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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

October 2012

COST OF MEDICAL DEVICES TO INCREASE BY 2.3% ON JANUARY 1ST

by Andrew D. Schwartz, CPA

Owners of medical and dental practices beware. Due to a provision included in the Affordable Care Act, the cost of medical devices is set to increase by 2.3% on January 1, 2013.

Called an Excise Tax, manufacturers are required to collect a tax equal to 2.3% of the sales price of each piece of equipment sold, and then remit that tax to the federal government.  Unless the manufacturer decides to reduce their prices by 2.3%, expect to pay more for your purchases of medical devices starting in 2013.

Let's say you purchase a medical device for $10,000.  As of January 1, 2013, your cost for that equipment will be $10,230.  Make capital expenditures of $100,000 for your practice, and you'll pay an extra $2,300 for that equipment starting next year.

Here is some information provided by our friends at the IRS regarding this new tax:

Medical Device Excise Tax: Frequently Asked Questions

The following questions and answers provide general information on the medical device excise tax. For more detailed information see the proposed regulations issued on Feb. 3, 2012.

Q. What is the medical device excise tax?

A. The medical device excise tax is a tax on the sale of certain medical devices by the manufacturer, producer or importer of the device.

Q. When does the tax go into effect?

A. The tax applies to sales of taxable medical devices by the manufacturer or importer after December 31, 2012.

Q. How much is the tax?

A. The tax is 2.3-percent of the price for which the manufacturer or importer sells the taxable medical device.

Q. Who is responsible for reporting and paying the medical device excise tax?

A. The manufacturer or importer of a taxable medical device is responsible for reporting and paying the tax.

Q. Will individual consumers be subject to any reporting or recordkeeping requirements?

A. No action is required by individual consumers.

Q. What form will be used to report the medical device excise tax?

A. The medical device excise tax is a manufacturers excise tax. Manufacturers excise taxes are reported on Form 720, Quarterly Federal Excise Tax Return.

Q. I’m not familiar with manufacturers excise taxes. Where can I learn more?

A. For more information about manufacturers excise taxes in general, see Chapter 5 of IRS Publication 510, Excise Taxes.

Q. Has the IRS issued guidance on the medical device excise tax?

A. The IRS and the Treasury Department issued proposed regulations on February 3, 2012. The IRS and the Treasury Department welcome comments on the proposed regulations.

Decreased Section 179 Deduction:

If you pay this 2.3% Excise Tax, you will add the tax paid to the cost of the equipment purchased.  You will then depreciate the cost of the equipment either over its useful life or claim the Section 179 election, which allows small business owners to write off the full cost of the business equipment they purchase all in one year. Please be aware that the maximum Section 179 deduction is slated to decrease to just $25,000 in 2013 - down from its 2012 limit of $139,000.

The reduced Section 179 max means a smaller depreciation deduction for small business owners in the year that the equipment is purchased.  However, you will ultimately claim depreciation  over its useful life equal to the full cost of the equipment.  Please note that Congress has already discussed increasing the Section 179 deduction to current levels or higher as an incentive for business owners to make capital expenditures.

For example: Let's say that you are planning to buy a piece of equipment for $100k. If you purchase the equipment in 2012, you can claim a Section 179 deduction of $100k in 2012.  If you wait and purchase the equipment in 2013, you'll claim a Section 179 deduction or $25k, and then will claim the remaining $75k over its useful life of 5 or 7 years.  Either way, you will ultimately claim depreciation equal to the full purchase price of the equipment.

You should also note that since you will add the 2.3% excise tax to the depreciable basis in your equipment, you will end up deducting this tax as part of the depreciation you'll claim.  Assuming you are in the highest tax bracket and also pay state and local income taxes, you will save as much as 1% in income taxes by paying this 2.3% excise tax.

Buy By 2012?

If you feel that the government will keep the Section 179 deduction at the $25k level starting in 2013 and you want to avoid paying the 2.3% Excise Tax, finalizing your purchases of medical devices prior to December 31st will make the most sense.  However, if you think income tax rates will increase substantially after 2012, then delaying the purchase of your equipment until 2013 or later, and depreciating that equipment over 5 or 7 years might save you taxes, even when factoring in this new Excise Tax.

With the November elections just one month away, you might consider waiting to see which candidate wins the Presidency and which Party controls the Senate and the House of Representatives before finalizing your practice's equipment purchases for the next year or two.

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GET UP TO ONE YEAR OF COLLEGE TUITION FOR FREE – GUARANTEED

by Todd Fothergill

The SAGE Scholars Tuition Rewards program is a college saving plan like no other. By enrolling in Tuition Rewards, students will earn guaranteed minimum scholarships at over 290 participating private colleges and universities across America. The scholarships can equal up to one full year's tuition!

