Patterson Tax & Accounting CPA

Patterson Tax & Accounting CPA Certified Public Accountant offering tax & accounting services for
businesses and individuals.

Certified Public Accountant * income tax * payroll * small business accounting

Receiving an inheritance often comes during a season of loss, and the added weight of financial "what-ifs" can feel over...
06/18/2026

Receiving an inheritance often comes during a season of loss, and the added weight of financial "what-ifs" can feel overwhelming.

One of the most common questions we get at Patterson Tax & Accounting is: "How much of this am I going to lose to the IRS?"

The good news is that for most of us, the actual inheritance itself isn't considered taxable income.

Whether it’s cash, a home, or a stock portfolio, you generally won't owe federal income tax just for receiving it.

However, what happens after you receive it is where the strategy comes in.

If you inherit a family home or a brokerage account, you typically benefit from what we call a "Step-Up in Basis."

This means the "cost" of the asset is reset to its value on the day your loved one passed away. If you sell it shortly after, you might owe very little—or even zero—in capital gains tax, even if they bought the property decades ago for a fraction of its current value.

The real "tax trap" usually hides in inherited retirement accounts, like a Traditional IRA or 401(k). Under current rules, most non-spouse beneficiaries are now required to fully deplete these accounts within 10 years.

If you wait until year 10 to take it all out, you could face a massive "tax bomb" by being pushed into the highest possible bracket.

Whether it’s managing the 10-year rule, understanding "Income in Respect of a Decedent" (IRD), or navigating the 2026 estate tax exemption of $15 million, we’re here to help you protect the legacy your loved one left behind.

An inheritance is a tool for your future—let’s make sure you get to keep as much of it as possible.

Call Patterson Tax & Accounting at 📲 719-437-7464 to schedule a consultation.

We can help you model a distribution plan that keeps your tax liability low and your financial goals on track.

There is something so satisfying about clearing out a stack of old paperwork, but in the tax world, a "clean desk" can s...
06/16/2026

There is something so satisfying about clearing out a stack of old paperwork, but in the tax world, a "clean desk" can sometimes lead to a big headache later.

We often get asked, "How long do I really need to keep this?"

The short answer is: it depends on the document.

While the general rule of thumb is to keep your records for three years after you file, there are a few big exceptions that could catch you off guard if you aren't careful.

Think of your tax records as your insurance policy for an IRS audit. If you’re ever asked to prove your income, deductions, or credits, those receipts and bank statements are your best friends.

Here is how we look at it at Patterson Tax & Accounting:

Most of your standard support—like W-2s and charitable receipts—can hit the shredder after three years.

However, if you’ve omitted a significant chunk of income (even accidentally!), the IRS can reach back six years. And if you’re dealing with real estate or stocks, the clock doesn't even start until after you sell the asset.

You need to keep those purchase records for as long as you own the property, plus another three years, just to prove your "basis" and ensure you aren't overpaying on capital gains.

We also recommend keeping records of nondeductible IRA contributions and your actual filed tax returns indefinitely.

It’s much easier to have a digital folder ready to go than it is to try and recreate a decade of financial history from scratch.

Before you start the shredder this weekend, make sure you aren't tossing your proof!

If you’ve got a box of "maybe" files and aren't sure what's safe to let go of, we’re here to help you sort through the noise.

Give our office a call at 📲 719-437-7464 and let’s make sure your record-keeping is audit-proof.

When you sell a piece of investment or commercial real estate, that "big win" can quickly feel smaller once the capital ...
06/11/2026

When you sell a piece of investment or commercial real estate, that "big win" can quickly feel smaller once the capital gains tax hits.

If you’re looking at a significant gain in 2026, receiving the full purchase price at once could push you into the highest tax brackets—potentially triggering a 20% capital gains rate or the 3.8% Net Investment Income Tax (NIIT).

The good news? You don't have to take the hit all at once.

Enter: The Installment Sale.

