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Useful Links: - 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.

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December 2010


by Andrew D. Schwartz, CPA


As of January 1, 2010, taxpayers with incomes exceeding $100,000 finally have the opportunity to convert their traditional IRAs and other qualified retirement accounts into a Roth IRA.  Plus, people who convert during 2010 can choose to report all of the income on their 2010 returns, or can split the income from the conversion over the following two tax years - 2011 and 2012.

The decision to convert existing retirement accounts to a Roth IRA carries tax ramifications that not only affect you now and down the road, but also impact your beneficiaries who someday stand to inherit your retirement accounts. If you have existing IRAs (traditional IRAs, rollover IRAs, SEP-IRAs, SIMPLE IRAs) and/or 401(k) or 403(b) accounts held with a former employer (or a current employer that allows in-service distributions), and are considering converting some or all of those assets to a Roth IRA, please contact your CPA who can help you work through a detailed analysis prior to your making a final decision.  If you aren't currently working with a CPA, the closest MDTAXES CPA can help you out.

Over the past few years, we wrote a lot of articles about Roth Conversions for our monthly newsletter.  You can find an index of all of our Prior Months' Newsletters on our Newsletter Archives.


You only have through December 31, 2010 to purchase energy efficient improvements for your home and qualify for a lucrative tax break.  The maximum credit is equal to 30% of the first $5,000 spent on high-efficiency heat pumps, air conditioners, and water heaters, or energy-efficient windows, doors, insulation materials, and certain roofs.  You can also claim the credit for certain types of asphalt roofs and for stoves that burn biomass fuel.

Even if you claimed the $500 tax credit a few years back for energy efficient improvements made to your home, you can still claim the full $1,500 tax credit for 2009 and 2010 as long as you make $5,000 worth of qualified energy efficient expenditures during that two year period.


Please note that the new rules did increase the standards for an energy efficient purchase to qualify for this tax credit.  Check out the products listed at to see if the energy efficient purchases you made qualify for this tax credit.

For more information about this tax break, download the Form 5695 available at



Properly valuing your donated clothing and household items has become more important these days.  If you ever get audited, there is a good chance that the IRS will use the new “good or better” standard as a way to greatly reduce the deduction they will ultimately allow you to claim. 

To help you put a value on the donated goods, we recommend that you use UDoGood, a new App for the iPhone and iPod touch now available on the App Store

More About UDoGood

UDoGood is an easy (and fun) App for the iPhone and iPod touch that helps you document, photograph and record your charitable donations of clothing and household goods.  UDoGood includes suggestions to help you determine the fair market value of your donations.  If you have an iPhone, UDoGood also lets you take photos of your donations to provide a visual record of your contributions.  Plus, with UDoGood, you can e-mail your list of donated goods to your tax preparer or to yourself.  

For more information about this App, please visit  Or, you can download this App onto your iPhone or iPod touch.

Apple, the Apple logo, iPod, and iTunes are trademarks of Apple Inc., registered in the U.S. and other countries. iPhone is a trademark of Apple Inc.



Watch Out For The States (Dental Talk Radio) (39 minutes)



by Andrew D. Schwartz, CPA

It's not too late to cut your 2010 tax bill. Prior to December 31st:

  • Increase your 401(k) and 403(b) contributions if you haven't been contributing at the maximum rate all year.  This year you can put up to $16,500 into your 401(k) or 403(b) plan.  Anyone 50 or older by December 31st can put away an additional $5,500.  Contributing to a 401(k) or 403(b) plan at work is one of the best tax shelters available to you during your working years.

  • If you’re self-employed, consider setting up a Solo 401(k) by 12/31.  A Solo 401(k) plan lets a self-employed person hit the $49k retirement plan max with less income than a SEP IRA, and also allows a person aged 50 or older to put away $54.5k into a retirement plan for 2010.

  • Take a look at your withholdings and instruct your employer to withhold additional taxes if you haven’t had enough taxes withheld during the year to avoid getting hit with an underpayment penalty.

  • Consider selling your investments held in non-retirement accounts that have decreased in value since your capital losses can offset other capital gains realized during the year (including from your mutual funds).  Excess losses can then be used to offset up to $3,000 of wages and other income.  Make sure to wait at least 31 days before buying back a security sold at a loss, or the IRS will disallow the loss under the "wash sale" rules.

  • Consider selling your investments that have increased in value if you are in the lowest tax bracket since the capital gains rate for you will be 0%, and this rule is slated to expire on 12/31/10.  You can then buy back those securities, and the "cost-basis" will be the higher amount.  This strategy will save you taxes down the road when you sell these securities.  Just make sure that the capital gains don't push you out of the 15% tax bracket, or you'll be taxed on those gains that fall outside that bracket.

  • Send in your January 2011 mortgage payment early enough so it will be processed prior to 12/31/10.  By sending in your payment a few weeks early, you can deduct the interest portion of that payment a full year earlier.

  • Clean out your closets and donate your clothing and household items to a charitable organization, since "non-cash" contributions are deductible if you itemize.  Don’t forget to get a receipt.  And you should make a list of each item donated, along with its condition.  Remember, only donations of clothing and household items in "good condition or better" qualify for a deduction.  (To track what you donate, download our Non-Cash Contribution Worksheet - Excel Version  or the PDF version, or use the App UDoGood.)

  • For gifts of money, making your donation by credit card before December 31st allows you to deduct the donation on this year's return, even if you don't pay your credit card bill until 2011.  And you always have the option of donating appreciated investments to charities. You get to claim your donation based on the value of the assets donated, without paying any capital gains taxes on the appreciation.

  • Pre-pay your projected state tax shortfall if you'll be itemizing your deductions and not subject to the alternative minimum tax.

  • Pre-pay and pay off your medical bills if your total medical expenses exceed 7.5% of your income and you itemize.

  • Evaluate whether you'll save any taxes by postponing 2010 income or deductions into 2011 or by accelerating 2011 income or deductions into 2010.




Income Taxes

Saving and Investing




  • 4th quarter state estimates should be paid by 12/31 for people who itemize their deductions and won't be hit by the AMT.
  • Keogh plans and Solo 401(k)'s must be established by 12/31
  • 529 Plans must be funded by 12/31 to take full advantage of this year's gift limit of $13,000.
  • Last chance to maximize annual contributions to your 401(k) or 403(b) plan of up to $16,500, ($22,000 if 50 or older).


2010 & 2011 TAX FACTS

  • For 2010, the standard deduction for a single individual is $5,700 and for a married couple is $11,400. 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 2010, the personal exemption is $3,650. Individuals will claim a personal deduction for themselves, their spouse, and their dependents. 
  • The maximum earnings subject to social security taxes is $106,800 for 2010 and 2011.
  • The standard mileage rate is $.50 per business mile as of January 1, 2010, down from $.55 per mile for 2009.
  • The maximum annual contribution into a 401(k) plan or a 403(b) plan is $16,500 in 2010 and 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 2010.  And if you turn 50 by December 31st, you can contribute an extra $1,000 that year.  You have until April 15, 2011 to make your 2010 IRA contributions. 


You're Invited to Attend Our Complimentary Presentation on:

Tax and Basic Financial Planning Issues Applicable to Young Healthcare Professionals

Here is a list of cities where the presentation will be held:

Boston - 1/20/11


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This Month's Topics

To Complete by December 31st:

Use UDoGood App To Track Donations Of Clothing And Household Goods

Checklist To Cut Your 2010 Taxes

The FICA Refund for Medical Residents 

2010 & 2011 Tax Facts

Tax and Financial Planning Calendar for December 2010


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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