MDTAXES is a nationwide network of CPAs who specialize in the tax issues affecting healthcare professionals.

Find a CPA
Newsletters
Post a Question
PodCasts and Videos
Deduct your professional expenses
Track your professional expenses
Non-Cash Contribution Excel Worksheet * or PDF version *or uDoGood App
Listen About MDTAXES
Sign up to receive our monthly e-newsletter.
Email:
CPAs: Join the Network
Not a healthcare professional?


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

July 2011

$7,500! NOW THAT'S ELECTRIC!

by Andrew D. Schwartz, CPA

With gas prices finally drifting down from their recent highs of $4.00 per gallon, drivers are once again deciding whether it makes sense to replace their current gas powered automobile with a more fuel efficient vehicle.  Five years ago, Hybrids were all the rage.  Now, thanks in part to a $7,500 tax credit from the federal government, some US drivers are beginning to seriously look at purchasing Plug-in Electric vehicles.

According to the IRS, "For plug-in electric vehicles acquired after December 31, 2009, the credit is equal to $2,500 plus, for a vehicle which draws propulsion energy from a battery with at least 5 kilowatt hours of capacity, $417, plus an additional $417 for each kilowatt hour of battery capacity in excess of 5 kilowatt hours. The total amount of the credit allowed for a vehicle is limited to $7,500."

Currently, all seven certified vehicles meet the requirements making them eligible for the full $7,500 tax break.  Below are the vehicles certified for the Qualified Plug-In Electric Drive Motor Vehicle Credit as of the end of June:

Vehicle Credit
   

CODA Sedan (Electric Vehicle Manufactured by CODA Automotive Inc.) – 2010

$7,500
Chevrolet Volt - 2011 $7,500

Nissan Leaf – 2011

$7,500

smart fortwo Electric Drive Vehicle distributed by smart USA Distributor LLC – 2011

$7,500

Tesla Roadster- 2008-2011

$7,500

Think City EV (Electric Vehicle) -2011

$7,500

Wheego LiFe Electric Vehicle -2011

$7,500

 

Please note that there are a few additional rules applicable to this tax break.  For starters, to qualify, you must purchase the car as new.  Used vehicles don't qualify.  Plus, if you lease the car, the tax credit goes to the company that you leased the vehicle from, and not to you.  Finally, you're supposed to use the vehicle primarily in the US.

200K Car Limit

Like with the Hybrid Car Tax Credit, this credit will begin to phase-out on some of the more popular models.  To level the playing field for each manufacturer, the allowable tax credit starts to disappear for a manufacturer once they sell 200,000 plug-in electric vehicles, as follows:

  • The full credit is allowed through the end of the quarter following the quarter during which the manufacturer sells its 200,000th plug-in electric vehicle.

  • The credit is cut in half for the subsequent two quarters.

  • The credit is then cut to a quarter of the original credit for the subsequent two quarters.

  • No credit is allowed for vehicles purchased from that manufacturer thereafter.

As we discussed in our August 2006 Newsletter, the phase-out of the Hybrid Vehicle Tax Credit began once a manufacturer sold 60,000 vehicles. The popularity of the Toyota and Lexus hybrids caused the credit for their models to begin to be phased-out almost immediately.  With sales of the Nissan Leaf at 1,000 vehicles, there is no reason to believe that this credit will be phased-out any time soon. 

 

New Tax Break Won't Lose to the AMT

Another problem with the Hybrid vehicle tax credit was that taxpayers subject to the Alternative Minimum Tax (AMT) did not receive any tax benefit.  And with more and more taxpayers paying this tax each year, many Hybrid purchasers were out of luck.

The Qualified Plug-in Electric Drive Motor Vehicle Credit is not limited by the AMT, making this tax break much more valuable to individuals in a position to purchase Electric vehicles.  As we wrote in our October 2010 Newsletter in an article on the AMT, all but a few of my firm's married clients whose Adjusted Gross Income (AGI) fell between $210k and $615k were hit by the AMT.

