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3 Business Tax Planning 2022 Year-End Business Tax Planning November 17, 2022 Dear Clients and Friends: This is the inaugural business year-end tax planning letter for the newly combined firm of DMJPS PLLC. The purpose of this letter is to bring business year-end tax information to your attention as the calendar year 2022 draws to a close. Please carefully consider these items and how they may affect your business. Please do not hesitate to contact us for further clarification on any of these matters. If you would like a copy of our separate year-end tax planning letter that focuses on the individual tax payer, email us at connect@dmjps.com to be added to the recipient list. Please note that our default delivery method remains electronic. Many of our clients already prefer an electronic copy because it is easier to store, secure, and share a copy with banks or other interested parties. Simply let us know what email address is good to use for confidential matters, and we will email you a secure link that will allow you to download a PDF copy of your returns from our portal. This portal can also be used to electronically upload information. You can, of course, continue to opt for a paper copy. One policy note. Please return your engagement letter when it arrives. Our firm policy does not allow us to begin your tax return engagement until we have this signed document. NEW LEGISLATION The prior twelve months have seen the passage of one significant piece of tax legislation – The Inflation Reduction Act. The business provisions generally affect only the very largest corporate taxpayers, so we will not discuss those provisions here. Most of the provisions affecting our clients are for personal energy credits. Let us know if you would like a further discussion of those.

DMJPS PLLC I 888.873.2545 I dmjps.com I be greater Member of CPAmerica, Inc.PLAN TO MAXIMIZE TAX DEPRECIATION Making the most of tax depreciation is still one of the best tax planning strategies. With unlimited Section 168(k) bonus depreciation and generous Section 179 depreciation (up to $1,080,000 for up to $2.70 million of additions in 2022), most of the planning is left for real estate and vehicles. Bonus depreciation continues to be 100% through the remainder of 2022, steps down to 80% for 2023, and continues to step down 20% each year until phasing out. For 2023, Section 179 amounts will be $1,160,000 and $2.89 million, respectively. Consult with us on new business real estate acquisitions to see if a cost segregation study is cost beneficial. The generous Section 168(k) bonus depreciation rules can magnify the effectiveness of a cost segregation study. For new or used trucks, vans, and SUVs over 6,000 pounds GVW, these can be 100% expensed in the year of acquisition (assuming it is used 100% for business). For SUVs under 6,000 pounds GVW, the first year maximum is $19,200 in 2022. A pickup is an SUV for this purpose generally if the interior length of the truck bed is less than six feet. In addition, there is no longer a tax benefit to trading vehicles. With the passage of the Tax Cuts and Jobs Act of 2017, like-kind exchanges are no longer allowed for personal property – only real estate exchanges can defer gain. If you trade vehicles, for tax purposes, it is reported as a taxable sale followed by a purchase. Given the generous depreciation rules for the new additions, this change is probably not a penalty overall. GENERAL BUSINESS PLANNING CONCEPTS Cash basis businesses that want to defer 2022 income into 2023 should consider sending end of year invoices very late so that customers do not remit their payment until 2023. Also, try to avoid having unpaid bills on hand at the end of the year so as to garner a 2022 deduction. Remember that expenses paid with a credit card are considered paid when charged, even if the credit card bill is outstanding at year-end. Accrual basis businesses that want to defer 2022 income into 2023 should defer providing goods and services until next year. This may or may not be a wise business decision – you will need to decide that for yourself. However, note that the constructive receipt rules dictate that income is received when you have the right to it – just choosing to not take it does not defer the tax on it. For additional deductions, consider establishing a retirement plan this year. A retirement plan contribution made in 2023 for the 2022 tax year, is deductible in 2022, whether your business reports on the accrual or cash basis, as long as the payment is made by your business tax return deadline, including extensions.

