This Month's Topics

  • Beware of the Alternative Minimum Tax
  • Get More For Your Money With Your Flexible Benefits
  • Save Money by Taking Advantage of Low Interest Rates
  • The FICA Refund for Medical Residents
  • Have you checked your credit report lately?
  • 2002 & 2001 Tax facts
  • Our NEWSLETTER ARCHIVES contains an
     index and links to our previous months' newsletters

     

    NEED HELP WITH YOUR TAXES?

    Check out our Directory of Affiliated Offices or click on our Map of the United States to find a CPA near you who specializes in the tax planning and preparation for young health care professionals.

     

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    HAVE YOU SIGNED UP FOR THE "UPROMISE" YET?

    When you join Upromise, you'll save for a child's education just by doing what you normally do everyday.  Through the program, companies contribute a portion of what you spend into a Upromise account for your child, grandchild, or any other future college student.  Believe it or not, you'll earn college savings when you buy toys, office supplies and gas, dine out, shop on-line - and even buy or sell a house or get a new mortgage.  To find out more about this great program, check out Upromise.com

     

    INTERESTED IN JOINING OUR NETWORK?

    If you're a CPA who provides tax planning and preparation services to young health care professionals, and you’d like to find out more about The MDTAXES Network, please give us a call at  (800) 471-0045 or e-mail us at info@mdtaxes.com. (Don't forget to include your mailing address.)

     

    First Annual MDTAXES Conference

    We're pleased to be hosting our first annual MDTAXES conference, exclusively for our member CPA firms, in New York City, on Saturday, November 16th.  During the conference, we'll focus on the 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.

     

     
    October, 2002

    ARE YOU DOING ALL THAT YOU CAN DO?

    Taking full advantage of the current tax rules can really help you stretch your savings dollar.  Are you on track to take full advantage of the current rules? 

    • Will you contribute $11,000 into your 401(k) or 403(b) account at work for 2002?  If you'll be 50 or older by December 31st, your maximum contribution this year is $12,000.

    • If youíre self-employed, do you intend to contribute the maximum into either a SEP, SIMPLE, or the new One-Person 401(k) Plan by April 15th?

    • Do you plan to contribute $3,000 into your traditional IRAs or Roth IRAs this year?

    • Will you (or a family member if your income is too high) contribute $2,000 into an Education Savings Account on behalf of each of your children?

    • Have you set up a 529 College Savings Account for each of your children, and will you fund that account with the maximum of $11,000 this year (or $55,000 to fund the plan to the extent allowable in one year)?

    • If you want to put away even more money for your retirement, have you started contributing to either a Variable Annuity or a Variable Universal Life Insurance policy?

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    GET MORE FOR YOUR MONEY THROUGH YOUR FLEXIBLE BENEFITS

    by Andrew D. Schwartz, CPA

    Trying to get more for your money has become an American pastime.  Retailers are always having sales, the auto industry is continually offering different incentives, and restaurants come up with new promotions all the time.  Over the years, consumers have embraced these discounts and have become accustomed to paying less than full price whenever possible.

    Besides paying discounted prices, a great way to get more for your money is by purchasing goods and services with "pre-tax dollars" versus "after-tax dollars".  Remember, because of income taxes, $100 of pre-tax dollars has the same purchasing power as approximately $166 of post-tax dollars.

    The Cafeteria Plan

    One place to find a variety of pre-tax opportunities is your benefits package at work.  These days, most employers offer benefits to their employees through a "cafeteria plan", which allow you to select your benefits, such as medical and dental insurance, from the options provided through the plan, and pay for only those benefits that you select.

    As a participant in a cafeteria plan, your employer will provide you with an allowance to purchase your benefits through the plan.  If your allowance exceeds the cost of the benefits selected, the excess is included in your paycheck as taxable wages.  If the cost of the benefits you select exceeds the allowance, you'll pay for the shortfall with pre-tax dollars.

    Flexible Spending Accounts

    As part of your benefits package, you probably have the option to set aside a portion of your salary, pre-tax, into a flexible spending account.  Most plans allow their employees to designate quite a bit of money for out-of-pocket medical and dental expenses, and up to $5,000 per year per family for dependent care expenses.  By taking advantage of your flexible spending account, you're able to pay for certain personal expenses with pre-tax dollars, thus getting more for your money.

    One downside to flexible spending accounts is that if you don't "use it, you lose it".  In other words, if you set aside money in your flexible spending account, but don't have enough expenses to cover the amount you set aside, the excess won't be paid out to you.  Instead, any money remaining in your flexible spending account at the end of the year will be lost.  

    Annual Benefits Review

    Since many employers allow you to change certain benefits only once a year (usually in the fall), now's the time to contact the benefits department to review your options.  Make sure to ask about the different pre-tax opportunities available through your employer's benefit plan.  Only by planning ahead will you be able to maximize your personal expenses that are paid with pre-tax dollars.

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    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's 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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    WONDERING HOW TO GET BACK $3,000 FROM THE GOVERNMENT FOR EVERY YEAR THAT YOU WERE A MEDICAL RESIDENT?

    For more information, go to our February, 2001 Newsletter

    TOP


    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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    TAX AND FINANCIAL PLANNING CALENDAR FOR OCTOBER, 2002

    Month

    Income Taxes

    Saving and Investing

    October

    • Returns on second extension due 10/15/02

    • Update your net worth statement using 9/30 information

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    2002 & 2001 TAX FACTS

    • For 2001, the standard deduction for a single individual is $4,550 and for a married couple is $7,600. 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 standard deduction has increased to $4,700 for single individuals and to $7,850 for married couples.
    • For 2001, the personal exemption is $2,900. Individuals will claim a personal deduction for themselves, their spouse, and their dependents.  For 2002, the personal exemption has increased to $3,000.
    • The maximum earnings subject to social security taxes has been increased to $84,900 in 2002 from $80,400 in 2001.
    • The standard mileage rate has been increased to $.365 per mile in 2002 from $.345 per mile during 2001. 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 been increased to $11,000 for 2002 from $10,500 in 2001.  And if you'll be 50 or older by December 31, 2002, you can contribute an extra $1,000 into your 401(k) or 403(b) account this year.

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    Tax and financial planning calendar for October, 2002


    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!"


    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)


    Save for your child’s college education just by doing what you normally do every day.

    Upromise.com - Save for College!

     


     

    Insurance.com - Life Insurance Quotes

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    The MDTAXES Network   (800) 471-0045 ~ fax (800) 547-8836    Email us at cpa@mdtaxes.com