Don’t be Fooled by Fake IRS Communications

5 things you should know about phishing scams

Be aware that fraudsters are trying everything they can to obtain your personal or business financial information.  I received a call from a doctor client who indicated that she received an e-mail from the IRS stating that they were due a refund for taxes paid.  The e-mail looks legitimate as even indicates an official looking reply to address –  The body of the email states the following:

Phishing Scam Warning Sign

4 Tax Planning Tips & Ways to Avoid Tax Scams [Podcast]

Tax form operating budget and stopwatch in closeup

Don’t Wait – The Time to Start Tax Planning is Now

Episode 009

Doctors Business Management Show

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In this episode, Mike DeVries & Co-Host, Ben Lane discuss 4 Tax Planning Tips that you can do now and through-out the year as well as Ways to Avoid Tax Scams.  The following are notes based upon our discussion.

4 Tax Planning Tips

  1. Don’t Wait – Start Organizing Now
    • Use a Simple Tax Folder to organize your information during the year
      (I purchased this one from Amazon – Tax Folder)
    • Track your financial activity with computer software
      • I use Quicken – Click Here – (I use an older Mac Version)
      • Ben likes Mint – Click Here
      • Or, simply use a spreadsheet program like Excel
      • Use a system, even if it is a manual system
  2. Prepare a Life Inventory
    • Click Here – for a copy of my “Life Inventory” Worksheet
  3. Prepare a Personal Financial Statement
  4. Schedule a Date with your Tax Preparer
    • Be proactive in reviewing your tax estimates through-out the year

Ways to Avoid Tax Scams

  1. Fraudulent Phone Calls
    • IRS will contact you by correspondence first
    • IRS will not ask you to use a credit card
    • IRS will not threaten you with an arrest by the local police department
    • Treasury Inspector General’s Hotline 1-800-366-4484 Website
  2. Phishing Scams
    • Don’t click on suspicious links
    • Keep your passwords updated
  3. ID-Theft and Fraudulent Returns

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Mike DeVries is a CERTIFIED FINANCIAL PLANNER ™, Enrolled Agent,  and a Certified Healthcare Business Consultant focusing on helping healthcare professionals. If you would like to learn more about becoming a client, contact Mike at

New Increases for 2015

The Social Security Administration announced on October 22, 2014 that the wage base for computing the Social Security tax in 2015 will increase to $118,500 from $117,000, which is the current wage base for 2014.

What impact does this have on doctors? Assuming you make at least this much as a wage, you will pay an extra $93 of Social Security Tax to meet the new maximum amount o $7,347.00 per individual.  Your employer will also match this amount or you will if you are the employer – so,  the total additional tax amount for 2015 will be $186.

The IRS also announced many retirement plan dollar limits for 2015.  Here are those that have an impact on the doctors with whom we work:

  • Catch Up contributions for 401(k) and SIMPLE plans (for those age 50 and over) – increased from $5,500 to $6,000
  • Defined Contribution Plans – the limit on the annual additions to a participant’s account increases from $52,000 to $53,000
  • Elective deferrals for 401(k) plans – increases from $17,500 to $18,000
  • Annual Compensation Limit – the maximum amount of annual compensation that be considered for purposes of a qualified plan will move from $260,000 to $265,000
  • Elective deferrals for a SIMPLE plan – increases from $12,000 to $12,5000
  • Simplified Employee Pensions (SEP’s) – the compensation limit for keeping employees from participating in the plan increases from $550 to $600

The IRA contribution limits remain unchanged at $5,500 per year.


