by The MDTAXES Network | Oct 4, 2023 | 2023 Oct
Effective January 1, 2024, the Corporate Transparency Act (CTA) establishes a new filing requirement for small business. Qualifying businesses must file a Beneficial Owner Information (BOI) report with Financial Crimes Enforcement network (FinCEN), a bureau under the Department of Treasury.
According to the bureau’s website, the expectation is that nearly all small businesses will meet the criteria and must file (Beneficial Ownership Information Reporting Rule Fact Sheet | FinCEN.gov).
The CTA details 23 exemptions from filing a BOI report. Notably exempt are “large operating companies” defined as any entity that “(a) employs more than 20 full-time employees in the U.S., (b) has filed a federal tax return or, if applicable, consolidated federal tax return recording more than $5 million in gross receipts or sales in the previous year and (c) has an operating presence at a physical office in the U.S” (FinCEN’s Proposed Rule: The Who, What and When of Beneficial Ownership Reporting under the CTA |… (williamsmullen.com))
Information on the reporting company itself that must be disclosed in the BOI report filing:
- Full name of the reporting company
- Any trade name or ‘doing business as’ name of the reporting company
- Business street address of the reporting company
- State or Tribal jurisdiction of formation of the reporting company
- IRS TIN of the reporting company
And for each beneficial owner identified, the reporting company must provide:
FinCEN defines “beneficial owner” as “any individual who, directly or indirectly, either (1) exercises substantial control over a reporting company, or (2) owns or controls at least 25 percent of the ownership interests of a reporting company”.
Entities registered before January 1, 2024 have one year to file initial reports. Entities registered after 1/1/24 will have 30 days from notice of registration to file. Penalties for reporting violations are severe, reaching up to $10,000 in fines and up to 2 years imprisonment for criminal violations.
by The MDTAXES Network | Oct 4, 2023 | 2023 Oct
Interest rates generally move in the same direction as inflation. And with inflation creeping up over the past year or so, interest rates being offered by banks have jumped up too.
If you have excess money sitting in your practice bank accounts, please take a few minutes to set up a companion savings account and transfer any money not needed for working capital into that account. You should be able to earn 4% or more on those funds previously earning no interest. That equates to $4k of interest on every $100k transferred into an interest-bearing account.
For working capital, we generally recommend that our clients keep just one to two months of expenses on hand. Expenses include your “non-doctor” overhead costs, the salaries and benefits paid to your associates, the salaries and benefits paid to you and your family members, loan payments, and money needed to invest back into the practice within the next year or so to purchase equipment or improve the facility.
Another option is to take distributions from your practice and personally invest those funds into a savings account. Personal savings accounts generally pay a higher interest rate than what banks offer for accounts owned by businesses. Please be aware that there might be a tax pitfall when taking distributions from newer practices. As long as you have owned the practice for a while and the bulk of the practice loans have been paid off, you should be able to take distributions from the practice and personally invest those funds into a high-yield savings account, certificate of deposits, or money market accounts without triggering a tax on “distributions in excess of basis”.
by The MDTAXES Network | Oct 4, 2023 | 2023 Oct
Your 2022 tax return needs to be filed by Monday, October 16. With the partnership and S-Corp extension filing date of 9/15 behind us, taxpayers that were waiting on late K-1’s should have received them by now.
And, if you filed an extension back in April to give yourself more time to fund your retirement plan for you and your staff if you operate your practice as an unincorporated business, the deadline to top off your retirement plan for 2022 is also 10/16/23.
by The MDTAXES Network | Sep 13, 2023 | 2023 Sept news
If you are starting your own business, opening up a private practice or thinking about implementing a new retirement plan for your existing business, you have several retirement plan options available to you.
Below is a list of the primary retirement plan options for small businesses summarizing the key features (for 2023) of each plan.
