Month: June 2025

Preface: “Cell phones are so convenient that they’re an inconvenience.”— Haruki Murakami

Managing Employee Cell Phone Use: A Guide for Business Owners

In today’s mobile-centric work environment, providing employees with cell phones or compensating them for work-related mobile use is increasingly common. Employers typically choose between three primary approaches: (A) issuing company-owned phones, (B) offering monthly stipends, or (C) reimbursing employees for business-related use of their personal devices. Each method has distinct tax implications and operational considerations.

Company-Issued Phones

If the mobile phone is provided primarily for non-compensatory business reasons—such as the need to contact employees during work-related emergencies—the value of the phone is generally excluded from the employee’s income. Occasional personal use is treated as a de minimis fringe benefit and is also nontaxable. 

Benefits of company-issued phones include enhanced security as employers can enforce security protocols and manage devices centrally. Uniform hardware and software across the organization simplify IT support. Bulk purchasing and corporate plans may reduce per-unit costs.

Disadvantages include employees being reluctant to carry two devices, and managing inventory, repairs, and replacements adds to the IT workload.

Cell Phone Stipends

Stipends are generally considered nontaxable if they are provided for substantial non-compensatory business reasons and are not a substitute for wages. 

Reasons for cell phone stipends include simplicity as fixed monthly payments are easy to administer. Employees can choose their preferred devices and plans.

Reasons not to use cell phone stipends include potential tax risks. If stipends are not properly documented as business-related, they may be considered taxable income. Additionally, employers have limited oversight over device security and usage.

Reimbursement for Personal Phone Use

Reimbursements are nontaxable if they are for business use, are reasonably calculated not to exceed actual expenses, and are not a substitute for wages. 

Employers appreciate reimbursements for personal phone use for several reasons. Firstly, they only pay for actual business-related expenses, which can help contain costs. Additionally, allowing employees to use their personal devices reduces the company’s need to provide equipment.

However, there are also drawbacks to this approach. A significant concern is the administrative burden, as employees are required to submit detailed expense reports and receipts. Moreover, some employees may be hesitant to share information about their phone usage.

Best Practices for Employers

• • Establish Clear Policies: Define eligibility, usage expectations, and reimbursement procedures.
  • Document Business Necessity: Maintain records demonstrating the business reasons for providing stipends or reimbursements.
  • Monitor Compliance: Regularly review policies and practices to ensure they align with IRS guidelines.

Conclusion

Selecting the appropriate method for employee cell phone use depends on your organization’s specific needs, budget, and operational considerations. By understanding the tax implications and weighing the pros and cons of each approach, business owners can make informed decisions that support both business objectives and employee satisfaction.

Preface: “Happy is a man who can make a living by his hobby. “– George Bernard Shaw

Why Your Business Must Be More Than Just a Hobby

If you’re deducting losses from your business activities, it’s critical to ensure the IRS recognizes them as valid business expenses, not just costs from a hobby. Here’s what you need to know — and why it matters.

Under IRC Section 183, if the IRS determines your activity isn’t profit-driven, you can only deduct expenses up to the income generated by that activity, meaning losses can’t offset other income like wages or investment gains.

Since the Tax Cuts and Jobs Act (2017), miscellaneous deductions—including hobby losses—have been eliminated through 2025, making this distinction even more crucial.

A simple rule of thumb exists: if you show a profit in at least three of the last five years, the IRS assumes you’re operating with a profit motive, or two of seven years for horse-related activities.

The Weighting Factors Test

The IRS examines whether your activity resembles a business by weighing factors such as :

1. 1. Businesslike operations: Do you maintain separate books and records?
   2. Expertise: Have you studied the trade or consulted professionals?
   3. Time & effort: Is this a casual pastime or your primary focus?
   4. Profit history & potential: Have you turned a profit occasionally? Can you realistically expect future gains?
   5. Financial dependence: Do you rely on this activity for income?
   6. Personal enjoyment: Is this driven by passion or profit?

No single factor decides—it’s the overall picture that matters.

Example 1: A self-published novelist who alternates between profitable years and losses faces red flags. To preserve deductions, she must show businesslike behavior—marketing efforts, separate accounts, advertising expenses—and document a genuine plan to earn a profit.

