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January 2013


Get Your Deductions: Moonlighting and Professional Expenses Made Easy

January 16, 2013 – Wednesday, 1-2pm EST - Speaker Andrew Schwartz, CPA

Are you unsure what expenses you can deduct from your moonlighting income? Not sure what to track all year for professional expenses? Do you want to make sure you receive the maximum deduction allowed for work-related expenses? If so, this webinar is for you! Learn what the most common expenses allowable for healthcare professionals are and how to track them to make tax time easy!

Recent Tax Law Changes and Basic Retirement Planning

January 23, 2013 – Wednesday, 1-2pm EST - Speaker Richard Schwartz, CPA

Are you looking for a recap of the 2013 tax law changes and how they’ll impact you? Do you need help navigating your retirement planning options for 2013? If so, this webinar is for you! Learn what tax changes are coming in 2013 to capital gains, deductions, personal tax rates, Medicare and Social Security. Rick will also cover how to choose the retirement vehicles that will bring you the most savings.


by Andrew D. Schwartz, CPA

There might be a lot of uncertainty surrounding the tax rules these days.  Don't use that uncertainty as an excuse to avoid trying to improve your personal finances.  What better time to make some resolutions for 2013 than New Year's Day?

Last January 1st, did you make any resolutions concerning your personal finances?  If so, how'd you do?  Did you attain your financial goals, or was 2012 a total financial washout?

The good news about New Year's resolutions is that you get to make new ones each year.  Below are some New Year's resolutions to improve your finances.

Pay Some Extra Principal With Your Mortgage Payment Each Month

Looking for a risk-free return on your money?  By paying extra toward your mortgage each month, you'll get a risk-free return on that money equal to your mortgage interest rate.  Plus, you'll cut down on the number of years it will take to pay off your mortgage.  As a rule of thumb, try to pay extra principal each month equal to at least 10% of your total mortgage payment.

If You Don't Own A Home, Try to Qualify For the Home Office Deduction

If you're a renter, the rent you pay generally isn't deductible on your federal tax return.  By claiming the home office deduction, you make a portion of your rent tax deductible.  To qualify, you need to use a portion of your home regularly and exclusively in connection with your trade or business.  Using your office for managerial and administrative tasks qualifies.  You'll claim the home office either directly against your self-employment income on the Schedule C or as a miscellaneous itemized deduction on the Schedule A.

Save A Set Amount Of Money Each Month

Did you know that if you deposit $81.50 into your savings account each month, the account would be worth $1,000 at the end of the year?  To help you reach your goal, make sure to transfer the money out of your checking account into a separate savings or investment account. By doing so, it's more difficult to spend the money that you have managed to save.  Download our (Microsoft Excel) debt/savings calculator to calculate how much you need to set aside each month to reach a certain savings goal.  

Pay Down Those Credit Cards

If you owe money on your credit cards, determine how much you can realistically afford to pay down during the year. For best results, try not to charge additional purchases on those cards while you're trying to pay down what you owe.  Download our (Microsoft Excel) debt/savings calculator to calculate how much you need to pay each month to pay off a debt.

Maximize Your 401(k) & 403(b) Plan Contributions

At work, you probably have the opportunity to save for your retirement through a 401(k) or 403(b) plan sponsored by your employer.  The maximum annual contribution for 2013 has increased to $17,500.  And anyone who will be 50 or older by December 31st can contribute an extra $5,500 this year.  Remember, amounts contributed to these plans reduce your taxable compensation and grow tax deferred. 

Unless you're already on track to contribute the maximum to your 401(k) or 403(b) plan this year, now's the time to instruct your employer's benefit department to increase the percentage of your salary going towards this tax-advantaged retirement savings account. 

And if you're self-employed, set up a solo 401(k) plan or a SEP IRA plan as soon as possible, if you haven't already done so, and try to contribute to these plans systematically over the year.

Contribute $5,500 to a Roth IRA

Roth IRAs are one of the few tax-free investments available to individuals.  This year, you can contribute up to $5,500 to your Roth IRA. You won't get a tax deduction, but amounts contributed grow tax-free, as long as certain conditions are met. Consider signing up with a mutual fund company to have $458.33 automatically transferred from your checking account into a Roth IRA each month. 

Don't forget, if you're single and your adjusted gross income (AGI) exceeds $127,000 or married and your AGI exceeds $188,000, you're not eligible to contribute to a Roth IRA that year.  If your income exceeds the applicable threshold, you're still eligible to contribute to a traditional IRA for that year.  The amount contributed isn't tax deductible if either you or your spouse is covered under a retirement plan at work, but grows tax-deferred. You can also convert your IRAs to a Roth IRA at any time under the current rules, no matter how high your income will be.

Take Advantage of the Tax-Free College Savings Opportunities

Money contributed to Education Savings Accounts (formerly Education IRAs) and 529 Plans grow tax-free, as long as any money withdrawn is used for tuition and certain other college expenses, or in the case of ESAs, for private elementary school or high school as well.  You can contribute up to $2,000 per year per child into an ESA, and up to $14,000 per year, or frontload $70,000 at one time, into a 529 Plan, subject to certain restrictions.  With tax rates on the rise, these tax-free opportunities become even more attractive to most taxpayers.

Avoid Resolution Pollution

Did you set so many financial goals that you'll end up attaining none of them?  If so, take this opportunity to restate your financial resolutions for 2013.



Check out this article included in Becker's Spine Review titled: 12 Steps for Spine Surgeons to Take Now Before Bush Tax Cuts ExpireAndrew Schwartz CPA is quoted throughout the article.  While many of the strategies recommended in this article needed to be implemented prior to 12/31/12, it's still important to understand the tax increases we are all facing until such time that Congress and the President can enact tax legislation to address many of the expiring tax breaks.  We've written other articles on this topic as well in the prior few months' newsletters, including:



by Andrew D. Schwartz, CPA

I'm a CPA and my wife is a CFP (Certified Financial Planner).  Even so, I think together we've done a lousy job teaching our two kids - Jonathan (age 14) and Lizzie (age 13) - much about personal finances. We have also done little to help them learn anything about exercising fiscal discipline.

