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Summer hours are in effect: Our offices close at NOON on Fridays from May 17th to July 12th
Please note: Our offices will be closed on July 16 and 17 for Employee Appreciation Days.
Summer hours are in effect: Our offices close at NOON on Fridays from May 17th to July 12th
Please note: Our offices will be closed on July 16 and 17 for Employee Appreciation Days.
A report from UBS Wealth Management Americas found that nine in ten millionaires say they make significant donations to charity, yet only 20% rate their giving approach as “extremely” or “very” effective. While the millionaires surveyed consider giving to be important, they often give haphazardly, in response to requests that come in. Only one in ten incorporates philanthropic giving into their financial planning. This “checkbook philanthropy” translates into lower satisfaction with the effect the donations have on the donors’ communities and broader society.
Notably, most millionaires see giving time to be as valuable as giving money and find the former more personally meaningful. Investors whose friends and family also are involved reap more satisfaction from the impact of their philanthropy than those who give or volunteer on their own.
So, what can not-for-profit's do if they want to address these findings? Encourage contributors to donate their time as well as their money. Also ask them to recruit family and friends for volunteer work and donations.
The Chronicle of Philanthropy’s annual compensation survey has found that executives of large not-for-profit's and foundations are starting to see bigger raises. This follows a long dry period during which the median annual increases basically just kept up with inflation.
For the 82 organizations on which the Chronicle had 2011 and 2012 data, the median change in salary was 4.9%. Since the end of the financial crisis in 2009, not-for-profits have increased top executive compensation modestly — on average about 3% per year. Excluding the organizations that reduced pay or kept it flat, the remaining organizations surveyed boosted their CEO pay in 2012 by 6.8%. The survey also found 18 CEOs with compensation exceeding $2 million. In comparison, chief executives of S&P 500 companies saw median compensation rise 9.5% in 2013, to $10.1 million.
Based on social-science research, a new online tool designed by the Low Income Investment Fund (LIIF) puts dollar values on the social impact of investments in areas such as affordable housing, child care centers and improved schools in impoverished neighborhoods. LIIF developed its “social impact calculator” to assess how effective it is in creating opportunity and reducing inequality.
The calculator estimates the monetized impact of investments. For example, the impacts of a high-performing school would include boosted lifetime earnings, reduced odds of incarceration and decreased health care costs for students. LIIF is making the calculator and its methodology fully accessible to others at liifund.org/calculator.
Second in a series.
So, you’ve landed that first big job out of residency or dental school. All the long hours and training have paid off, and you’re finally enjoying a rewarding salary and benefits.
The trick now is to make some smart moves to maximize the value of your new status as an employed physician or dentist. Here’s how:
The overall value of benefits packages can add up to 36 percent of pay for health care providers, according to data from HR consulting firm Towers Watson. But to take full advantage of your benefits package, you’ll need to understand the scope and effective date of each benefit. Does disability insurance provide long-term coverage — or only short-term? If your employer has provided an allowance for continuing education, when and how can it be used? Likewise, are paid vacation days a use-it-or-lose-it proposition, or can unused days be banked?
Unreimbursed business expenses generally will not provide a tax benefit, since you can only claim expenses that are more than 2 percent of your adjusted gross income. So make sure that your employer pays for — or that you are reimbursed for – things like office equipment and supplies, professional dues, medical equipment, and business meals and entertainment.
Employed physicians and dentists should sign up for their employer’s 401(k) as soon as they are eligible and start contributing on a monthly basis — at least enough to receive any employer match. The trick is to start early and let the incredibly powerful effect of compounding work in your favor.
Of course, any contributions to the company retirement plan should be balanced against the need to pay down debt. Review all your debt, interest rates and due dates. Here, it’s important to review your options for refinancing credit card debt and school loans. Ultimately, you’ll want to prioritize debt reduction so that the highest-rate, non-deductible interest is paid off first.
