TAX SEASON: Planning and Preparation for Doctors

Posted on April 15, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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DEFINITION: Tax season is the period of time, generally between January 1st and April 15th of each year, when individual taxpayers prepare to report their taxable income to the federal government and, in most cases, to the government of the state in which they live.

CITE: https://www.r2library.com/Resource

Some Year-End Preparation for the Upcoming Tax Filing Season

The filing season for 2023 tax returns us now upon us. A little advance preparation can prevent stressful tax time surprises for doctors and all medical professionals. Here are some important steps you can take now to set yourself up for worry-free tax filing:

  • Do one last withholding checkup. Time is running out to adjust your paycheck withholding to make sure you have paid enough tax throughout 2023. You can use the online IRS Withholding Estimator tool to make sure your numbers are on track.
  • If your name changed in 2023, report the change to the Social Security Administration as soon as possible, preferably before the end of the year.
  • Locate your bank account information, including both your account number and the bank routing number, so you can receive your tax refund by direct deposit.
  • Watch for year-end income statements, especially in late January and early February. These statements may include W-2 forms, along with 1099-NEC, 1099-MISC, 1099-INT, 1099-G and other 1099 forms. Note that some of these forms may come by mail, while others may be sent to you electronically. Keep all of the forms together and organized.
  • Organize records for tax deductions and credits. These records may include Form 1095-A (Health Insurance Marketplace Statement), tuition statements (Form 1098-T), medical bills, mortgage interest statements, and home energy improvement or clean vehicle receipts or invoices.

Waiting until the last minute to try to assemble these documents can lead to missing the filing deadline, so start early.

COMMENTS APPRECIATED

Thank You

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The New Social Security Wage Base for 2017

Posted on October 24, 2016 by Dr. David Edward Marcinko MBA MEd CMP™

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Social Security wage base increases to $127,200 for 2017

[By Robert Whirley CPA & Associates, LLC + ProActive Advisory]

The Social Security Administration has announced that the wage base for computing the Social Security tax (OASDI) in 2017 will increase to $127,200.

The Federal Insurance Contributions Act (FICA) imposes two taxes on employers, employees, and self-employed workers—one for Old Age, Survivors and Disability Insurance (OASDI; commonly known as the Social Security tax), and the other for Hospital Insurance (HI; commonly known as the Medicare tax).

For 2017, the FICA tax rate for employers is 7.65%—6.2% for OASDI and 1.45% for HI.

For 2017, an employee will pay:

  1. 6.2% Social Security tax on the first $127,200 of wages (maximum tax is $7,886.40 [6.2% of $127,200]), plus
  2. 1.45% Medicare tax on the first $200,000 of wages ($250,000 for joint returns; $125,000 for married taxpayers filing a separate return), plus
  3. 2.35% Medicare tax (regular 1.45% Medicare tax + 0.9% additional Medicare tax) on all wages in excess of $200,000 ($250,000 for joint returns; $125,000 for married taxpayers filing a separate return). (Code Sec. 3101(b)(2))

For 2017, the self-employment tax imposed on self-employed people is:

  • 12.4% OASDI on the first $127,200 of self-employment income, for a maximum tax of $15,772.80 (12.40% of $127,200); plus
  • 2.90% Medicare tax on the first $200,000 of self-employment income ($250,000 of combined self-employment income on a joint return, $125,000 on a separate return), (Code Sec. 1401(a), Code Sec. 1401(b)), plus
  • 3.8% (2.90% regular Medicare tax + 0.9% additional Medicare tax) on all self-employment income in excess of $200,000 ($250,000 of combined self-employment income on a joint return, $125,000 for married taxpayers filing a separate return). (Code Sec. 1401(b)(2))
  • There is a maximum amount of compensation subject to the OASDI tax, but no maximum for HI.

IRS

Conclusion

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Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

Risk Management, Liability Insurance, and Asset Protection Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™8Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™

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Is Social Security a Rip-Off?

Posted on July 21, 2015 by Dr. David Edward Marcinko MBA MEd CMP™

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 “WHERE DID THAT MONEY GO?”

