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You're Invited to Attend Our Complimentary Presentation

on

Tax and Basic Financial Planning Issues Applicable to Young Health Care Professionals

Various members of The MDTAXES Network will be hosting a  complimentary presentation on the tax and basic financial planning issues that affect you and your colleagues. 

The presentation will focus on the tax issues surrounding moonlighting and deducting professional expenses.  We'll also discuss many of the tax law changes that arose from the 2004 Tax Acts.

Here is a list of cities where the presentation will be held:

Boston - 1/25/05
Denver - 1/27/05

For more information, click on the name of the city to send the CPA an e-mail.
 

NEED HELP WITH YOUR TAXES?

Check out our Directory of Affiliated Offices or click on our Map of the United States to find a CPA near you who specializes in the tax planning and preparation for young healthcare professionals.

 

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INTERESTED IN JOINING OUR NETWORK?

If you're a CPA who provides tax planning and preparation services to young healthcare professionals, and you’d like to find out more about The MDTAXES Network, please give us a call at  (800) 471-0045 or e-mail us at info@mdtaxes.com. (Don't forget to include your mailing address.)

 

WHAT'S NEW WITH THE FICA REFUND?

Most recent information issued by the IRS

Check out the memorandum issued by the U.S. District Court in Minneapolis and you'll see that the court found that medical residents and fellows might not be subject to FICA taxes in many instances.

For more information, go to our February, 2001 Newsletter or read through the IRS' Chief Counsel Advice Memorandum on this issue.

 

 


January, 2005

RESET YOUR MONTHLY RETIREMENT SAVINGS

by Andrew D. Schwartz, CPA

While December 31st is a day to reflect on the year gone by, January 1st is a time to look forward to 2005.  Have you reset your monthly retirement savings to take full advantage of this year's increased tax breaks?

Most working professionals have access to a 401(k) plan or a 403(b) plan at work.  Amounts contributed to these plans reduce your taxable earnings and grow tax deferred.  This year, you can contribute up to $14,000, or $1,166.67 per month, into a 401(k) or 403(b) plan through salary deferrals.

Will you be 50 or older by December 31st?  If so, you can contribute an extra $4,000 into your 401(k) or 403(b) plan this year, for a total of $18,000.  To max out this pre-tax opportunity, instruct your employer to withhold $1,500.00 each month from your salary.

Many smaller employers offer SIMPLE/IRAs instead.  SIMPLE's work just like 401(k) plans, which means it's up to you to fund your account through salary deferrals.  For 2005, the maximum contribution into your SIMPLE is $10,000, or $833.33 per month.  Anyone 50 or older by December 31st can sock away an additional $2,000 this year, for a total annual contribution of $12,000, or $1,000 per month.

Are you self-employed?  Each year, you can contribute up to 20% of your net self-employment income into a SEP IRA.  The maximum contribution for 2005 is $42,000, or $3,500 per month.

Solo 401(k)'s are an attractive alternative to many sole proprietors and business owners with no full time employees (those who work more than 1,000 hours per year) besides a spouse.  If you don't have access to a 401(k) or 403(b) plan through another employer, the Solo 401(k) plan makes it easier for you hit the this year's max of $42,000.  If you're 50 or older, your maximum contribution into a Solo 401(k) jumps to $46,000, or $3,833.33 per month.

And don't forget about IRA's.  Even if you're covered under a retirement plan at work, you and your spouse can each contribute up to $4,000, or $333.33 per month, into a traditional IRA or Roth IRA this year.  Anyone 50 or older can contribute an extra $500, increasing the total allowable contribution to $4,500, or $375 per month.

Most people won't be able to max out these tax-advantaged retirement options unless they get on a budget and put away a set amount of money each month.  Now's the time to reset your monthly retirement savings for 2005.

2005 Maximum Retirement Account Contributions


Retirement Savings Option
 
Under the age
 of 50
50 or older by December 31st

401(k) or 403(b)
 
$14,000
($1,166.67/month)
$18,000 ($1,500.00/month)

SIMPLE IRA
 
$10,000
($833.33/month)
$12,000 ($1,000.00/month)

SEP IRA
 
$42,000
($3,500.00/month)
$42,000
($3,500.00/month)

Solo 401(k)
 
$42,000
($3,500.00/month)
$46,000 or
($3,833.33/month)

IRA
 
$4,000
($333.33/month)
$4,500 ($375.00/month)

 TOP


FADS ARE USUALLY FRAUDS 

by Andrew D. Schwartz, CPA

When deciding how to invest your money, don't get stuck holding the fad bag.   While some people may make oodles of money while an investment fad remains in vogue, most end up losing the bulk of what they invest.

One of the earliest investments fads that you read about is the tulip fad back in Holland.  Somehow, people were convinced to pay extraordinary sums of money for a flower.

