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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

November 2016

IRS ANNOUNCES FEW INCREASES TO RETIREMENT SAVINGS LIMITS FOR 2017

by Andrew D. Schwartz, CPA

On October 27th, the IRS announced the cost of living adjustments applicable to the various retirement plan limitations for 2017.  Unfortunately, for the second year in a row, the bulk of the retirement savings limits will not increase from 2015 levels. 

No Increases for 2017

Most working professionals have access to a 401(k) plan or a 403(b) plan at work.  Amounts contributed to these plans generally reduce your taxable earnings and always grow tax deferred.  Like 2015 and 2016, you can contribute up to $18,000 into a 401(k) or 403(b) plan through salary deferrals in 2017.

Anyone 50 or older by December 31, 2017 can contribute an extra $6,000 into their 401(k) or 403(b) plan through salary deferrals next year, for a total annual contribution of $24,000.  That is the same as what was allowed for the prior two years. Please note that you don't need to actually wait until your 50th birthday to be able to start making these catch-up contributions, so adjust your deferrals as of the first paycheck of that monumental year.

Many smaller employers offer their staff access to SIMPLE/IRAs instead.  SIMPLE's work just like 401(k) plans, which means it's up to you to fund the bulk of this retirement savings account through salary deferrals.  For 2017, the maximum contribution into your SIMPLE as salary deferrals remains at $12,500.  Anyone 50 or older by December 31st can sock away an additional $3,000 in 2017, for a total annual salary deferral of $15,500, unchanged from 2016.  Your employer will generally make matching contributions into your account of up to 3% of your salary.

And if you are self-employed, you can contribute up to 20% of your net self-employment income into a SEP IRA.  The maximum contribution into your SEP IRA for 2017 increases by $1,000 to $54,000.  Solo 401k's allow self-employed individuals to hit the $54k max on less income, and increases the max for people 50 and over to $60k.

Increase to IRAs

Don't forget about IRA's.  Even if you're covered under a retirement plan at work, you and your spouse can each contribute up to $5,500 into a traditional IRA or Roth IRA next year, as long as your combined wages and net self-employment income exceeds the total amount contributed.  Anyone 50 or older can contribute an extra $1,000, increasing the total allowable contribution to $6,500.  You have until April 15, 2018 to contribute to your IRAs for 2017.

There is a bit of good news for people looking to contribute to a Roth IRA in 2017.  The amount you can earn and still contribute to a Roth did increase by $1,000 for single individuals and $2,000 for joint filers as follows:

  Single Individuals Married Couples
Phase-out begins $118,000 $186,000
Phase-out ends $133,000 $196,000

If your income is too high for a Roth, don't forget that the rules changed a few years ago, eliminating the income limitation as of 2010 for people looking to convert their IRAs to a Roth IRA.  This tax law change provides high-income taxpayers with a great opportunity to get money into these tax-free investment accounts.  Lately, we've written a lot of articles on Roth Conversions, which you can locate on our Newsletter Archive.

And finally, if you're married and your spouse isn't covered under either an employer sponsored or self-employed retirement plan during the year, the phase-out range for your spouse making a deductible IRA contribution has increased to $186,000 - $196,000 for 2017, which is identical to the Roth IRA phase-out limits.

Re-Set Your 2017 Retirement Savings Budget

Most people won't be able to max out these tax-advantaged retirement options unless they get on a budget and put away a set amount of money each month.  With 2016 winding down, now's the time to start thinking about resetting your monthly retirement savings goals for 2017.

2017 Maximum Retirement Account Contributions


Retirement Savings Option
 
Under the age
 of 50
50 or older by December 31st

401(k) or 403(b) deferrals
 
$18,000
($1,500/month)
$24,000
 ($2,000/month)

SIMPLE IRA deferrals
 
$12,500
($1,041.67/month)
$15,500
 ($1,291.67/month)

SEP IRA
 
$54,000
($4,500/month)
$54,000
($4,500/month)

Solo 401(k)
 
$54,000
($4,500/month)
$60,000 or
($5,000/month)

IRA or Roth IRA
 
$5,500
($458.33/month)
$6,500
($541.66/month)

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SOCIAL SECURITY MAX JUMPS TO $127,200 FOR 2017

by Andrew D. Schwartz, CPA

Most years, the government bumps up the maximum Social Security taxes that you can pay.  For 2017, the maximum wage base jumps to $127,200, an increase of $8,700, or 7.3%, over the max of $118,500 that was in place for 2015 and 2016. 

The Social Security Administration predicts that 12 million individuals will end up paying higher taxes due to this increase, out of the estimated 173 million workers who will pay Social Security taxes next year. 

At a rate of 6.2%, the maximum Social Security taxes that your employer will withhold from your salary is $7.886.  This is $539 higher than the 2016 max of $7,347. 

Why such a big increase this year?  According to the Social Security Administration, the annual change is based on the National Wage Index.