Rick Kahler MS CFP

By Rick Kahler MS CFP http://www.KahlerFinancial.com

A reader recently forwarded me an email that began, “Who died before they collected Social Security?” It asked how many people only collected a small portion of what they paid into Social Security because they, or a spouse, died soon after retiring. Then it screamed in all caps, “WHERE DID THAT MONEY GO?”

Introduction

The rest of the piece, after calculations of how much an average person pays into Social Security, suggested the government is short-changing those who die before they receive back in benefits everything they paid in. It claimed that Social Security premiums were to have been put in a “locked box,” that instead they were loaned to the US Treasury, and that Social Security is therefore running out of money.

The many misstatements and errors in this piece highlight a common misunderstanding about the Social Security insurance program. It is not an income tax. Nor; is it actually insurance – or an investment!

Example:

If you earn a salary, you are familiar with the FICA (Federal Insurance Contributions Act) tax that, like federal income tax, is withheld from your paycheck. Everyone must pay it on their first $118,500 of earned income. The current rate for employees is 7.65% (6.2% for Social Security and 1.45% for Medicare), an amount matched by employers. The self-employed pay 15.3%.

FICA payments are not an income tax, but are insurance premiums used to fund the Social Security program. It is a direct transfer program, meaning the money coming into the plan is immediately paid out to retired or disabled participants. The proceeds are not directly deposited to the general account to be spent however Congress wishes.

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train station

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The Tipping Point?

However, in the past, because more money came into Social Security than was paid out in benefits, the program did loan the excess to the US Treasury Department (receiving bonds in return) to fund the operating expenses of the federal government. The program built up a significant investment in US Treasuries until 2010, when it began paying more out in benefits than it receives from participants. The program is now beginning to redeem the bonds. Officials project that in 2033 the program will have depleted the investment in bonds and will need to either adjust benefits, raise the payroll tax, or borrow from the US Treasury.

What it’s not?

  • Social Security isn’t insurance in the sense that insurance pays only when a person suffers a loss. With Social Security, everyone who has worked for more than 10 years will collect a monthly income upon retirement.
  • SS is also not a savings account or a retirement plan like an IRA or a 401(k). It is not set aside in a segregated account with your name on it. The money you pay in doesn’t accumulate or earn interest. If Social Security were designed as a retirement plan that would refund what participants pay in, plus some type of return, the payroll tax would far surpass 15.3%.

What it is?

So if Social Security isn’t an income tax, an insurance plan, or a retirement plan, what is it? It’s an annuity. Participants are guaranteed a monthly income for life; a lesser amount if they retire at age 62 or a higher amount if they wait until full retirement age or later.

Like any annuity, when you die the payments stop. The amount of the payroll tax/premium incorporates actuarial estimates of how many people will die before the average mortality age or live long past it. The money paid in by people who die early is not “missing.”

Assessment

If you have questions about Social Security, you can find detailed information at www.socialsecurity.gov. It’s a much more reliable source than anonymous forwarded emails.

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

Risk Management, Liability Insurance, and Asset Protection Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™8Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™


“The medical education system is grueling and designed to produce excellence in medical knowledge and patient care. What it doesn’t prepare us for is the slings and arrows that come our way once we actually start practicing medicine. Successfully avoiding these land mines can make all the difference in the world when it comes to having a fulfilling practice. Given the importance of risk management and mitigation, you would think these subjects would be front and center in both medical school and residency – ‘they aren’t.’

Thankfully, the brain trust over at iMBA Inc., has compiled this comprehensive guide designed to help you navigate these mine fields so that you can focus on what really matters – patient care.”

 Dennis Bethel MD [Emergency Medicine Physician]

 

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A Hospitalist Asks a CPA – “what happened to my paycheck?”

Posted on January 18, 2013 by Dr. David Edward Marcinko MBA MEd CMP™

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Law changes will result in smaller paychecks in 2013

DT&PA number of law changes go into effect in 2013 that will result in employees [like hospitalists, nurses, allied healthcare providers and some pHO members, etc] seeing smaller paychecks, including the expiration of the payroll tax cut, the increase in the Social Security taxable wage base, and the new 0.9% Medicare tax imposed on high wage earners.