SEP-IRA
-
- Contribution limits:
- 25% of employee W-2 wages up to a maximum contribution of $66,000, or
- 20% of owners net SE income (for Schedule C and Partnership income) after the self-employment tax deduction up to a maximum contribution capped at $66,000
- Date to establish and fund the plan:
- The filing date of the tax return including extension
- Form 5500 annual tax return filing requirement:
- Best suited for:
- SE individuals/entities with no employees
- SE individuals/entities with employees who have worked for less than 3 years
- Moonlighting individuals paid as an independent contractor (1099-NEC) who decide to contribute additional amounts to a retirement plan when meeting with their tax preparer after December 31, 2023
Solo 401k
-
- Contribution limits:
- $22,500 as an employee/salary deferral contribution
- $7,500 as an employee/salary deferral catch-up contribution (if age 50 or greater)
- 20% of owner’s net SE income after self-employment tax deduction as an employer contribution, or
- 25% of employee W-2 wages as an employer contribution
- Total maximum combined contribution capped at $66,000 (or $73,500 including $7,500 catch-up contribution)
- Date to establish and fund the plan:
- Plan must be established by December 31 of the current year
- Employee/salary deferral portion must be contributed by December 31 of the current year
- Employer contribution must be contributed by the tax return filing date including extension
- Form 5500 annual tax return filing requirement:
- Once Plan assets equal or exceed $250,000 at the end of the tax year the Plan is required to file Form 5500-EZ
- Best suited for:
- Self-employed individuals with no employees except a spouse (and other employees that work less than 1,000 hours per year)
- Owner is not already part of a salary deferral plan (401(k), 403(b), SIMPLE) with another employer
- Owners that annually fund a “Back-Door Roth Conversion”
SIMPLE IRA
-
- Contribution limits:
- Employee elective deferral limited to $15,500 plus catch-up provision of $3,500
- Employer can either match employee elective deferrals (for only participating employees) dollar for dollar up to 3% of W-2 wages (which can be reduced to 1% in any 2 out of a 5-year period) or contribute 2% of W-2 wages (up to $330K of wages) for all eligible employees (including non-participating employees)
- Date to establish and fund the plan:
- Plan must be established by October 1 of the current year
- Employer contributions must be contributed by the tax return filing date including extension
- Form 5500 annual tax return filing requirement:
- Best suited for:
- Newly formed or small employer entities that want to offer a salary deferral retirement plan to their employees at minimal costs (with regard to both employer contributions and administration costs), and
- The owner either cannot afford or prefers not to make a large retirement contribution on his/her own behalf
401k
-
- Contribution limits:
- Employee elective deferral limited to $22,500 plus catch-up provision of $7,500
- Combined employee and employer contribution limited to $66,000 or $73,500 including a catch-up provision
- Typically set up as a Safe Harbor Plan for smaller entities – to guarantee the owner’s contribution is not limited:
- Non-Elective Safe Harbor Plan: 3% employer non-matching contribution for all eligible employees’ W-2 wages
- Enhanced Safe Harbor Match: dollar for dollar matching contribution up to 4% (not to exceed 6%) of W-2 wages for participating employees
- Date to establish and fund the plan:
- Plan must be established by December 31 of the current year
- Employer contributions must be contributed by the tax return filing date including extension
- Form 5500 annual tax return filing requirement:
- the Plan is required to file Form 5500-EZ
- Best suited for:
- Established entities that can afford the company contribution funding amount plus administrative costs
- The owner plans to significantly fund or maximize his/her retirement contribution
Navigating the maze of retirement plan options to find the best opportunity for your company is not a simple task. The list above provides a basic summary of information for small business retirement plans. And working with your tax advisor to fully discuss the pros and cons of each plan as it relates to your practice or business will assist you in determining the best retirement planning strategy for your company.
by The MDTAXES Network | Sep 13, 2023 | 2023 Sept news
The IRS recently issued proposed regulations requiring brokers to provide reports of digital asset transactions, including cryptocurrency sales, to their customers at year-end.
Per the proposed regulations, beginning with the 2025 tax/calendar year, brokers that provide digital asset transactional services to their customers will be required to track and report gross proceeds from these investments to their customers. Proceeds from digital asset transactions will be reported on a Form 1099-DA. For sales that take place after 2025 this new report will be required to include basis and capital gain information to facilitate the reporting of these transactions by taxpayers on their annual personal income tax return.
Because of the lack of a standardized tax reporting requirement for digital assets, the proposed regulations should simplify and clarify necessary tax information from these specialized investments and will facilitate the proper reporting of these investment transactions on personal income tax returns annually.
As these are only proposed regulations and not final, we will continue to track the progress of this new reporting initiative.
