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7 Hidden Mistakes Business Owners Should Avoid for Maximum Profitability & Growth
Rebella Accountancy | Certified Public Accountants | 507 E. First Street, Suite A | Tustin, CA 92780
Winter 2011 Newsletter
Dear Client and Friend,
As we approach the end of the year, I hope that you can focus on some positive aspects of the past year and look forward to a new year and new possibilities!
This issue is about “Planning” for the end of this year and beyond. Knowing how the tax laws work can help you acquire the best plan for both your practice's and personal financial success.
Let's get started...
1. Increase your 401(k) contributions to the maximum allowed ($16,500 or $22,000 for age 50 plus). Also consider converting to a Roth IRA. Although the tax is due April 15, 2012 there will be no tax on the appreciation after 2011.
2. Pay January mortgage prior to 12/31/11 to deduct that interest in 2011. Make sure your bank includes this interest on your Form 1098.
3. Make donations by credit card prior to 12/31/11 and you can deduct this year even if you don't pay the credit card until 2012. Donating appreciated stock allows you to avoid capital gains taxes on the appreciation and get a deduction for the full market value of the stock. If you are required to take distributions and you do not need the income you can have your distribution transferred to a charity. You do not report the income or the charitable contribution. This can keep your income lower and avoid increase in Medicare costs.
4. If you itemize, pre-
5. Take advantage of the energy efficient home improvement credit. You can claim
10% (up to $500) of all qualified expenditures during 2011 for such improvements
as insulation, windows, doors, roofs, heating and air conditioning systems and water
heaters. Any credits taken in 2009-
6. The Residential Energy Efficient Property Credit is another energy credit for such things as solar electric systems, solar hot water heaters, geothermal pumps, wind turbines and fuel cell property. The credit is 30 percent of the entire cost, generally labor included, with no cap except for fuel cells. These are credits and reduce tax owed dollar for dollar. You do not have to itemize deductions. These have to be in placed into service before Jan. 1, 2012.
7. Clean out your closets and donate clothing and household items to charity. Be
sure to keep records of all items donated. A donation guide can be found on Salvation
Army website at www.satruck.org/donation with estimates for non-
8. Look at your year-
9. Estate and Gift Taxes are both at a $5 million lifetime allowance. This is above the annual $13,000 gift allowance. Review your estate plan and annual gifting provisions. This may not be around after 2012.
10. Maximize “above-
11. Be prepared to substantiate any business gift with the following information: Amount, time, description of gift, business purpose, business relationship. Maximum deduction is $25.00 per gift to clients, customers or contacts.
12. Brokerage firms now must submit 1099's to the IRS that report the price of any sale and your cost. Be sure, especially on inherited funds, that the broker has the correct information. If you do not, the broker may report your cost at N/A or Unknown. The IRS will interpret a $0. If your records are not in good order you will be fighting with the IRS to support what you think is your cost.
13. Prepay your practice's expenses by December 31, in advance for next year for vehicle leases, rent payments on office and/or equipment and even your business and malpractice insurance.
14. Plan on making any capital expenses for property purchases now under Section 179. The limit for 2011 is $500,000 and going down to $125,000 in 2012! In 2013 it may completely go away. You must purchase and put into service by the end of the year.
As we have discussed in our last issue, President Obama's “Tax Relief Act” passed on December 17, 2010. Here are some additional items that may be of assistance to you in planning for this year's tax preparation and beyond.
THE 1099 PANIC STOPS!
No 1099 will have to be sent on corporations providing your practice with goods and services over $600 as previously written to start in 2012. This part of the Health Reform Act has been repealed!
Also repealed, was the legislation that required Real Estate investment owners to send 1099's on service providers paid over $600.
With the Estate and Gift taxes continuing with high exclusions through 2012, this may be a good time to examine transferring business and investment assets to your children and grandchildren tax free.
I often reach out to other professionals to assist my clients in many ways. Recently,
I had a call and e-
The reason for these audits, Ron explained, is that certain employers are paying people as independent contractors when the individuals are really employees for purposes of Workers Compensation. Just because you issue a Form 1099 does not automatically mean there will be an adjustment to your Workers Compensation policy. The following is the criteria of the Workers Compensation Insurers for paying as employees versus independent contractors:
1. The employee needs to report directly to you as their supervisor
2. The employee needs to work for 52 or more hours in a 90 day period
3. The employee needs to be paid over $100 in a 90-
According to Ron, the audit process is usually a very short review. The insurers are asking to check your financials, including payroll records, check registers, and tax returns. This should not be a problem if you are keeping good financial records or if we handle your accounting needs.