More recent fads include the Beanie Baby craze of the late 20th century during which time people paid in excess of $2,500 for a stuffed animal.  Guess what those stuffed animals are worth today.

Most investment fads don't reach the level of tulips or Beanie Babies.  Even so, by recognizing a fad as nothing more than a fraud, many average investors could have significantly cut their losses by not getting caught up in the hype.  Let's take a look at some of the signs of an investment fad:

Clue #1:  Promises of Quick and Risk-free Investment Returns:  Think back to the late 1990s and the high-flying NASDAQ when annual returns of 40% or more were the norm.

Clue #2:  It Just Doesn't Feel Right:  Beanie Babies selling for $2,500!!!

Clue #3:  It's All You Hear:  Before the Great Depression, one successful investor sold all his holdings upon hearing taxi drivers giving investment advice.  And during the dot-com boom, you couldn't go anywhere without friends and family members bragging about the quick money they made by investing in tech stocks.

Clue #4:  It's All You Read About:  How many dot-com success stories did we endure during the Internet boom?

Clue #5:  New Set of Rules Appear:  None of the "new-economy" stocks could be valued using traditional valuation techniques, so new techniques were concocted.

Clue #6:  New Crop of Talking Heads:  All of a sudden, a plethora of new experts appear touting the latest fad.

Clue #7:  Established Experts Become Contrarians:  Everyone was questioning why Warren Buffet never purchased any "new-economy" stocks, but ended up seeing the wisdom of his ways.

What should you do if you spot a fad?

Don't let greed and the lure of easy money get the best of you.  Stick to your pre-fad asset allocation model, and make sure to systematically rebalance your portfolio.  By doing so, you'll be sure to lock in some gains realized from the overpriced sectors.

And be patient.  Before long, your willpower will pay huge dividends as the fad turns out to be nothing more than a fraud.

TOP


TAX AND FINANCIAL PLANNING CALENDAR FOR JANUARY, 2005

Month

Income Taxes

Saving and Investing

 

 

January

  • 4th quarter 2004 estimates due 1/15/05

  • Receive W-2s and 1099s by January 31, 2005

  • Review your withholding for 2005, and, if necessary, file a new W-4 Form with your employer to adjust your withholding

  • Establish a savings and debt reduction goals for the year

  • Try to increase your monthly contributions to your 401(k) or 403(b) plans.  The maximum annual contribution for 2005 is $14,000, or $1,166.67 per month

  • Automatically transfer $333.33 per month from your checking account into a Roth or Traditional IRA, and $166.67 per month into an Education Savings Account for each of your children

TOP


2004 & 2005 TAX FACTS

  • For 2004 the standard deduction for a single individual is $4,850 and for a married couple is $9,700. A person will benefit by itemizing once allowable deductions exceed the applicable standard deduction. Itemized deductions include state and local income taxes (or sales taxes), real estate taxes, mortgage interest, charitable contributions, and unreimbursed employee business expenses. Our March, 1998 newsletter addressed the issue of itemizing your deductions.
  • For 2004, the personal exemption is $3,100. Individuals will claim a personal deduction for themselves, their spouse, and their dependents. 
  • The maximum earnings subject to social security taxes will be $90,000 for 2005 up from $87,900 in 2004.
  • The standard mileage rate is $.375 per mile for 2004, and will increase to $.405 per mile for 2005. Deducting automobile expenses was addressed in our March, 1996 newsletter .
  • The maximum annual contribution to a 401(k) plan or a 403(b) plan is $14,000 for 2005.  And if you'll be 50 or older by December 31, 2005, you can contribute an extra $4,000 into your 401(k) or 403(b) account this year.
  • The maximum annual contribution to your IRA is $3,000 for 2004.  And once you turn 50, you can contribute an extra $500 into your IRA this year.  You have until April 15, 2005 to make your 2004 IRA contributions.  For 2005, you can contribute up to $4,000 ($4,500 if 50 or older) into your IRA.

TOP

copyright - 2004 - The MDTAXES Network

 


Looking for a Lawyer or a Financial Advisor?

Check out our Directory of Lawyers to find an attorney familiar with the issues that affect you and your colleagues, and our Directory of Financial Advisors to find an experienced professional who can help.
 


Tax and financial planning calendar for January, 2005


Interact with our CPAs everyday on The MDTAXES Message Board


Join our Live Tax Chat on the first Wednesday of each month at 9 pm (eastern time)


GOT STUDENT LOANS?

Here are some revelations for people in student loan nation:

  • Consolidation before grace period expiration

  • Notification of your relocation

  • Rehabilitation before consolidation

We're pleased to have a student loan counselor available on staff.

If you have questions about your loan portfolio, or want to find out more about the services we provide, please call (800) 471-0045 or e-mail us at studentloans@mdtaxes.com


 




The MDTAXES Network   (800) 471-0045 ~ fax (800) 547-8836    Email us at cpa@mdtaxes.com