Employer-provided disability coverage may leave dangerous gaps. Review coverage with an experienced agent and consider beefing up coverage with policy riders to ensure that you obtain benefits specific to your needs and for as long as possible. Common riders include coverage for own occupation, residual disability and future purchase options.
Insurance experts suggest you carry life insurance benefits equivalent to at least five times your annual income, and in some cases as much as nine times. Of course, early career is the ideal time to lock in long-term life insurance since you are young and healthy. If your employer-sponsored policy is not sufficient, consider increasing coverage.
Make sure you understand the policy limits. Is it “claims made” or “occurrence made”? Likewise, determine if tail coverage is provided if employment ends.
Finally, protect yourself against non-occupation-related liability. Typically, that entails increasing the liability limits on your personal insurance policies (e.g., homeowners, auto, boat, etc.) and then adding on an “umbrella policy”.
In the end, understanding the issues and economics of employment can help providers make wise choices. Contact our office for assistance with “running the numbers” and evaluating your options as an employed physician or dental professional.
In many parts of the country, autumn means a drop in temperatures and leaves turning color. But no matter where you live, it also means heading back to school. For college students and those who love them, that means tuition payments and other fees. The good news is that there are a variety of ways to handle these expenses in a tax-savvy manner.
American Opportunity Tax Credit
The American Opportunity Tax Credit (AOTC), which was extended through December 2017 by the American Taxpayer Relief Act of 2012, can be worth up to $2,500 per eligible student. However, it is only available for the first four years of post-secondary education and applies to qualified expenses such as tuition and fees, course-related books, supplies, and qualified equipment. The full credit is generally available to eligible taxpayers whose modified adjusted gross income (MAGI) falls below $80,000 for singles or $160,000 for married couples filing jointly.
Lifetime Learning Credit
Another tax break to look into is the Lifetime Learning Credit. It can be applied to any and all years of higher education, though it can’t be used concurrently with the American Opportunity credit. In 2015, a taxpayer may be able to claim a Lifetime Learning Credit for up to $2,000 for qualified expenses paid for a student enrolled in an eligible educational institution. The same $80,000/$160,000 MAGI limit applies.
Bear in mind that you can’t claim the tuition and fees deduction for the same student in the same year that you claim the American Opportunity credit or the Lifetime Learning credit. Taxpayers must take the credit or the deduction based on which is more beneficial.
Qualified expenses for the two credit options or tuition deduction are amounts paid for tuition, fees, and other related expenses required for enrollment or attendance at an eligible educational institution. For the AOTC only, you may also claim the cost of books, supplies, and equipment as qualified expenses. For the student loan interest deduction, the loan is allowed to cover all of the above as well as room and board and other necessary expenses like transportation. Be careful though; room and board is only allowed for the student loan interest deduction.
The tax breaks mentioned here may apply to you, your spouse or a dependent for whom you claim an exemption on your tax return. Ask your tax advisor about what best fits your specific situation.
The Financial Accounting Standards Board (FASB) has issued a proposed Accounting Standards Update (ASU) which would significantly change a 20-year-old financial reporting model. ASU No. 2015-230, Not-for-Profit Entities (Topic 958) and Health Care Entities (Topic 954): Presentation of Financial Statements of Not-for-Profit Entities, is intended to simplify the current net asset classification requirements and the presentation of information in financial statements and footnotes about liquidity, financial performance and cash flows. The ASU wouldn’t change the information being reported, but would require it to be presented in a more consistent manner that would be easier for users of financial statements to understand.
Among other changes, the proposed update would eliminate the requirement that nonprofits present temporarily restricted assets and permanently restricted net assets — and transactions in each of those asset classes — separately. Instead, a nonprofit would report amounts for “net assets with donor restrictions” and “net assets without donor restrictions,” along with the currently required amount for total net assets.
