Client Update
July 2026

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Many Americans are taking on side hustles and part-time jobs to boost their income. While earning extra money can help pay for vacations or provide a financial cushion for your family, it can also increase your tax bill.

In this month’s newsletter, learn how additional income may affect your tax situation and discover strategies to help avoid costly surprises when tax season arrives.

Also get the answers to several common tax questions, learn about simple techniques to forecast food costs more accurately in an unpredictable economy, and explore a growing movement among younger Americans who are choosing real-world connections over constant screen time, along with ideas for bringing more offline experiences into your own life.

As always, feel free to call if you wish a review of your situation and pass this information along to someone who might find it useful.

Avoid the Tax Pitfalls of Adding Extra Income

Earning extra income feels great until tax season arrives. A second job, freelance project, or growing side hustle can change how you’re taxed in ways many people don’t expect. Here are several rules to understand that will help you avoid the tax pitfalls of adding extra income.

Know whether you’re an employee or independent contractor

Potential tax pitfalls: Many contractors and freelancers assume they’re being taxed the same way they are at their day job. Then tax season arrives and they discover no one was setting aside money for Social Security, Medicare, or income taxes. In some cases, workers are even surprised to learn they were classified differently than they expected.

What you can do: Before accepting additional income, ask how you’ll be paid and whether you’ll receive a Form W-2 or Form 1099. A short conversation upfront can prevent a much longer conversation when you prepare your tax return.

Employee income isn’t always simple

Potential tax pitfalls: Your employer withholds Social Security and Medicare taxes from your paychecks, which makes payroll taxes feel largely automatic. The problem starts when you add a second job or other side income. Each employer calculates withholding as if it’s your only source of income, which can leave you short when everything gets added together on your tax return. Some workers may also receive tax forms other than a traditional W-2, creating another opportunity for confusion.

What you can do: Review your withholdings whenever you add a new income stream. A quick check during the year is much easier than finding out in April that your paycheck withholding wasn’t keeping pace with your total earnings.

Contracting income means more responsibility

Potential tax pitfalls: Receiving a 1099 often feels very different from receiving a paycheck because no taxes are being withheld along the way. You’re responsible for both sides of Social Security and Medicare taxes, which can make the final tax bill larger than expected. Mixing business and personal spending can also make it harder to identify expenses that could reduce taxable income.

What you can do: Keep business income and expenses separate from personal spending, whether that means opening a dedicated account or tightening up the one already in place. And if additional income becomes regular, build estimated tax payments into the routine instead of treating them as a year-end problem. A quick estimate during the year can help decide whether quarterly payments make sense.

Extra income can create new opportunities, but it also introduces new tax responsibilities. A little planning now can help keep more of what you earn and prevent unpleasant tax surprises later. Call if you have questions about your extra income.

Common Tax Questions

Here are several common tax questions and their answers. But like most things, there can be exceptions, so if in doubt always ask for help.

Is money earned through Venmo, PayPal, or Cash App taxable?

It depends on why you received the money. Payments from friends for splitting dinner or reimbursing expenses are not taxable. However, money received for selling goods or providing services is generally taxable income and may be reported to the IRS on Form 1099-K.

Do I have to pay taxes if I sell items online?

Maybe. Selling personal items for less than you originally paid generally doesn’t create taxable income, although the sale may still be reported to the IRS. If you sell items for a profit, the gain is usually taxable and should be reported on your tax return.

Can I deduct expenses for working from home?

Employees cannot claim a federal deduction for home office expenses. Self-employed workers may qualify if part of their home is used regularly and exclusively for business purposes. The deduction can include a portion of rent, utilities, insurance, and other eligible costs.

Is cryptocurrency taxable?

The IRS treats cryptocurrency as property, not currency. Selling crypto, trading one cryptocurrency for another, or using crypto to purchase goods and services can all create gains or losses that must be reported on your tax return. Even receiving cryptocurrency as payment, mining rewards, staking rewards, or certain promotional incentives may be taxable and must be reported on your return.