DMJPS PLLC I 888.873.2545 I dmjps.com I be greater Member of CPAmerica, Inc.If losses are expected, S corporation business owners should make sure that they have sufficient basis to deduct the losses on their tax return. Please see us for ideas on how to increase your basis before year-end. YEAR-END FORM W-2 REMINDERS Remember that several year-end adjustments are needed for your W-2 filings. These include the following –  If you provide a company vehicle to any employee (including company owners), the value of the personal use of the vehicle must be included in the W-2. This is income for federal and state withholding, FICA, Medicare, and federal and state unemployment tax purposes. We can assist with this calculation.  For this and similar non-cash compensation, you obviously cannot withhold tax when there is no cash payment. Therefore, you need to calculate this additional W-2 income before the last payroll of the year so that you can withhold additional tax from the last cash payroll, if needed.  If you provide group-term life insurance in excess of $50,000 to employees, the value of the life insurance in excess of the $50,000 must be included in the W-2. We can help with this calculation. Note that this should not be taken to read that the employer’s payment of the life insurance premium for anyone does not represent taxable compensation. A life insurance plan must meet specific requirements to be considered group-term life. Payments of life insurance outside of these requirements are completely taxable compensation.  Important. For “S” corporations, the amount the company paid for accident and health insurance (including dental, cancer, long-term care, and other policies) must be included in the W-2 of certain shareholders (those owning more-than-2% directly or indirectly of the company, including spouses, children, parents, and grandchildren). The amount paid is taxable for federal and state withholding purposes, but is not taxable for FICA, Medicare, or federal and state unemployment tax purposes. Note: The IRS has stated its intention to disallow the deduction for health insurance for more-than-2% “S” corporation shareholders if the company fails to include this health insurance in the W-2 of the shareholder.  Note that if the business pays for country club dues or similar social clubs for owners or officers and that membership is actually in the name of the individual instead of the business, then this payment is additional compensation and should be included in the W-2. It does not matter that the primary purpose of such use is for business marketing. Contact us if you require any assistance in calculating these amounts. YEAR-END FORM 1099 INFORMATION REPORTING REQUIREMENTS Please let us know by December 1, 2022, if you require assistance with form 1099 filings. They must be provided to the recipient by January 31, 2023.

DMJPS PLLC I 888.873.2545 I dmjps.com I be greater Member of CPAmerica, Inc. The form 1099 requirement in general includes payments of $600 or more for –  Fees and other compensation for services.  Commissions reduced by any repayment of current year’s (but not prior years) commissions.  Interest and dividends. If the company pays dividends or is in the business of paying interest, the threshold is reduced to $10 or more.  Rent except for those paid to real estate agents. Rent paid by the real estate agent to the landlord is reportable gross (not net) of any commissions retained.  Taxable prizes and awards paid in the course of business, such as by radio and television broadcasting companies, and incentive awards, such as those given to distributors by manufacturers.  Fees paid for professional services to attorneys, physicians, and similar service providers.  Royalties, annuities, pensions, and other gains, profits, and income. This requirement does not apply to the following types of payments –  Wages or other compensation reported on Form W-2.  Payments of any type to corporations other than medical and healthcare payments and attorney fees.  Payments of bills for merchandise, telephone, freight, storage, and similar charges. This exception does not apply when the merchandise is incidental to the receiving of services, such as auto or copier repairs from unincorporated providers.  Payments to employees under an “accountable” plan of expense reimbursement.  Salaries or profits paid or distributed by a partnership to the individual partners.  Trust or estate payments to beneficiaries.  Personal (non-business) payments for rent, interest, services, etc.  Qualified achievement or safety awards of tangible personal property valued at $400 or less. Some other rules to note –  For legal services, all payments of $600 or more for legal services must be reported, even if the payments are to a corporation. For reporting purposes, it does not matter that the attorney retains only a portion of the payment as his or her fee, but that the payment is made to the attorney.  Payments which included backup withholding must be reported on a 1099, regardless of the amount.  Sometimes the structure of the business arrangement makes it difficult to determine when the payment was made. For information reporting purposes, amounts that are credited to, or set aside, for a taxpayer during a calendar year are constructively received and should be reported, although not actually received by the taxpayer. For this rule to apply, there must be no substantial limitation or restriction as to the time or manner of payment, or condition upon which payment is to be made. The amount payable must be available to the taxpayer so that he may draw it at any time and its receipt brought entirely within his own control and disposition.  Where a payment is made in property other than money, the fair market value of the property at the time of payment is the amount subject to reporting.

