Empty Nesters- Protect Yourself! ~ Highlights from the day.
September 20, 2011 | 
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Today, in partnership with Hodes, Pessin, & Katz, P.A., Glass Jacobson’s Women in Business Practice hosted the first in the 2011-2012 series, “Women: Protect Yourself. Financial & Legal Strategies for Navigating Life’s Stages.” The series is dedicated to helping women navigate the unique challenges they face.
Today’s seminar, held over lunch, focused on women in the empty nest stage. Women at this time in their lives finally have a moment to think about their own future! Christine Schmitz of Glass Jacobson shared some interesting financial tools women can use to accumulate assets for their retirement, Kim Battaglia of Hodes, Pessin and Katz talked about legal ways to protect those assets, and our special guest, Elise Rubinstein, a Health Coach, helped us understand how we can feel good enough to enjoy them.
We will be posting the tools, articles and handouts from today’s session here.
Our next seminar, Business 101, is scheduled for November 15th from 11:45-1:30. More details to follow.
Irene Triggers MD Sept Filing Extension
September 7, 2011 | Subscribe to our RSS Feed
On September 1, 2011, the IRS announced it would grant taxpayers affected by Hurricane Irene an extension to file returns normally due September 15. This new extension, to Sept. 22, applies primarily to corporations, partnerships and trusts that previously obtained a tax filing extension.
The taxpayer’s tax preparer must be located in an area that was under an evacuation order or a severe weather warning because of Hurricane Irene, even if the tax preparer is located outside of the federally declared disaster areas.
Maryland tax preparers will qualify for this extension from the IRS. We have also confirmed that the Maryland Comptroller’s office will follow the IRS on granting this extension. You can find more information here.
Questions?
S Corporations- How do you get paid?
August 31, 2011 | Subscribe to our RSS Feed
Executive Summary:
S Corporation shareholders generally prefer to take dividend distributions from their profits as opposed to compensation payments. Compensation payments are subject to employment taxes, where as distribution payments are not. This gives S Corporation shareholders a distinct tax advantage over that of LLs, partnerships and sole proprietorships as these types of entities cannot take profit distributions.
The IRS does require S Corporations to pay “reasonable compensation” to shareholders to prevent these corporations from avoiding employment taxes.
If you are an S Corporation shareholder, particularly of a professional services firm, take note of the three qualifying factors for determining reasonable compensation:
- Employee performance
- Salary comparisons
- Company conditions
Background:
S Corporations have long enjoyed a tax advantage over that of sole proprietorships, partnerships, and LLCs. As the tax burdens on businesses grown, this advantage has become more pronounced. However, the IRS is taking aim at the S Corp distribution payments v. compensation payments debate.
Until recently, the IRS offered very little guidance to S Corporation shareholders and their tax advisors on defining and computing “reasonable compensation,” leaving the window open to a wide range of interpretation.
Determining an analytical approach to computing “Reasonable Compensation”:
Two recent district court cases (David E. Watson, P.C., 714 F. Supp. 2d 954 (S.D. Iowa 2010) and JD & Assocs., Ltd., 3:04-cv-59(D.N.D. 2006)) have finally shed some light on the methodology the IRS uses to determine reasonable compensation for S Corporations.
Both of these cases involve a shareholder in a professional services firm with a broad spectrum of responsibilities drawing what the IRS believed to be unreasonably low salaries. The District Court developed three groupings of factors to determine reasonable compensation:
- Employee performance
- Salary comparisons
- Company conditions
Regarding employee performance, the shareholders in question were leading profitable firms, and leveraging advanced degrees and decades of experience. The IRS ruled that they were underpaid for their services.
To determine comparative salaries, the IRS engaged a certified valuation engineer to make a determination of reasonable compensation. The expert compared various ratios, including the firm’s profitability in relation to peers and shareholder in question’s salary as a percentage of net sales in relation to peers. Whereas the firms in question were more profitable than peers, the Shareholders in question were making markedly less in compensation compared to peers (in some cases, over 250% less!).
Regarding company conditions, the court determined that a small yet profitable enterprise with few requirements in terms of reinvestment should have excess capital for reasonable employee compensation.
In other words, in both these cases, the Courts ruled in favor of the IRS.
It is not a coincidence that both these cases involved professional services firms (law, accounting, consulting). In the view of the IRS, these businesses generate profits primarily through personal efforts of their employees, as opposed to other types of businesses where revenue is driven more through a corporation’s capital and assets. In the case of professional services firms, profits should be paid out in compensation.
How can I determine reasonable compensation?
Use basic benchmarking tools, like monster.com, salary.com, Robert Half and the Bureau of Labor Statistics data to determine the reasonableness of shareholder compensation in relation to industry norms.
Questions?
New Standard Mileage Rates Begin July 2011
June 30, 2011 | Subscribe to our RSS Feed
The IRS has announced that it is modifying the standard mileage rates for computing the deductible costs of operating an automobile for business, medical or moving expense purposes. The new rates are effective July 1, 2011.
The revised mileage rates are:
- 55.5 cents/mile for business
- 23.5 cents/mile for medical and moving
The new standard mileage rates for charitable contributions is fixed at 14 cents/mile.
Questions?
New Medicare Part B Claims Process (MPPR)
June 6, 2011 | Subscribe to our RSS Feed
Effective January 1, 2011, Medicare enacted a new policy that affects Part B therapy services in a long term care setting. The Multiple Procedure Payment Reduction (MPPR) is now applied to the practice expense of select therapy services when more than one unit or procedure is provided to the same patient on the same day. The type of bill that is affected by the change is 22x. The revenue codes affected are 042x, 043x and 044x.
The MPPR applies to all services furnished to a patient on the same day regardless of whether the services are provided in one therapy discipline or multiple disciplines (PT, OT, and SLP).
Procedure codes or HCPCS codes are broken down by three components: 1. Work 2. Practice Expense (PE) and 3. Malpractice. The MPPR payment methodology is applied to the PE component of the HCPCS code.
Full payment is applied to the unit of HCPCS code with the highest PE and 75% payment is calculated for subsequent units and procedures furnished to the patient on the same day.
MPPR Calculation Example:
| Component | HCPCS Code | HCPCS Code | HCPCS Code | Prior Total Payment | Current Payment Calculation | Current Total Payment |
| 97016 | 97016 | 97018 | ||||
| Work | $7.00 | $7.00 | $11.00 | $25.00 | No reduction | $25.00 |
| PE | $10.00 | $10.00 | $8.00 | $28.00 | $10+$7.50 +$6 | $23.50 |
| Malpractice | $1.00 | $1.00 | $1.00 | $3.00 | No reduction | $3.00 |
| $56.00 | $51.50 |
Providers must remember to use the condition code “5” when identifying MPPR on their billing.
The FI will adjudicate claims accordingly and the remittance advice will include a claim adjustment reason code of “45”. Charge exceeds fee schedule/maximum allowable or contracted/legislated fee arrangement.
Questions about how to properly process your Medicare Part B claims under the new policy?
patrick.trotta@glassjacobson.com
carolyn.cunningham@glassjacobson.com