Is my tip income taxable?

Tips are still considered taxable income and must still be reported. However, under the One Big Beautiful Bill Act, many workers in occupations that customarily receive tips can claim a federal income tax deduction for qualified tip income through 2028. To qualify for the deduction, tips must be reported on Form W-2, Form 1099, or other approved reporting methods, and the worker must be employed in a qualifying occupation designated by the IRS. The deduction is limited to $25,000 per year and begins phasing out for higher-income taxpayers. Social Security and Medicare taxes still apply.

How much of my overtime pay is deductible?

Under the One Big Beautiful Bill Act, workers may deduct the overtime premium portion of qualified overtime pay through 2028. In a typical time-and-a-half situation, only the extra half-time portion is deductible, not your entire overtime paycheck. For example, if you normally earn $20 per hour and are paid $30 per hour for overtime, only the additional $10 premium qualifies. The deduction is capped at $12,500 annually ($25,000 for joint filers) and phases out at higher income levels. Social Security and Medicare taxes still apply.

Please call to schedule a tax planning session so you can be prepared to navigate around any potential tax surprises you may encounter on your 2026 tax return.

Predicting Your Food Bill in an Unpredictable Environment

Inflation. Supply chain issues. The bottomless stomach in each of your kids. Predicting your food bill isn’t just about guessing what groceries will cost next month. The challenge is figuring out your future food needs without tracking every bowl of cereal and glass of chocolate milk. Fortunately, a few simple strategies can help you make surprisingly accurate food budget forecasts.

Strategy #1 – Forecast your behavior, not boxes of cereal

You aren’t trying to predict how many pounds of ground beef you’ll buy over the next month. Rather you’re trying to predict the behaviors that drive your food spending. Start with a few broad categories such as these:

• Big Box Food – Purchases from a supermarket, warehouse club, or big box store.
• Restaurants – Purchases for fast food, takeout, coffee shops, and sit-down dining
• Snacks – Any food purchase from a convenience store, gas station, vending machine, or quick-stop shop.

After a few weeks, you’ll begin to see patterns emerge. These high-level behaviors are often far more useful for predicting next month’s food bill than tracking every item that goes into your shopping cart.

Strategy #2 – Reduce the Number of On-the-Spot Food Decisions

Most food budgets get thrown off by last-minute decisions. A busy week leads to takeout, or an empty refrigerator turns into an extra grocery trip. But instead of creating a rigid meal plan for every breakfast, lunch, and dinner, create a simple framework for the week.

Maybe tacos are always Tuesday, pizza is Friday, and one night is reserved for leftovers. The more food decisions you make ahead of time, the fewer expensive surprises you’ll encounter later. A consistent meal routine won’t eliminate unexpected expenses, but it will make your household’s food consumption more predictable – and your food bill easier to forecast.

Strategy #3 – Work With Your Grocery Store, Not Against It

Your grocery store is constantly providing clues about how to save money. Most stores offer loyalty programs, weekly ads, mobile apps, and email alerts that notify customers about upcoming sales and promotions.

When staple items your family regularly consumes go on sale, consider stocking up. The goal isn’t to chase every discount. It’s to identify the products your family consistently uses and take advantage of opportunities when those items become more affordable.

By working with your grocery store’s sales cycle, you’ll gain more control over your food spending and reduce the impact of unexpected spikes in your food budget.

Strategy #4 – Expect the Unexpected

No matter how carefully you plan, life has a way of disrupting your food budget. A child hits a growth spurt. Friends stop by for a spur-of-the-moment cookout. A busy week leads to more takeout than usual. These events aren’t mistakes in your forecast. They’re part of normal life. And you should enjoy these moments.

Rather than trying to predict every possibility, build some flexibility into your food budget. Even households with consistent spending habits will have an occasional month that ends up costing more than others. The goal isn’t to create a perfect forecast. It’s to create a realistic one that can absorb the occasional surprise without throwing your finances off track.

