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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 2013

OCTOBER 1ST IS DEADLINE TO PROVIDE STAFF WITH WRITTEN NOTICE ABOUT HEALTH INSURANCE

by Andrew D. Schwartz, CPA and Bill Stukey CPA

If your practice has revenues in excess of $500k and employs at least one person, the Affordable Care Act (ACA) mandates that you provide your staff with certain information pertaining to the health insurance benefits they receive from your practice.  The due date to provide your employees with a written notice is October 1, 2013.  At this time, there does not appear to be a requirement for employers to provide written notice to their staff on an annual basis.   

Even if your practice doesn't provide your staff with any health benefits, you are still required to distribute a written notice to all full-time and part-time employees by October 1st. And make sure to give any new staff members this written notice within 14 days of the hire date. 

The government was kind enough to provide the following two "model notices" for employers to use:

If you don't use the model notices, you must include the following three points in your version of the written notice:

  • The existence of the government-run health care exchanges/the marketplace, including a description of the services provided and the manner in which employees may contact an exchange to request assistance.

  • If the employer plan’s share of the total allowed costs of benefits provided under the plan is less than 60 percent of such costs, workers may be eligible for a premium tax credit if they purchase a qualified health plan through an exchange.

  • Employees who purchase a qualified health plan through an exchange may lose their employer’s contribution to any health benefits plan the organization offers. All or a portion of this contribution may be excluded from income for federal income tax purposes.

According to the rules, there is a penalty for non-compliance of $100 per each day that you are late distributing the written notices.  However, it appears that the penalty won't be enforced for the October 1, 2013 deadline.

As part of the PPACA, the federal government instituted the Federal Health Insurance Marketplace.  For more information about these new rules and to learn about how this new exchange might benefit you, go to www.healthcare.gov.

All I can say is that if you are en employer, it's going to be a confusing time trying to comply with these new PPACA rules, regardless of whether you offer your staff health insurance.

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ANSWERS TO FREQUENTLY ASKED QUESTIONS FOR INDIVIDUALS OF THE SAME SEX WHO ARE MARRIED UNDER STATE LAW

In June 2013, the US Supreme Court overturned Section 3 of the Defense of Marriage Act (DOMA), which defined a marriage as a union between a man and a woman for federal purposes.  With the historic June 2013 decision, same sex married couples (SSMC’s) have been granted the same federal rights, privileges, and protections as heterosexual married couples as long as they were legally married in states where same sex marriages are recognized. 

The IRS recently updated their FAQS for same sex married couples.

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A FEW REASONS TO OPEN A RETIREMENT PLAN FOR YOUR PRACTICE

by Andrew D. Schwartz, CPA

Let’s start by discussing some of the benefits of setting up and maintaining a Retirement Plan for your practice.  The first benefit is that contributions you make into the retirement plan are generally tax deductible, and then those contributions grow tax deferred.  Remember, contributing to a retirement plan is one of the best tax shelters available to people during their working years.

Here are a few questions I get all the time:

  • Why bother contributing to a retirement plan at all? 

  • Any why contribute now, especially since the stock market, until recently, hasn’t performed all that well during the past decade or so?

When you contribute to a retirement plan, the taxes you save provide you with an Immediate Return on your Investment.  Let’s assume you’re in the 28% federal tax rate, and you live in a state with a 5% rate.  So each additional dollar of income you earn is taxed at 33%.

In this scenario, you would earn an instant 49.25% return on your investment by contributing to a retirement plan. That’s because it only costs you $670 in after-tax dollars for every $1,000 that is now invested. You’ve already earned a whopping $330 on the $670 you invested.

Yes, you will owe income taxes on the money withdrawn from these accounts down the road, but you get to invest the government’s money over all those years that the money remains within your retirement accounts. And, you get to keep the investment earnings on the government’s money.  Trust me, investing the tax savings over time really adds up.  The compounded growth on the tax savings can easily add up to tens of thousands of dollars or more.

For example, $100k invested and earning an average of  8% per year over 25 years will grow to be worth $685k within a tax-deferred account.  What happens if you pay taxes each year at a 33% rate?  Since your compounded return falls from 8% to 5.35%, this $100k investment will grow to just $370k over 25 years, assuming all the income and growth within the account is fully taxed each year. That’s how powerful tax-deferred compounding can be.

There are additional benefits of a retirement plan.  For starters, money in most retirement plans is protected from your creditors. That’s great news for anyone in a profession like healthcare where getting sued is not completely out of the question. Please check with a lawyer to find out which types of retirement accounts are protected based on the rules for your state.

Plus, contributing to a retirement plan is one of the best ways to build a nest-egg to fund your post-working years.  Unless you work for a government employer or some other business that provides a lucrative pension, it’s up to you to make sure you have enough money set aside to fully fund a comfortable retirement.  And the earlier you start building our nest egg, the better chance you give yourself to reach your retirement savings goals.

Looking for additional benefits of maintaining a retirement plan for your practice?  Offering a retirement plan might be a way to help you attract and retain staff, and is also a great way to reward staff for loyalty and longevity at your practice.  Most practice owners would agree that having an engaged staff is a key ingredient to having a successful practice.

We're please to provide you with a recorded PowerPoint presentation narrated by yours truly (Boston accent and all) on Retirement Plan Basics for Practice Owners.  This presentation explains the benefits and costs of the most popular retirement plan options available to self-employed Doctors including SEP IRA, SIMPLE IRAs, Keoghs, Profit Sharing Plans, Safe Harbor 401ks, and Cash Balance Defined Benefit Plans.

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TAX AND FINANCIAL PLANNING CALENDAR FOR OCTOBER 2013

Month

Income Taxes

Saving and Investing

 

October

 TOP


2012 & 2013 TAX FACTS

  • For 2012, the standard deduction for a single individual is $5,950 and for a married couple is $11,900. 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 2012, the personal exemption is $3,800. Individuals will claim a personal deduction for themselves, their spouse, and their dependents. 
  • The maximum earnings subject to social security taxes is $113,700 for 2013, up from $110,100 for 2012.
  • The standard mileage rate is $.565 per business mile as of January 1, 2012, up one cent from $.555 per mile since July 1, 2011.
  • The maximum annual salary deferral into a 401(k) plan or a 403(b) plan is $17,500 in 2013, up from $17,000 in 2012.  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, up from $5,000 in 2012.  And if you turn 50 by December 31st, you can contribute an extra $1,000 that year.  You have until April 15, 2014 to make your 2013 IRA contributions. 

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Need Help With Your Nanny Payroll?
 

This Month's Topics

October 1st Is Deadline To Provide Staff With Written Notice About Health Insurance

Answers to Frequently Asked Questions for Individuals of the Same Sex Who Are Married Under State Law

A Few Reasons To Open A Retirement Plan For Your Practice

The FICA Refund for Medical Residents 

2012 & 2013 Tax Facts

Tax and Financial Planning Calendar for October 2013

 

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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