Category: News

Strategies for Navigating the Uncertainty

By James Duncan, International Tax Practice Leader

The Top Line

On Tuesday, March 4th, the Trump administration imposed 25% tariffs on goods imported from Canada and Mexico, along with an additional 10% tariff on goods from China, bringing the total tariff on Chinese imports to 20%. These tariffs have sparked retaliatory measures from other countries and ongoing diplomatic discussions, creating uncertainty in the marketplace.

Regardless of the outcome of these discussions, small businesses are already feeling the effects. Higher import costs, supply chain disruptions, and competitive pressures are just a few of the challenges emerging from these new policies. This article explores how tariffs are impacting small businesses and provides strategies to navigate this evolving landscape.

Breaking It Down – How US Tariffs Impact Small Businesses

1. Increased Costs and Reduced Profit Margins

Tariffs function as taxes on imported goods, driving up costs for small businesses that rely on foreign materials and products.

For example, a small business specializing in pool installations may find that the cost of imported materials has increased, squeezing profit margins. Many businesses are unable to pass these additional costs on to customers entirely, forcing them to absorb the expenses or find alternative solutions.

2. Supply Chain Disruptions

Small businesses depend on steady and predictable supply chains. However, tariffs can disrupt this flow by making imported goods more expensive or harder to obtain. Suppliers may face delays, increased costs, or even cutbacks in production, leaving businesses scrambling to find alternatives.

Finding new suppliers or shifting production locations is not always an easy fix—it can require significant time and investment.

3. Competitive Disadvantages

Larger corporations often have the financial resources to absorb tariff-related cost increases, while small businesses operate on thinner margins. This puts them at a competitive disadvantage, as they struggle to maintain pricing and profitability.

Big companies may also have more leverage to negotiate better terms with suppliers, leaving smaller businesses struggling to keep up.

4. Uncertainty and Planning Challenges

One of the biggest challenges small businesses face is the unpredictability of tariff policies.

• Swift and unexpected tariff increases make it difficult for businesses to plan ahead.
• Uncertainty around future policies makes long-term investments riskier.
• Without clear guidance, businesses may hesitate to expand, hire, or invest in new technology.

This volatility creates a challenging environment for strategic decision-making.

Navigating the Challenges – Strategies for Small Businesses

Despite the obstacles, businesses can take proactive steps to mitigate the impact of tariffs:

1. Diversify Suppliers

• Source materials and products from multiple suppliers in different countries, especially those not impacted by the tariffs.
• Reducing reliance on a single supplier minimizes risk.

2. Negotiate with Suppliers

• Engage in discussions with suppliers to explore discounts, better terms, or alternative supply options.
• Strengthening supplier relationships can lead to more favorable agreements during economic uncertainty.

3. Increase Domestic Sourcing

• Shifting to US-based suppliers can help avoid tariffs altogether.
• While domestic options may not always be cheaper, reducing dependency on international markets can provide stability.

4. Pass Costs to Customers (Strategically)

• While raising prices is not always ideal, businesses may gradually adjust pricing to offset tariff-related cost increases.
• Transparent communication with customers about why prices are rising can help maintain trust.

5. Improve Efficiency

• Streamlining operations, reducing waste, and investing in automation can help cut costs elsewhere in the business.
• Efficiency improvements can counterbalance tariff-related expenses.

6. Financial Planning and Risk Management

• Set aside financial reserves and explore financing options to maintain cash flow.
• Having a contingency plan ensures businesses are prepared for unexpected tariff hikes.

7. Collaborate with Other Businesses

• Forming alliances with other small businesses can lead to shared resources and collective purchasing power.
• Businesses facing similar challenges can work together on bulk purchasing agreements or advocacy efforts.

What This Means for You

Tariffs introduce uncertainty, but businesses that adapt and plan strategically will be in a stronger position to navigate these challenges.

If your small business relies on imported goods, consider assessing your exposure to tariffs and exploring cost-saving measures before they impact your bottom line.

• Are your supply chains vulnerable?
• Have you evaluated domestic alternatives?
• Do you have a financial plan in place to absorb rising costs?

By taking proactive steps, businesses can minimize disruptions, protect profitability, and stay competitive despite shifting trade policies.

Preparing for the Future

The tariff landscape will continue to evolve, making flexibility and adaptability crucial for small businesses. Now is the time to assess risks, explore alternatives, and implement strategies to safeguard your business.

