Summer hours are in effect: Our offices close at NOON on Fridays from May 17th to July 12th
Our offices are closed tomorrow 1/7/25 from 8am – 1pm for a firm event. Thank you.
Summer hours are in effect: Our offices close at NOON on Fridays from May 17th to July 12th
Our offices are closed tomorrow 1/7/25 from 8am – 1pm for a firm event. Thank you.
The U.S. Citizenship and Immigration Services (USCIS) has released a revised version of the Form I-9 (Employment Eligibility Verification). Employees must begin using the new version to verify a new hire's identity and work authorization by September 18, 2017. In the meantime, employers have the option of using the outgoing version, which is dated 11/14/16.
What is different in the new version?
Revisions to the instructions: Relatively minor revisions, such as changing the name of the Office of Special Counsel for Immigration-Related Unfair Employment Practices to its new name, Immigrant and Employee Rights Section.
Revisions to the list of acceptable documents:
What is Form I-9?
Form I-9 is used for verifying the identity and employment authorization of individuals hired for employment in the United States. All U.S. employers must ensure proper completion of Form I-9 for each individual they hire for employment in the United States. This includes citizens and noncitizens.
Both employees and employers (or authorized representatives of the employer) must complete the form. On the form, an employee must attest to his or her employment authorization. The employee must also present his or her employer with acceptable documents evidencing identity and employment authorization. The employer must examine the employment eligibility and identity document(s) an employee presents to determine whether the document(s) reasonably appear to be genuine and to relate to the employee and record the document information on the Form I-9. The list of acceptable documents can be found on the last page of the form. Employers must retain Form I-9 for a designated period and make it available for inspection by authorized government officers.
NOTE: State agencies may use Form I-9. Also, some agricultural recruiters and referrers for a fee may be required to use Form I-9.
With school out, parents and grandparents may be swimming in planning summer activities. The beginning of summer vacation is also a good time to think about Coverdell Education Savings Accounts (ESAs) — especially if the children are in grade school or younger.
One major advantage of ESAs over another popular education saving tool, the Section 529 plan, is that tax-free ESA distributions are not limited to college expenses; they also can fund elementary and secondary school costs. That means you can use ESA funds to pay for such qualified expenses as tutoring and private school tuition.
Other benefits
Other key ESA benefits include:
A sibling or first cousin is a typical example of a qualifying family member, if he or she is eligible to be an ESA beneficiary (that is, under age 18 or has special needs).
Limitations
The ESA annual contribution limit is $2,000 per beneficiary. The total contributions for a particular ESA beneficiary cannot be more than $2,000 in any year, no matter how many accounts have been established or how many people are contributing.
However, the ability to contribute is phased-out based on income. The phase-out range is modified adjusted gross income (MAGI) of $190,000–$220,000 for married couples filing jointly and $95,000–$110,000 for other filers. You can make a partial contribution if your MAGI falls within the applicable range, and no contribution if it exceeds the top of the range.
If there is a balance in the ESA when the beneficiary reaches age 30 (unless the beneficiary is a special needs individual), it must generally be distributed within 30 days. The portion representing earnings on the account will be taxable and subject to a 10 percent penalty. But these taxes can be avoided by rolling over the full balance to another ESA for a qualifying family member.
To learn more about ESAs or other tax-advantaged ways to fund your child’s — or grandchild’s — education expenses, please contact your tax advisor.
Did you know that you face a much higher probability of becoming disabled than of dying during your working years?
Considering that the average long-term disability absence lasts 2.5 years, your family’s finances — and your practice — could take a hit if you are disabled and have not prepared.
The Council for Disability Awareness’ most recent Long-Term Disability Claims Review shows that the following conditions are the leading causes of new disability claims:
You can use the calculator developed by the Council for Disability Awareness to calculate your own “disability quotient.” Access the calculator here.
You may have heard this before: Your health is your wealth. Your most important asset, as a medical or dental professional, is your intellectual capital and your ability to work. Even with basic disability insurance, you will probably be able to replace only 50 to 60 percent of current income, and monthly benefits will probably be capped.
To mitigate the risk of that loss, consider how a disability of any duration would impact your finances — and what you can do to prepare.
