gates advocates for proactive tax planning for medical practices
DESCRIPTION
PYA Principal Greg Gates, CPA, recently addressed financial professionals who work with healthcare providers at the 2013 Tennessee Society of Certified Public Accountants Healthcare Conference. Gates discussed the importance of being a proactive tax advisor.TRANSCRIPT
![Page 1: Gates Advocates for Proactive Tax Planning for Medical Practices](https://reader036.vdocument.in/reader036/viewer/2022062702/554b817cb4c90574668b496a/html5/thumbnails/1.jpg)
Page 1December 2, 2013
Prepared for Tennessee Society of CPA’s Healthcare Conference
Proactive Tax Planning for Medical PracticesTennessee Society of CPA’s Healthcare Conference
December 2, 2013
Presented by Greg B. Gates, CPA, J.D., Principal
PYA GatesMoore
Atlanta, GA
![Page 2: Gates Advocates for Proactive Tax Planning for Medical Practices](https://reader036.vdocument.in/reader036/viewer/2022062702/554b817cb4c90574668b496a/html5/thumbnails/2.jpg)
Page 2December 2, 2013
Prepared for Tennessee Society of CPA’s Healthcare Conference
Characteristics of a Proactive Adviser• Bring ideas to “the table” (arrows in your quiver)
• Contact clients with matters of benefit, interest, or concern
• Return client calls and emails TIMELY
• Annual review with staff
– What are we doing for the client they can do for themselves
– What are we not doing in advising the client that we should
• Bottom line: Take a real interest in the client and do not take them for granted.
P.S. – “Anybody” can prepare a tax return.
![Page 3: Gates Advocates for Proactive Tax Planning for Medical Practices](https://reader036.vdocument.in/reader036/viewer/2022062702/554b817cb4c90574668b496a/html5/thumbnails/3.jpg)
Page 3December 2, 2013
Prepared for Tennessee Society of CPA’s Healthcare Conference
Overview of ….• Micro Captive Insurance Companies (CIC)
• Cash Balance Retirement Plans
Historically
• 401(k) Safe Harbor Profit Sharing Plans
• Medical Expense Reimbursement Plans (C Corporations)
• Conversion from LLC to S Corporation
• Deferred Income Tax Liability (C Corporations)
![Page 4: Gates Advocates for Proactive Tax Planning for Medical Practices](https://reader036.vdocument.in/reader036/viewer/2022062702/554b817cb4c90574668b496a/html5/thumbnails/4.jpg)
Page 4December 2, 2013
Prepared for Tennessee Society of CPA’s Healthcare Conference
What a CIC is not ….
• Offshore (but it can be)
• A replacement for Professional Liability Insurance (Malpractice)
• Life insurance
![Page 5: Gates Advocates for Proactive Tax Planning for Medical Practices](https://reader036.vdocument.in/reader036/viewer/2022062702/554b817cb4c90574668b496a/html5/thumbnails/5.jpg)
Page 5December 2, 2013
Prepared for Tennessee Society of CPA’s Healthcare Conference
When meeting with a client regarding a CIC have everyone in the room who may be a participant or a
‘Naysayer’
(“The confused mind always says ‘No’.”)
e.g. Attorney
Investment Advisor
Other?
![Page 6: Gates Advocates for Proactive Tax Planning for Medical Practices](https://reader036.vdocument.in/reader036/viewer/2022062702/554b817cb4c90574668b496a/html5/thumbnails/6.jpg)
Page 6December 2, 2013
Prepared for Tennessee Society of CPA’s Healthcare Conference
Captive Insurance Companies - 831(b)
Medical Practice
Physician Owners
Physicians or Family
Members
CIC
Provides insurance coverage for various risks
$350K* to $1.2 million of annual insurance
premiums*Practical not statutory
Premium $’s
![Page 7: Gates Advocates for Proactive Tax Planning for Medical Practices](https://reader036.vdocument.in/reader036/viewer/2022062702/554b817cb4c90574668b496a/html5/thumbnails/7.jpg)
Page 7December 2, 2013
Prepared for Tennessee Society of CPA’s Healthcare Conference
Qualifying Factors
• First & foremost: this is an insurance company
• $1.2 million ceiling on annual premium income
• Design the insurance to fit practice needs
• Viable for medical practices with “excess cash”
![Page 8: Gates Advocates for Proactive Tax Planning for Medical Practices](https://reader036.vdocument.in/reader036/viewer/2022062702/554b817cb4c90574668b496a/html5/thumbnails/8.jpg)
Page 8December 2, 2013
Prepared for Tennessee Society of CPA’s Healthcare Conference
Introduction to 831(b) Captive Insurance Companies
IRS 831(b) provides that:
• Insurance companies with less than $1.2 million of annual premium pay $0 income tax on insurance “profits” (premium income)
• Investment income is taxed as income to C-Corporation
• 831(b) must be timely elected and cannot be revoked without the permission of the Secretary
![Page 9: Gates Advocates for Proactive Tax Planning for Medical Practices](https://reader036.vdocument.in/reader036/viewer/2022062702/554b817cb4c90574668b496a/html5/thumbnails/9.jpg)
Page 9December 2, 2013
Prepared for Tennessee Society of CPA’s Healthcare Conference
IRC Sec. 831(b) – Code Language• 831(b) Alternative tax for certain small companies
• (1) In general
• In lieu of the tax otherwise applicable under subsection (a), there is hereby imposed for each taxable year on the income of every insurance company to which this subsection applies a tax computed by multiplying the taxable investment income of such company for such taxable year by the rates provided in section 11(b)
• (2) Companies to which this subsection applies
• (A) In general
• This subsection shall apply to every insurance company other than life (including interinsurers and reciprocal underwriters) if –
• (i) the net written premiums (or, if greater, direct written premiums) for the taxable year do not exceed $1,200,000, and
• (ii) such company elects the application of this subsection for such taxable year
• The election under clause (ii) shall apply to the taxable year for which made and for all subsequent taxable years for which the requirements of clause (i) are met. Such an election, once made, may be revoked only with the consent of the Secretary.
