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October 2014


by Andrew D. Schwartz, CPA

The IRS launched their very user-friendly electronic filing system around 25 years ago during the late 80's. Since that time, people who e-file their federal income tax returns receive their tax refunds directly deposited into their bank accounts as soon as 10 days after electronically submitting the return.

While there are some checks and balances built into the IRS' e-file system, much of the system's integrity is based on nothing more than the population's collective honesty.  This na´vetÚ of the developers of the e-file system has left the federal government open to a multi-billion dollar fraud where scammers file fake tax returns using randomly obtained social security numbers and directing the refunds to be deposited into their reloadable debit cards or the scammer's bank account. 

As an example of a glaring oversight, the IRS waits until July to compare the W-2 information included as part of the e-filed tax return with their database of that year's W-2s filed by the country's employers.  With the current scam based on phony W-2 information being included as part of the fraudulently e-filed tax returns, this three or four month delay is a critical and easily exploitable weakness to the system.

While this identity tax refund fraud is growing exponentially, the IRS has moved slowly to come up with a solution.  In a recent article on Accounting Today, "...the IRS estimates it paid $5.2 billion in fraudulent identity theft refunds in the 2013 filing season, while preventing $24.2 billion in such refunds, based on what it could detect." 

How big is this problem for US taxpayers?  Big enough that 60 Minutes aired  an exposÚ about this fraud on their September 21st program available at:

We also wrote this article available on our May 2014 Newsletter: IRS Warns That Identity Theft Leading to Fraudulently Filed Tax Returns Is On The Rise.

To be honest, my tax return is on extension and I'm a little concerned that this fraud is so widespread that when I file my 1040 during the next few weeks it will be rejected due to another return already being fraudulently e-filed using either my social security number or my wife's.

With a projected fraud of $5 billion and growing, can't the government hire Google, Amazon, Microsoft, or Apple to help develop a system where each taxpayer is given a unique PIN?  I suggest that adding a PIN to each taxpayer's record is a viable solution costing significantly less than the $5 billion currently being stolen from our Treasury.



by Andrew D. Schwartz, CPA

Crap happens.  How prepared are you at your practice and/or at home to withstand an injury, illness, or other crisis that puts you out of commission for a period of time?

Written Contingency Plan:

A written contingency plan details the information other people would need to keep your business or household operating smoothly while you aren't available.  Here are some questions we'll be asking our practice owner clients as part of a risk self-assessment that we'll be competing with them during our upcoming year-end planning meetings:

  • Are check signing and other payment and/or signature authority in place if your are absent?

  • Is all the login info for websites and computer programs available in one place?

  • Is access info to voice mail and electronic messages available for your staff or family?

  • Does someone besides you have the location of keys, combinations to locks, and safe deposit boxes?

  • Is there an up-to-date listing of service contracts, leases, insurance policies and other legal documents?

  • Does your practice have coverage arrangements and/or referral options in place for patient treatment while the Doctor is unavailable?

Important Documents, Accounts, and Policies (I.D.A.P.):

About 10 years ago, we put together an article in the August 2003 Newsletter called Is Your I.D.A.P. List Up-To-Date?  The article also included a link to an Excel Spreadsheet so you can come compile your I.D.A.P. list.  Please use this tool to update your records as you develop a contingency plan for your practice or personal life.



by Schwartz & Schwartz Staff,

(Instead of reading this article you can watch their recorded presentation instead.)

Let’s talk 1099s.

Every business that makes payments during the year totaling $600 or more to any person or non-corporate entity (with certain exceptions) is required to file a Form 1099-Misc with the IRS and send a copy to the payee.  Examples of people who you might need to issue a 1099-Misc include:

  • Outside Contractors not paid as employees

  • Physicians, dentists and other healthcare providers working as Associates

  • Office cleaners and landscapers with unincorporated businesses

  • Lawyers (because some have not paid their taxes and then claim attorney/client privilege when audited.)

  • Landlords

Also, interest or dividend payments totaling $10 or more must be reported on Form 1099-Int or Form 1099-Div.

Please note the name, address, and identification number of the recipients are required on all 1099 forms. A good practice when hiring outside contractors is to have them complete a Form W9 before they start working for you. If they appear uncomfortable filling one out, that is a red flag to consider not hiring them to avoid future headaches with the IRS.

Also, please consider giving a copy of the W9 to your accountant. Be sure to inform the contractor that if they have an address change, they must contact your company to update their information. The 1099 might not be processed if an incorrect address is used. 

Please note: ALL LINES must be filled out to complete a W9 correctly. The process will go much more smoothly if this is done correctly the first time!

For payments made during the year, a copy of Form 1099 must be mailed to each recipient prior to January 31st; a paper copy of the printed 1099 is required to be filed with the Internal Revenue Service (IRS) on or before February 28th; and lastly a copy of the 1099’s must be E-Filed to the Internal Revenue Service on or before March 31st.

Late Filing Penalties:

Penalties for filing your Form 1099s late are as follows:

  • $30 penalty for filing a 1099 not more than 30 days late

  • $60 penalty for filing a 1099 more than 30 days late but before August 1

  • $100 penalty for filing a 1099 on or after August 1

  • $250 penalty for intentional failure to file

All the above discussed forms and instructions, various 1099s, W9s and more are available on the IRS website:

(Instead of reading this article you can watch their recorded presentation instead.)




Income Taxes

Saving and Investing




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 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 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. 


Need Help With Your Nanny Payroll?

This Month's Topics

60 Minutes Airs ExposÚ on The Biggest IRS Tax Scam Around: Identity Tax Refund Fraud

Do You Have A Contingency Plan In Place For Your Practice (And Your Life)? 

Preparing 1099s For Your Practice

The FICA Refund for Medical Residents 

2013 & 2014 Tax Facts

Tax and Financial Planning Calendar for October 2014


Browse our index of previous months' newsletter topics

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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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