 

Yes, There's a Form for That

In case  you're wondering, yes, there is an IRS Tax form to complete in order to claim the Qualified Plug-in Electric Drive Motor Vehicle Credit.  Check out Form 8936, to see the information you need to report to the IRS to claim this credit, as well as two pages of instructions.

TOP


IRS ALERTS PUBLIC TO NEW IDENTITY THEFT SCAMS

Last month, a client forwarded my office an obviously fraudulent e-mail he received from someone posing as a representative of the Internal Revenue Service.  The e-mail asked this client to complete a form including social security numbers and banking information, and then fax the completed form to a number listed on the e-mail.  Luckily, the fax number was out of service, and this client was not able to forward the completed form to this person, even though he tried to do so more than once.

It's important to remember that the IRS does not correspond with taxpayers electronically.  If you receive an e-mail from the Internal Revenue Service asking you to provide information, that e-mail is most likely fraudulent.  Here is what the IRS has posted about scams like this:

The Internal Revenue Service has issued several recent consumer warnings on the fraudulent use of the IRS name or logo by scamsters trying to gain access to consumers’ financial information in order to steal their identity and assets. When identity theft takes place over the Internet, it is called phishing.

Suspicious e-Mail/Phishing

Phishing (as in “fishing for information” and “hooking” victims) is a scam where Internet fraudsters send e-mail messages to trick unsuspecting victims into revealing personal and financial information that can be used to steal the victims’ identity. Current scams include phony e-mails which claim to come from the IRS and which lure the victims into the scam by telling them that they are due a tax refund.

Form W-8BEN

[This is the scam e-mail that my client received.] In this scam, fraudsters modify a genuine IRS form, the W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding, to request detailed personal and financial information. This could include nationality, passport number, bank account and PIN numbers, spouse’s name and mother’s maiden name, or other personal or financial information or security measures for financial accounts. The scammers may use the genuine form number and name or may make up a new form number, such as W-4100B2.

They either e-mail or fax the form or letter. If only a letter, the letter itself contains the request for the personal and financial information. The letter, which claims to come from the IRS, states that the recipient will face additional taxes unless he or she quickly faxes the required information to the number provided by the scammer.

In reality, taxpayers file the genuine Form W-8BEN with their financial institutions, not with the IRS. Additionally, the genuine W-8BEN does not request the taxpayer’s passport number, bank account number, security or similar information.

You Can Help Shut Down Phishing Schemes

The good news is that you can help shut down these schemes and prevent others from being victimized. If you receive a suspicious e-mail that claims to come from the IRS, you can relay that e-mail to a new IRS mailbox, phishing@irs.gov. Follow instructions in the link below for sending the bogus e-mail to ensure that it retains critical elements found in the original e-mail. The IRS can use the information, URLs and links in the suspicious e-mails you send to trace the hosting Web site and alert authorities to help shut down the fraudulent sites. Unfortunately, due to the expected volume, the IRS will not be able to acknowledge receipt or respond to you.

You can read about additional scams discovered by the IRS at: http://www.irs.gov/newsroom/article/0,,id=211669,00.html

 TOP


STANDARD MILEAGE RATES INCREASE AS OF JULY 1ST

by Andrew D. Schwartz, CPA

The IRS announced that the standard mileage rate will increase to 55.5 cents per business mile driven, effective July 1, 2011.  That is a jump of approximately 9% over the 51 cents allowed for the first part of 2011.  According to the IRS, the primary reason for the rate hike is higher gasoline prices.

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.

There are two ways for you to calculate your automobile expenses.  You can either multiply the total business miles driven during the year with the applicable rate of $.555 for the last six months or $.51 for the first six months, or you can base your deduction on the percentage of miles your car was driven for business multiplied by actual costs incurred.  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 better off basing your deduction on the standard mileage rate.

Other Deductible Miles

Any mileage driven in connection with a qualified move is deductible at a rate of 23.5 cents per mile effective July 1, 2011, up from 19 cents per mile for the first part of the year, and should be reported on a Form 3903, Moving Expenses.  Medical mileage is deductible at the same rates, and should be reported with all other medical expenses on the Schedule A.

