Need employees? This tax credit may help

The unemployment rate was 4% in January 2025. The WOTC is available to employers that hire workers from targeted groups who face significant barriers to employment. The credit is generally worth up to $2,400 for each eligible employee. The maximum credit amounts differ for some employees, including certain veterans, long-term family assistance recipients and summer youth workers.

In most cases, eligible employees must begin working for the employer before January 1, 2026. Also, the job applicant and the employer must complete a prescreening notice before a job offer is made.

Exceptions to the 10% early withdrawal penalty for IRAs

If you have a tax-deferred retirement plan, you probably know they’re designed to encourage you to grow your savings by leaving your money in the account. Therefore, withdrawals before age 59 ½ generally trigger a 10% penalty. But suppose you need to access your funds. Traditional 401(k) plans list several exceptions to the penalty, including for the birth or adoption of a child, personal emergencies, and disaster recovery. However, the exceptions for IRAs are a little different. For example, they allow you to take penalty-free distributions for a first-time home purchase. You may take up to $10,000 to buy or build a first home, meaning that you haven’t owned a home in the past two years. Also, you can pay for higher education expenses. You may withdraw funds to pay qualified higher education costs for yourself, your spouse or your children. For students enrolled at least half-time, this includes tuition, fees, books, and room and board. And finally, certain unemployed persons can use funds to pay for health insurance premiums. If you’ve lost your job and received unemployment compensation for 12 consecutive weeks, you can take IRA distributions to pay health insurance premiums.

Note: The amounts withdrawn will still be added to your taxable income, and additional rules and limits apply.

A buy-sell agreement has estate benefits

In many cases, a large portion of a small business owner’s estate consists of the individual’s ownership share in the company. If the business doesn’t have a buy-sell agreement in place, heirs may face significant challenges when the owner dies. They may be forced to sell the business interest to pay estate taxes. In a limited market, that could mean selling at a steep discount. Heirs who opt to retain the business interest must obtain a qualified valuation for tax purposes, which the IRS may challenge. This brings the risk of penalties and higher taxes.

A carefully drafted buy-sell agreement resolves these issues by guaranteeing a sale under pre-approved terms, ensuring liquidity to cover estate taxes. It also establishes the business’s fair market value for federal estate tax purposes, which minimizes IRS disputes. In short, a buy-sell agreement protects the business owner’s estate, simplifies tax compliance and provides heirs with financial security.

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