1. Review your current income and monthly expenses.
Start with an honest appraisal of your lifestyle. If your income stream was disrupted, would you be able to maintain financial commitments such as private schools for the kids, philanthropic undertakings and planning for a comfortable retirement? What about any lingering educational debt? Then, factor in the normal costs of living (mortgages, healthcare, etc.) and ask yourself if your assets and income will cover expenses.
Action: Determine how expenses could be adjusted to eliminate unnecessary spending in the event of disability. Review potential sources of income to replace your current paycheck and help weather the disability crisis.
2. Consider the long-term impact of a disability.
A disability can potentially rob you of the ability to earn a living. In the case of a permanent disability, the potential loss of income can run into the millions of dollars for a physician or dentist whose career spans 20-30 years. At the same time your earning potential dries up, medical and other bills related to the disability only increase. For example, there may be costs for specialized transportation, ongoing care and alterations to accommodate your disability.
Action: Determine the income you would need to replace and the potential expenses that would need to be covered in the event of your disability. Then figure out if you have the personal savings, investments or other financial resources to cover them.
3. Consider the impact on your practice.
What about the income of the practice? For example, if you are a sole practitioner and a disability keeps you from generating revenue for any length of time, you might not have a practice to return to.
Action: Think through what would happen if you needed to use personal assets to keep the practice open. Last-resort options might include using credit cards to pay expenses, obtaining a second mortgage, using a home-equity line of credit or withdrawing money from a retirement plan.
4. Salt away some savings.
Long-term disability insurance typically kicks in only after 90 or 180 days, so it is important to be able to cover expenses until the elimination period has been completed and benefits start flowing.
Action: If you haven’t already, make sure you have access to enough liquid funds to cover anywhere from three to nine months of living expenses. This could be CDs, Treasury Bills or even a line of credit.
After you’ve reviewed the impact of disability and your current disability coverage, determine what additional disability coverage and overhead continuation insurance you might need.
The threat of disability is real. Let our experienced accounting professionals help you run the numbers to see if you are prepared to weather a disruption in income.
It’s an age-old conundrum: determining whether a worker is an employee or an independent contractor. While it might seem like a simple question, it’s not. And the IRS is hot on the heels of any contractor who doesn’t understand the difference.
For example, in the traditional employer-employee relationship, the employer is responsible for a number of tasks, such as withholding federal and state income taxes, paying unemployment taxes (FUTA), withholding the employee’s share of FICA and Medicare taxes, remitting the amounts withheld, and paying both the employee and employer portions of FICA and Medicare taxes.
Independent contractors are responsible for their own taxes. In addition to making estimated tax payments for their federal and state income tax liabilities, they’re subject to self-employment tax, which covers both the employer and employee shares of FICA. (They are, however, entitled to a deduction for the “employer’s” portion.)
Because it’s easier and cheaper to collect taxes from a single employer than from multiple independent contractors, the IRS has a strong preference for employee status. If the IRS reclassifies independent contractors as employees, it can go after your company for back taxes that should have been paid, payroll and income taxes that should have been withheld, and penalties and interest.
Additional penalties may apply if the IRS finds that you intentionally disregarded your tax obligations. And, of course, your state may impose penalties of its own. Finally, “responsible persons” — including certain officers, partners and managers — could be personally liable for uncollected taxes.
Even if workers you treat as independent contractors have paid their taxes, you’re not necessarily safe. If the IRS finds they should have been classified as employees, it still may hit you with penalties equal to 20% of your tax liability.
The simplest way to avoid these consequences is to treat workers as employees unless they clearly qualify as independent contractors. The IRS typically examines and weighs numerous factors to determine whether a worker is an employee or independent contractor. These considerations indicate to the agency the degree of control exercised by the employer and the degree of independence of the worker.
For instance, the IRS looks at behavioral control such as instruction (employees usually receive detailed instructions about when, where and how to work) and training (employees often receive training on how to perform their job duties).
The type of relationship is also important. Does the individual receive benefits? Is he or she working for the business indefinitely? Are his or her services critical to the company’s ongoing operations? Affirmative answers to any or all of these questions would bolster an IRS case that the person in question is an employee, not an independent contractor.