DMJPS PLLC I 888.873.2545 I dmjps.com I be greater Member of CPAmerica, Inc. Direct sales of at least $5,000 of consumer products sold to a buyer for resale, anywhere other than a permanent retail establishment, must be reported on Form 1099-MISC.  Note that those who file 250 or more information returns are required to submit these forms electronically. Failure to comply with this requirement brings a significant penalty. We can assist you with this compliance.  Rental activities that are considered a business should also consider filing Forms 1099. The IRS has said that failure to file Forms 1099 could jeopardize the position that the rental is a business; thus, the net income from this business could be subject to the 3.8% tax on net investment income AND the activity would not be a business for purposes of the Section 199A deduction on qualified business income. Consider auditing your vendor files to make sure that you have a signed W-9 on file for each. If you do not, request one now. Electronic filing: If you prepare your own W-2s and/or 1099s, please note that with each passing year, the IRS is lowering the threshold of the number of returns filed before e-filing is required. This includes 1099s! So you should consider an electronic filing solution, through us or your own software, before mailing in a stack of 1099s. SETTING UP NEW EMPLOYEES Please make sure that your system for onboarding new employees is following the requirements for items that need to be documented from an immigration perspective. Consider looking over your employee files to make sure that you have a Form I-9 for all workers. Acquire the form where a copy is missing. Also, consider placing a copy of all I-9s in a separate file for easy access in the event of an immigration employment audit. DMJPS are not human resource professionals and you should consider engaging one for HR matters. EMPLOYEES OR INDEPENDENT CONTRACTORS It is critical that business owners correctly determine whether the individuals providing services are employees or independent contractors. Generally, you must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee. You do not generally have to withhold or pay any federal taxes on payments to independent contractors. However, see a later section on NC withholding requirements. If you classify some of your workers as independent contractors who are actually employees, please note that the government continues to pursue these issues. Your business could be required to pay unpaid Note: Penalties for failure to file correct information returns and/or to furnish correct payee statements have increased in recent years and are now subject to inflationary adjustments. There is no limitation on the penalties for intentional disregard to file. Information returns and payee statements include, for example, Forms 1098, 1099, W-2G, and W-2.

DMJPS PLLC I 888.873.2545 I dmjps.com I be greater Member of CPAmerica, Inc.payroll taxes, interest, and penalties. Your company could also be obligated to pay for employee benefits that it did not previously provide, as well as federal penalties. The basic guidance is an “economic realities test.” How much control does your company have over the way workers perform their jobs? For example: 1. Do the workers in question determine how they accomplish their task, or do you closely supervise them? 2. Do they have other clients, or do they work full-time for you? 3. Do they receive payment for each job, or do you pay them on your schedule? 4. Do they own their own equipment and facilities, or does your company provide equipment, supplies, and office space? LIFE INSURANCE If your business has purchased and owns life insurance on employees, or is considering doing so, note that your business needs to comply with the “Notice and Consent” procedures. Failure to follow these rules can result in a future collection on the insurance policy becoming taxable income. If the company carries life insurance on any employee, consult with your life insurance agent to make sure that you are in compliance with the “Notice and Consent” rules. UNCLAIMED (ESCHEAT) PROPERTY Unclaimed property consists of tangible and intangible property that has been abandoned, such as bank accounts, wages, refunds, utility deposits, and others. Any business entity in possession of unclaimed property is a potential “holder” of unclaimed property. Practically all states have such a rule. North Carolina’s Unclaimed Property Law requires all companies and institutions operating in the State to examine their books and other accounting records on an annual basis to determine whether they are in possession of dormant unclaimed property. Once the holder determines the property held is abandoned, a good faith effort must be made to locate the owner. In some instances, a due diligence letter must be sent to the owner. Please note there are specific due dates that must be adhered to with respect to identifying unclaimed property and notifying owners. Holders must file the Unclaimed Property Verification Report (Form ASD-159) and other necessary forms along with any property to the NC Department of State Treasurer. If a business entity asserts it does not hold any unclaimed property, a Negative Report of Unclaimed Property (Form ASD-NEG) may be filed, to run the statute of limitations on unclaimed property reporting for that year. These and other considerations are important in determining a worker’s status. If you have any questions, consult with us about the proper classification of your workers to avoid additional taxes and penalties.

