Tax season is here again and even for those who file quarterly for business expenses and liabilities, there are still plenty of changes afoot that have likely already impacted your personal and family taxes and deductions and those of your employees, vendors and other associates.
Small business-owner alerts
For small businesses anticipating utilizing pass-through deductions, there’s some bad news courtesy of the tax law changes: eligibility guidelines have been made much more restrictive, according to a 200-page explanation of pass-through eligibility guidelines (and which wasn’t even issued until January 18, 2019) for Sub S corporations, partnerships and sole proprietorships.
Unfortunately, language errors in the tax bill, especially for owners of hotels or restaurants regarding amortization of renovations over a longer stretch of time rather than as immediate write-offs, may add further to financial tolls taken on numerous smaller businesses.
For those who may have invested in these as possible tax shelters or additional sources of income, this could spell bad news sooner than later.
A brief summary of the most significant changes:
Virtually every significant deduction or expense has been affected by the tax bill: child tax credits, elder care, mortgage interest deductions, standard deductions, state and local taxes and medical expenses.
- The standard deduction
These increased to $12,000 for individuals and $24,000 for joint returns, so fewer may be itemizing as in the past. If you donated to charities, you should be aware that unless any other itemized deductions puts you across the threshold of standard deductions or charitable gifts are grouped into a single year instead of multiple years, this change now minimizes tax advantages once associated with charitable donations.
One bright spot is that the allowable student loan interest deduction of $2,500 hasn’t been affected.
- Child tax credit and elder care deductions
The law’s changes have doubled the child tax credit to $2,000 per child, and raised the income cap for married couples filing jointly to $400,000. Those caring for elderly parents can claim a non-child dependent $600 credit also.
- Personal exemptions
The pre-tax personal exemption of $4,050 for a taxpayer, spouse and each dependent, and which previously lowered the total taxable income, has been removed. This will most likely adversely affect lower and middle-income families, so you may want to keep this in mind when billing your patients, who may in turn be struggling from this increased tax burden as well as related financial uncertainties and meeting other expenses.
- Mortgage interest deduction
While we’re on the subject of deductions, past and (so far) present, recent high-end homeowners are in for some bad news: the deductible interest allowed has dropped from $1 million to the first $750,000 of the home’s value. (Note that existing mortgages have been “grandfathered” in and aren’t affected by the changes.)
In addition, home equity lines of credit are no longer deductible as in the past, unless the proceeds realized have been used to “buy, build or substantially improve” the home for which the loan was secured.
- State and local tax changes
Deductions for state and local income taxes, including property taxes, are now capped at $10,000, but only for those itemizing deductions.
- Pay attention to 2019 withholding
According to the General Accounting Office, if you are an employee, watch your 2019 withholding closely. By keeping your withholding closely matching your actual income, you’ll stand a better chance of staying out of the group of 32 million taxpayers expected to owe taxes in 2019, as well as out of trouble with the IRS.
Don’t fall for tax and investment scams: why the IRS warns investors targeted by the “Dirty Dozen”
Scammers targeting physicians abound year-round, and nowhere more so than close to tax time. While no one wants to pay more taxes than necessary, turning to a trustworthy and experienced tax professional can show you where to take legitimate deductions and other tips to keep more of your money, while avoiding fraudulent “tax shelter” schemes.
Some of the lies that scammers use to scare taxpayers and persuade them to part with hard-earned money include:
- You can “opt-out” of the overall tax system by transferring your assets to “our” tax-free trust without having to pay taxes.
- Wealthy CEOs, politicians and others use “hidden secrets” in estate and tax planning that the “rest of us’” aren’t supposed to know about.
- Use (and abuse) of “captive” insurance companies as tax shelters, that are now under audit from the IRS for fraudulent activity. If you are already involved in one, even if there have been no audits (yet), seek the advice of a trusted and competent third party immediately.
Grow your practice the right way by properly managing and increasing your revenues while remaining compliant of federal, state and local billing, privacy and tax laws
Remember that there is no such thing in the real world as a legitimate “secret” savings or investment plan. You are always legally responsible for the accuracy and truthfulness of information provided to the IRS, no matter who has advised you.
In addition to cultivating a relationship with an ethical financial planner and tax advisor, partnering with a trusted, experienced medical billing and practice management service is really the best way to grow and manage revenue while preserving your practice’s hard-won good name and reputation among colleagues and patients alike.
M-Scribe has been in the business of helping practices of all sizes and specialties with their billing, follow-up revenue cycle management and other needs and services since 2002. A trusted leader in the medical billing and practice management industry, M-Scribe offers sound advice and assistance based on experience and updated training for our personnel in the latest regulatory changes, whether at the federal, state or local levels as well as keeping abreast of insurance industry changes.
Contact one of our counselors at M-Scribe at 770-666-0470 or by email to learn more about how we can help boost your revenues while remaining fully compliant of the latest regulations regardless of sources.