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NOTICE TO RESIDENTS OF MARYLAND

We are NOT affiliated with the State of Maryland. If you are looking for information about Maryland income taxes, please go to www.marylandtaxes.com.


Useful Links:

FindAGoodCPA.com - Not a healthcare professional?  Find a CPA or EA who understands the tax issues specific to you.

Nanny Taxes - Find out what's involved with complying with the Nanny Tax Rules

IRS Web Site - for tax forms, publications, and general tax information.

Exchange Authority - New England's first authority for IRC 1031 Exchanges

Cost Segregation Studies - Accelerate tax depreciation deductions on new and existing buildings through cost segregation studies

Social Security - find out the latest rules or your projected retirement benefit.

The Company Corporation offers fast, reliable & affordable incorporation and LLC services.


MONTHLY TAX NEWSLETTER

January 2014

RE: 2014: EIGHT RESPLENDENT RESOLUTIONS TO IMPROVE YOUR PERSONAL FINANCES

by Andrew D. Schwartz, CPA

Personal financial planning is an ongoing process.  The good news is that financially speaking, 2013 was a really good year. The stock markets are at all time highs.  Many real estate markets around the country rebounded nicely.  And interest rates remain near historic lows.

Hello 2014.  Who knows how financially friendly this year will be? For that reason, here are some prudent steps you can take to keep your personal finances moving on the right track:

  • REset your retirement savings:  Most people find it easier to max out their retirement contributions by budgeting a set amount each month.  Instruct your employer to withhold $1,458.33 per month for your 401(k) or 403(b) plan to ensure that you hit the max of $17,500 in 2014.  Are you self-employed?  If so, you can sock away up to $52,000 next year into a SEP, Keogh or Solo 401(k), which equals $4,333.33 per month.  And if you'll be 50 or older by December 31st, the maximum 2013 contribution jumps to $23,000 for 401(k) and 403(b) salary deferrals and $57,500 for Solo 401(k)'s.

  • REfinance your home mortgage:  Back in 2012, my wife and I locked in a fifteen-year fixed-rate mortgage at 2.875% with no points.  While mortgage rates are no longer that low, according to our go to mortgage guy Bob Cahill of Leader Bank, there are still a variety of low-rate mortgage products currently available to people looking to purchase a new home or refinance an existing mortgage.

  • REduce your personal debt: Over time, people and businesses seem to have forgotten that any money borrowed needs to be repaid.  Remember, leverage equals risk.  Make 2014 a year to pay down some of your personal debt.  Perhaps you can delay the purchase of a new car, scale down your awesome vacation, or settle for a 42 inch flat screen TV.

  • REvise your savings and debt reduction goals: Take a few minutes to set new savings goals including how much you’d like to put away towards your retirement, a child’s education, and/or the down payment on a home, and also to reset how much you plan to pay down your student loans, personal debt, and home mortgage.  Download our (Microsoft Excel) debt/savings calculator to help you crunch the numbers.

  • REbalance your investment portfolio:   Warren Buffet said it best by stating, "A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful."  During 2013, the stock market posted substantial gains.  By rebalancing your portfolio to its original or updated asset allocation, you lock in gains from the sectors that performed the best and move money into sectors that underperformed and soon enough should be poised to catch up.

  • REcalculate how much your retirement savings will be worth when you retire: With the Dow at all time highs, now's a great time to take a look at how much buying power you can expect to have upon retiring by downloading our (Microsoft Excel) unique on-line retirement calculator.

  • REvisit your life and disability insurance needs: As you move through your career and your life, your disability insurance needs change. Give some thought to how much of these insurances you need versus how much you currently get through your employer’s benefit package and how much coverage you've already purchased for your personal policies. 

  • REsolve errors on your credit report:  Each year, you’re entitled to three free credit reports, so there’s no excuse to not look at this important financial report annually, especially since errors are not uncommon.  Order your free report at www.annualcreditreport.com.

Questions about financial planning steps you should take for 2014? Please check out our Directory of Financial Advisors to find a professional familiar with the financial planning issues that affect you and your colleagues. 

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IRS ANNOUNCES LOWER STANDARD MILEAGE RATES FOR 2014

by Andrew D. Schwartz, CPA

The IRS announced that the standard mileage rate will decrease to 56 cents per business mile driven in 2014.  That is a decrease of approximately 0.9% over the 56.5 cents allowed in 2013.  According to the IRS, "The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile."

When you use your car for business, driving between job sites is deductible.  So is driving between your home and a temporary job site, job interviews, and conferences.  Commuting between your home and a regular place of business generally isn't tax deductible.

Standard Mileage Rates Versus Actual Expenses

There are two ways for you to calculate your automobile expenses.  You can either claim $.56 per business mile driven in 2014 (decreased from $.565 for 2013), or you can base your deduction on the percentage of miles your car was driven for business purposes multiplied by the actual costs incurred during the year.  Allowable costs include gas, insurance, repairs, parking at home, and either your lease payments, or if you own your car, a factor for depreciation.

Generally, unless you drive your car relatively few miles each year, with most of those miles being allowable business miles, you're often times better off over time by basing your deduction on the standard mileage rate.

For Example

Let's say you lease a car for $400 a month that you drive only 3,000 total miles during the year.  And of those miles, 2,000 qualify as deductible business miles.  By calculating your deduction based on the standard mileage rate, you'll end up with a deduction of just $1,120 (2,000 business miles * $.565 per mile).

What would your deduction be based on the actual expenses incurred, assuming you spend $1,200 on insurance, $.10 per mile driven for gas, and $1,200 on parking at home?  Based on $7,500 of total automobile expenses (including the lease payments), multiplied by two-thirds (2,000 business miles divided by 3,000 total miles), your allowable deduction for your automobile expenses jumps to $5,000 - almost five times the $1,120 allowed using the standard mileage rate.