The following law changes go into effect in 2013

  • The payroll tax cut, which temporarily lowered the Social Security withholding tax rate on wages earned by employees in 2011 and 2012 from 6.2% to 4.2%, has expired. Accordingly, employees will see a 2-percentage-point bump in the amount of Social Security tax withheld from their paychecks from 2012 to 2013.
  • The Social Security taxable wage base has increased by $3,600, from $110,100 to $113,700.
  • An additional 0.9% Medicare surtax is withheld from wages paid to an employee in excess of $200,000 in a calendar year.

Effect of these changes on paychecks

The following illustrations show the effect of these law changes on employees’ paychecks:

… Employees earning $50,000 in 2013 FICA wages will have $1,000 more in FICA taxes withheld ($50,000 × [6.2% – 4.2%]) than they would have in 2012, due to the 2-percentage-point increase in the Social Security tax rate.

… Employees earning $100,000 in 2013 FICA wages will have $2,000 more in FICA taxes withheld ($100,000 × [6.2% – 4.2%]) than they would have in 2012, due to the 2-percentage-point increase in the Social Security tax rate.

… Employees earning $300,000 in 2013 FICA wages will have $3,325.20 more in FICA taxes withheld than they would have in 2012. This includes $2,202 in additional Social Security taxes due to the increase in the Social Security tax rate ($110,100 × [6.2% – 4.2%]), $223.20 in additional Social Security taxes due to the increase in the Social Security taxable wage base ([$113,700 – $110,100] × 6.2%), and $900 in additional Medicare tax ([$300,000 – $200,000] × 0.9%).

… Employees earning $500,000 in 2013 FICA wages will have $5,125.20 more in FICA taxes withheld than they would have in 2012. This includes $2,202 in additional Social Security taxes due to the increase in the Social Security tax rate ($110,100 × [6.2% – 4.2%]), $223.20 in additional Social Security taxes due to the increase in the Social Security taxable wage base ([$113,700 – $110,100] × 6.2%), and $2,700 in additional Medicare tax ([$500,000 – $200,000] × 0.9%).

… Employees earning $1,000,000 in 2013 FICA wages will have $9,625.20 more in FICA taxes withheld than they would have in 2012. This includes $2,202 in additional Social Security taxes due to the increase in the Social Security tax rate ($110,100 × [6.2% – 4.2%]), $223.20 in additional Social Security taxes due to the increase in the Social Security taxable wage base ([$113,700 – $110,100] × 6.2%), and $7,200 in additional Medicare Tax ([$1,000,000 – $200,000] × 0.9%).

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jobs

Assessment

There is also a new 39.6% income tax withholding rate on high wage earners (previously, the highest withholding tax rate was 35%). This withholding rate is used for single taxpayers with annual wages greater than $402,200 and for married taxpayers with annual wages greater than $458,300.

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Conclusion

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Explaining the New Taxpayer Relief Act

Posted on January 4, 2013 by Dr. David Edward Marcinko MBA MEd CMP™

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aka … The Fiscal Cliff Deal Wake-Up Call

By Lon Jefferies MBA CFP®

www.NetWorthAdvice.com

Lon JeffriesBelow is a brief summary of the major implications of the Taxpayer Relief Act that was passed by congress. The changes under the act are permanent and do not expire like the previous round of Bush tax cuts. Note, however, that laws can always be changed.

The Tax Increase That Will Impact Us All

As of December 31, 2012, the Payroll Tax Cut expired. The cut reduced the FICA tax rate by 2% in 2011 and 2012. Consequently, this Social Security tax rate will return to 6.2% for employees (as opposed to the 4.2% rate during the last two years). This tax will apply to any income below the Social Security Wage Base of $113,700.

Essentially, this change will cause an average taxpayer earning $50k per year to pay $1,000 more in federal taxes.

Income Tax Brackets

The top tax bracket will increase from 35% to 39.6% and will apply to individuals with taxable income in excess of $400k and married couples with incomes over $450k. No other changes were made to the federal income tax.