Example 2: A hobby photographer who deducts significant equipment expenses but reports minimal income may have those deductions disallowed. If audited, the IRS can reclassify the activity as a hobby and only allow deductions up to the income earned.

Steps to demonstrate profit intent to strengthen your position:

• • • Structure your operation professionally – maintain clean financial records and business accounts.
    • Develop a formal business plan – document goals, marketing strategies, and profitability milestones.
    • Make proactive changes – adjust pricing, marketing, or operations if losses persist.
    • Invest in growth – continue professional development or hire skilled advisors.
    • Track time and expenses diligently – show you’re treating this as a serious enterprise, not a pastime

Why Does This Matter?

Legitimate business losses can offset other income. Clear documentation and professional conduct reduce IRS scrutiny. A plan demonstrates to lenders, investors, or partners that your operation is serious and sustainable.

Operating a business with a clear profit motive benefits not only your taxes but also your credibility and growth potential.

Entering into the hobby trap limits your deductions and increases audit risk. If you’ve claimed losses but your activity hasn’t consistently turned a profit, or your record-keeping could be stronger, now’s the time to tighten up. Need help documenting your profit intent and ensuring compliance? Schedule a consultation—we’re here to help you.

Preface: “I was rich, if not in money, in sunny hours and summer days.” — Henry David Thoreau

Smart Tax Planning Strategies for Summer 2025: Creative Ways to Save Your Tax Money

Summer is an ideal time to assess your financial situation and implement tax planning strategies that can lead to significant savings by year-end. By proactively managing your finances now, you can reduce your tax liability and enhance your financial well-being. Here are several creative and practical tax planning strategy ideas to consider this summer.

Maximize Retirement Contributions

Taxpayers can take advantage of increased contribution limits for retirement accounts in 2025. For 401(k) s, the contribution limit has increased to $23,500. Traditional and Roth IRAs permit you to contribute up to $7,000, with an additional $1,000 catch-up contribution if you’re 50 or older.

Contributing the maximum allowed to these accounts can reduce your taxable income and bolster your retirement savings. 

 Consider a Roth IRA Conversion

If you anticipate being in a higher tax bracket in the future, converting a Traditional IRA to a Roth IRA now can be beneficial. While you’ll pay taxes on the converted amount this year, future withdrawals from the Roth IRA will be tax-free, providing long-term tax savings. 

Utilize Health Savings Accounts (HSAs)

If you’re enrolled in a high-deductible health plan, contributing to an HSA offers triple tax benefits, including tax-free growth and tax-free withdrawals for qualified medical expenses

For 2025, the contribution limits are $4,150 for individuals and $8,300 for families, with an additional $1,000 catch-up contribution for those 55 or older. 

Invest in a 529 College Savings Plan

Contributions to a 529 plan grow tax-deferred, and withdrawals used for qualified education expenses are tax-free. Some states also offer tax deductions or credits for contributions to these plans, providing additional tax savings. 

Review and Adjust Tax Withholdings

Mid-year is an excellent time to review your W-4 form and ensure that the correct amount is being withheld from your paycheck. Adjusting your withholdings now can prevent a large tax bill or refund when you file your return. 

Implement Tax-Loss Harvesting

If you have investments in taxable accounts, consider selling underperforming assets to realize losses. These losses can offset capital gains and reduce your taxable income. Be mindful of the “wash-sale” rule, which disallows the deduction if you repurchase the same or substantially identical security within 30 days. 

Bunch Charitable Contributions

If your itemized deductions are close to the standard deduction threshold, consider “bunching” charitable donations by making two years’ worth of contributions in one year. This strategy can help you exceed the standard deduction and maximize your tax benefits. 

Conduct a Mid-Year Tax Check-Up

Review your income, deductions, and credits to date to estimate your tax liability for the year. This assessment allows you to make informed decisions, such as adjusting estimated tax payments or withholding, to avoid surprises at tax time. 

Stay Informed on Tax Law Changes

Tax laws can change, impacting deductions, credits, and tax rates. For instance, the standard deduction for 2025 has increased to $14,600 for single filers and $29,200 for married couples filing jointly. 

Consult a Tax Professional

Scheduling a meeting with a tax advisor who can provide personalized strategies tailored to your financial situation can save you money. They can help you navigate complex tax laws and identify easy-to-overlook opportunities for tax savings.