Tax Savings Moves for the rest of 2014

Tax Cut

Year-end tax planning for 2014 is particularly challenging because Congress has yet acted on a host of tax breaks that expired at the end of 2013. It is uncertain at this time whether the extender provisions will be extended by Congress on a permanent or temporary basis (and whether any such extension would be made retroactive). These extender provisions may be dealt with as part of a broader tax reform effort, be examined on an individual basis as opposed to as part of the traditionally passed ”extenders package,” or simply allowed to remain expired. These tax breaks include the following:

For Individuals

  1. An option to deduct state and local sales and use taxes instead of state and local income taxes
  2. An above-the-line-deduction for qualified higher education expenses
  3. The use of tax-free IRA distributions for charitable purposes by those age 70-1/2 or older
  4. The exclusion for up-to-$2 million of mortgage debt forgiveness on a principal residence

Our doctor clients that are retired may find numbers one and three above to have some impact on their planning, but for most other doctors these individual provisions will have no impact on their personal returns.

For Businesses

  1. 50% bonus first year depreciation for most new machinery, equipment and software – Expired
  2. $500,000 annual expensing limitation – Reduced back to $25,000 limit
  3. Research tax credit – Expired
  4. 15-year write-off for qualified leasehold improvement property – Expired

Our healthcare business clients may find numbers 1, 2 and 4 to have an impact on their tax planning this year.  In the past several years these tax provisions have been extended; however, this year an “extender package” may not be available.

Tax planning towards the end of this year will take on the same time-honored approach of deferring income and accelerating expenses to  minimize your 2014 income taxes.

First of all, we will want to keep an eye on the suspended Business tax deductions noted above. If these regulations are reinstated for 2014, taking advantage of the accelerated depreciation or election to expense more than $25,000 of capital purchases will be worth considering.

Effective year-end tax planning should take account of each doctor’s particular situation and planning goals, with the aim of minimizing taxes to the greatest extent possible. Doctors are often taxed in higher tax brackets –  the 39.6% top tax bracket, the 20% tax rate on long-term capital gains and qualified dividends for taxpayers taxed at a rate of 39.6% on ordinary income, the phaseout of itemized deductions and personal exemptions when income is over specified thresholds, and the 3.8% surtax (Medicare contribution tax) on net investment income for taxpayers whose income exceeds specified thresholds (which are lower than the thresholds at which the phase-out of itemized deductions and personal exemptions begins). So, while many doctors may come out ahead by following the traditional approach (deferring income and accelerating deductions), others, who might be in lower tax brackets or have special circumstances, may benefit from considering accelerating income and deferring deductions. Most traditional techniques for deferring income and accelerating expenses can be reversed to achieve the opposite effect.

The following are a few examples of year-end tax strategies and planning to consider:

  • If you are operating your business as an S-Corporation, give consideration to maximizing the pass-through income and then distribute the money as a dividend.  You should take caution to setting this dividend too high for various reasons, but moving in this direction makes sense today.  Dividends received through your S-Corporation will be taxed as ordinary income, but you will save money on payroll taxes and surtaxes that may apply.
  • Many doctors experienced losses in their investment portfolios several years ago when they sold out during a down-turn of the market and are carrying over their losses each year due to limits on deducting the overall loss.  If your current portfolio has experienced gains, give consideration to selling your investment at a gain that can be off-set with prior year losses that are being carried forward from year to year.  If you like the investment, you can always re-purchase, which will then establish a new basis for a sale down the road.  Just keep in mind, that you can’t sell and investment at a loss and then repurchase the investment and still take the loss due to what is called “wash-sale” rules.
  • Historically, you may have taken the approach of delaying your billing so that you can move income into the next year.  While this might make some sense from the tax viewpoint, I’m not in favor of this from a business standpoint – especially, for my healthcare businesses.  Working and maintaining your accounts receivable trumps taxes, in my opinion (see 5 Actions Steps for Optimizing Your Collections).  Accelerating your expenses at year-end still makes for good tax planning.  Take advantage of year-end sales from your clinical and office suppliers.  Pay for these supplies and other invoices prior to December 31st.  If you expect that your cash flow will improve in January (it often doesn’t, however), you can put the costs on a business credit card.  For cash basis taxpayers, an expense charged on a credit card is considered as though you actually paid for the item when you charge it on the card.  Keep in mind, that you need to have a business credit card – doctors that put the expense on their personal do not receive a business deduction until the business reimburses the cost to the doctor.
  • Over the years of working with doctors, I have seen life-circumstances have impact on my clients and their business.  Changes in a doctor’s tax status due, say, to divorce, marriage, or loss of head of household status should be considered.  For example, if your 2014 tax filling will be as “Head of Household”, and then the following year will be “Single” it may be wise to accelerate your income into 2014 to take advantage of the “Head of Household” filing.  Certain widows or widowers whose spouses died will need to look at the impact of filing a joint return versus filing as a single taxpayer in years following the loss of their spouse.  And, reviewing your tax situation in the year you plan to be married is also something to be considered.
  • Doctors who are trying to save money for their retirement should give consideration to funding an IRA in coordination with their typical qualified retirement plans that they have at the office.  Utilizing this approach to savings allows for options of either deferring the earnings until retirement or potentially converting the IRA to a Roth IRA, which currently holds favorable tax status. For more information on this discussion, see Consider Converting Your Traditional IRA to a Roth IRA.
  • Be on the look out for Alternative Minimum Tax (AMT).  I find this affecting doctors more today than ever before.  While you may not be able to keep it from impacting your tax return, you can try to minimize the effect.  If you are subject to AMT, be sure to review the deductions that are causing it to occur in your situation.  You may be able to time your expenses from year to year that will help minimize the impact of AMT.
  • Finally, being charitable with your money can provide you with tax savings. There are many ways in which you can spread the love to your favorite charity – simply writing a check is one way, but beginning in 2014, again, your itemized deduction may be subjected to a partial phase-out based upon your income.  You might consider supporting your charity through your business by advertising with them at a fund-raising function.  This would move the deduction from your personal return to your business return, which will ultimately reduce your available income that you would receive from the business and taxed personally.  This action would take planning, especially if you are in a group practice.  Another option for being charitable is to gift appreciated assets.  Recently, I had a doctor gift a rare Civil War document to a museum that he acquired.  This will turn out to be a great deduction in his situation.

Attempting to limit your tax exposure takes planning.  And, that planning doesn’t occur just when you file your taxes in early 2015 – it happens through-out the year.  Doctors that invest their time with their tax advisors during the year will move in the right direction for saving taxes when they ultimately have their tax advisor file their return.

Mike DeVries is a CERTIFIED FINANCIAL PLANNER ™, Enrolled Agent,  and a Certified Healthcare Business Consultant focusing on helping healthcare professionals. If you would like to learn more about becoming a client, contact Mike at

Phone Scam is Catching Taxpayers

I had a doctor tell me that his spouse received a phone call, apparently from the IRS, requesting that she pay a sum of money immediately or they would have to arrest her.  Needless to say, the client was a bit befuddled, and it turned out to be another scam to solicit money from innocent taxpayers.

On August 13, the IRS issued a warning to taxpayers to be extra vigilant regarding a telephone scam in which taxpayers receive unsolicited calls from individuals demanding payment while fraudulently claiming to be from the agency. According to IRS, the Treasury Inspector General for Tax Administration (TIGTA) has already received 90,000 complaints regarding this type of scam and has identified some 1,100 victims who have lost a total of $5 million as a result. “There are clear warning signs about these scams, which continue at high levels throughout the nation,” said IRS Commissioner John Koskinen. “Taxpayers should remember their first contact with the IRS will not be a call from out of the blue, but through official correspondence sent through the mail.” Angry and threatening calls from people claiming to be from IRS, combined with demands for immediate payment, should be a “big red flag,” Koskinen said, adding that people should immediately hang up and contact TIGTA or IRS. Additional information is available at .