The proposed update also would require changes to the reporting of operating activities on the statements of activities, with investment income generally not included in the results of operations. The proposed presentation would be more consistent with the method many nonprofits currently use to track budget vs. actual results. In another change, nonprofits would be required to present on their statements of activities a uniform measure of operations — reflecting their mission and the availability of funds.
Additionally, nonprofits would be required to present their operating cash flows using the direct method, which provides more meaningful information to users than the currently allowed indirect method. And nonprofits would need to provide enhanced disclosures on several matters, including liquidity of assets and operating expenses by nature and function.
This fall, the FASB received harsh feedback on the proposal and has decided to focus its efforts on the aspects of the proposal that received support and delay work on some of the more controvercial parts.
First in a series.Many dentists and physicians just entering professional practice face a mountain of debt. The Medscape Resident Salary & Debt Report 2014 notes that 36 percent of residents had more than $200,000 of education debt.
Add in a mortgage, a car loan, credit card debt and financing to start or buy into a practice, and you could easily find yourself burdened by more than $1 million of debt — debt that will impact your finances for years to come.
With this in mind, it’s critical to establish a plan for managing debt — and to develop some sound financial habits for the future.
Consider a recent dental school grad with $200,000 in student loans. At a fixed rate of 3.8 percent over 15 years, our new dentist would be writing a check for $1,459 every month, and wind up paying $62,694 in interest over the life of the loan. But if she decided to pay down this debt by increasing payments to $2,500 a month, the loan would be paid off in nearly half the time — seven years and eight months — and save $31,697 in interest.
If paying down debt is a priority for you, consider these two popular methods for tackling repayment:
1. The Snowball Method — Start by paying off the debt with the lowest principle balance. To the extent that your budget allows, begin making extra loan payments. At the same time, make the minimum payment on other debts. Once the target debt is paid off, take the amount you were paying on that debt and apply all of it to your debt with the next lowest principle balance. Keep doing this until all debts are paid. This debt reduction method is popular because it provides “quick wins” and encouragement and momentum to borrowers.
2. The Avalanche Method — Here, you pick the highest-interest-rate debt to pay off first — again, making the minimum payment on other debts. Once done, you then apply those payments to the next debt in line. Work your way downhill like an avalanche to the lowest-rate debt. Note that you’ll want to prioritize debt reduction so that the highest rate non-deductible interest is paid off earliest (e.g., student loans or credit card debt versus a loan for practice acquisition). The avalanche method is the preferable method because this method reduces interest expense on the highest interest rate loans first.
Medical and dental professionals with good credit scores and professional incomes are desirable customers for private lenders who may be willing to consolidate student or other loans at lower interest rates than federal loans. Just be sure to compare lenders’ origination and closing fees with the same diligence that you compare interest rates and loan terms.
Consider following the tried-and-true rule of thumb: Keep your monthly debt commitments below 35 percent of your monthly income before taxes and other deductions (maybe even shoot for 25 or 30 percent). It’s helpful to perform a regular review of your personal finances, including income tax planning, with a qualified CPA.
Next up: Smart Moves for Newly Employed Physicians and Dentists
A not-for-profit’s accounting function is its financial backbone. Efficient accounting processes along with sound controls to monitor them will put the organization on the right track for financial stability and growth.
Are you satisfied with your not-for-profit’s accounting function? Does it seem less efficient than you think it could be? Here are some suggestions for improving this important piece of your operation.
A good first step toward accounting function improvement is creating policies for the monthly cutoff of invoicing and recording expenses. For instance, require all invoices to be submitted to the accounting department by the end of each month. Too many adjustments, or waiting for tardy employees or departments to weigh in can waste time and delay the completion of your financial statements.
Another time saver: You may be able to spare days at the end of the year by reconciling your bank accounts shortly after the end of each month. It’s a lot easier to correct errors when you catch them early. Also reconcile accounts payable and accounts receivable data to your statements of financial position.