 

Tuition Reward Points accrue like frequent flyer miles and are earned by saving and investing with SAGE's Financial Affiliates, which include 529 plans, banks, brokerage firms, credit unions, employers, financial service companies involved in cash-value insurance products, retirement plans, reverse mortgages and other instruments and with fee based college advisory firms who can award points in other ways. What makes Tuition Rewards even more unique is that you do not have to use the investment vehicle that is earning Reward Points to pay for college! How you pay for college is your choice.

Tuition Reward Points typically accrue annually at a rate of 5% (or 2.5% bi-annually or 1.25% quarterly) on the value of eligible assets. For example, if you’ve invested $10,000 with one of SAGE's Financial Affiliates, you will receive 500 Tuition Reward Points annually (assuming no change in asset value); if you invest $20,000, you will earn 1,000 Tuition Reward Points annually. The more you save, and the longer you're associated with our financial affiliates, the more Tuition Reward Points you'll earn!

Each Tuition Reward Point is equal to $1.00 in tuition discounts if the student attends a participating college or university. The accumulated points represent the minimum scholarship (grant or discount - non-loan based financial aid) that the student will receive. Yes, 20,000 Tuition Reward Points represent a guaranteed minimum $20,000 scholarship at any of our member schools. 

Students may be sponsored and receive Tuition Reward Points from multiple sponsors (ex: parents & grandparents,). A sponsor designates the Tuition Reward Points to students before August 31st between the student's junior and senior years in high school. A sponsor may provide Tuition Rewards to children, grandchildren, nieces, and nephews.

Students are eligible to be added to the SAGE Tuition Rewards Program from birth until the beginning of their junior year in high school (August 31st between the sophomore and junior years in high school is the cut-off date). 

Communication With Colleges

Participating colleges may send information to high school students and their families enrolled in the SAGE program -- enabling colleges to communicate to members who fit the college's student profile. Under no circumstances are investment details or account balances ever divulged to participating colleges.

No Restriction On How You Pay for College

Specific investments that have been used for the calculation of Tuition Reward Points need NOT be used for payment of college expenses. For example, you may not want to sell appreciated assets at this time, deferring capital gains tax. With the SAGE Tuition Rewards Program, you choose how you pay for college.

College Admission & Transfers

Our college list keeps growing, giving your child a larger number of schools to choose from. Rewards can only be used at participating colleges. Students do NOT need to pick a particular college now -- that's one beauty of the SAGE program.

Students must apply and be accepted through a participating colleges' normal admissions procedures to qualify for the reward. SAGE membership is not considered in the admissions process.

If students transfer from one participating college to another, the college accepting the student has the right to decide whether it will honor any unused Tuition Rewards.

If your child is a SAGE member but does not attend a participating college, you may have to pay "list price" for a college education. Being part of our unique college savings program will put you closer to meeting your financial goals. In all ways, SAGE will help you save for college!

For additional information on how you can participate in the SAGE Scholars Tuition Rewards program, please email Todd Fothergill(tfothergill@strategiesforcollege.com) or visit strategiesforcollege.net/sage. Todd is a SAGE authorized affiliate who can help you learn more about the program and how to enroll. 

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TAX AND FINANCIAL PLANNING CALENDAR FOR OCTOBER 2012

Month

Income Taxes

Saving and Investing

 

October

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2011 & 2012 TAX FACTS

  • For 2011, the standard deduction for a single individual is $5,800 and for a married couple is $11,600. 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 2011, the personal exemption is $3,700. Individuals will claim a personal deduction for themselves, their spouse, and their dependents. 
  • The maximum earnings subject to social security taxes is $110,100 for 2012, up from $106,800 for 2011.
  • The standard mileage rate is $.555 per business mile as of July 1, 2011, up from $.51 per mile for the first six months of 2011.
  • The maximum annual salary deferral into a 401(k) plan or a 403(b) plan is $17,000 in 2012, up from $16,500 in 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 2012.  And if you turn 50 by December 31st, you can contribute an extra $1,000 that year.  You have until April 15, 2013 to make your 2012 IRA contributions. 

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"Roundtable" Dinner Meeting for Dental Practice Owners
 
(and for dentists looking to purchase or open a practice.)

Please join Andrew and Richard Schwartz for an interactive evening dinner meeting in Wellesley. MA on Tuesday, 11/13

Winning Strageties: Tackle Your Toughest Employee Issues

 

Need Help With Your Nanny Payroll?
 

This Month's Topics

Cost of Medical Devices To Increase By 2.3% On January 1st

Get Up To One Year Of College Tuition For Free – Guaranteed

The FICA Refund for Medical Residents 

2011 & 2012 Tax Facts

Tax and Financial Planning Calendar for October 2012

 

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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