The most accurate food budgets aren’t rigid. They’re flexible enough to handle real life and help you predict your food bill in an unpredictable environment.

The Great Unplugging

One generation’s quiet pushback against screen fatigue

A growing number of people are stepping away from their electronic devices and returning to the physical world. Tired of being online all the time, many are rediscovering something that feels surprisingly refreshing: hanging out in real life. Here’s a look at how this is playing out around the country and how you can join The Great Unplugging.

The mall as a real-world refuge

The Problem: Social media promised to make people feel more connected, but for many users the opposite has happened. Spending hours interacting with friends online has left many wanting more real in-person conversations.

The Phenomenon: In an unexpected twist, shopping malls are becoming popular again among Gen Z. What was once viewed as a fading relic of suburban culture now offers something many young people feel is missing online: a shared physical space filled with the sights and sounds of human interaction.

The analog status symbol

The Problem: Smartphones have become less of a status symbol and more of a necessity. For many young people, they are tied to school assignments, endless notifications, location tracking, and the expectation of being available at all times.

The Phenomenon: Flip phones are gaining popularity among those looking to reduce distractions and spend less time online, while vintage digital cameras have become a favorite way to capture memories without immediately posting them to social media.

The Evolution of the Digital Third Place

The Problem: Online communities once gave people a place to connect, share interests, and spend time together outside of school and home. But as social platforms have become increasingly driven by advertising, subscriptions, and engagement metrics, many users feel these spaces have become less welcoming and more commercialized.

The Phenomenon: People are spending more time on hobbies, local events, clubs, and face-to-face social circles that feel less curated and more genuine. Alongside the revival of shopping malls, other gathering places such as coffee shops, bookstores, and – believe it or not – simply hanging out at a friend’s house are making a comeback as young people look for connection beyond the screen.

How you can join The Great Unplugging

• Park your phone. When you walk through the front door at home, hang your phone up in a designated spot instead of carrying it from room to room.
• Budget screen time. Instead of finding yourself doomscrolling for three hours before bed, set a daily limit for social media and stick to it.
• Reclaim your real-world third places. Spend time somewhere that isn’t home, work, or school, such as a mall, coffee shop, bookstore, park, or community center.
• Pick up a creative hobby. Start one or two hobbies that involve creating, building, or learning a new skill, such as painting, drawing, learning an instrument, cooking, woodworking, or gardening.
• Practice being bored. Resist the urge to reach for your phone every time you have a few free minutes. Waiting in line, sitting in a lobby, or riding in the passenger seat can become opportunities to think, observe, or simply be present.

The Great Unplugging isn’t about rejecting technology. It’s about putting screens back in their place and reconnecting with the people, places, and experiences that make life feel real.

What to Look for in the Fine Print

6 great ideas everyone should know

You may sign most agreements without reading them. Unfortunately, the fine print often decides what happens when something goes wrong. The good news: you don’t need to memorize every word. You just need to know what to look for. Here are several areas to consider paying attention to when reading the fine print.

What to pay attention to

1. Read it first. You’d be surprised how many people never read the agreement. Skim through the document and highlight important sections. Focus on your rights & responsibilities, termination or cancellation rules, and security & privacy provisions
2. Watch out for auto-renewals. Many subscriptions, memberships, and services renew automatically. Understand when the renewal occurs and what notice is required to cancel. Consider setting a calendar reminder before the renewal date. Better yet, cancel the renewal immediately after purchase.
3. Protect your most valuable asset – your identity. Understand how your personal information will be used. Do they share or sell your data? Can they rent access to it? Can you request deletion later? Finding answers to these questions is especially important when dealing with banks, insurance companies, healthcare providers, and online platforms.
4. Understand how disputes are handled. Many agreements limit your ability to sue in court. Some require disputes to be settled through arbitration. Know where disputes must be handled and who pays the associated costs, as these clauses can significantly affect your options if a problem arises.
5. Know the limits of coverage. Many companies advertise broad protection but limit it in the contract. Look for exclusions, caps on payouts, and situations where coverage doesn’t apply. The details often matter more than what you read or see in marketing materials.
6. Check the exit rules. Some agreements make signing up easy and leaving difficult. Review cancellation procedures, notice periods, fees, and penalties. Understand exactly what happens if you decide to end the relationship.

