Update

Benefit Plans

Splitting 401(k) funds in a divorce can lead to unintended tax consequences. A 10% fine hits many pre-age-59½ payouts from IRAs, 401(k)s and the like. This excise tax on early distributions is in addition to any regular income tax due. But paying 401(k) funds early to an ex-spouse can avoid the penalty. Use of a qualified domestic relations order is required. The QDRO, which is issued by a court or state agency, recognizes a divorcing spouse’s right to receive all or a portion of the account owner’s 401(k) or certain other benefit plans. The QDRO exception doesn’t apply to IRA funds paid to a spouse in a divorce.

Payroll Taxes

The Social Security wage base cap is expected to be $183,600 for 2026, up $7,500 from this year’s cap, according to Social Security Admin. trustees. The final number, based on national average-wage-index growth, comes in mid-Oct.

Small start-up businesses can use R&D credits to offset payroll taxes. Eligible firms can opt to claim up to $500,000 of qualified research expenses to offset payroll taxes instead of income taxes. The election, which is available to firms in business for not more than five years that have gross receipts of less than $5 million, is made on Form 6765 and attached to the income tax return. Firms use Form 8974 to figure the credit and claim it on Form 941 for the period after the tax return is filed