However, there is an exception built into the rules that the Wage Base doesn't increase in any years that Benefits don't increase.  That is why the wage base remained at $118,500 for the prior two years, even through the National Wage Index increased from September 2014 to September 2015.  This year, we are absorbing two years of increases to the index.

Higher Medicare Taxes Due To The Affordable Care Act:

As we wrote in our August 2012 Newsletter, on June 28, 2012, the Supreme Court upheld most of the provisions of The Patient Protection and Affordable Care Act, including the increase to the Medicare taxes high-income taxpayers will pay starting in 2013.

Starting in 2013, the employee portion of the Medicare tax jumps from the current rate of 1.45% to 2.35% on earned income in excess of $200k for single individuals and $250k for married couples filing a joint tax return. As of now, the employer will continue to match their employees' Medicare taxes at a rate of 1.45%, which means the total Medicare tax will be 3.8% for high-income taxpayers. This tax is reported on the Form 8959.

For example, if you're single, and earn $500k from your job, expect to pay $2,700 in additional Medicare taxes (($500k - $200k) * .9%) for 2013 and beyond.

To increase taxes for high-income individuals even more, the Medicare tax will also apply to unearned income for the first time since this tax was enacted. People over the $200k or $250k threshold should expect to pay Medicare taxes at a rate of 3.8% on interest, dividends, capital gains, and net rental income beginning in 2013. You will pay this tax in addition to any federal and state income taxes due on this income. This tax is reported on the Form 8960.

Calculating the Self-employment Tax:

If you're self-employed and earn more than $400 in net profit from your business, you're subject to social security and Medicare taxes as well. Known as the "self-employment tax", you'll need to complete a Schedule SE to calculate this tax, and then report the amount due on page 2 of your Form 1040.

The self-employment tax is based on a social security tax rate of 12.4% and a Medicare tax rate of 2.9%. These rates are double those paid by employees, since a self-employed person must pay both the employee's portion and the employer's portion of both taxes.  Remember, when you work as an employee, your employer matches the Social Security and Medicare taxes withheld from your pay.

Unlike most other taxes, when dealing with self-employment taxes, the more you earn, the less you pay in taxes.  If you earn income as an employee and as an independent contractor, and your combined income exceeds $118,500 in 2016, make sure to complete Section B of the Schedule SE. Otherwise, your tax calculation will be incorrect and you'll end up overpaying your self-employment taxes.

Do You Work For More Than One Employer in 2016 and Earn More Than $118,500?

For 2016, each of your employers withholds social security taxes from the first $118,500 that you earn from them.  If you work for more than one employer and your total salary from all sources exceeds that threshold, you'll have excess social security taxes withheld. Make sure to claim a credit for these excess taxes on your 1040 as additional federal taxes paid in.

For Example:

Let's say you work for two employers and earn $75,000 from each employer. Employer #1 withholds $4,650 in social security taxes ($75,000 * 6.2%). Employer #2 also withholds $4,650 in social security taxes - for a total of $9,300 in social security taxes withheld during the year. Since the maximum social security taxes that you should pay through payroll withholdings for 2016 is limited to $7,347, the excess of $1,953 counts as additional federal income taxes paid in by you.

A) Social security taxes withheld by Employer #1

$4,650.00

B) Social security taxes withheld by Employer #2

$4,650.00

C) Total social security taxes withheld during the year (A+B)

$9,300.00

D) Social security max for 2014

$7,347.00

E) Excess social security taxes withheld (C-D)

$1,953.00

www.ssa.gov

A great place to find out more about your social security taxes and projected benefits is at the Social Security Administration's website located at www.ssa.gov, or learn about what's new for the 2017 Social Security Changes.

FYI: The social security wage base has been increased each year. The wage base maximum has been increased as follows:

2017 wage base max: $127,200
2015 & 2016 wage base max: $118,500

2014 wage base max: $117,000
2013 wage base max: $113,700
2012 wage base max: $110,100
2009, 2010 & 2011 wage base max: $106,800
2008 wage base max: $102,000
2007 wage base max: $97,500
2006 wage base max: $94,200
2005 wage base max: $90,000
2004 wage base max: $87,900
2003 wage base max: $87,000
2002 wage base max: $84,900
2001 wage base max: $80,400
2000 wage base max: $76,200
1999 wage base max: $72,600
1998 wage base max: $68,400
1997 wage base max: $65,400
1996 wage base max: $62,700
1995 wage base max: $61,200
1994 wage base max: $60,600

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5 THINGS EVERY SAVVY BUSINESS OWNER KNOWS WHEN PICKING A REAL ESTATE AGENT

by Dave Miller  of Carr Healthcare Realty

A commercial real estate transaction can either catapult or cripple your business. As one the highest expenses of healthcare practices, a real estate negotiation needs to be handled by an expert. One small mistake on a lease or purchase can cost hundreds of thousands of dollars. 