Mike DeVries is a CERTIFIED FINANCIAL PLANNER ™, Enrolled Agent,  and a Certified Healthcare Business Consultant focusing on helping healthcare professionals. If you would like to learn more about becoming a client, contact Mike at

11 Steps to Plan Your Estate


What do you think of when you think about estate planning?  Do you think is just about the amount of assets you have accumulated? Not so!  While not everyone needs to set up a family foundation or create complex trusts to pass assets on to their beneficiaries, everyone should take the time to do some basic estate planning.  Give your family an awesome gift and have things organized, and in order by taking the following basic steps.  

Basic Steps in Estate Planning

  1. Make a complete and accurate inventory of all assets and their values.
  2. Determine the form of ownership of each asset; understand its effect on the transfer of property at death.
  3. Verify beneficiary designations on life insurance policies and retirement accounts.
  4. Estimate the size of the estate to determine whether estate tax planning is needed.
  5. Decide whether certain family members or assets need special protection (minor children, those with special needs, family business).
  6. Select beneficiaries and determine what provisions should be made for each.
  7. Determine how financial and health care decisions will be made in the case of illness or disability.
  8. Determine how health care will be funded.
  9. Estimate the cost of alternative estate planning methods that will meet the goals.
  10. Select and implement the estate plan.
  11. Laws and family circumstances change. Review plan regularly. 

Mike DeVries is a CERTIFIED FINANCIAL PLANNER ™ and a Certified Healthcare Business Consultant focusing on helping healthcare professionals. If you would like to learn more about becoming a client of Mike’s, contact him at

The “Other” Surtax?

Since we are in the midst of “tax season” and the subject of tax is on my mind, I thought I would spend just a few moments this month touching base on a lesser talked about tax that will have an impact on many of my doctor clients this year.

When the Supreme Court upheld the 2010 health-care law, much of the focus was on the 3.8% Medicare surtax that will apply to some high-income investors beginning this year.  Understandably this is a concern; especially when you consider that the top tax rate is being raised to 39.6%.  Those in this bracket will pay an effective rate of as much as 43.4% on their investment income.  Add to this to the tax you pay at your individual State level and the overall tax paid becomes a bit painful.

What seems to be overlooked, in much of the discussion, is the “other” surtax that is in effect this year.  An extra 0.9% Medicare tax will be applied to those whose “earned income” exceeds an annual threshold – $200,000 for “single filing” taxpayers and $250,000 for joint filers.  Unlike its 3.8% big brother, that is applied depending upon the amount of your investment income as well as your other overall earnings, the computation on this surtax is straightforward. And, it may seem like a small amount, but it still has an impact when you consider how much tax is already being paid over a career.

Let’s take look at an example with a married couple that earns $350,000 a year.  Starting this year, this couple will have to pay an extra $900 in Medicare tax ($350,000 – $250,000 = $100,000 X 0.9% = $900).  Compounded over ten years of work, this couple will contribute an additional $9,000 or more to the Medicare system.  Keep in mind that withholding for this additional Medicare tax occurs once an individual is paid wages in excess of $200,000.  In our example, here, if the couple each make $175,000 or some other combination where they both earn less than $200,000 they will not have any withholding out of their wages for the additional surtax.

In giving consideration to both surtax amounts and the higher tax rates being applied to your earnings, I would recommend two things:

1.     Proactive Tax Planning – taking time during the year to plan for the taxes that you may need to pay is more important now than ever before.  In addition to planning for the amounts you may need to pay, your planning should also give consideration to ways in which you may be able to limit the tax you pay.  This may include examining how you receive your money in some cases or even how you invest the money you earn.

2.     Save more money in your Retirement Plan – The new tax will not apply to income in tax-deferred retirement accounts such as 401(k) plans or distributions from such plans.  Increasing your retirement plan contributions should be considered.  And if you are already funding your 401(k) Profit Sharing Plan to the maximum, I would suggest that you give consideration to adding a Cash Balance Plan or review other retirement plan strategies that will assist you in saving for your future and help you keep more of the money you earn.


