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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:

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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.

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MONTHLY TAX NEWSLETTER

August 2014

BEWARE OF PHONE CALLS FROM SCAMMERS CLAIMING TO BE IRS AGENTS

by Andrew D. Schwartz, CPA

Yikes!  I got the call.

As we wrote in an article from our May 2014 newsletter, identity theft in connection with federal tax filings is on the rise.  One specific fraud involves people receiving phone calls from scammers posing as IRS agents and then being aggressively instructed to wire money directly to the scammer to pay off a fictitious tax debt.

Here is a transcript of the automated voicemail message left on my home phone last month by someone trying to commit this fraud on me:

You received this message.  I need you or your retained attorney to return this call.  The issue at hand is extremely time sensitive.  I'm officer Hannah Gray from the Internal Revenue Service and the hot line to my position is 415-251-9813.  I repeat, it's 415-251-9813.  Don't disregard this message and return this call before we take any legal allegation against you.  Goodbye and take care.

If I weren't aware that this scam existed, my initial reaction would have been to call the number left by the scammer as soon as possible.  But remember, the IRS does not send e-mails or make phone calls like these to taxpayers. Instead, the IRS is continually warning taxpayers about scams like this; including the following press release issued last Halloween:

IRS Warns of Pervasive Telephone Scam

IR-2013-84, Oct. 31, 2013

WASHINGTON — The Internal Revenue Service today warned consumers about a sophisticated phone scam targeting taxpayers, including recent immigrants, throughout the country.

Victims are told they owe money to the IRS and it must be paid promptly through a pre-loaded debit card or wire transfer. If the victim refuses to cooperate, they are then threatened with arrest, deportation or suspension of a business or driver’s license. In many cases, the caller becomes hostile and insulting.

“This scam has hit taxpayers in nearly every state in the country.  We want to educate taxpayers so they can help protect themselves.  Rest assured, we do not and will not ask for credit card numbers over the phone, nor request a pre-paid debit card or wire transfer,” says IRS Acting Commissioner Danny Werfel. “If someone unexpectedly calls claiming to be from the IRS and threatens police arrest, deportation or license revocation if you don’t pay immediately, that is a sign that it really isn’t the IRS calling.” Werfel noted that the first IRS contact with taxpayers on a tax issue is likely to occur via mail.

Other characteristics of this scam include:

  • Scammers use fake names and IRS badge numbers. They generally use common names and surnames to identify themselves.
  • Scammers may be able to recite the last four digits of a victim’s Social Security Number.
  • Scammers spoof the IRS toll-free number on caller ID to make it appear that it’s the IRS calling.
  • Scammers sometimes send bogus IRS emails to some victims to support their bogus calls.
  • Victims hear background noise of other calls being conducted to mimic a call site.
  • After threatening victims with jail time or driver’s license revocation, scammers hang up and others soon call back pretending to be from the local police or DMV, and the caller ID supports their claim.

If you get a phone call from someone claiming to be from the IRS, here’s what you should do:

  • If you know you owe taxes or you think you might owe taxes, call the IRS at 1.800.829.1040. The IRS employees at that line can help you with a payment issue – if there really is such an issue.
  • If you know you don’t owe taxes or have no reason to think that you owe any taxes (for example, you’ve never received a bill or the caller made some bogus threats as described above), then call and report the incident to the Treasury Inspector General for Tax Administration at 1.800.366.4484.
  • If you’ve been targeted by this scam, you should also contact the Federal Trade Commission and use their “FTC Complaint Assistant” at FTC.gov.  Please add "IRS Telephone Scam" to the comments of your complaint.

Taxpayers should be aware that there are other unrelated scams (such as a lottery sweepstakes) and solicitations (such as debt relief) that fraudulently claim to be from the IRS.

The IRS encourages taxpayers to be vigilant against phone and email scams that use the IRS as a lure. The IRS does not initiate contact with taxpayers by email to request personal or financial information.  This includes any type of electronic communication, such as text messages and social media channels. The IRS also does not ask for PINs, passwords or similar confidential access information for credit card, bank or other financial accounts. Recipients should not open any attachments or click on any links contained in the message. Instead, forward the e-mail to phishing@irs.gov.