Now let's see what happens if you drive 20,000 total miles during the year.   Assuming your allowable business miles remains at 2,000, you can either claim an automobile deduction of $1,120 based on the standard mileage rate, or $920 based on one-tenth (2,000 business miles divided by 20,000 total miles) of your actual automobile expenses incurred.

Expense 3,000
total miles
driven
20,000
total miles
driven
Lease payments $4,800 $4,800
Insurance $1,200 $1,200
Gas ($.10 per mile driven) $300 $2,000
Parking at home $1,200 $1,200
     
Total costs $7,500 $9,200
     
Business use % on 2,000
     business miles driven
66.67% 10%
     
Allowable deduction for
     auto expenses based
     on actual expenses
$5,000 $920

How to Claim The Deduction

Taxpayers who are compensated as employees generally will claim their deductible automobile expenses as an unreimbursed employee business expense. These type expenses are reported on a Form 2106 and are deducted as a miscellaneous itemized deduction on the Schedule A.  Keep in mind that miscellaneous itemized deductions are only allowable to the extent they exceed 2% of your income, and are not allowable when calculating the Alternative Minimum Tax (AMT).

Those taxpayers compensated as independent contractors will generally claim their allowable automobile expenses directly against their self-employment income. For these taxpayers, automobile expenses should be reported the Schedule C.

Other Deductible Miles

The use of an automobile in connection with a charitable activity is deductible at a rate of 14 cents per mile in 2014 and should be reported with other charitable contributions as an itemized deduction of the Schedule A. 

You'll deduct any mileage driven in connection with a qualified move at a rate of 23.5 cents per mile in 2014, down from 24 cents per mile in 2013, and should report that mileage along with your other allowable expenses on a Form 3903, Moving Expenses.

And don't forget that medical related mileage is also deductible.  For 2014, medical mileage is allowable at 23.5 cents per mile, and should be reported with all other medical expenses on the Schedule A.

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NEW PRESENTATIONS RECORDED DURING 2013 AVAILABLE ON MDTAXES

We're pleased to share with you with links to the following presentations recorded during 2013:

Professional Expenses Commonly Deducted by Doctors to Save Taxes

Physicians, dentists, psychologists, and other healthcare professionals can often times save some taxes by deducting their unreimbursed professional expenses. Check out this presentation to learn about a variety of professional expenses commonly deducted by doctors in the U.S.

Retirement Plan Basics for Practice Owners

Wondering which type of retirement plan makes the most sense for your practice? Check out this presentation on the most common retirement plan options available to practice owners. You'll also learn why it makes sense to set up and begin to max out your retirement plan savings as soon as possible.

Million Dollar Metrics for General Dentists

The ten "million dollar metrics" presented in this video will provide general dentists with valuable insight to help improve their practice management. General dentists can learn which metrics to generate to gauge how their dental practice is doing, and then compare those metrics with other general dental practices, including those practices from the sample that collected one million dollars or more during 2012.

Increase Practice Revenue and Profits with SIBS (Simple Incentive Bonus System)

Learn to increase revenues and profits at your practice by implementing a Simple Incentive Bonus System. For short we call this SIBS. We've seen a lot of clients implement bonus system similar to the one presented in this video who saw immediate positive results within their practice.

Recorded Short Presentations on QuantiaMD:

We also have four three-minute multi-media podcasts, including insightful poll questions, available only on QuantiaMD:

And One Modest Attempt at Humor. 

Editor's note: Please don't ask us why.  Sometimes there are things in a person's brain that just need to come out.  Please remember that we are tax accountants first, and I don't even know where comedian would come on this list.

Best Depreciation Joke Ever Written

Suggestions for Future Recorded Presentations???

If you have any suggestions for information you'd like us to include in our 2014 recorded presentations, please e-mail me.

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TAX AND FINANCIAL PLANNING CALENDAR FOR JANUARY 2014

Month

Income Taxes

Saving and Investing

 

 

 

January

  • 4th quarter 2013 estimates due 1/15/14
  • Expect to receive W-2s and 1099s by January 31, 2014
  • Review your withholding for 2014, 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 2014 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

 TOP


2013 & 2014 TAX FACTS

  • For 2013, the standard deduction for a single individual is $6,100 and for a married couple is $12,200. 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 2013, the personal exemption is $3,900. Individuals will claim a personal deduction for themselves, their spouse, and their dependents. 
  • The maximum earnings subject to social security taxes is $117,000 for 2014, up from $113,700 in 2013.
  • The standard mileage rate is $.56 per business mile as of January 1, 2014, down from $.565 for 2013.
  • The maximum annual salary deferral into a 401(k) plan or a 403(b) plan is $17,500 in 2013 and 2014.  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 $5,500 for 2013 and 2014.  And if you turn 50 by December 31st, you can contribute an extra $1,000 that year.  You have until April 15, 2014 to make your 2013 IRA contributions. 

TOP

Need Help With Your Nanny Payroll?
 

This Month's Topics

RE: 2014: Eight REsplendent REsolutions To Improve Your Personal Finances

IRS Announces Lower Standard Mileage Rates For 2014

New Presentations Recorded During 2013 Available On MDTAXES

The FICA Refund for Medical Residents 

2013 & 2014 Tax Facts

Tax and Financial Planning Calendar for January 2014

 

NEWSLETTER ARCHIVES
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Need help with your MEDICAL BILLING?

Find out about Billing Depot, an innovative and proven web-based medical billing and EMR provider.

WHAT'S NEW WITH THE FICA REFUND?

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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