The standard mileage rate for using your automobile in connection with a charitable activity did not increase and remains at 14 cents per mile.  Make sure to report these miles with other charitable contributions as an itemized deduction of the Schedule A. 

TOP


STRATEGIES FOR COLLEGE ON MDTAXES.COM

by Our Friends At Strategies for College

The weather is getting hot. Picnics, barbecues and getting in the water somewhere are the thoughts that occupy our minds.

There might even be brief occasions when a high school student might think about getting into college, or a parent might be concerned about finding money for college, but why not wait until high school starts again in September?

Or for those parents with younger children, setting up camp schedules for their 7 and 8 year-olds, planning for summer and vacations – Money for college and other college search questions can stay on the back burner. After all, those kids will not head off to college for another 10 years or so.

Yes, why worry? There is no pressure (otherwise known as “ignorance is bliss”).

If our College Search GamePLAN blog had a big air horn, we’d let it rip right now!

Remember the old saying: “A stitch in time saves nine”?

This is a golden rule if your student is college bound (no matter the age).

Since we don’t have a foghorn or an air horn like those big old trains, we’ll just try to spread the word and hope a few will listen and TAKE ACTION!

Here are just some of the issues we will be discussing over the next few weeks:

  • Who should be planning for college and when should they start? (And who is “who”?)
  • Money for college: When and how should you begin a college financial plan?
  • Who should be involved in the college search and admissions process? (And again, who is “who”?)
  • Why “scholarships” might be “fools’ gold”
  • College search – Beware of “shiny objects”
  • College statistics that can make your eyes water

So stay tuned. The posts won’t be super long and will address a variety of issues as well as money for college. But if they flip your college search and financing switch and help get you on the go, they will have done the trick.

 TOP


TAX AND FINANCIAL PLANNING CALENDAR FOR JULY 2011

Month

Income Taxes

Saving and Investing

 

July

  • If you changed jobs, give one of our CPAs a call to discuss filling out new W-4 Forms
  • Now's the time to work through your 2011 income tax projection
  • Update your monthly cash flow budget
  • If your Keogh or Solo 401(k) accounts are worth more than $250,000, or if you have employees in your plan, Form 5500-EZ due by 7/31/11
  • Review, update or create your healthcare proxy.  Need Help?.

 TOP


2010 & 2011 TAX FACTS

  • For 2010, the standard deduction for a single individual is $5,700 and for a married couple is $11,400. 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 2010, the personal exemption is $3,650. Individuals will claim a personal deduction for themselves, their spouse, and their dependents. 
  • The maximum earnings subject to social security taxes is $106,800 for 2010 and 2011.
  • The standard mileage rate is $.51 per business mile as of January 1, 2011, up from $.50 per mile for 2010.
  • The maximum annual contribution into a 401(k) plan or a 403(b) plan is $16,500 in 2010 and 2011.  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 2011.  And if you turn 50 by December 31st, you can contribute an extra $1,000 that year.  You have until April 15, 2012 to make your 2011 IRA contributions. 

TOP

Need Help With Your Nanny Payroll?
 

This Month's Topics

$7,500! Now That's Electric!

IRS Alerts Public To New Identity Theft Scams

Standard Mileage Rates Increase As Of July 1st

Strategies For College On MDTAXES.Com

The FICA Refund for Medical Residents 

2010 & 2011 Tax Facts

Tax and Financial Planning Calendar for July 2011

 

NEWSLETTER ARCHIVES
Browse our index of previous months' newsletter topics

Need a Lawyer or
Financial Advisor?


Directory of Lawyers &
Directory of Financial Advisors
 Lists of MDTAXES-affiliated professionals experienced with the issues that affect you and your colleagues.

Not a Healthcare Professional?

Go to FindAGoodCPA.com to locate a tax professional in your metropolitan area based on the professional's specialty.

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.

Copyright 2011 The MDTAXES Network by CPANiche, LLC    Email us at  admin@cpaniche.com