By receiving payments over time (essentially acting as the bank for the buyer), you only recognize the gain as you receive the cash. This "tax-smart" move allows you to:

🔹 Stay in a Lower Bracket:
Spreading the gain over several years can keep your income below the thresholds where higher tax rates kick in ($613,700 for married couples in 2026).

🔹 Attract More Buyers:
In a tighter lending market, offering seller financing can make your property much more appealing to buyers who might struggle with traditional bank hurdles.

🔹 Earn Interest:
Not only are you deferring taxes, but you’re also typically earning interest on the promissory note from the buyer.

A Note of Caution: Tax rules like depreciation recapture still apply and are usually due in the year of the sale, regardless of when you get paid. Plus, if the deal is over $5 million, the IRS might have a few extra questions (and interest charges).

Strategy is the difference between a high tax bill and a high net worth.

Before you sign that closing disclosure, let’s make sure your exit plan is as efficient as possible.

Ready to model your next real estate move?

Call Patterson Tax & Accounting today at 📲 719-437-7464 and let’s look at the numbers together!

If you’ve always contributed pre-tax dollars to a traditional 401(k) or IRA, you might be missing out on a powerful tool...
06/09/2026

If you’ve always contributed pre-tax dollars to a traditional 401(k) or IRA, you might be missing out on a powerful tool for your future: the Roth account.

While you forgo a tax break today, diversifying your retirement "buckets" can lead to massive savings down the road.

In the tax world, we call this "tax diversification."

Here is why having a Roth option in your plan is a game-changer for 2026:

✅ TAX-FREE RETIREMENT:
With a traditional account, you owe the IRS a piece of every withdrawal. With a Roth, your contributions are made with after-tax dollars now, so your qualified distributions later are generally 100% tax-free.

✅ HEDGE AGAINST HIGHER RATES:

None of us has a crystal ball, but if tax rates rise by the time you retire, or if your income puts you in a higher bracket later in life, the Roth account protects you from that future tax bite.

✅ THE 2026 SHIFT:
Under the SECURE 2.0 Act, many high earners are now required to make their catch-up contributions to a Roth account. Instead of seeing this as a lost deduction, think of it as a forced opportunity to build tax-free wealth.

✅ NO RMDs:
Unlike traditional employer-sponsored plans, Roth accounts in those same plans are now exempt from Required Minimum Distributions (RMDs). This gives you total control over when—and if—you take your money.

A tax return is a look at where you've been, but your retirement strategy is a look at the life you’re building.

Having both "buckets" gives you the flexibility to choose which one to pull from based on the tax laws at the time.

Not sure if a Roth conversion or new contribution strategy makes sense for your bracket?

Call our office today!

We can help you model your long-term tax liability and ensure your retirement plan is as efficient as possible.

If you’re a business owner or self-employed and spend a lot of time behind the wheel, the IRS just gave your 2026 tax re...
06/04/2026

If you’re a business owner or self-employed and spend a lot of time behind the wheel, the IRS just gave your 2026 tax return a boost.

The standard mileage rate for business driving has officially increased to 72.5 cents per mile—up from 70 cents in 2025! 📈

While a few cents might not seem like much, those miles add up quickly when it comes to lowering your taxable income.

Here is the breakdown for the 2026 rates:

✅ BUSINESS MILEAGE:
Now 72.5 cents per mile. This applies to all eligible business-related driving, whether you’re meeting clients or picking up supplies.

✅ MEDICAL & MOVING:
These rates are set at 20.5 cents per mile for 2026.

✅ CHARITABLE DRIVING:
The rate for driving in service of a charitable organization remains at 14 cents per mile.

✅ CHOOSE YOUR METHOD:
You have options! You can either use the Standard Mileage Rate to simplify your record-keeping, or the Actual Expense Method (tracking gas, oil changes, repairs, and insurance). Depending on your vehicle and how much you drive, one may offer a significantly higher deduction than the other.

✅ DOCUMENTATION IS NON-NEGOTIABLE:
Regardless of which method you choose, the IRS requires a contemporaneous log. That means you need to track the date, miles, and business purpose of every trip.