More information on how to report phishing scams involving the IRS is available on the genuine IRS website, IRS.gov.

TOP


ELECTRIC CAR CREDIT PUTS $7,500 IN YOUR POCKET

by Andrew D. Schwartz, CPA

We've received quite a few questions recently about the federal income tax credit available to people who purchase electric cars. The maximum tax credit is currently $7,500, and there appear to be 24 manufacturers who produce electric cars at this time. 

The good news is that there is no income limitation for this $7,500 tax credit.  Plus. you can still claim this credit even if you are subject to the dreaded Alternative Minimum Tax.  According to the IRS, here is a list of the auto manufacturers who produce electric cars, along with a link that lists the tax credits allowed for each of their models:

Index to Manufacturers

Qualified Plug-in Electric Drive Motor Vehicles (IRC 30D)
American Honda Motor Co. Inc.
AMP Electric Vehicles, Inc.
Azure Dynamics
BMW of North America
Boulder Electric Vehicles, Inc.
BYD Motors Inc
Chrysler Group LLC
CODA Automotive
Electric Vehicles International
Electric Mobile Cars
Fisker Automotive, Inc.
Ford Motor Company
General Motors Corporation
Mercedes-Benz USA, LLC
Mitsubishi Motors North America, Inc.
Nissan North America
Porsche Cars North America, Inc.
Smart USA Distributor LLC
Tesla
Think
Toyota Motor Sales
VIA Motors, Inc.
Wheego Electric Cars, Inc.
Zenith Motors, Inc.

(Last Reviewed or Updated: 23-Jun-2014)

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 cumulative sales of the Nissan leaf at 64,782 and the Ford electric cars at 30,374 , there is no reason to believe that this credit will be phased-out any time soon for any of the brands.

Form 8936

If you purchase an electric car, use the Form 8936, Qualified Pug-in Electric Drive Motor Vehicle Credit to claim this valuable tax credit as part of your federal tax filing.

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UMBRELLA INSURANCE IS MALPRACTICE COVERAGE FOR EVERYDAY LIVING

by W. Ben Utley, CFP and Lawrence B. Keller, CFP, CLU, ChFC, RHU, LUTCF

As a doctor, you have a bright red target painted on your back with a big dollar sign in the bull’s eye. Everybody wants a piece of you. While there’s nothing you can do to keep them from suing you, you have plenty of options when it comes to protecting yourself.

 

At work, you have malpractice insurance. But what can you do about a liability you might incur throughout the course of your life outside your profession?

 

If you crash your car into someone, your auto insurance will cover you. If someone trips and falls on your property, your homeowner’s insurance covers that. But what if something really bad happens? What if the defense—and the damages—are substantially more than the limits on your policies?

 

You can pay the costs out of pocket if you have the resources. But if you don’t, the person who sues you may attach your future earnings to satisfy the liability.

 

Open Your Umbrella

 

To protect yourself, what you really need is something like malpractice insurance for everyday living. In fact, there is a special form of property and casualty insurance that’s layered on top of your homeowner’s and automobile insurance policies. Since it covers liability “above and beyond” that afforded by your base layers, it’s known as “umbrella” insurance.

 

This “excess liability insurance policy” sits on top of your other coverage and picks up the liability where the base layers leave off. It can pay for your legal defense and cover the damages up to the limits of the policy.

 

For example, let’s say you are implicated in a motor vehicle accident and found liable for a bodily injury claim totaling $1,500,000. If your auto policy’s liability limit is $500,000 and you did not have an umbrella policy, you would be expected to meet the remainder of that claim ($1 million) yourself. However, if you had a $1,000,000 umbrella policy layered on top of your auto coverage, you would be adequately protected since your base policy would pay the first $500,000 and the umbrella policy would cover the rest of the claim.

