responsibilities.

Communication cannot eliminate every challenge, but it can eliminate much of the uncertainty that often accompanies transitions.

As Stephen Covey wisely stated, “Begin with the end in mind.” That principle applies not only to leadership but to legacy.

The Greatest Asset You Leave Behind

Many business owners believe their greatest asset is their company.

I would respectfully disagree. Your greatest asset is the people your leadership has influenced.

The employees whose careers you helped shape. The customers whose trust you earned. The family whose future you protected.

The next generation of leaders you intentionally developed.

Businesses may eventually change ownership. Buildings may be sold. Equipment will eventually wear out. Even financial wealth will be distributed.

Character, values, and effective leadership, however, have the potential to endure.

A Final Reflection

There is an old proverb that says:

“A society grows great when wise men plant trees whose shade they know they shall never sit in.”

Business ownership is much the same. The finest entrepreneurs understand that their responsibility extends beyond quarterly profits and annual tax returns.

They recognize that true stewardship means preparing others to succeed long after they themselves are gone.

Estate planning is not about anticipating an end. It is about ensuring that everything you have spent your life building continues to bless your family, your employees, your customers, and your community.

That may be the greatest leadership decision you will ever make.

Preface: “Transfer wisdom before wealth.” — Ron Blue, Splitting Heirs

Why Estate Planning Matters More Than You Think

The greatest threat to many family-owned businesses is not competition, taxes, inflation, or economic recessions. It is a lack of appropriate preparation for the future.

Estate planning is one such consideration. Most business owners spend years, and often decades, building something that matters. They work, they sacrifice evenings and weekends. They weather economic downturns. They take risks that others are unwilling to take. They create jobs, serve customers, support their communities, and provide opportunities for their families and employees.

Yet surprisingly, many business owners spend more time planning next year’s budget than planning for the future of everything they have spent a lifetime building.

That is where estate planning enters the picture. Unfortunately, many people hear the words “estate planning” and immediately think of attorneys, legal documents, taxes, trusts, and paperwork. While those components are certainly important, they miss the larger point. Estate planning is not primarily about documents. It is about stewardship. It is about leadership. It is about ensuring that the people, values, and organizations that matter most continue to thrive when you are no longer able to lead them.

Imagine for a moment that a successful business owner unexpectedly passes away. The company has loyal employees, strong customer relationships, profitable operations, and a respected reputation in the marketplace. Yet within days, uncertainty begins to spread. Who has authority to make decisions? Who signs payroll? Who can access the bank accounts? Who owns the company? Will the business continue? Will employees keep their jobs? Will family members agree on the future?

These questions are not hypothetical. They occur every year in businesses across the country. In many cases, the problem is not that the business lacked profitability or opportunity. The problem is that the owner never developed a plan for transition.

For most entrepreneurs, their business represents far more than an income-producing asset. It often represents the largest portion of their net worth. It may include real estate, equipment, intellectual property, customer relationships, goodwill, and years of accumulated knowledge. Yet many owners have never clearly communicated what should happen to these assets if they are no longer present to oversee them.

One of the most important questions every business owner should answer is simple: Who will run the business?

Ownership and management are not always the same thing. A son or daughter may inherit ownership but have little interest in operating the company. A key employee may have the ability to lead but no ownership stake. A spouse may inherit significant value but lack familiarity with daily operations. Without clear planning, these situations can create confusion, conflict, and financial hardship at precisely the time when families are already facing emotional challenges.

Another critical question is: Who will own the business? Many business owners assume these issues will work themselves out naturally. History suggests otherwise. Family disagreements, unclear expectations, and conflicting visions have destroyed many successful companies after the founder’s departure.

For businesses with multiple owners, buy-sell agreements become especially important. These agreements establish how ownership interests will be valued, who may purchase ownership interests, and how those transactions will be funded. Without a clear buy-sell agreement, surviving partners and family members may find themselves navigating difficult negotiations during an already stressful period.

Business valuation also plays a vital role in effective estate planning. As a Certified Valuation Analyst, I often meet business owners who have a general sense of what they believe their company is worth but have never completed a formal valuation. Yet it is difficult for those left behind, to transfer, gift, sell, or protect an asset when its value is ambiguous.

A professional business valuation can provide clarity for: Succession planning, Buy-sell agreements, Ownership transitions, and Estate and gift tax reporting

Understanding the value of a business allows owners to make informed decisions rather than assumptions.

Warren Buffett once said, “Someone is sitting in the shade today because someone planted a tree a long time ago.” Estate planning is one of the most important trees a business owner can plant. The benefits may not be fully realized today, but future generations will experience the shade. Many business owners also underestimate the importance of organization.