A tax return is a look at where you've been—but your mileage log is a look at how hard you've worked!

Don't leave money on the table by guestimating your miles at the end of the year.

Not sure which deduction method will save you the most?
Call our office today!

We can help you review your vehicle expenses and ensure you’re maximizing every mile you drive for your business.

Generally, scholarships are a huge win for students, but they aren't always a "get out of taxes free" card. If you or yo...
06/02/2026

Generally, scholarships are a huge win for students, but they aren't always a "get out of taxes free" card. If you or your child is heading to campus in 2026, understanding the distinction between qualified and non-qualified expenses is essential to avoiding a surprise bill.

The IRS has specific rules on what money they can—and can't—touch.

Here is the breakdown:

✅ QUALIFIED (TAX-FREE) EXPENSES:
Amounts used for tuition, mandatory enrollment fees, and required books, supplies, or equipment are generally tax-free for degree candidates.

✅ NONQUALIFIED (TAXABLE) EXPENSES:
This is where many families get caught off guard. Any scholarship money used for room and board, travel, or optional equipment is considered taxable income.

✅ SERVICE REQUIREMENTS:
If a scholarship requires the student to perform services—like teaching or research—the portion of the "award" paid for those services is generally taxable income and must be reported.

✅ THE "KIDDIE TAX" TRAP:
Any taxable portion of a scholarship must be reported on the student’s tax return. If that amount is high enough and isn't tied to performing services, it might trigger the “kiddie tax,” meaning that income could be taxed at the parents’ higher tax rate.

A tax return is a look at where you've been—but a solid education plan is about where you’re going.

Don't wait until next April to realize your "free" money came with a cost!

Unsure how your student's financial aid package will affect your 2026 return?

Call our office today!

We can help you review your scholarship details and ensure you’re maximizing your education credits while staying in full compliance.

Growth is often viewed as the ultimate goal for any small business, but without a solid plan, it can quickly become unsu...
05/28/2026

Growth is often viewed as the ultimate goal for any small business, but without a solid plan, it can quickly become unsustainable.

Recent 2026 data shows that while most owners want to expand, many are struggling to achieve those goals without straining their cash flow or overwhelming their staff.

The good news? Most growth missteps are predictable and preventable.

Here is what you should watch for as you scale:

Expanding too quickly without a clear operational plan can weaken your service quality and stress your systems. Before you add more customers, evaluate your staffing needs and process efficiency. Phased growth helps protect your profitability.

Revenue growth doesn't always equal financial stability. Higher sales often lead to higher expenses—like payroll, inventory, and marketing. Without careful forecasting, you could find yourself short on working capital despite strong sales.

Hiring too early creates unnecessary costs, but waiting too long leads to burnout. Thoughtful workforce planning ensures that every new team member contributes to measurable business outcomes from day one.

As your business grows, your leadership style has to evolve. Owners who try to control every tiny decision often become the bottleneck. Empowering your staff frees you to focus on high-level strategy rather than daily tasks.

Growth should never come at the cost of your stability or your financial health. A tax return is a look at where you've been, but a growth strategy is a look at where you’re going!

Ready to turn your growth goals into a sustainable reality?
Call our office today!

We can help you model your cash flow and build a financial roadmap that supports your vision without the stress.

Turning a favorite pastime into a source of income is rewarding, but it raises a critical tax question: Is your activity...
05/26/2026

Turning a favorite pastime into a source of income is rewarding, but it raises a critical tax question: Is your activity a hobby or a business?

The answer matters more than ever in 2026 because the tax rules for each are worlds apart.

While you must report income from both, the ability to deduct your expenses depends entirely on your classification.

Here is how the IRS draws the line:

The IRS looks at whether you conduct the activity in a businesslike manner. This means keeping complete records, tracking every dollar, and taking active steps to improve your operations and profitability.

The amount of time you devote to the activity is a major factor. If you’re putting in the work to make it profitable rather than just recreational, the IRS is more likely to view it as a business.