Another important issue is financial control. The IRS will look for unreimbursed business expenses, which are usually incurred by independent contractors, not employees. Independent contractors often make significant investments in facilities and equipment as well. Employees don’t.
In addition, employees are usually paid by the hour, week or some other period. But independent contractors generally receive a flat fee or submit an invoice for services. So method of payment is a key consideration. Independent contractors will also often continue marketing themselves while working on a given project and risk suffering a profit loss on every job.
Ultimately, no one factor controls the outcome. You need to examine and weigh all the factors to determine whether a particular worker is an employee or independent contractor.
If you are uncertain about the status of your workers, contact your tax advisor. He or she can help you determine which workers are truly employees and which are independent contractors. In the event that contractors are misclassified, your tax professional can advise you whether the IRS Voluntary Classification Settlement Program is a good option for you.
For additional information on determining status, see the IRS guidelines here.
When President Obama signed into law the 21st Century Cures Act on December 13, 2016, most of the media coverage focused on the provisions related to medical innovation. But the law also includes some good news for small businesses that have been prohibited in recent years from providing their employees with Health Reimbursement Arrangements (HRAs). Specifically, as of January 1, 2017, qualified small employers can use HRAs to reimburse employees who purchase individual insurance coverage, rather than providing employees with costly group health plans.
Employers can use HRAs to reimburse their workers’ medical expenses, including health insurance premiums, up to a certain amount each year. The reimbursements are excludable from employees’ taxable income, and untapped amounts can be rolled over to future years. HRAs generally have been considered to be group health plans for tax purposes.
The Affordable Care Act (ACA) prohibits group health plans from imposing annual or lifetime benefits limits and requires such plans to provide certain preventive services without any cost-sharing by employees. According to previous IRS guidance, “standalone HRAs” — those not tied to an existing group health plan — didn’t comply with these rules, even if the HRAs were used to purchase health insurance coverage that did comply. And businesses that provided the HRAs were subject to fines of $100 per day for each affected employee.
The IRS position was troublesome for smaller businesses that struggled to pay for traditional group health plans or to administer their own self-insurance plans. The changes in the 21st Century Cures Act give these employers a third option for providing one of the benefits most valued by today’s employees.
The law incorporates an earlier bill known as the Small Business Healthcare Relief Act in creating an exception from the ACA penalties for “Qualified Small Employer Health Reimbursement Arrangements” (QSEHRAs). These HRAs won’t be treated as group health plans. Employees won’t be required to pay taxes on the employer’s contribution, nor will the employer be liable for payroll taxes on it.
In addition, when an employer offers an HRA, all employees generally must be eligible unless they’re within their first 90 days on the job, under age 25, part-time or seasonal workers, covered in a collective bargaining unit, or certain nonresident aliens.
Employers that offer QSEHRAs must comply with some notice requirements. At least 90 days before each plan year begins (or on the first day a new employee is eligible), the employer must provide eligible employees a notice stating:
Failure to provide timely notice will subject an employer to a $50 penalty for each employee, up to $2,500 annually. Notice will be considered timely for 2017 if provided by March 31, 2017.
In addition, employers must report the value of any QSEHRA benefit on employees’ Forms W-2, beginning with forms issued in January 2018 for 2017. Future IRS guidance on such reporting is expected.
An employee’s eligibility for subsidies for individual insurance will be affected by his or her eligibility for a QSEHRA. If the QSEHRA makes health insurance “affordable” (meaning Silver-level coverage would cost no more than 9.69% of the employee’s household income), the employee won’t qualify for a subsidy. If the QSEHRA doesn’t make health insurance affordable, the employee can receive a subsidy but the amount will be reduced by the amount of the HRA benefit.
Although President-elect Trump and the Republican Congress have promised to repeal the ACA, the QSEHRA exception in the 21st Century Cures Act could complicate matters. If smaller employers take advantage of the exception, the individual insurance market is likely to expand and the risk pool is likely to diversify. This could both stabilize premiums and give more citizens a stake in preserving some of the ACA’s provisions.