Disclaimer/Disclosure – the above summary does not constitute specific tax advice.  The reader should be certain to review their personal tax situation with their own tax professional.  Any US tax advice included in this written or electronic communication was not intended or written to be used, nor can it be used by a taxpayer, for the purpose of avoiding any penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.

Non-Cash Contribution Tax Deduction – Homework made Easy

Each year, during “tax season”, I will have clients provide me with lists of items that they have donated to their favorite charity.  It makes sense right? Out with the old and in with the new.  Items in your household or wardrobe that you no longer need or maybe doesn’t fit quite right any more can find a new home or body size.  It’s perfect, your junk is someone else’s treasure.  And, instead of holding the dreaded “Garage Sale”, you receive an Itemized Deduction on your income taxes from Uncle Sam. Uncle Sam is such a good guy, isn’t he?  But wait a minute!  Your favorite Uncle has rules you must follow if you are going to turn these “treasures” into a deduction on your income tax return.

The following summary is meant to assist you in preparing the “treasure listing” that you provide me or your tax professional to ensure your deduction is used.  Keep in mind that all cash and non-cash charitable contributions must be substantiated in order to be deductible.

  • Name and Address of the Charity – make sure that you provide this information when organizing your tax information.  Often the organization will provide you with a receipt that contains this information.  If your total non-cash contributions exceed $500, a form 8283 must be attached to your return.  This form requires this information for the donee organization.
  • A Description of the property being donated – typically, the recipient of these goods will provide you with a form or receipt that provides space for describing the property.  Be sure to keep a good list of what you donated.  A description like, “Three garbage bags of clothing” will likely not fly with the IRS in an audit.  Be sure to list the items separately.   The form 8283 doesn’t require that each item is listed separately, but your records need to clearly substantiate the deduction.  Also, keep in mind, that household items that you donate must be “in good used condition or better”.  Most tax professionals now believe that used clothing is not “in good used condition or better” and no longer qualifies for a non-cash charitable donation deduction. So, if you are going to donate clothing and you wish to take a deduction, you should be able to verify that it meets this criteria.
  • Dates, Costs, and Fair Market Value – your records should list the date you donated the property to the organization and the date you originally acquired the property.  Each item donated should contain the original cost of the item (or adjusted basis) as well as the fair market value of the item.  The method used for determining “fair market value” may also be required, if you need to file a form 8283.  To obtain a value of your items, I would suggest that you use a donation calculator, like the one found here at Goodwill Industries of West Michigan to substantiate your deduction even if you donate the items to another charity.
  • Qualified 501 (c) (3) Charitable Organization – whether you donate cash or non-cash, your contribution must be given to a qualified charity to receive  a deduction.  To make sure that you are donating to a charity that will qualify, look the charity up on the IRS website that allows you to search for the organization.  It really works quite well – click here to go to the IRS webpage and search for the exempt organizations that are eligible to receive tax-deductible contributions.

Substantiating your non-cash charitable contributions at the time you make the donation will assist you in taking an appropriate donation and receiving a deduction. Using the steps above and the two websites referenced will help make your homework easy!


Disclaimer/Disclosure – the above summary does not constitute specific tax advice.  The reader should be certain to review their personal tax situation with their own tax professional.  Any US tax advice included in this written or electronic communication was not intended or written to be used, nor can it be used by a taxpayer, for the purpose of avoiding any penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.

Scheduled October 1, 2011 Tax Decrease in Michigan – Delayed

Under a 2007 law, Michigan’s income and withholding tax rates were scheduled to decrease from 4.35% to 4.25% on October 1, 2011.  However, under legislation enacted into law on May 25, 2011, this decrease has been postponed until January 1, 2013.  In addition, the 2011 law revokes the additional tax rate decreases that were scheduled from October 1, 2012 through October 1, 2015.

Mike DeVries is a CERTIFIED FINANCIAL PLANNER ™ and a Certified Healthcare Business Consultant focusing on helping healthcare professionals. If you would like to learn more about becoming a client of Mike’s, contact him at