In Conclusion

Proactive tax planning during the summer can lead to significant savings and reduce stress during tax season. By implementing these strategies, you can optimize your financial situation and take control of your tax liability. Remember, consulting with a tax professional can further enhance your planning efforts and ensure compliance with current tax laws.

Preface: “Praise the Lord.” – Psalm 111:1 NIV

Psalm 111: Timeless Principles for Faithful Business Management

Psalm 111 is a profound hymn of praise, celebrating God’s works, righteousness, and enduring faithfulness. Beyond its spiritual significance, this psalm offers valuable insights for business leaders seeking to align their practices with principles of truth, stewardship, and wisdom. Let’s explore how the themes of Psalm 111 can inform and inspire effective business management.

“I will extol the Lord with all my heart in the council of the upright and in the assembly.” (Psalm 111:1)

The psalmist’s declaration emphasizes wholehearted devotion. In business, this translates to a passionate commitment to one’s mission and values. Leaders who engage fully with their purpose inspire trust and dedication among employees and stakeholders.

Application: Cultivate a company culture where the organization’s mission is clearly communicated and embraced at all levels. Encourage open discussions about values and purpose during team meetings and strategic planning sessions to foster a shared understanding of these key concepts.

Diligent Study and Appreciation of Work

 “Great are the works of the Lord; they are pondered by all who delight in them.” (Psalm 111:2)

This verse highlights the importance of reflecting on and appreciating the work at hand. For business leaders, it underscores the value of continuous learning and thoughtful analysis. Understanding the intricacies of one’s industry and operations leads to informed decision-making.

Application: Implement regular review processes to assess company performance and market trends. Encourage team members to pursue professional development opportunities and share insights gained with the broader team.

Integrity and Righteousness in Operations

“Glorious and majestic are his deeds, and his righteousness endures forever.” (Psalm 111:3)

God’s enduring righteousness serves as a model for ethical conduct. In business, maintaining the truth builds reputation and trust. Proper processes should be the foundation of all operations, from financial reporting to customer relations.

Application: Develop and enforce a comprehensive code of conduct. Provide training to ensure that all employees understand and adhere to the expected standards. Regularly analyze your business practices to ensure compliance and address any areas of process non-conformance or concern.

Compassionate Leadership and Provision

“He has caused his wonders to be remembered; the Lord is gracious and compassionate. He provides food for those who fear him; he remembers his covenant forever.” (Psalm 111:4-5)

God’s compassion and provision are central themes in this passage. Business leaders can emulate this by prioritizing employee well-being and fostering a supportive work environment, which serves as a foundational block for delivering value to customers. Recognizing and addressing the needs of employees first leads to increased morale and productivity.

Application: Provide competitive compensation. Implement ideas that support a work-life balance, such as flexible hours and adequate paid time off (PTO). Regularly solicit and implement employee feedback to enhance the workplace culture.

Commitment to Equity

“The works of his hands are faithful and just; all his precepts are trustworthy.” (Psalm 111:7)

Faithfulness and equity are hallmarks of God’s actions. In business, this translates to fairness in dealings with clients, suppliers, and employees. Transparent HR policies, core values, and clear expectations build a culture of trust and respect.

Application: Ensure hiring, promotion, and compensation practices are objective and unbiased and aligned with your business’s core values and purpose. Establish clear procedures to listen to and address employee concerns in a prompt and objective manner.

Pursuit of Wisdom Through Reverence

“The fear of the Lord is the beginning of wisdom; all who follow his precepts have good understanding.” (Psalm 111:10)

Reverence for God is the foundation of wisdom. For business leaders, humility and a willingness to seek guidance lead to better decision-making. Acknowledging one’s strengths and weaknesses as a leader and valuing objective perspectives can help you grow in effectiveness and awareness, ultimately building a more successful enterprise.

Application: Intentionally promote a culture where continuous learning is encouraged. Engage with mentors, advisors, and industry peers to gain insights. Encourage team members to share ideas and challenge assumptions constructively.

Psalm 111 presents timeless principles that, when applied to business management, foster and encourage trusted leadership, productive practices, and informed decision-making. By embracing these tenets, business leaders can build organizations that not only achieve incredible success, but also contribute positively to their communities, building Kingdom-driven businesses.