If you need guidance on your insurance or other benefits planning during this uncertain time, we can help.
The year is quickly drawing to a close, but there’s still time to take steps to reduce your 2016 tax liability — you just must act by December 31. Here are six actions to consider taking:
1. Prepay tuition bills for academic periods that will begin in January, February or March of 2017 (if it will make you eligible for a tax credit).
If your 2016 adjusted gross income (AGI) qualifies you for the American Opportunity credit (maximum of $2,500 per eligible student) or the Lifetime Learning credit (maximum of $2,000 per family), consider prepaying tuition bills that aren’t due until early 2017 if it generates a bigger credit on this year’s tax return. You can claim a 2016 credit based on prepaying tuition for academic periods that begin in January through March of 2017.
Bear in mind that both the American Opportunity credit and the Lifetime Learning credit can be reduced or eliminated if your modified adjusted gross income (MAGI) is too high. For the former, the current MAGI phaseout range for unmarried individuals is $80,000 to $90,000 and the range for married couples filing jointly is $160,000 to $180,000. For the latter, the phaseout range for unmarried individuals is $55,000 to $65,000, and for married couples filing jointly it’s $111,000 to $131,000.
If you’re ineligible for these two higher education tax credits because your MAGI is too high, you might still qualify for a deduction of up to $4,000 of qualified higher education tuition. However, you can’t claim the deduction for the same year you claim an education credit or if anyone else claims an education credit for the same student for the same year.
2. Donate to your favorite charities.
If reducing your taxable estate is an important estate planning goal for you, making lifetime charitable donations can help achieve that goal and benefit your favorite organizations. In addition, by making donations during your lifetime, rather than at death, you’ll receive income tax deductions.
Consider making charitable gifts of appreciated stock if you plan to make significant charitable donations before year-end. If the appreciated stock has been held for one year or more, you’ll avoid paying tax on the appreciation but will still be able to deduct the donated property’s full value. There’s paperwork involved with the donation of appreciated stock, so start now to give yourself and your investment advisor enough time to complete the donation before year-end.
To take a 2016 charitable donation deduction, the gift must be made by December 31. According to the IRS, a donation generally is “made” at the time of its “unconditional delivery.” But what does this mean? Is it the date you, for example, write a check or make an online gift via your credit card? Or is it the date the charity actually receives the funds — or perhaps the date of the charity’s acknowledgment of your gift?
The delivery date depends in part on what you donate and how you donate it. Here are a few examples for common donations:
3. Sell investments at a loss to offset capital gains you’ve recognized this year.
Selling investments that are currently worth less than what you paid for them and are held in taxable brokerage accounts may allow you to lower your 2016 tax bill. Why? Because you can offset the resulting capital losses against capital gains from earlier in the year.
If your losses exceed gains, you’ll have a net capital loss for the year. You can deduct up to $3,000 of net capital loss (or $1,500 if you are married and file separately) on this year’s return against ordinary income from salary, self-employment activities, alimony, interest, and other types of income. Any excess net capital loss is carried forward to future years and puts you in position for tax savings in 2017 and beyond.
However, be aware of the wash-sale rules, which preclude the deductibility of losses in certain situations. If, for example, you sold a security the last week of December for a loss and then bought it back the first week of January next year, you wouldn’t be able to use the loss to offset your 2016 gains.
4. Avoid a 50% penalty by taking retirement plan RMDs.
After you reach age 70½, you must take annual required minimum distributions (RMDs) from your IRAs (except Roth IRAs) and, generally, from your defined contribution plans (such as 401(k) plans). You also could be required to take RMDs if you inherited a retirement plan (including Roth IRAs).
If you don’t comply — which usually requires taking the RMD by December 31 — you can owe a penalty equal to 50% of the amount you should have withdrawn but didn’t.
5. Make 2016 annual exclusion gifts.
The 2016 gift tax annual exclusion allows you to give up to $14,000 per recipient tax-free — without using up any of your gift and estate or GST tax exemption. A married couple can give $28,000 to each recipient. (The exclusion amount will remain the same for 2017.)