Looking for guidance on navigating tariffs? Schedule a 30 minute complimentary consultation with me by filling out our contact form.

Barrett Gay, Digital Solutions Practice Leader

 The Top Line

In today’s fast-moving business environment, automation and systems integration aren’t just efficiency boosters—they’re competitive necessities. Small and mid-sized businesses (SMBs) often face challenges such as manual processes, disconnected systems, and scalability issue that slow growth and increase costs. Without the right technology in place, businesses risk inefficiencies that can limit their potential.

By integrating systems and automating workflows, companies can eliminate bottlenecks, reduce errors, and free up resources to focus on strategic growth. This article explores the key indicators that signal a need for automation and how businesses can take action to stay competitive in a digital-first world.

Breaking It Down – Recognizing the Need for Automation

 Repetitive, Manual Tasks Are Draining Time

Is your team constantly handling data entry, invoice processing, or inventory tracking? These routine tasks consume valuable time and leave little room for high-value work. Automating these processes can increase productivity and reduce labor costs.

Disconnected Systems Create Inefficiencies

If your CRM, accounting, and operations platforms don’t communicate your team likely wastes time manually transferring data between systems—leading to delays and costly errors.  Integrated systems ensure real-time data synchronization and smoother operations.

Your Business Is Struggling to Scale

As companies grow, outdated processes can’t keep up with demand.  If expansion means hiring more staff just to manage inefficiencies, automation can help scale operations without a significant increase in overhead.

Error-Prone Processes Are Hurting the Bottom Line 

Frequent mistakes in billing, reporting, or order processing create unnecessary rework and can erode customer trust.  Automated workflows minimize human error and ensure consistency across operations.

Compliance & Reporting Are Time-Consuming

Regulatory compliance and manual report generation can be overwhelming for businesses. Automation can streamline data collection, ensure compliance, and generate accurate reports in a fraction of the time.

What This Means for You

Every business’s journey to automation is unique, but the benefits are universal: increased efficiency, cost savings, and improved decision-making. Businesses that fail to modernize risk falling behind competitors who embrace digital transformation.

If your company faces bottlenecks, scalability challenges, or inefficient processes, it’s time to explore how automation and systems integration can enhance performance.

Don’t let outdated systems limit your growth—modernizing your operations today ensures agility, efficiency, and long-term success.

Ready to automate, schedule a 30 minute complimentary consultation with me by filling out our contact form.

A variety of tax-related limits that affect businesses are indexed annually based on inflation. Many have increased for 2025, but with inflation cooling, the increases aren’t as great as they have been in the last few years. Here are some amounts that may affect you and your business.

2025 deductions as compared with 2024:

• Section 179 expensing: Limit: $1.25 million (up from $1.22 million)
• Phaseout: $3.13 million (up from $3.05 million)
• Sec. 179 expensing limit for certain heavy vehicles: $31,300 (up from $30,500)
• Standard mileage rate for business driving: 70 cents per mile (up from 67 cents)

Income-based phaseouts for certain limits on the Sec. 199A qualified business income deduction begin at:

• Married filing jointly: $394,600 (up from $383,900) Other filers: $197,300 (up from $191,950)

Retirement plans in 2025 vs. 2024

• Employee contributions to 401(k) plans: $23,500 (up from $23,000)
• Catch-up contributions to 401(k) plans: $7,500 (unchanged)
• Catch-up contributions to 401(k) plans for those age 60, 61, 62 or 63: $11,250 (not available in 2024)
• Employee contributions to SIMPLEs: $16,500 (up from $16,000)
• Catch-up contributions to SIMPLEs: $3,500 (unchanged)
• Catch-up contributions to SIMPLE plans for those age 60, 61, 62 or 63: $5,250 (not available in 2024)
• Combined employer/employee contributions to defined contribution plans (not including catch-ups): $70,000 (up from $69,000)
• Maximum compensation used to determine contributions: $350,000 (up from $345,000)
• Annual benefit for defined benefit plans: $280,000 (up from $275,000)
• Compensation defining a highly compensated employee: $160,000 (up from $155,000)
• Compensation defining a “key” employee: $230,000 (up from $220,000)
• Social Security tax Cap on amount of employees’ earnings subject to Social Security tax for 2025: $176,100 (up from $168,600 in 2024).

