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Second Annual MDTAXES Conference

We'll be hosting our second annual MDTAXES conference, exclusively for our member CPA firms, in Washington, DC, on Friday, October 17th.  During the conference, we'll focus on various tax and financial planning issues applicable to young health care professionals.

All CPAs who are members of The MDTAXES Network are invited to attend.  For information, please e-mail us at info@mdtaxes.com.

 

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August, 2003

IS YOUR I.D.A.P. LIST UP-TO-DATE?

by Andrew D. Schwartz, CPA

Do you maintain a list of your important documents, accounts, and policies (I.D.A.P.)?  If so, do you update that list from time to time?  Do other people know where to find your list, and then, could they make sense of the information listed?

Maintaining an updated inventory of your important documents, accounts, and policies is a smart thing to do.  When compiling your list, make sure to include a description of the following items, including account numbers and where each item is located:

  • Bank accounts
  • Investment accounts
  • Retirement accounts
  • Credit and debit cards
  • Real estate deeds and mortgages
  • Auto loans, leases and insurance policies
  • Other loans and debts
  • Life and disability insurance policies
  • Homeowner's/renter's insurance policies
  • Wills
  • Other important legal documents including health care proxies and durable powers of attorney
  • Tax records
  • Jewelry and other valuables

When going through your accounts, take the time to double-check who is the named beneficiaries on each of your insurance policies and retirement accounts.

It's also a good idea to inventory what's in your wallet.  All you need to do is make a photocopy of the front and back of each item you carry around with you.  When copying what's in your wallet, why not cancel those credit cards you never use any more?

Do you have a safe deposit box?  Since that's where you hold many of your important documents, maintaining an updated inventory of what's in your box should not be overlooked. 

Upon completing or updating your inventory, make at least three copies of your I.D.A.P. list.  Keep one in your files at your home or office.  Give a second copy to a family member, close friend, or to your CPA or attorney.  And if you have a safe deposit box, that's the perfect place for a third copy to be stored.

While putting together and updating your inventory takes time, imagine the time that will be wasted if you (or someone else) need to find all your important documents, accounts, and policies without the help of an updated list to go by.

We've prepared an Excel Template (idap_list.xls) that you can download to help you keep track of your important documents, accounts, and policies.

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TIME TO WORK THROUGH YOUR 2003 TAX PROJECTION

During August or September, it's a good idea to work through a tax projection to take a preliminary look at your 2003 taxes.  That's the only way you can avoid any surprises next winter in connection with your 2003 income taxes. 

By working through your projection during the summer, you'll have four or five months to adjust your withholdings if you're having too much taxes withheld from work, or are on track to owe a lot of taxes next April.  Or, if you're paying quarterly estimates, you can adjust your third quarter estimate (due 9/15/03) and your fourth quarter estimate (1/15/04) accordingly.

To find a CPA who can help you with your mid-year tax projection, go to our Directory of Affiliated Offices or click on our Map of the United States.

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THE HUMMER DEDUCTION

by Andrew D. Schwartz, CPA

If you're planning to purchase a vehicle that you'll use in connection with your trade or business, the 2003 Tax Act will save you some money.  That's because the recent tax-cut package increased the allowable first year depreciation for automobiles by $3,050 to $10,710.

And if you're looking to buy one of those huge SUVs, the potential tax savings to you is huge.  Believe it or not, you can now write-off 100% of the cost of certain SUVs - up to $100,000.

Generally, when you purchase a business auto, the depreciation you're allowed to claim the first year is limited.  Certain SUVs, however, are exempt from the luxury auto limitations. To qualify for the Hummer deduction, the vehicle must have a loaded gross vehicle weight in excess of 6,000 pounds.  Plus, more than half of the miles driven must be for business purposes.

Here's where you can really benefit from the Hummer deduction.  Through December 31, 2005, you can write off the first $100,000 of business property and equipment you purchase each year - including SUVs with a loaded gross vehicle weight in excess of 6,000 pounds.