The gifted assets are removed from your taxable estate, which can be especially advantageous if you expect them to appreciate. That’s because the future appreciation can avoid gift and estate taxes. Because the exclusion doesn’t carry over from year to year, you need to use your 2016 exclusion by December 31.
6. Incur deductible medical expenses (if your deductible medical expenses for the year already exceed the applicable floor).
Consider bunching nonurgent medical procedures (and any other services and purchases with timing that you can control without negatively affecting your or your family’s health) into one year.
Medical costs are deductible only to the extent they exceed 10% of AGI for people younger than age 65. However, if you or your spouse will be age 65 or older as of year end, the deduction threshold for this year is only 7.5% of AGI. (In 2017, this threshold will increase to 10% of AGI for people age 65 or older.) These taxpayers may want to bunch medical expenses into 2016 to potentially be able to take advantage of the 7.5% floor.
Keep in mind that in certain situations these strategies might not make sense. We’d be pleased to help you determine the right steps to take now to lessen your 2016 tax bite.
It’s a fact of life that physicians and dental professionals operate under an increased level of scrutiny. Increasingly, compliance checks are digging in to more than charts and coding. The IRS is paying particular attention to these hot-button compliance areas:
Is your practice classifying hired physicians as independent contractors? The IRS may come knocking for a look at your payroll records. Violations can result in practice owners and officers being held individually liable for back payroll taxes (including withholding taxes) plus penalties and interest.
Generally, for professionals, the IRS looks at three important factors to make the legal distinction between the employee vs. contractor status of a physician/dentist:
Experts in employment law say that, against this backdrop, most hired physicians/dentists legally fall under the category of employee. Obvious exceptions include physicians and dentists who do locum tenens or who have their own professional medical entities and bring their own ancillary personnel to the job.
Action: To avoid sending up an audit red flag, don’t convert an existing physician employee to contractor status unless he or she has a significant change in job duties. And if you have workers doing the same job, don’t classify some as employees and others as contractors. Consult your attorney regarding appropriate classification and contracts.
Read More: To learn more about this important issue, see our January, 2016, article here.
Physicians who own their medical building are facing increased IRS scrutiny. In particular, auditors are looking for the cozy transactions that can occur when the medical practice is both the tenant and the landlord.
Action: Experts say the best approach is to treat it as if you were renting office space from someone you didn't know. Have a formal lease in place and make payments by physically writing a check or transferring money from your practice account into a separate medical building account.
Most states impose a “use tax” on certain personal property that was purchased from a seller outside of the state for use in that state. Essentially, it taxes the use of goods on which no sales tax has been paid. Unlike sales taxes, which are charged and collected by the vendor, the use tax is self-reported by the purchaser.
Action: If you purchase supplies or equipment from out-of-state vendors, determine whether state and local sales tax applies to these items. Then report any taxable sales on your monthly or quarterly sales tax report. Ask your CPA for guidance in this critical area.
Managing the typical 401(k) plan can be incredibly challenging, and the IRS (and Department of Labor) cuts offenders no slack. Penalties for noncompliance — even unintentional errors — may be severe, and can even result in the loss of a plan’s tax-deferred status.
One of the most common compliance errors involves failing to follow the terms of your original plan document — either taking actions that aren’t covered or allowed, or making changes to the plan document and then not following them in day-to-day practice. For example, maybe you’ve begun allowing participants to take out loans and hardship distributions, even though these weren’t included in your original written plan.
Action: Make sure you understand how to detect — and correct — errors in plan administration. Start by downloading the IRS’ comprehensive 401(k) Fix-It Guide at http://www.irs.gov/pub/irs-tege/401k_mistakes.pdf.
Head off an audit before it occurs by taking steps now to identify potential compliance problem areas. Contact our office for guidance in ensuring that your practice remains compliant in all areas of operation.
| Some tax refunds delayed next year to help combat tax identity theft |
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| In efforts to combat target areas of identity theft, no credit or refund will be issued before February 15 on returns processed in early 2017 with the Earned Income Credit and/or the Additional Child Tax Credit, due to a mandate enacted December 18, 2015 by the PATH Act. Since many of the fraudulent returns contain refundable credits, the delay in processing refunds will allow the IRS more time to analyze returns for validity. |