Protect yourself and your business by identifying these five warning signs that you might be picking the wrong real estate agent.

  • The agent only shows you one property at a time.  As a business owner your time is extremely valuable.  You should be looking at multiple properties and evaluating them simultaneously.  This gives you leverage in your negotiations, back up plans in the event your first choice doesn't work out and a snapshot of the market in a competitive environment.  Every landlord is different in their willingness to earn your business. It is critical to have multiple options (whenever possible) so you don't miss a good deal.
  • The agent is on the flyer of the space you are looking at.  You are entitled to representation. If the agent you're working with has a listing agreement with the landlord, their fiduciary responsibility is to maximize that landlords profit. They cannot represent the landlord and adequately represent your interests as well.  Avoid conflicts of interest by signing an agreement with an agent that specializes in buyer/tenant representation.  
  • The agent is asking you questions about your business that are obvious to anyone who knows your industry.  Questions like, "What do you want to offer? How long of a term do you want? And how long does your construction typically take?" These are red flags that demonstrates that they do not know your industry or the needs of your business.  Medical and dental offices have specific electrical and mechanical needs that need to be addressed up front or they could be very costly.  Also, if they don’t understand your business and industry, they can’t sell the landlord on your value as a tenant.
  • Reputable professionals in your industry can't vouch for their experience.  Building a dental or medical practice is a collaborative process between your equipment specialist, contractor, architect, lender, and real estate agent.  If your agent is not in sync with those professionals it can turn your project into a nightmare. 
  • The agent has listings in your desired market.  If the agent has listings in the market you are looking in, they have a conflict of interest in representing you as a tenant or buyer and should be eliminated as an option to represent you.  That agent is financially incentivized to push you towards their listings. Also, they have existing working relationships with landlords in your market. If negotiations get tough, does your agent’s loyalty lie with the landlord or you?  You might miss the ideal property because it is listed by your agent’s biggest competitor.

Just like dental and medical professionals specialize, so do real estate agents. You wouldn't refer an Endodontist to give your patient braces.   The real estate agent who handles your transaction will impact the trajectory of your business for the next 20 years in either a negative or positive way.  Choose wisely!

Carr Healthcare Realty is the nation’s leading provider of commercial real estate services for healthcare tenants and buyers. Every year, hundreds of dental, medical, veterinary, and other healthcare practices trust Carr Healthcare Realty to help them achieve the most favorable terms on their lease and purchase negotiations. By not representing landlords or sellers, Carr Healthcare Realty is able to strongly advocate for healthcare providers and avoid conflicts of interest while saving their clients hundreds of thousands of dollars. Carr Healthcare Realty’s team of experts can assist with all types of real estate transactions, including lease renewals, expansions, relocations, startup offices, purchases, and practice transitions.

Visit www.carrhr.com to find an expert in your area to help with your commercial real estate needs.

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TAX AND FINANCIAL PLANNING CALENDAR FOR NOVEMBER 2016

Month

Income Taxes

Saving and Investing

 

 

 

November

  • Need to make applicable elections in connection with employer's flexible spending account
  • Good time to make semi-annual donation of clothing and household items to charitable organizations.  Don't forget to make a list, including each item's condition, since only items "good or better" qualify for deduction. 
  • Contact an MDTAXES CPA to discuss any year end tax planning questions or strategies
  • Determine whether  to convert your IRAs to a Roth IRA prior to 12/31/16.
  • Order your free credit report from here

 TOP


2015 & 2016 TAX FACTS

  • For 2015, the standard deduction for a single individual is $6,300 and for a married couple is $12,600. 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 2015, the personal exemption is $4,000. Individuals will claim a personal deduction for themselves, their spouse, and their dependents. 
  • The maximum earnings subject to social security taxes is $127,200 for 2017, up from $118,500 for 2015 and 2016.
  • The standard mileage rate is $.575 per business mile as of January 1, 2015, up from $.56 for 2014.
  • The maximum annual salary deferral into a 401(k) plan or a 403(b) plan is $18,000 in 2015, 2016 and 2017, up from $17.5k in 2014.  And if you'll be 50 or older by December 31st, you can contribute an extra $6,000 into your 401(k) or 403(b) account this year.
  • The maximum annual contribution to your IRA is $5,500 for 2014 through 2017.  And if you turn 50 by December 31st, you can contribute an extra $1,000 that year.  You have until April 15, 2017 to make your 2016 IRA contributions.

TOP

Need Help With Your Nanny Payroll?
 

This Month's Topics

IRS Announces Few Increases To Retirement Savings Limits For 2017

Social Security Max Jumps To $127,200 For 2017

5 Things Every Savvy Doctor Knows When Picking a Real Estate Agent

The FICA Refund for Medical Residents 

2015 & 2016 Tax Facts

Tax and Financial Planning Calendar for November 2016

 

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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