If something happened tomorrow, could your family quickly locate: Your will and trust documents? Partnership agreements? Insurance policies? Tax returns? Banking information? Business records?

Often the most valuable gift is appropriate preparation for the future. A well-organized estate plan can significantly reduce stress and uncertainty for loved ones during difficult circumstances.

Of course, effective estate planning extends beyond legal documents. It also includes preparing people. Do key employees understand their responsibilities? Have family members been informed of the plan? Are successor leaders being developed? Are expectations clearly communicated?

Leadership succession should never begin after a transition occurs. It should begin years before. Business owners often spend their careers helping employees, customers, and organizations become their best. Estate planning is an opportunity to ensure that the fruits of those efforts continue long after they are gone.

At its core, estate planning is not an exercise in pessimism. It is an exercise in stewardship. It reflects a commitment to family. It demonstrates responsibility toward employees. It protects customers and business relationships. It preserves opportunities for future generations.

Most importantly, it allows business owners to be more faithful stewards of the resources entrusted to them. The reality is that every business will eventually experience a transition. The only uncertainty is whether that transition will be planned or unplanned.

The question is whether you will be prepared. Your family, your employees, and your legacy deserve nothing less.

Preface: “The estimated average amount changes monthly. For example, the estimated average monthly Social Security retirement benefit for January 2026 is $2,071.”– https://www.ssa.gov/faqs/en/questions/KA-01903.html

Social Security – Claiming Retirement Benefits

The following is the second in a series of blog posts on the subject of Social Security. The first installment, which can be found here:

• • • Reviewed the history of the Social Security program
    • Listed the different types of Social Security benefits

This second installment will discuss:

• • • When you can claim Social Security retirement benefits
    • The amount of your Social Security retirement benefits
    • Working while receiving Social Security retirement benefits

Future posts in this series will address:

• • • 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

Social Security Credits

To claim Social Security retirement benefits, you must have accumulated at least 40 Social Security “credits”. This really just means the Social Security Administration (SSA) wants to make sure that you worked for a non-trivial amount of pay for at least ten years. The credits are counted as follows:

• • • Anyone born in 1929 or later needs 40 credits to be eligible for retirement benefits.
    • A maximum of four credits can be accumulated per year.
    • In 2026, you receive 1 credit for each $1,890 of earnings, up to the maximum of 4.
    • Each year, the dollar amount of earnings needed for a credit goes up slightly.

Once you’ve reached 40 credits, you are eligible to claim benefits when you reach retirement age. There is no partial credit for less than 40 credits, nor is there any particular significance to attaining more than 40. The dollar amount of your benefits will be determined by a graduated formula that we discuss in more detail in the next section.

If you are not sure whether you have accumulated sufficient credit or you want to see what kind of monthly benefit you can expect to receive, you can find all this out by creating a free and secure account with the SSA at https://www.ssa.gov/myaccount/. You will not need to give the SSA any information about your work history. They already have it. Once you create the account, they will make this information visible to you.

The Amount of Your Security Retirement Benefits

The year in which you claim your Security retirement benefits, a monthly benefit amount is calculated based on your earnings history. The SSA then pays you monthly benefits for the rest of your life, starting with this amount and adjusting it each year for inflation.

The monthly benefit amount is calculated thus:

• • 1. Earnings from all the years you worked are converted into present-year dollars.
    2. The 35 highest-earning years are selected. Income above the annual threshold is ignored. For 2026, the threshold is $184,500.
    3. A monthly average is computed.
    4. The monthly average is divided into three segments. For 2026, these segments occur at $1,286 and $7,749. These are known as “bend points”.
    5. Income up to the first bend point is multiplied by 90%, above the first and up to the second by 32%, and above that by 15%.
    6. Add these three discounted amounts together, and that is the baseline for your monthly benefit.

This baseline amount may be further modified depending on how old you are when you claim, as follows:

• • • Current law defines full retirement age (FRA) for people born in 1960 and after as 67. If you claim retirement benefits at FRA, you receive 100% of the benefit as calculated.
    • If you claim retirement benefits before reaching FRA, your benefit is a reduced percentage. The reduction is 6.67% per year for each of the first three years and 5% per year for the remaining two years. The earliest age for claiming retirement benefits is 62, in which case you will only receive 70% of the amount.
    • If you wait past FRA to claim the benefits, they are increased above 100% by 8% a year up to a maximum of 124% if you claim at age 70. There is no additional benefit to waiting beyond age 70 to claim.

So, if you wait until you are past age 62 to claim retirement benefits, you will have greater benefits going forward. However, you will miss out on the benefits you didn’t receive during the years you were waiting.

The benefits you get the year you claim are then adjusted for inflation each year.