Other employee benefits this year vs. last year

• Qualified transportation fringe-benefits employee income exclusion: $325 per month (up from $315)
• Health Savings Account contribution limit: Individual coverage: $4,300 (up from $4,150)
• Family coverage: $8,550 (up from $8,300)
• Catch-up contribution: $1,000 (unchanged)
• Flexible Spending Account contributions:
• Health care: $3,300 (up from $3,200)
• Health care FSA rollover limit (if plan permits): $660 (up from $640)
• Dependent care: $5,000 (unchanged)

Potential upcoming tax changes

These are only some of the tax limits and deductions that may affect your business, and additional rules may apply. But there’s more to keep in mind. With President Trump back in the White House and the Republicans controlling Congress, several tax policy changes have been proposed and could potentially be enacted in 2025. For example, Trump has proposed lowering the corporate tax rate (currently 21%) and eliminating taxes on overtime pay, tips, and Social Security benefits.

These and other potential changes could have wide-ranging impacts on businesses and individuals. It’s important to stay informed. Consult with us if you have questions about your situation. © 2025

President Trump announced that 25% tariffs would be imposed on products from Canada and Mexico, effective Feb. 4. But on Feb. 3 after a stock market drop, he announced that tariffs on Mexico would be paused for one month. He also imposed a 10% tax on energy resources from Canada. In addition, he imposed an additional 10% tariff on Chinese imports.

As of Monday morning, the tariffs on Canada and China stand, and Canada has retaliated with tariffs against the United States. Mexico is the United States’ largest trading partner and Canada is the largest export market for 36 states. Trump said that Americans may feel “some pain” due to the tariffs but it will be “worth the price.” Stay tuned.

Many people dream of turning a hobby into a regular business. Perhaps you enjoy boating and would like to open a charter fishing business. Or maybe you’d like to turn your sewing or photography skills into an income-producing business. You probably won’t have any tax headaches if your new business is profitable over a certain period of time. But what if the new enterprise consistently generates losses (your deductions exceed income) and you claim them on your tax return?

You can generally deduct losses for expenses incurred in a bona fide business. However, the IRS may step in and say the venture is a hobby — an activity not engaged in for profit — rather than a business. Then you’ll be unable to deduct losses. By contrast, if the new enterprise isn’t affected by the hobby loss rules, all otherwise allowable expenses are deductible, generally on Schedule C, even if they exceed income from the enterprise. Important: Before 2018, deductible hobby expenses could be claimed as miscellaneous itemized deductions subject to a 2%-of-AGI “floor.” However, because miscellaneous deductions aren’t allowed from 2018 through 2025, deductible hobby expenses are effectively wiped out from 2018 through 2025.

How to NOT be deemed a hobby:

There are two ways to avoid the hobby loss rules: Show a profit in at least three out of five consecutive years (two out of seven years for breeding, training, showing or racing horses). Run the venture in such a way as to show that you intend to turn it into a profit maker rather than a mere hobby. The IRS regs themselves say that the hobby loss rules won’t apply if the facts and circumstances show that you have a profit-making objective. How can you prove you have a profit-making objective? You should operate the venture in a businesslike manner.

The IRS and the courts will look at the following factors: How you run the activity, Your expertise in the area (and your advisors’ expertise), The time and effort you expend in the enterprise, Whether there’s an expectation that the assets used in the activity will rise in value, your success in carrying on other activities, your history of income or loss in the activity, the amount of any occasional profits earned, your financial status, and whether the activity involves elements of personal pleasure or recreation. Case illustrates the issues in one court case, partners operated a farm that bought, sold, bred and raced standardbred horses. It didn’t qualify as an activity engaged in for profit, according to a U.S. Appeals Court. The court noted that the partnership had a substantial loss history and paid for personal expenses. Also, the taxpayers kept inaccurate records, had no business plan, earned significant income from other sources and derived personal pleasure from the activity. (Skolnick, CA 3, 3/8/23)

Contact us for more details on whether a venture of yours may be affected by the hobby loss rules, and what you should do to avoid tax problems. © 2024

It’s not unusual for a partner to incur expenses related to the partnership’s business. This is especially likely to occur in service partnerships such as an architecture or law firm. For example, partners in service partnerships may incur business expenses in developing new client relationships. They may also incur expenses for: transportation to get to and from client meetings, professional publications, continuing education and home office.

What’s the tax treatment of such expenses?