DMJPS PLLC I 888.873.2545 I dmjps.com I be greater Member of CPAmerica, Inc.North Carolina Department of State Treasurer Unclaimed Property Division encourages holders that are not currently in compliance with Unclaimed Property Laws to participate in a Volunteer Disclosure Program (VDP). This VDP allows a holder to conduct a self-examination of their books and records to determine if they hold property which is past due and reportable to North Carolina, and to remit such without being assessed interest or penalties. Visit http://www.NCCash.com/Reporting or contact us for more information to ensure compliance. Review outstanding checks at least annually over a reasonable number of days and attempt to follow up with the payee. Consider remitting and reporting the payments to the State Treasurer if due diligence was not successful. Even if you have no escheats to remit, consider filing a negative report to run the statute of limitations on that reporting period. SOCIAL SECURITY LIMIT FOR 2023 The Social Security wage maximum for 2023 has increased substantially to $160,200; thus, you will need to make sure that your payroll software settings are adjusted for this limit in 2023. PENSION LIMITS FOR 2023 Be sure that your payroll systems reflect these amounts; practically all have changed from 2022. The 2023 amounts include –  401(k) or 403(b) maximum deferral - $22,500 in 2023 (increased from $20,500 in 2022), plus an additional catch-up of $7,500 (increased from $6,500 in 2022) for those who turn age 50 or higher in these years.  401(k) maximum contributions from all sources in 2023 is $66,000 ($73,500 for those 50 or older). This is compared to $61,000 ($67,500 for those age 50 or older) in 2022.  SIMPLE plans maximum deferral - $15,500 in 2023 (increased from $14,000 in 2022), plus additional catch-up of $3,500 for those age 50 or older (increased from $3,000 in 2022). Consider whether your 401(k) plan should offer a Roth deferral option. For those who defer at the maximum amount, a Roth option allows the individual (economically speaking) to contribute both the deferral, and also an additional amount represented by the tax on their deferral contribution. FOREIGN BANK OR INVESTMENT ACCOUNTS If you and/or any of your officers have any interest or signatory authority over any non-U.S. bank or investment accounts, please note that certain Treasury Department disclosures are probably required. The IRS has been aggressively auditing taxpayers in this area and penalties for non-compliance are significant. Foreign accounts include bank accounts, hedge funds, brokerage accounts, and other investments. Connect with us if you think that this requirement may apply to you. Please note that the due date is April 17, 2023, with a six-month extension available. Other requirements exist for other foreign activities. Please make sure that you discuss any foreign investment, sales, purchases, or other activities with us.

DMJPS PLLC I 888.873.2545 I dmjps.com I be greater Member of CPAmerica, Inc.CRYPTOCURRENCY AND DIGITAL ASSETS An increasing number of clients are choosing to invest in cryptocurrencies and other digital assets. If this includes your business, there are a few tax issues of which you need to be aware. Under IRS regulations, crypto and digital investments are capital assets; therefore, the sale of these are a short-term or long-term capital gain or loss. You cannot exchange one currency for another and avoid this result. Careful records must be maintained here for every acquisition and every sale. Trading platforms are not issuing detailed summaries for you to report on your tax return, so it is up to you to track this. If you are engaged in mining cryptocurrencies, you should discuss this activity with us because this brings a wholly different set of compliance issues. Also, if you receive staking income, this is ordinary income. Staking income from digital currency is the equivalent of interest income on a cash bank account. In any case, the IRS is receiving details of cryptocurrency trades from the exchanges, and they are scaling up enforcement on those who do not report this activity on their tax return. Finally, note that if your cryptocurrency is offshore, and your total holdings are valued at more than $10,000, you may also have a Foreign Bank Account Report due. This is a required report to the Treasury Department, separate from your tax return. The penalty for failure to file this report, when required, is significant. You must engage us in writing to prepare this form if you are required to comply. If you are receiving cryptocurrency as payment in lieu of cash, please discuss with us as there are reporting requirements that need to be considered. Likewise, if you are paying contractors, employees, or vendors with cryptocurrency instead of cash, you need to consider the filing requirements and tax effects of these transactions. TRAVEL PER DIEM RATES FOR 2023 The standard business mileage rate for 2023 is not available at the time of this letter’s publication, to compare to 62.5 cents for the last half of 2022. Follow us on Twitter, visit our website at dmjps.com, or check with your DMJPS tax professional for the latest information on this. The per diem travel rates for hotels, and meals and incidentals are as follows. These rates actually took effect on October 1, 2022. The reimbursement rates are: High Cost Areas  Lodging $223 (Previously $221)  Meals and incidental expenses $74 (Unchanged) Low Cost Areas  Lodging $140 (Previously $138)  Meals and incidental expenses $64 (Unchanged)

DMJPS PLLC I 888.873.2545 I dmjps.com I be greater Member of CPAmerica, Inc.The high cost areas in our area of the country are: North Carolina When  Kill Devil Hills 4/1 – 9/30 Virginia  Virginia Beach 6/1 – 8/30  Wallops Island 7/1 – 8/31  Washington DC Metro All Year South Carolina  Charleston All Year  Hilton Head 6/1 – 8/31  Mrytle Beach 6/1 – 8/31 Tennessee  Nashville All Year See us if you need details of other high cost areas. Or, you can go to www.irs.gov and search “Notice 2022-44”. The 2023 special meals and incidental expense rate for those in the transportation industry is $69 per day in the continental U.S. NEXUS IN GENERAL Are you doing business in new states, or has your activity changed in any existing states? Connect with us if this may be the case. Note that states are increasingly aggressive at pursuing out-of-state businesses for sales/use and income taxes. Some indications that you may be doing business in that state include sending salespersons into that state, having payroll, leasing property, buying assets, etc. Consult with us if you have activity outside of your home state or if you believe that you may have filing exposure in other states. SALES TAX – PLEASE NOTE THE WAYFAIR COURT DECISION If your company is making sales out of state, it is now easier for those other states to force you to collect sales tax on those sales. No longer is there a requirement that you have a physical presence in that state. Many states began enforcing this rule quite recently, so this is a good time to take a look at whether your company is correctly complying with these rules. Consult with us soon on whether you have sales tax assessment and withholding requirements for your sales out-of-state. Please note that almost all states that impose a sales tax of some type have adjusted their sales tax requirements after the Wayfair decision. Please do not underestimate this risk.