Let's say you purchase an eligible SUV with a cost of $50,000, which you use 80% for your business.  If that's the case, you'll be entitled to claim a $40,000 deduction on your tax return.

What's the catch?  If the stop using your SUV more than 50% for business within five years, you need to "recapture" the excess depreciation that you claimed.  Basically, the IRS would require you to repay some of the taxes you saved by claiming such a large deduction the year you bought your SUV.

While the Hummer deduction can be substantial, it shouldn't be the only factor to consider when purchasing your next vehicle.  As my tax professor told the class many times during my Intro to Tax class, "When it comes to saving taxes, don't let the tail wag the dog." 

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WHAT'S NEW WITH THE FICA REFUND?

A lot is new!!!  And it's all good!  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.

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TAX AND FINANCIAL PLANNING CALENDAR FOR AUGUST, 2003

Month

Income Taxes

Saving and Investing

 

August

  • Returns on extension are due 8/15/03

  • Requests for 2nd extension, Form 2688, due 8/15/03

  • Self-employed individuals who went on extension need to fund retirement plans by 8/15/03 or should file Form 2688

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2002 & 2003 TAX FACTS

  • For 2002, the standard deduction for a single individual is $4,700 and for a married couple is $7,850. A person will benefit by itemizing once allowable deductions exceed the applicable standard deduction. Itemized deductions include state and local income taxes, real estate taxes, mortgage interest, charitable contributions, and unreimbursed employee business expenses. Our February, 1998 newsletter addressed the issue of itemizing your deductions.
  • For 2002, the personal exemption is $3,000. Individuals will claim a personal deduction for themselves, their spouse, and their dependents. 
  • The maximum earnings subject to social security taxes has increased to $87,000 in 2003 from $84,900 in 2002.
  • The standard mileage rate is $.36 per mile for 2003, down from $.365 per mile for 2002. Deducting automobile expenses was addressed in our February, 1996 newsletter .
  • The maximum annual contribution to a 401(k) plan or a 403(b) plan has increased to $12,000 for 2003 from $11,000 in 2002.  And if you'll be 50 or older by December 31, 2003, you can contribute an extra $2,000 into your 401(k) or 403(b) account this year.
  • The maximum annual contribution to your IRA is $3,000 for 2003 and 2002.  And once you turn 50, you can contribute an extra $500 into your IRA this year.

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copyright - 2003 - The MDTAXES Network



Tax and financial planning calendar for August, 2003


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)


The Millionaire Next Door.  Find out the habits of America's wealthy. You'll be surprised at who comprises the bulk of America's millionaires.

Organize Your Finances with Quicken 2001 in a Weekend

Both these books are available at Barnes&Noble.com.


If you have a friend, colleague, or family member who is always bragging about things they have done to cut their taxes, then check out our new gift items with the saying - "Everything is deductible...until you get audited!"


SAVE MONEY BY TAKING ADVANTAGE OF LOW INTEREST RATES

Are you taking advantage of these reduced rates?  Lower rates will help you cut down on the time it takes you to get out of debt by minimizing the interest you pay each month.  Remember, the lower the interest rate, the larger the portion of your monthly payment that will get applied against your outstanding balances.

  • If you're carrying a balance on your credit cards, there are plenty of opportunities available to cut your interest rate.  Check out CardOffers.com to find the best deals available.

  • If you still owe student loans, see how much you'll save by consolidating your loans into one loan with a lower interest rate at FinancialAid.com.

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HAVE YOU CHECKED YOUR CREDIT REPORT LATELY?

You work hard to keep your credit report as clean as possible. Even so, the current credit reporting system allows for incorrect items to appear on your report that could adversely affect your credit score. Make sure that the information on your credit report is accurate by ordering a free copy of your credit report on-line at  OnlineCreditInfo.com or by purchasing a merged credit report reflecting information from all three credit reports at 130secondreport.com.

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