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New Tax Return Due Dates

On July 31, 2015, President Obama signed into law P.L. 114-41, the "Surface Transportation and Veterans Health Care Choice Improvement Act of 2015" (the Act). The Act includes a number of important tax provisions mostly relating to tax return due dates. The main idea of the due date revisions is to have tax returns for flow-through entities (partnerships or S-corps) due before the tax returns they flow to (individuals and C-corps).

 

Corporate, Partnership, and Trust Due Dates Revised

 

Under current law, domestic corporations (including S corporations) with a fiscal year must file their returns by the 15th day of the third month after the end of the tax year; thus, those with a calendar year must file their returns by Mar. 15 of the following year...


Best Way to Save for College? Hire Your Kids

A few weeks ago a friend approached me very frustrated. His son just told him that he’s not going to college, which was a huge disappointment for my friend. But what further added to the pain was he had put away thousands of dollars every year into a 529 plan for his son, and now he couldn’t touch that money without picking up the gains on the growth and with a whopping additional 10% tax penalty. Ouch!

 

“Isn’t there a better way to save for college?” he asked me. “What do you recommend your clients do to save for college?”

 

“That’s easy,” I said. “Hire your kids - with the condition that they put everything in their Roth IRA.”

 

Roth IRA Funds Can Be Used for College1

 

Most people are unfamiliar with the rule that Roth IRA contributions can be used for qualified tuition expenses without incurring the additional 10% tax penalty...


Can I Throw Away This Receipt Yet?

One question our clients frequently us is just how long should I keep my receipts in case of an IRS audit? They’ve got file cabinets, drawers, and folders completely full of old receipts, bank statements, and invoices, and they’re running out of space. The short answer is to hold on to documents that are either paper or electronic for at least four years. However, there are a few important exceptions to this rule, and missing the proper documentation can leave you at the mercy of an IRS agent so read on.


The Statute of Limitations


A general rule of thumb with tax documents is to hold on to them for four years. The statute of limitations for tax purposes is a limit on the number of years the IRS has to audit your tax return. After that period you can relax and rest assured that you won’t get a notice in the mail or have an unfriendly auditor knocking on your office door...


How to Determine “Reasonable Salary” in an S-corporation

If you own a dental or medical practice taxed as an S-corporation, then the IRS has sent you a notice CP261 with language that reads something like this:

“You must determine a reasonable salary when a shareholder-employee of an S corporation provides services to the corporation. Payments to a shareholder-employee for services provided to an S corporation are wages and are subject to employment taxes. We may re-characterize distributions paid to a shareholder as salary if the distribution was paid in lieu of reasonable compensation.”1

In every practice where the dentist is both an owner and seeing patients, there are two types of compensation. First, as an employee working on patients you should be paid a salary or wage for your hours worked. Second, as a business owner you should be entitled to distributions to pay the taxes that flow to your personal income tax return, pay for debt services, receive a return on capital invested in the business, and for time spent growing the business as an entrepreneur...


Net Investment Income Pitfalls and Planning for Dentists and Medical Professionals

If you’re a dentist, doctor, or other entrepreneur who has looked closely at your tax return this year, you probably noticed a new form 8960 hitting you with a new “Net Investment Income” tax, or simply NII for short. This blog gives a quick overview of the tax, and provides a few ideas – and warnings – about how to plan for the tax appropriately.

What is the NII?

The NII tax is an entirely new tax, meaning that it’s in addition to all other taxes you already pay, such as payroll tax, self-employment tax, alternative minimum tax, capital gains tax and, of course, regular tax (the last two of course also having been increased in 2013 through the addition of higher tax brackets). The NII tax is a 3.8% tax on the lesser of net investment income and income over $250,0001, and that limit is not adjusted for inflation, so as the value of the dollar decreases each year, more and more people will get caught by the tax each year...


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