Remember, if you are audited, relax. You most likely don't have anything to worry
about. If you have any further questions regarding this topic, Ron Esparza has been
kind enough to welcome my clients' calls at (714) 505-
I am asked this question often by my dental clients. I called and asked my clients who continue to prosper what they are doing and what seems to be working. Here are some points they made.
1. Get ready with the new advertising trends. Yellow pages and direct mail advertising are yesterday's charms. Today new patients find you when they “Google” a dentist in their area. My successful clients are making sure patients that had a good experience are writing reviews for the doctor as they check out. Post the reviews immediately. A constant stream of positive , current reviews will keep you at the top of Google when people use it to find a dentist in your area.
2. Keep overhead expenses down. A well run dental practice should have overhead at below 60%. You must win the overhead war.
I have written before about Dr. Phil Potter. Dr. Potter is successfully retired, but continues to assist fellow dentists. Recently, Dr. Potter was called in to help a dentist, in South Orange County, put together a team of dentists who will step into each other's practice and keep production going when one of them was ill. Are you prepared? If not, call me for further assistance.
As many have heard reported, the IRS is looking to increase their revenue by monitoring tax returns with an eagle eye! Here are some ways you can avoid falling into the traps.
1) Are you a corporation?
2) Do you generate Form 1099s?
3) Are you using a Schedule C or Schedule E?
4) Are you making charitable donations?
5) Do you have offshore investments?
6) Do you have a retirement plan?
I can't say it enough, even though you may tire of it, but documentation of expenses
is extremely important and vital to, avoidance of or being successful in, an IRS
audit! Here are some how-
For those with “Smart” phones, check out the following applications you can use:
1. www.expensify.com – links your credit card account and imports your purchase history. Generates IRS ready receipts for expenses under $75.
2. www.lemon.com – takes photos of your receipts, digitized and creates a master list online.
3. www.proongo.com – Allows exportation of receipts and details to QuickBooks or Excel. Can fill out an expense report based o photo of receipts.
Check out Google for more applications available.
The Supreme Court has decided it will be taking up the issue of the 2010 Healthcare Legislation next year. Things may change!
Some additional information going into the future, as we know it now, is:
a) You may no longer deduct over-
b) Beginning in 2011, Employers may voluntarily include the costs of Health Care
Benefits on employees Form W-
Regardless of your AGI, it is still possible for your traditional IRA to be converted to a Roth IRA. If the valuation of the IRA is low you may want to convert now to a Roth IRA for the lower income tax liability. You will have the opportunity to reconvert back to the traditional IRA up until October 15, 2012. You may want to do this depending on the value of the assets or the increase in tax rates.
Besides the benefits of establishing a sense of responsibility, accomplishment and good work ethics, hiring your children can also save your practice in taxes and start building a college fund for your child.
Here are reasons for consideration:
Steps to build your audit-
1. Get an employer ID
2. Require a time sheet from the child
3. Document the pay scale
4. Pay with a payroll check
5. Complete the federal and state payroll forms; W-
While on this topic, there was recently a court case that allowed a wife to be paid
to paint her husband's office with no payroll taxes and no self-
Did you know that you can get 100% first year depreciation on your practice's vehicle? It's true for the crossover vehicle (SUV) classified with “truck” status that has an over 6,000 pounds Gross Vehicle Weight Rating (GVWR).
The vehicle qualifies as truck status by being able to create flat, floor-
1. Approach angle of not less than 28 degrees
2. Breakover angle of not less than 14 degrees
3. Departure angle of not less than 20 degrees
4. Running clearance of not less than 20 centimeters
5. Front and rear axle clearances of not less than 18 centimeters
Also, if the manufacturer classifies the vehicle as a truck, it is usually so. You might find this information on a website. Remember, you must prove the “truck” status.
What is the GVWR? It means the “loaded weight of the vehicle” and it includes the
actual weight of the crossover vehicle, government-
If your vehicle meets these standards and is new, for 2011 you can take a full 100% depreciation, or take a 179 expense up to $25,000 and depreciate the rest in the first year!! Something to think about prior to making your next vehicle purchase. In 2012 this goes down to 50% depreciation.
I hope you have found this information useful to you for planning out your year end strategies for your dental practice and/or personal life. I am always available to assist you further in your tax or financial needs.
Please feel free to call the office at 714-
Remember, your success is our business!
Monica Rebella, CPA
Successful Tips For Year End Tax Planning | The “Tax Relief Act” of December 17,
2010 | Personal Deductions and Credits | Business Deductions and Credits | Estate
and Gift Taxes | Workers Compensation Insurance Carrier | How Are Other Dentists
Continuing to Prosper? | Do You Have Back-