Here are the answers. Reimbursable or not as long as the expenses are the type a partner is expected to pay without reimbursement under the partnership agreement or firm policy (written or unwritten), the partner can deduct the expenses on Schedule E of Form 1040. Conversely, a partner can’t deduct expenses if the partnership would have honored a request for reimbursement. A partner’s unreimbursed partnership business expenses should also generally be included as deductions in arriving at the partner’s net income from self-employment on Schedule SE.

For example, let’s say you’re a partner in a local architecture firm. Under the firm’s partnership agreement, partners are expected to bear the costs of soliciting potential new business except in unusual cases where attracting a large potential new client is deemed to be a firm-wide goal. In attempting to attract new clients this year, you spend $4,500 of your own money on meal expenses. You receive no reimbursement from the firm. On your Schedule E, you should report a deductible item of $2,250 (50% of $4,500). You should also include the $2,250 as a deduction in calculating your net self-employment income on Schedule SE. So far, so good, but here’s the issue: a partner can’t deduct expenses if they could have been reimbursed by the firm. In other words, no deduction is allowed for “voluntary” out-of-pocket expenses.

The best way to eliminate any doubt about the proper tax treatment of unreimbursed partnership expenses is to install a written firm policy that clearly states what will and won’t be reimbursed. That way, the partners can deduct their unreimbursed firm-related business expenses without any problems from the IRS. Office in a partner’s home subject to the normal deduction limits under the home office rules, a partner can deduct expenses allocable to the regular and exclusive use of a home office for partnership business. The partner’s deductible home office expenses should be reported on Schedule E in the same fashion as other unreimbursed partnership expenses.

If a partner has a deductible home office, the Schedule E home office deduction can deliver multiple tax-saving benefits because it’s effectively deducted for both federal income tax and self-employment tax purposes. In addition, if the partner’s deductible home office qualifies as a principal place of business, commuting mileage from the home office to partnership business temporary work locations (such as client sites) and partnership permanent work locations (such as the partnership’s official office) count as business mileage.

The principal place of business test can be passed in two ways:

First, the partner can conduct most of partnership income-earning activities in the home office. Second, the partner can pass the principal place of business test if he or she: Uses the home office to conduct partnership administrative and management tasks and doesn’t make substantial use of any other fixed location (such as the partnership’s official office) for such administrative and management tasks.

To sum up when a partner can be reimbursed for business expenses under a partnership agreement or standard operating procedures, the partner should turn them in. Otherwise, the partner can’t deduct the expenses. On the partnership side of the deal, the business should set forth a written firm policy that clearly states what will and won’t be reimbursed, including home office expenses if applicable. This applies equally to members of LLCs that are treated as partnerships for federal tax purposes because those members count as partners under tax law. © 2024

Operational changes

Effective January 2, 2024, ATA CPAs + Advisors PLLC entered into a new operating structure called an alternative practice structure. As part of that restructuring, ATA CPAs + Advisors PLLC has transferred all of its nonattest business and engagements as well as all employees to a new company called ATA Advisory, LLC. All attest and assurance work will remain in the current entity that will be renamed ATA, PLLC. The two entities will operate under the jointly marketed name “ATA” going forward.

What this means

ATA, PLLC will remain a licensed CPA firm that provides attest services; ATA Advisory, LLC and its subsidiary entities will provide tax and advisory services and not operate as a licensed CPA firm. All partners with ATA, PLLC will also be partners with ATA Advisory, LLC. All current staff will be employed by ATA Advisory, LLC under this agreement.

As part of this arrangement, ATA, PLLC and ATA Advisory, LLC will enter into an administrative services agreement. Within the operations of the alternative practice structure, and under the administrative services agreement, ATA, PLLC will lease professional and administrative staff from ATA Advisory, LLC to support ATA, PLLC’s performance of audit and attest engagements.  The employees leased from ATA Advisory will be under the supervision of ATA, PLLC when they are working on ATA, PLLC assurance engagements.

ATA Advisory, LLC will maintain custody of all files for clients of both ATA, PLLC and ATA Advisory, LLC. Both companies will comply with the same confidentiality obligations with respect to your confidential information. Please let us know immediately if you have any objections to the transfer of your files between the two entities.

What to expect 

Ultimately, you should expect to interact with the same partners and associates within ATA. Operationally, the alternative practice structure will allow us to provide improved service offerings to better serve our clients.

If you have questions, don’t hesitate to contact the partner with whom you have an established relationship.