Income Tax Brackets

Taxpayers in the 10% or 15% or income tax bracket will continue paying 0% tax on long-term capital gains and dividends. A 15% capital gains and dividend tax will continue to apply to all other taxpayers not in the highest tax bracket (again, individuals with incomes above $400k and married couples with incomes above $450k). For taxpayers in the top tax bracket, the capital gains and dividend tax effectually rises to 23.8% – consisting of 20% for capital gains or dividends plus an additional 3.8% Medicare tax to boot.

Phaseout of Deductions and Exemptions

Total itemized deductions are reduced by 3% of any excess income over an established limit. That limit is adjusted gross income (AGI) of $250k for individuals and $300k for married couples. Personal exemptions are also phased out once AGI is above the same limits. The exemptions are reduced by 2% for each $2,500 of excess income over these limits.

Professional Wake Up Call

Estate Taxes

While the top estate tax rate has been increased from 35% to 40%, individuals will continue to pay no taxes on estates less than $5,120,000. This figure will continue to rise with inflation. Note: couples essentially get two of these exemptions, allowing them to pass $10,240,000 to heirs without paying estate taxes.

Alternative Minimum Tax

The new AMT exemption amount will be $50,600 for individuals and $78,750 for married couples. These figures will be adjusted annually for inflation. Speak to an account to determine how this impacts your tax return.

Bonus – Potential 401k to Roth 401k Conversions

If your employer offers Roth 401k accounts, you can now convert your traditional 401k investments to the Roth plan while still employed. This process will be similar to converting a traditional IRA to a Roth IRA and taxes will be due upon conversion. However, your employer isn’t required to offer a Roth 401k, so speak to your employer’s HR department to determine if this is an option. Further, speak with your financial planner for information on whether this is a strategy you should explore.

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Hospital Cafeteria Plan Elections

Posted on February 19, 2009 by Dr. David Edward Marcinko MBA MEd CMP™

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On Health and Dependent Care

By Dr. David Edward Marcinko; MBA, CMP™

[Publisher-in-Chief]

DEM 2013

I wrote a bit about hospital cafeteria plans in an earlier blog post.

Link: https://healthcarefinancials.wordpress.com/2008/04/02/hospital-cafeteria-plans/

Now, any hospital, or other employee given the opportunity to participate in a cafeteria plan should consider the following important two elections; health and dependent care.

Healthcare [Working Spouse]

If the employee is married and has a spouse who also works, and the employer-provided health benefits are better under the spouse’s plan, then the employee should elect to be covered by the spouse’s plan and choose another nontaxable benefit or a cash benefit that would be taxable under his or her own cafeteria plan, such as dependent-care coverage or group term insurance coverage. Switching health insurance requires planning to eliminate potential gaps in coverage created by insurance enrollment criteria. If the employee does not need the salary or cafeteria-plan benefits to meet current expenses, he or she should consider contributing the cash to a 401(k) plan and defer the tax liability.

Healthcare [Non-Working Souse]

If the employee has no working spouse and the employee’s plan is the only source for certain health benefits, the employee should consider what type of benefits he or she really needs for his or her family. In other words, can the employee get the necessary benefits under the company plan cheaper than he or she could individually, after taking into account that individual coverage will be paid with after-tax dollars, whereas under a cafeteria plan such benefits can be paid with before-tax dollars?

For example, if an employee who is in the 30% tax bracket is provided a $6,000 plan by her employer. He or she would have to be able to get a comparable plan independently for only  $3,741 to be in the same position on an after-tax basis. ($6,000 minus income taxes of $1,800 = $4,200, $4,200  minus $459 of avoided FICA

Dependent-Care

An employee who has a choice of including dependent-care costs may be entitled to an income-tax credit for such expenses if, the employer does not reimburse them. Thus, if a credit is worth the same or more than the payment under the cafeteria plan, the employee may choose to contribute those dollars toward additional health or life insurance.

Assessment

There is no doubt why healthcare and dependent care are the two most important cafeteria plan election determinants that clients seek in our advisory practice. The issues are that vital to all employees.

Conclusion

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Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

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