Hiring Your Child to Work in Your Practice
March 27, 2012 | 
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A Wise Investment…
It is the day after Johnny or Sally’s sixth birthday and they are bored and moping around the house saying there is nothing to do. Sit them down, look them in the eye and tell them, “My child it is time to go to work in my dental office.” If they don’t look right back at you and say, “Mom (or Dad) you are crazy”, then something is wrong. But let’s look at why it is not a crazy idea at all and can benefit both parent and child.
You can have your child do some menial tasks around the office for a couple of hours a week. Maybe they can straighten the waiting area or help with filing. Pay them a salary just below the wage level that requires them to file a tax return and look what happens: You have gotten a tax deduction at your tax bracket and your child has gotten income that is taxed at 0%.
Better yet take their earnings and invest it in a Roth IRA. Five thousand dollars invested for ten consecutive years, from six years old to 15 years old with no additional investments made, with an 8% annual return would yield a whopping, drum roll please, $2,500,000 when your child turned 60 years old. You read that right, that $50,000 investment turned into, two million five hundred thousand dollars. That is quite a tidy sum. Ah, the power of compounding.
This is truly a win-win situation for everyone involved. What are you waiting for? The time has come to put your children to work in your dental office. As always, discuss this with your accountant to see if this is the right strategy for you.
Questions for Larry the Accountodontist?
larry.goldberg@glassjacobson.com
Penalties for 1099 Non-Compliance
March 13, 2012 | Subscribe to our RSS Feed
- Did the corporation make any payment in 2011 that would require it to file Form(s) 1099?
- If “yes”, did the corporation file or will it file all required Forms 1099?
On the surface these are two pretty innocuous questions. For the first time they are appearing on Form 1120, Form 1120S, Form 1065 and Schedule C.
I know I have been beating this 1099 issue to death recently, but now you are going to sign your tax return and state that the answer to the above questions is either Yes or No. As I mentioned in a previous blog there can be a $30 penalty per 1099 filed late.
However, Sam Cohen of the Glass Jacobson tax department pointed out that the penalties can be even more onerous. This paragraph is lifted right from the IRS’s instructions on preparing 1099’s:
Intentional disregard of filing requirements. If any failure to file a correct information return is due to intentional disregard of the filing or correct information requirements, the penalty is at least $250 per information return with no maximum penalty.(Italics added by me)
Now that $250 penalty to who knows what per return is pretty steep and there are exceptions to having to pay the penalty, but an error or omission of a taxpayer identification number or name is not one of them.
These payments do not just include temporary dental help, they can include the guy who mows the lawn at the office, the cleaning person, or dental consultant.
What can you do?
- Have a pre-printed form that contract labor/ temporary help can fill out.
- Even if you don’t think you will be paying that person $600 or more have them fill out the form the first day they work in the office before they begin working.
- Don’t agree to not prepare a 1099 for someone so that they will work for you. You bear all the risk for not filing that 1099. Find someone else to do the work.
The IRS is getting serious about having people report all their income and it is up to your dental practice to comply with the reporting rules or face the possible penalties.
Questions for Larry?
larry.goldberg@glassjacobson.com
I Want to Take Your Hire- Part II
February 28, 2012 | Subscribe to our RSS Feed
You may remember my blog from 2010 regarding the HIRE credit, which your dental practice would have taken on its tax return if you hired someone who had been unemployed and met certain criteria.
You may also remember that there was a new hire retention credit linked to the HIRE credit or maybe you don’t remember and thus the reason for this edition of my Larry the Accountodontist blog.
For any employee who qualified for the HIRE credit if they were still working for your dental practice 52 consecutive weeks after their hire date as long as their wages in the last 26 weeks was at least equal to 80% of their wages in the first 26 weeks of their employment. Got that?
The credit is then equal to the lesser of $1,000 or 6.2% of wages paid during the 52 consecutive week period. This translates to a salary of $16,129.03 as the breakeven point. If your employee(s) made more than $16,129.03 then you get a $1,000 credit. If they made less than $16,129.03 then you would get a credit equal to 6.2% of those wages.
Now comes the hard part. Because the HIRE credit was just payroll related nothing showed up on the tax return for your dental practice meaning it may be easy to overlook the retention credit. If you think some of your employees qualified for the HIRE credit in 2010 be sure to alert your accountant to that fact so they can examine the payroll reports to see if that was the case. If that employee is still working in your dental practice 52 weeks after that initial hire date you’re in the money. If you think you may have employees who qualify, contact me. We can determine if you qualify for the credit on your 2011 returns.
What is the 1099-K and what do I do with it?
February 15, 2012 | Subscribe to our RSS Feed
A few weeks ago, we talked about 1099s that you should be sending to different individuals, vendors and attorneys.
New this year is the 1099-K, which your dental practice should be receiving from credit card processors: those folks who process your patient payments made by credit card.
The new 1099-K will show the gross amount of those payments and then a monthly breakdown. In conjunction with this new reporting there has been a new line included on the Form 1120S and Form 1065 for all you S Corporations and partnerships out there.
For record keeping purposes it will probably be necessary for us accountant’s to add a new income account to our dental client’s QuickBooks or other accounting software. It seems the Internal Revenue Service felt that small businesses were not reporting all the income they were receiving. If you are having all your patient credit card payments get deposited directly to your business checking account just consider yourself caught in the crossfire.
There is really nothing your practice needs to do from an administrative standpoint. What may happen are the fees the credit card processors charge to process your patient payments may (will) go up due to their increased costs for having to process the 1099-K’s. So, again, just consider yourself caught in the crossfire.
If you have questions about your tax preparation for yourself or your practice this year, I can help.
larry.goldberg@glassjacobson.com
Tax Prep Explained: 1099s
January 23, 2012 | Subscribe to our RSS Feed
As another year in the life of your dental practice has come to an end and it is time to start preparing all those dreaded year-end forms. There are tax returns to filed, prepared by your CPA. There are W-2’s and year-end payroll reports prepared by your 
payroll service or maybe you decide to tackle them yourself. And there are 1099 forms to file paid to independent contractors and temporary help who worked in your dental practice. No matter who is going to prepare them, be it you, your CPA or payroll service, they should be filed.
Let’s take a look at who should receive a 1099 and what penalties there may be for not filing them in a timely fashion. The Internal Revenue service wants the 1099’s filed so income does not fly under the radar and is reported on the recipients income tax return.
Who, related to payments made by your dental practice, is required to receive a 1099?
- Persons receiving $600.00 or more for services
- Persons receiving $600.00 or more for rent
- Attorneys receiving $600.00 in legal fees. This applies to both individuals and legal firms.
You will need to have the person or entities name, address and social security/ federal ID number to correctly record payments made to them. Therefore, once you have someone work at your dental office you should get that information up front. The last thing you want is to have you or your staff playing private detective to try and hunt someone down come the end of the year.
The 1099’s are supposed to be in the recipient’s hands by January 31 similar to a W-2. The due date to get the 1099’s to the Internal Revenue Service is February 28. If you don’t file the 1099’s by the due date and cannot show reasonable cause you may be subject to a penalty. The amount of the penalty depends on when you file the correct 1099.
- $30 per 1099 if you file within 30 days of the February 28 deadline penalty
- $60 per 1099 if you file more than 30 days late and before August 1
- $100 per 1099 if you file after August 1 or do not file the required returns
Don’t let the filing of 1099’s become an administrative headache for your dental practice. With a little upfront information gathering you can get out the necessary forms and avoid those nasty penalties.