Designing a coding cover sheet is another step toward boosting efficiency. An accounting clerk or bookkeeper needs a variety of information to enter vendor bills and donor gifts into your accounting system. Speed up the process by collecting all of that information on one page. The cover sheet should list your not-for-profit’s general ledger account numbers so that the employee entering data doesn’t have to look them up each time.
Additionally, cover sheets should indicate whether the invoice is to be paid by check, electronic transfer or credit card and provide a place for the appropriate person to approve the invoice for payment. Use multiple-choice boxes to indicate which cost center the amounts should be allocated to. The invoice or copy of the donor’s check can be attached to the cover sheet for reference.
Another invoice tip: Don’t enter only one invoice or cut only one check at a time. Set aside a block of time to do the job when you have multiple items to process.
Many organizations underuse the accounting software package they’ve purchased because they haven’t invested enough time to learn its full functionality. If needed, hire a trainer to review the software’s basic functions with staff and teach time-saving tricks and shortcuts.
Become more efficient by avoiding any calculations or financial report presentations in Excel or other spreadsheet programs. Standardize the reports coming from your accounting software to meet your needs with no modification. This will reduce input errors and will also provide helpful financial information, not only at month end but throughout the year.
Consider performing standard journal entries and payroll allocations automatically within your accounting software. Many systems have the ability to recall transactions and can automate payroll allocations to various programs or vacation accrual reports. Make sure to review any estimates against actual figures periodically, and always adjust to the actual amount before closing your books at year end.
Accounting systems can become inefficient over time if they aren’t monitored. Look for labor-intensive steps that could be automated or steps that don’t add value and could be eliminated.
Make sure that the individual or group that’s responsible for the organization’s overall financial oversight (for example, your CFO, treasurer or finance committee) promptly reviews monthly bank statements, financial statements and accounting entries for obvious errors or unexpected amounts.
Make sure that you’re optimizing your accounting resources. Considering the growing list of tasks that arise, implementing one or more of the above processes can help free up valuable time. This will allow management to focus on larger projects or initiatives as well as the big picture.
If you have questions on how to make the accounting process in your not-for-profit more efficient, don’t hesitate to reach out to us.
Have you thought about how you are going to save for your children’s education? There are many available options, but the most well known college savings program is the 529 savings plan. This type of plan has been around since 1996 and is very popular for two main reasons:
The income tax benefit to this type of plan (besides tax-free earnings) is the potential to reduce your taxable income on your state tax return by subtracting the amount of your contribution. For instance, with the Colorado income tax rate at 4.63%, a contribution of $25,000 could save you almost $1,200 in Colorado taxes!
Please contact us if you would like to know more or to discuss how a 529 savings plan could benefit both you and your student.
Every day, some 10,000 baby boomers turn 65. At that rate, the day may soon come when a baby boomer physician is ready to retire from your practice.
Ideally, everything from required notifications to payout of deferred compensation will be spelled out in a partnership agreement or employment contract. But you’ll still want to take steps to ensure a smooth transition in patient care and minimize disruption to the practice. Here’s how:
1. Review contracts. Review any legal agreements that the retiring physician is party to — equipment and building leases, bank notes and any shareholders’ agreement (for practices structured as a corporation) or operating agreement (for LLCs).
2. Develop a plan for patient notification. To avoid charges of patient abandonment, physicians must scrupulously adhere to state and federal guidelines regarding patient notification — including, in some cases, publishing notices in the newspaper. The practice can do its part by displaying announcements in the waiting room and adding a message to its voice mail system informing patients of a physician’s departure.
3. Notify third parties. Your state licensing board, the Drug Enforcement Administration, third-party payers and your malpractice carrier will all need to be notified of the change in status. While the individual doctor may do some of this legwork, it's ultimately the practice's responsibility to make sure that everyone is properly notified.
4. Think through capacity. Switching patients to other physicians in the group is certainly an option if the practice has the capacity. But if you’re planning to replace a retiring physician, consider whether you’ll need to bring in a locum tenens or tap a local physician to cover until you are able to recruit the right provider.