DMJPS PLLC I 888.873.2545 I dmjps.com I be greater Member of CPAmerica, Inc.NC INCOME TAX NEXUS NC adopted market-based sourcing effective January 1, 2020. Please consider how this may affect your business filings. First, an explanation. States generally have two alternate methods of determining to which state a sale is attributable. This is relevant because a sale by a NC business to a VA customer could be claimed, for income tax nexus purposes, by either or even both states. Example – a NC business provides a service in NC and delivers it via the internet to a VA customer. The methods are - 1. Cost of performance sourcing. This is NC’s method through 2019. In cost of performance, one looks to where the costs were incurred in creating the product sold. In the example, NC considers this is a NC sale as the work was done in NC. 2. Market-based sourcing. This is NC’s method beginning in 2020, and most states are migrating to this method. In market-based sourcing, one looks to where the benefit of the sale was received by the customer. In the example, NC considers this is a VA sale as that is where the customer is located. Some important comments – 1. Note that this is the rule for income tax, not sales tax. For sales tax, consider the Wayfair decision above. 2. It is generally harder to create income tax nexus versus sales tax nexus. For income tax, you generally must have employees working in that state, or are renting or owning property located in that state. This is a generalization and you should engage us to look at rules for specific states. For sales tax, after Wayfair, it is no longer necessary to have physical presence in the state to have sales tax nexus. 3. Note that as some states are still using cost of performance sourcing, it is possible for more than one state to claim that the revenue is attributable to their state. Since NC has adopted market-based sourcing, be sure that your records of revenue by state are kept with that in mind. We would be happy to provide you with an update of the rules for each state, or consult with you about nexus-related matters. OTHER SERVICES We at DMJPS believe that we can provide the attention and service of a local CPA firm, with the resources of a large regional firm. We can generally get an estimate of the amount of the benefit without a cost or obligation to you. Those larger service offerings could include the following items.  Cost segregation studies. Have you placed business real estate in service this year? If so, we can determine if significant depreciation tax savings are available.  Research and experimentation credits. If your business is developing new processes as part of doing business, have you considered if a tax credit is available for this effort?  International tax consulting. Please discuss with us before you venture beyond the US.  We have specialized expertise in our firm in these and other areas. Mergers and acquisitions. Succession planning. Outsourced accounting services. Fraud detection and prevention.

DMJPS PLLC I 888.873.2545 I dmjps.com I be greater Member of CPAmerica, Inc. CONCLUSION DMJPS has a secure portal available for you to upload the electronic files that you need to send to us. Speak to your DMJPS representative if you want to gain access to the portal. The DMJPS Client Center is available for helpful tutorials on the website by visiting, https://dmjps.com/client-center/. In closing, DMJPS is dedicated to personalized service that exceeds our clients’ expectations. As a premier North Carolina accounting firm, our CPAs and accounting consultants proudly serve clients locally, regionally, or internationally. With North Carolina offices from the mountains to the coast in Greensboro, Asheville, Boone, Durham, Marion, Sanford, and Wilmington, DMJPS provides solutions from one reliable firm. While our offices are physically located in North Carolina, we assist clients with tax reporting matters in practically every jurisdiction in the country, as well as many foreign countries. Where we do not have the first-hand contacts and experience, we rely on associate firms through our CPAmerica association, both nationwide and worldwide. We bring you the access, knowledge, and experience of much larger firms while providing you with the customized service and familiar faces you know and trust. We encourage you to stay in contact and learn more about our services and relevant news by following our social media channels at @DMJPSConnect. Receive monthly email updated and relevant tax news by joining our mailing list by contacting connect@dmjps.com. Sincerely, We also encourage you to visit dmjps.com for a full firm directory, tax alerts, and other helpful insights throughout the year. Certified Public Accountant