What you can do

• Test the agreement with real-life scenarios. Create a few realistic situations and see how the agreement responds.
• A tree falls on your house and heavy rain causes flooding afterward. Is both damage covered?
• Someone totals your car. Will the payout fully replace the vehicle or only cover depreciated value?
• Your online account is hacked and personal information is exposed. What protections and remedies are available?

If the answers aren’t clear, ask questions before signing.

• Get a second opinion. Before you sign, ask someone you trust what they think. Online reviews can help too, not because every complaint is accurate, but because repeated complaints often reveal predictable problems and show how a company responds when customers need help.
• Compare the promise to the contract. Advertising tells you why you should buy. The agreement tells you what you’re actually getting. If the salesperson promises fast service, full coverage, or easy cancellation, make sure those promises appear somewhere in writing. If they’re not in the agreement, they may be difficult to enforce later.

Fine print isn’t designed to be exciting, but it can be extremely important. Spending a few minutes before committing to review key terms can help you avoid unexpected costs, privacy issues, and difficult disputes.

A Mid-Year Checklist for Small Business Owners

Summer reveals what January planning can’t – which goals survived contact with customers, cash flow, and capacity. A mid-year review helps turn these lessons into better decisions for the months ahead. Here are several areas to consider evaluating before the second half of the year begins.

Financial performance

• Revenue and sales goals. Compare your year-to-date revenue against the goals you set at the beginning of the year. If you’re ahead or behind schedule, now is the time to adjust your expectations and strategy.
• Profit margins. Revenue growth doesn’t always translate into profitability. Review margins across products and services to identify areas where rising costs may be reducing returns.
• Cash flow health. Cash flow issues can develop even when sales are strong. Evaluate receivables, payables, and cash reserves to ensure your business remains financially flexible.

Employee and team performance

• Staffing levels and workforce needs. Consider whether your current team has the capacity to support business goals through the rest of the year. Growth, turnover, or changing priorities may require adjustments.
• Employee engagement and retention. Mid-year is a good opportunity to gauge morale and identify potential retention concerns. Simple conversations with employees can reveal issues before they become costly problems.
• Training and development progress. Review the skills your team has gained so far this year and identify any gaps that could limit performance. Investing in employee development can improve both productivity and retention.

Customer experience and marketing

• Customer satisfaction. Customer reviews, surveys, and support requests can provide valuable insights into the customer experience. Look for recurring themes that may require attention.
• Customer retention and loyalty. Acquiring new customers is important, but retaining existing ones is often more profitable. Review repeat purchase rates and customer retention trends to understand long-term customer value.
• Marketing effectiveness. Evaluate which marketing activities are generating results and which are falling short. Redirecting resources toward the most effective channels can improve return on investment.

Operations and productivity

• Operational efficiency. Examine daily workflows to identify bottlenecks, redundancies, or unnecessary complexity. Small process improvements can create meaningful gains over time.
• Technology and systems. Review the tools and systems your business relies on every day. Outdated software, manual processes, or underused technology may be limiting growth and efficiency.

Products and services

• Product and service performance. Analyze which offerings are driving revenue, profitability, and customer interest. Mid-year is an ideal time to refine, expand, or retire products and services based on actual performance rather than assumptions.

A mid-year review doesn’t need to be complicated. By looking at the right areas now, your business can make practical adjustments, protect momentum, and enter the second half of the year with a clearer sense of where attention is needed most.

As always, should you have any questions or concerns regarding your tax situation please feel free to call.

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