Your Detailed Tax Review Report

Nicolette Yearde, CPA, EA, MTax

LPB Tax and Accounting Services

Client: John Smith

Tax Year: 2025

Filing Status: Married Filing Jointly

1. EXECUTIVE SUMMARY

- Reported gross income: $85,000 for tax year 2025.

- Federal balance due on filing: $3,200 owed.

- State result: Georgia refund of $1,000 (state balance -$1,000 indicates a refund to you).

- Special situations: None reported.

- Audit risk: No flags identified; overall audit risk is low given wage income and no complex transactions.

- Primary concern: Underwithholding or insufficient estimated payments resulted in a $3,200 federal balance due. Objective is to reduce or eliminate a similar federal balance in 2026 and to capture available tax-saving opportunities.

2. LINE-BY-LINE ACCURACY ASSESSMENT

- Income (Line for wages, salaries): $85,000. Action: Verify W-2(s) and any 1099s match this total. Confirm no omitted income items.

- Adjustments to income: No adjustments reported. Action: Confirm whether you are eligible for pre-tax retirement deferrals, HSA contributions, or educator expenses that should reduce AGI.

- Standard deduction versus itemized deductions: No itemization flags provided. With $85,000 and no special situations, the standard deduction for Married Filing Jointly is typically advantageous. Action: Review mortgage interest, state and local tax paid, charitable gifts, and unreimbursed medical expenses for possible itemization or bunching opportunities.

- Tax computation: Federal liability produced a $3,200 balance due. Action: Confirm tax computation uses correct filing status, credits, and tax tables for 2025.

- Credits: No credits flagged. Action: Confirm eligibility for any child tax credit, dependent credits, or education credits and ensure they are claimed correctly.

- Payments and withholding: The $3,200 balance indicates your withholdings and estimated payments were short by that amount. Action: Compare Box 2 of W-2(s) to total federal tax liability and identify whether underwithholding or timing of payments caused the balance.

- State processing: Georgia refund of $1,000. Action: Confirm direct deposit routing or check address and confirm how you want to receive that refund.

3. DEDUCTION GAPS IDENTIFIED

- Retirement plan contributions: Increasing pre-tax 401(k) or 403(b) contributions reduces taxable income. At your income level you are likely in the 12 percent marginal federal tax bracket under recent bracket structures. Each $1,000 of pre-tax retirement deferral reduces federal tax by roughly $120, assuming a 12 percent marginal rate. To eliminate a $3,200 federal balance through retirement deferrals alone would require a very large deferral, so adjusting withholding is the more direct remedy.

- Health Savings Account (HSA): If eligible, an HSA contribution provides federal income tax savings, payroll tax savings if through employer, and tax-free distributions for qualified medical expenses.

- Flexible Spending Account (FSA): If your employer offers a health care FSA, use it for predictable medical spending to capture pre-tax savings.

- Charitable giving and bunching: If you make charitable gifts, consider bunching donations into alternating years if you approach the threshold to itemize.

- State tax planning: Georgia taxes and deductions can affect your federal position through state and local tax deductions. Note SALT limitations remain relevant for higher state tax payments.

4. FILING STATUS OPTIMIZATION

- Current status Married Filing Jointly is appropriate for your situation and generally offers the lowest combined federal tax for a household with $85,000 combined income and no special circumstances.

- Married Filing Separately can be beneficial only in narrow circumstances such as significant medical expenses or liability issues for one spouse. Given no special situations reported, remain Married Filing Jointly for 2026.

5. 2025 TAX LAW UPDATES

- Expect inflation adjustments for 2025 in the standard deduction, tax brackets, and retirement contribution limits. These updates are published by the IRS in the fall prior to the tax year.

- Contribution limits for employer retirement plans and HSAs may be increased for 2025. Confirm the official IRS limits when they are released.

- State of Georgia may update withholding tables or credits for 2025. Check the Georgia Department of Revenue for final 2025 guidance and any new state-level credits or changes.

- Action: We will review finalized IRS and Georgia updates when published and adjust withholding or planning recommendations accordingly.

6. AUDIT RISK ASSESSMENT

- Overall audit risk: Low.

- Reasons: Reported wage income of $85,000, no large itemized deductions, no self-employment income, and no unusual credits or losses.

- Controls to maintain low risk: Keep copies of W-2s and 1099s, retain receipts for any itemized deductions, document charitable gifts, and retain records supporting all credits claimed.

7. TOP 5 RECOMMENDATIONS

1) Adjust withholding to eliminate the recurring federal balance. To prevent a similar $3,200 balance in 2026, increase withholding by $3,200 annually. This equals approximately $267 per month, $123 per biweekly pay period if paid 26 times per year, or $62 per weekly pay period if paid 52 times per year. Use Form W-4 to set an additional flat dollar amount per pay period or change withholding allowances as appropriate.

2) Maximize pre-tax retirement deferrals to reduce taxable income. Even modest increases will lower tax and build retirement savings. Confirm your plan’s contribution limits and employer match.

3) If eligible, open or contribute to an HSA for triple tax benefit. If you have a high deductible health plan, prioritize HSA contributions before year end.

4) Use the $1,000 Georgia refund intentionally. Options include funding an emergency savings account, contributing to a Roth IRA if eligible, or applying part of it as a prepayment toward next year’s state taxes.

5) Annual review and recordkeeping. Keep a rolling folder of receipts for deductible expenses, confirm W-2 and 1099 data when issued, and schedule a mid-year review to address withholding changes early.

8. YEAR-END ACTION ITEMS

- By next pay period: Submit a revised Form W-4 with your employer to increase federal withholding by an additional $123 per biweekly paycheck, or the equivalent monthly amount of $267. Choose the frequency that matches your payroll schedule.

- By December 31, 2025: Increase 401(k) or other pre-tax retirement contributions for the remainder of the year if your pay cadence and plan permit. Even an extra $50 to $200 per pay period will lower tax liability.

- If eligible and not yet funded: Contribute to HSA for 2025 before year end. Confirm contribution limits with plan administrator.

- Implement recordkeeping: Create a folder for 2025 receipts for medical expenses, charitable gifts, and any large purchases. Save W-2s and 1099s as issued.

- Confirm state refund handling: Verify whether you received the $1,000 Georgia refund as direct deposit or check and allocate it per the recommendation above.

- Schedule a mid-year tax check in Q2 2026: We will re-evaluate changes in income, withholding, and any newly published 2025 IRS and Georgia rules to ensure you remain on track.

If you would like, I can calculate exact withholding adjustments using your pay frequency and current federal withholding amounts, or prepare a mid-year estimate based on any anticipated changes in income or deductions. Please provide pay frequency and current federal withholding per pay period if you want that calculation.

Prepared by:

Nicolette Yearde, CPA, EA, MTax

LPB Tax and Accounting Services