Does the income from this activity help support you, or are your other earnings primarily funding it? If it's purely for "enjoyment or relaxation," it may be classified as a hobby.

Under the "One Big Beautiful Bill Act" of 2025, the suspension of hobby deductions is now permanent. This means if your activity is a hobby, you pay tax on every dollar of income but get zero deductions for expenses. If it’s a business, you can generally deduct expenses and even use losses to offset other income.

The IRS considers your track record. If you’ve had success in similar ventures or if your current losses are typical for a new startup, it strengthens your case for a business classification.

The line between a hobby and a business isn’t always clear, and a course correction now can save you a major headache during tax season.

Ready to turn your passion into a profitable venture?
Call our office today!

We can help you evaluate your specific situation and ensure your business structure and recordkeeping are set up for success.

One tax dispute is stressful—but two can quickly become a crisis for your business. If you receive a notice from the IRS...
05/21/2026

One tax dispute is stressful—but two can quickly become a crisis for your business.

If you receive a notice from the IRS, it’s easy to focus solely on the federal level.

However, a resolution with the IRS doesn't automatically settle the score with the state.

In fact, if the IRS adjusts your taxable income, your state's Department of Revenue is often right behind them, ready to adjust their own assessment to match—or even take a more aggressive stance.

Here is what you need to know about navigating "dual disputes":

Because states and the federal government share data, an audit in one area frequently triggers a second review in the other. This is a common trap for businesses that operate in multiple states or have complex payroll and worker classifications.

Every response must be strategic. A statement that helps you with a federal auditor might inadvertently create a new problem with a state tax tribunal. You need a unified strategy that aligns both positions to avoid conflicting outcomes.

Missing a response window can limit your rights to appeal and lead to compounding penalties. Managing the different timelines and technical requirements for both agencies is critical to protecting your cash flow.

Unresolved disputes can lead to liens, levies, or damage to your business credit. A tax return is a look at where you've been—but a tax dispute requires a steady hand to protect where you’re going.

Tax disputes are about more than just the numbers; they are about managing the process.

If you’ve received a notice from more than one tax authority, don't try to juggle them alone!

Ready to move from reactive stress to proactive control?
Call our office today!

We specialize in coordinating these complex responses to ensure your business stays protected on all fronts and focused on growth.

There is nothing quite like the excitement of opening your doors for the first time. But before you sell your first prod...
05/19/2026

There is nothing quite like the excitement of opening your doors for the first time.

But before you sell your first product or sign your first client, there’s a critical "behind-the-scenes" step that determines your long-term success: choosing your tax structure.

The "exciting" part of business is the vision, but the "sustainable" part is the strategy.

Here is what every new founder needs to have on their radar from day one:

Whether you’re operating as a sole proprietorship, an LLC, a partnership, or a corporation, your choice dictates almost everything about your tax life. It affects which forms you’ll file, how much self-employment tax you’ll owe, and even your eligibility for certain credits.

Beyond just picking a structure, you’ll likely need an Employer Identification Number (EIN) for tax purposes. This is your business’s social security number and is essential for opening bank accounts and hiring your first team members.

Good bookkeeping isn't just about staying out of trouble with the IRS; it’s about having the data you need to make smart growth decisions. Without a clear trail of income and expenses, you could be leaving valuable deductions on the table.

From income and employment taxes to specific excise taxes, understanding your federal responsibilities early avoids costly headaches come tax season.

Starting a business is a major milestone, and getting the tax details right is the first step toward a secure financial future. Don't wait until next April to realize you need a course correction!

Ready to transition from "side hustle" to "official business"?
Call our office today to schedule a setup consultation.

We’ll help you choose the right structure and set up a tax-ready system so you can focus on building your dream.

Address

2920 N Academy Boulevard, Suite 100
Colorado Springs, CO
80917

Opening Hours

Monday 9am - 6pm
Tuesday 9am - 6pm
Wednesday 9am - 6pm
Thursday 9am - 6pm
Friday 9am - 5pm
Saturday 9am - 3pm

Telephone

(719) 459-1462

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