2009 tax tips that'll save you money

February 5, 2009

Every physician should recognize the need for tax planning and the benefits that can result from it. The simple goal is to defer or reduce your practice's tax bill whenever possible.

Every physician should recognize the need for tax planning and the benefits that can result from it. The simple goal is to defer or reduce your practice's tax bill whenever possible.

Now that the 2008 tax year has ended for most physicians, all that can be done between now and the deadline for filing returns is to make the most of existing tax rules, all the while keeping an eye on your potential tax bill for 2009. That means not only making the most of your already completed transactions, but doing so in a manner that will not adversely affect or reduce future deductions.

PRACTICE TAX PLANNING

STIMULATING THE ECONOMY, 2008-STYLE

As the deadline for filing tax returns fast approaches, and regardless of whether professional tax assistance is utilized, every physician should be aware of the many changes to our tax laws-changes that will affect both your tax bill for 2008, as well as that of your practice for many years to come.

Early last year, the Economic Stimulus Act of 2008 became law, complete with rebates and business incentives. Most noticeable for its "Recovery Rebates," which reached as high as $600 for individuals and $1,200 for married couples, the new law also included $44.8 billion in business incentives.

For those practices acquiring equipment, the new law almost doubled the Section 179, first-year write-off for newly acquired equipment to $250,000 for 2008. Thus, up to $250,000 of the cost of equipment acquired and placed in service in 2008 can be treated as a business expense and fully deducted on returns for the 2008 tax year. (Should the cost of newly acquired equipment total more than $800,000 for 2008, the $250,000 Section 179 write-off must be reduced, dollar-for-dollar, for the excess above the $800,000 ceiling.)

Another provision in the stimulus package allows medical practices to claim a 50 percent "bonus" depreciation allowance for newly acquired equipment. To qualify, the equipment must be eligible for depreciation and have a useful life of less than 20 years. Off-the-shelf computer software and improvements made to property leased by a practice also qualify for bonus depreciation. Best of all, the 50 percent bonus depreciation applies in both the 2008 and 2009 tax years. (See "Bonus Depreciation".)

TAX BREAKS TO IGNORE

Obviously, not all of the tax breaks contained in the 2008 law will affect all physicians or their practices. In fact, many of the provisions contained in our tax laws, both new and existing, often are better off ignored.

You might, for example, have acquired needed equipment in 2008. The expenditure for that equipment would qualify as a Section 179 expensing deduction-small enough not to trigger the ceiling. However, with little in the way of profits, a depreciation write-off over a number of years-when profits will, one hopes, be greater and the tax bracket more onerous-might be more advantageous.

CHANGING YOUR MIND

While last year's changes in our tax laws are reflected on the tax returns and in the guidance provided by the Internal Revenue Service, and while most tax professionals are aware of them, there are always changes that slip by unnoticed. To take advantage of those missed tax deductions or tax savings possibilities that might become a reality in the months ahead, you can change or "amend" already filed tax returns.

Once the return has been filed, and if you believe the final tax bill was incorrect, a "claim for refund" may be filed using Form 1040X. A claim for refund may be made within three years from the time the original return was filed or within two years from the time when the tax was paid.

Incorporated medical or health-care practices that file Form 1120 should use Form 1120X to file a refund claim. Those who used forms other than 1040 or 1120 for filing their income tax returns should use the appropriate amended tax return.