Working While Receiving Social Security Retirement Benefits

If you continue to work and earn income after you begin receiving Social Security retirement benefits, your retirement benefits may be reduced. For this purpose, “earned income” includes wages and self-employment income. It does not include passive or investment income, or income from annuities, pensions, IRAs, or other retirement benefits.

If you are younger than FRA, you are subject to a limit above which your retirement benefits will be reduced. For 2026, that limit is $24,480. If your earned income for the year is within the limit, your Social Security retirement benefits will not be reduced. Every dollar you earn over the limit will reduce your benefit total by 50¢ for the year.

For the year in which you reach FRA, the limit is $65,160. However, the limit only applies to earnings during the months before you reach FRA. Every dollar earned above the limit reduces your benefits by 33¢ for the year.

If you are older than full retirement age (FRA), no amount of income you earn will reduce your Social Security retirement benefits.

Earned income during years you receive Social Security retirement benefits is still subject to FICA. If your earnings at this time are high enough, the SSA may recalculate and increase your baseline benefit.

In the next post we will explain who can claim survivor and family member benefits and how they are figured.

Preface: “There is a point of complexity beyond which a business is no longer manageable.” — Peter F. Drucker, Management: Tasks, Responsibilities, Practices

The Technology Labyrinth: Why Business Systems Become Hard to Navigate

Most business owners do not set out to create a complicated technology environment. It happens gradually. A company starts with accounting software, adds payroll, implements a customer relationship management system, adopts a project management platform, integrates an e-commerce solution, and then purchases specialized applications to solve specific operational challenges. Each decision makes sense at the time. However, years later, many organizations find themselves operating inside a technology labyrinth — a maze of disconnected systems, duplicate data, manual workarounds, and reports that do not always agree.

As a CPA, I have observed that most businesses do not have a technology problem. They have an integration and decision-making problem. The issue is rarely the software itself. The challenge is that information becomes scattered across multiple platforms, requiring employees to spend valuable time entering data, reconciling reports, and determining which numbers are accurate. What begins as a collection of helpful tools can eventually become a maze that makes it harder for leadership to see the business clearly.

The true cost of a fragmented technology stack extends far beyond monthly software subscriptions. Employees spend hours manually transferring information between systems. Accounting departments perform reconciliations that should occur automatically. Managers receive conflicting reports from different departments and must spend time validating data before making decisions. What appears to be a technology issue often becomes a productivity issue, a reporting issue, and ultimately a profitability issue.

Many businesses eventually recognize they are stuck in this labyrinth and decide that a software migration or enterprise resource planning implementation will provide the way out. Yet research consistently shows that software migrations are among the most difficult business initiatives to execute successfully. Industry studies have found that many ERP implementations exceed their original budgets or timelines, while Gartner has reported that many organizations fail to achieve the business objectives that justified the project in the first place. These statistics are revealing because they demonstrate that software alone is rarely the solution. Success depends on clear business processes, reliable data, employee adoption, and careful planning before the migration begins.

Accounting departments are often the first to recognize when the technology labyrinth is becoming difficult to navigate. The accounting team sits at the intersection of nearly every business process. Sales transactions must ultimately be recorded in the financial system. Payroll information must be reconciled. Inventory activity must align with accounting records. When systems fail to communicate effectively, accounting becomes the department responsible for finding the path through the maze and correcting the discrepancies. Over time, finance professionals spend less time analyzing business performance and more time untangling data issues created elsewhere in the organization.

Business owners frequently ask what software they should purchase next. In many cases, that is the wrong question. A more productive question is whether existing systems are working together effectively. If employees rely heavily on spreadsheets to move information between applications, if customer data exists in multiple locations, or if monthly financial reporting requires extensive manual intervention, the organization may not need another application. It may need a clearer map of the systems it already owns.

The most successful businesses are not necessarily those with the most sophisticated technology. They are often the organizations that have created a reliable flow of information throughout the company. Their systems support decision-making rather than complicate it. Management can access timely and accurate information, employees spend less time performing repetitive administrative tasks, and accounting teams can focus on providing insights rather than correcting errors.

Technology should create clarity, not confusion. Before investing in another application or undertaking a major software migration, business owners should take time to evaluate how information moves through their organization. The greatest challenge may not be finding better software. It may be understanding the maze that has quietly formed over years of well-intentioned decisions.

A technology labyrinth rarely appears overnight. It is built one software decision at a time. The good news is that businesses can find their way through with unified processes, improving integrations, and aligning technology decisions with financial reporting and workflow needs. In today’s business world, navigating the technology labyrinth may be one of the most important steps a company can take toward better decision-making and sustainable management of growth.