5. Evaluate malpractice coverage. “Tail coverage” may be necessary to cover any claims filed against a retired physician for treatment that a physician provided while employed at the practice (especially if he or she has previously been insured on a “claims made” basis). The employment or shareholder’s agreement should spell out exactly who is responsible for procuring the coverage, and the party securing the coverage should provide a certificate of insurance to the other party.
6. Make plans for records. Ultimately, physicians own their patient’s records and are responsible for archiving them. But to ease the transition, the departing physician can authorize the practice manager to coordinate patient access to their medical records and/or facilitate transfer records to other physicians. Physicians will also need to check with their Electronic Medical Record (EMR) vendor on policies for retrieving and archiving their particular electronic health records.
7. Address IT issues. A physician’s departure also requires dotting the technology I’s and crossing the T’s. This could be as basic as changing passwords and login credentials, or it could mean modifying contracts for scheduling, billing and/or EMR software.
To bring some order to the process, some practices negotiate a formal separation agreement with departing physicians to clarify and solidify the terms of departure, including the settlement of any money owed. The key to a smooth transition is to create a transition plan well before the retiring physician’s departure — some practice consultants say as much as 18-24 months in advance.
With open enrollment for employer benefits coming up, now is the perfect time to consider opening a Health Savings Account (HSA). An HSA is a great opportunity for eligible individuals to lower their out-of-pocket health care expenses and federal tax bill. But before you sign-up, there are a few things you should know about this option.
There are a few requirements for obtaining the benefits of an HSA:
An HSA can generally be set up at a bank, an insurance company, or other institution the IRS deems suitable as long as it’s established exclusively for the purpose of paying the account beneficiary’s qualified medical expenses
Eligible individuals under age 55 can make tax-deductible HSA contributions in 2015 of up to $3,350 for single coverage or $6,650 for family coverage. Individuals age 55 or older by the end of the tax year for which the HSA contribution is made can contribute up to $1,000 more. The contribution for a particular tax year can be made as late as April 15 of the following year.
Employer contributions to an employee’s HSA are exempt from federal income, Social Security, Medicare, and unemployment taxes.
HSA funds can be used to cover qualified medical expenses for the account beneficiary, their spouse, and dependents not covered by health or dental insurance such as co pays for doctor’s visits, prescriptions, and laboratory fees. However, health insurance premiums don’t qualify. (Click here for more examples).
HSA distributions that are not used for qualified medical expenses are included in your gross income and subjected to an additional 20% penalty tax.
If you make contributions to your HSA account and do not need to spend the entire amount contributed during the year on your qualified medical expenses, the balance in the HSA at year end can be carried over to the next year and beyond. In addition, there are no income phase-out rules, so HSAs are available to high-earners and low-earners alike.
The deduction for your contributions to an HSA can be claimed on Page 1 of your tax return after completing IRS Form 8889, Health Savings Accounts (HSAs). The deduction is claimed in arriving at adjusted gross income; thus, eligible individuals can claim the benefit whether they itemize or not. Unfortunately, however, the deduction doesn’t reduce a self-employed person’s self-employment tax bill.
The choices can be complicated — and errors can be costly. Business legal structures are regulated by state governments, but your county or municipality also may have license requirements. What’s more, current tax laws make it difficult to change your legal structure after you begin operating. Making the right decision before you open for business is very important. How do you decide which legal structure is best for you and avoid potential problems? Consult with a certified public accountant (CPA). A CPA can help you make well-informed choices, explain how business structure affects your organization’s bottom line and file the necessary paperwork to start your business, if you’d like.
We have included the basic pros and cons of each structure in the chart below.
This is a complicated subject. To learn more about each structure and how to compare and determine which one is right for your business, read or download our Guide to Selecting Your Small Business Legal Structure or contact your SKR+Co tax advisor. We are happy to answer your questions and help you make the best choice for your specific situation.