 

Umbrella insurance may also protect you from losses not covered by basic liability insurance.  It often covers damages for unusual occurrences  including personal injury losses due to libel, slander, wrongful eviction, false arrest, and invasion of privacy.  Your umbrella liability policy might also pay for damages incurred in situations where coverage from auto and homeowner’s insurance might not apply, as may be the case when you are traveling.

 

In addition, an umbrella policy might pay a proportionate share of a claim even if your basic liability insurance policy cannot pay its portion, either because you failed to comply with the conditions of the base policy or because the base layer insurer has become insolvent.

 

Be aware that umbrella policies usually do not protect you against damages you cause intentionally, liability that you accept contractually, liability related to planes, boats and other “toys” (which should be covered under other policies) or damages arising out of business or professional pursuits (which is usually covered by your malpractice insurance).

 

Big Risks, Little Premiums

 

If all this talk about millions of dollars makes you think, “this insurance must be expensive…” guess again. The perils covered by umbrella insurance are as rare as they are catastrophic, and the premium reflects this fact. The average $1 million umbrella policy comes with an annual premium ranging from $300 to $500, while a $5 million policy might cost you $600 to $700 per year, or about two dollars a day. If you have a weak credit history, a bad driving record, or teenage drivers in your household, you may pay a little more.

While paying the premium is easy, knowing how much coverage to get is the hard part since it’s not an exact science. The best practice here is to get somewhere between $1 million in umbrella coverage (obeying the “something is better than nothing” principle) and as much as your insurer will allow (which conforms to the principle of least regret).

Getting enough insurance to cover all your assets plus another $500,000 for legal defense seems like the happy medium. For example, a physician with a net worth of $2 million might opt for $2.5 million in coverage. As you make your decision, you might also consider factors such as how often you have guests in your home, how many miles you drive and whether your kids are likely to cause you to incur liability.

The best place to start shopping for coverage is with the insurance companies who currently cover your autos and your home since these policies are prerequisites for coverage.

When you set up your coverage, make sure there’s no gap between the top limit of your base layer coverage and the bottom limit of your umbrella policy. For example, if you have a $300,000 liability limit on your home, you might find yourself out of pocket for $200,000 when you incur a $1.5 million liability and also have $1 million in coverage from your umbrella policy. The first $300,000 would be paid by your base layer, then you would pay the next $200,000 and your umbrella would pay the remainder of the claim. A little diligence in the process can save you a bundle.

As a doctor, you already know people think you’ve got deep pockets. By putting a cheap but vital second layer of coverage on top of your base layers, you can show them the money if your legal team can’t show them to the exits first.

About the Authors

Lawrence B. Keller, CFP, CLU, ChFC, RHU, LUTCF is the founder of Physician Financial Services. Based in New York, he offers income protection and wealth accumulation strategies for physicians nationwide. Contact him at (800) 481-6447 or LKeller@physicianfinancialservices.com.

W. Ben Utley, CFP, is an attending advisor with Physician Family Financial Advisors, a fee-only financial planning firm helping physicians throughout the U.S. to make a plan and get on track with saving for college and invest for retirement. Visit PhysicianFamily.com.

 TOP


TAX AND FINANCIAL PLANNING CALENDAR FOR AUGUST 2014

Month

Income Taxes

Saving and Investing

 

 

 

August

  • Returns on extension are no longer due 8/15.  For 2014, you have until 10/15 to file returns that have been put on extension.

 

  • Consider rolling your old retirement accounts  held at a previous employer into your current employer's 401(k) or 403(b) plan to consolidate your finances
  • If your income will be too high for 2014 to contribute to a Roth IRA this year, consider making a non-deductible contribution to an IRA to convert to a Roth before December 31st.

 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, 2015 to make your 2014 IRA contributions. 

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This Month's Topics

Beware Of Phone Calls From Scammers Claiming To Be IRS Agents

Electric Car Credit Puts $7,500 In Your Pocket

Umbrella Insurance Is Malpractice Coverage For Everyday Living

The FICA Refund for Medical Residents 

2013 & 2014 Tax Facts

Tax and Financial Planning Calendar for August 2014

 

NEWSLETTER ARCHIVES
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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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