Over the years, we've toyed with monthly allowances and paying our kids for doing their household chores.  The problem is that we have never been consistent with doling out the promised $20 per month or with enforcing the rules they need to follow to even be eligible to receive their allowance.  So my family's allowance system has evolved to something like this:

Child: "Dad and/or Mom, I'm getting together with friends.  Can I have some money?"

Parent: "Sure thing, Jonathan and/or Lizzie.  Will $20 be sufficient?"

Well, as my kids continue to grow up, we have reached the point where this conversation happens pretty regularly.  Our kids have no incentive not  to ask us for money, since we have a track record of giving them money whenever they ask.  And they also don't have an incentive to try to earn any money on their own, since we have gladly been supporting 100% of their spending.

That's all about to change.  Financial responsibility for the Schwartz Clan, here we come.  As a parent of a teenager, you might be asking, "How will you pull this off Andrew?"

For Christmas/Chanukah, we gave each child a Pass Card issued by American Express  These cards are only available to kids 13 or older. 

According to American Express, "Pass is a prepaid reloadable Card parents give to teens. It's safer than cash, and unlike a debit or credit card, teens can only spend what's preloaded on the Card."  For my two kids, we loaded each card with $100, and then will reload the card on the tenth of each month with their $25 allowance.

Pass cardholders can spend money on the prepaid card pretty much anywhere that takes credit cards.  And while parents do have the right to deny their kids access to cash from ATMs, we decided to set up the cards to allow ATM withdrawals.  We can change this setting at any time, however.  The first ATM transaction each month is free for each kid, and then there is a charge of $2 per withdrawal.

In theory, when either kid spends all the money on the card, they are out of money until they next receive the $25 on the tenth of the month.  Here is where my wife and I will need to exercise some parental discipline and not just dole out more spending money.  Instead, we need to try to use this opportunity to remind Jonathan or Lizzie that if they want to spend more than $25 per month, they can always babysit, shovel snow or rake leaves for our neighbors, work at my office during tax season, or try to find another job that hires 14 year-old kids (Lizzie will be 14 in the summer) to earn extra money . 

Other Advantages

For parents, the Pass Card has a nifty web interface that allows parents the opportunity to view balance and purchase history online at any time, transfer additional funds into the card, or tweak the amount or frequency of the automatic reloads.  Teens will also be able to logon to the Pass website under a separate login to monitor balances and activity.

According to the site, the Pass Card also provides your child some additional benefits similar to the benefits that come with the AMEX card, including:

  • Purchase Protection if an item purchased with the Pass Card breaks within 90 days
  • Roadside Assistance if your child's car won't start
  • Global Assist Services to provide your child with emergency services while traveling

I hope the Pass Card works out well for my family and helps my wife and I teach my kids a little about personal finances and fiscal discipline.  Check back next fall or winter, and I'll definitely give you an update on whether the Pass Card helped my family make progress towards these two goals.




Income Taxes

Saving and Investing




  • 4th quarter 2012 estimates due 1/15/13
  • Expect to receive W-2s and 1099s by January 31, 2013
  • Review your withholding for 2013, and, if necessary, file a new W-4 Form with your employer to adjust your withholding
  • Prepare a W-2 for your Nanny by January 31st
  • 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 2013 is $17,500.  Anyone 50 or older can contribute an extra $5,500
  • Automatically transfer $458.33 per month from your checking account into a Roth or Traditional IRA, and $1,166.67 per month into a 529 Account and/or $166.67 per month into an Education Savings Account for each of your children


2012 & 2013 TAX FACTS

  • For 2012, the standard deduction for a single individual is $5,950 and for a married couple is $11,900. 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.
  • For 2012, the personal exemption is $3,800. Individuals will claim a personal deduction for themselves, their spouse, and their dependents. 
  • The maximum earnings subject to social security taxes is $113,700 for 2013, up from $110,100 for 2012.
  • The standard mileage rate is $.565 per business mile as of January 1, 2012, up one cent from $.555 per mile since July 1, 2011.
  • The maximum annual salary deferral into a 401(k) plan or a 403(b) plan is $17,500 in 2013, up from $17,000 in 2012.  And if you'll be 50 or older by December 31st, you can contribute an extra $5,500 into your 401(k) or 403(b) account that year.
  • The maximum annual contribution to your IRA is $5,000 for 2012, increasing to $5,500 in 2013.  And if you turn 50 by December 31st, you can contribute an extra $1,000 that year.  You have until April 15, 2013 to make your 2012 IRA contributions. 


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This Month's Topics

New Year's Resolutions to Improve Your Finances

Beware of Higher Taxes As Part of the Fiscal Cliff

Teach Your Teens Financial Responsibility With The Pass Card Issued By Amex

The FICA Refund for Medical Residents 

2012 & 2013 Tax Facts

Tax and Financial Planning Calendar for January 2013


Browse our index of previous months' newsletter topics

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In a shocking development, the IRS recently announced that they will be honoring the FICA tax refunds submitted by residency programs and individual doctors.  The catch is that only FICA taxes paid prior to 4/1/05 qualify.

For more information, go to our April 2010 Newsletter, our January 2009 Newsletter, or our February 2001 Newsletter or read through the IRS' Chief Counsel Advice Memorandum on this issue.

Let's work together to keep current on this hugely valuable tax break.  Please post whatever you read or hear regarding this FICA issue on our new Message Board we set up just for this topic.

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