![Page 10: Gates Advocates for Proactive Tax Planning for Medical Practices](https://reader036.vdocument.in/reader036/viewer/2022062702/554b817cb4c90574668b496a/html5/thumbnails/10.jpg)
Page 10December 2, 2013
Prepared for Tennessee Society of CPA’s Healthcare Conference
Captive Insurance Company Policies• Everything a practice currently self-insures:
– Deductibles (e.g., Medical Malpractice)
– Excess losses above coverage limits
• Loss of income as a result of:
– Losing key employee
– Loss of license/professional risks (professionals)
– Weather
– ‘Downtime’ of clinical equipment, e.g., PET scanners, CT’s, MRI’s
• Liability risks for which practice does not insure
– Employee lawsuits – sexual harassment, wrongful termination, discrimination, etc.
![Page 11: Gates Advocates for Proactive Tax Planning for Medical Practices](https://reader036.vdocument.in/reader036/viewer/2022062702/554b817cb4c90574668b496a/html5/thumbnails/11.jpg)
Page 11December 2, 2013
Prepared for Tennessee Society of CPA’s Healthcare Conference
Examples of Captive InsurancePolicies Written
• Professional Liability Coverage
• General Liability Gap
• HIPAA/Billing Audit Liability • Professional Misconduct
• Contractual Liability • Directors and Officers Liability
• Cyber Liability • Punitive Damages
• Environmental Liability • Loss of Key Employee
• Employment Practices • Employee Dishonesty
Do Not Insure Things That Are Not Pertinent e.g., Patent Infringement If You Have No Patents
![Page 12: Gates Advocates for Proactive Tax Planning for Medical Practices](https://reader036.vdocument.in/reader036/viewer/2022062702/554b817cb4c90574668b496a/html5/thumbnails/12.jpg)
Page 12December 2, 2013
Prepared for Tennessee Society of CPA’s Healthcare Conference
The Ground Rules
• Premiums and policies must be market-comparable
• Actuarial support needed
• Insurance formalities complied with
![Page 13: Gates Advocates for Proactive Tax Planning for Medical Practices](https://reader036.vdocument.in/reader036/viewer/2022062702/554b817cb4c90574668b496a/html5/thumbnails/13.jpg)
Page 13December 2, 2013
Prepared for Tennessee Society of CPA’s Healthcare Conference
Real Life Example - Results
Do Nothing with $1.2M Captive 831(b)
• No risk management, asset protection, buy-out/retirement benefits of CIC
• Risk management, asset protection, buy-out/retirement benefits of CIC
• Earn money, income taxes • Create trust to own CIC (or have family members own)
• Taxable/tax deferred investments
• CIC invests in tax deferred investments
• Die, pay estate taxes • Tax efficient withdrawals from CIC
![Page 14: Gates Advocates for Proactive Tax Planning for Medical Practices](https://reader036.vdocument.in/reader036/viewer/2022062702/554b817cb4c90574668b496a/html5/thumbnails/14.jpg)
Page 14December 2, 2013
Prepared for Tennessee Society of CPA’s Healthcare Conference
Tax Planning Benefits1. Deductibility of premiums paid by Medical Practice –
IRC§162
– Assuming premiums are market comparable – determined by an actuary
2. CIC is not taxed on first $1.2 million of annual premium income
3. Distributions from CIC taxed at capital gain rates
4. Can transfer wealth if owners of CIC are family members
5. And… Asset Protection
![Page 15: Gates Advocates for Proactive Tax Planning for Medical Practices](https://reader036.vdocument.in/reader036/viewer/2022062702/554b817cb4c90574668b496a/html5/thumbnails/15.jpg)
Page 15December 2, 2013
Prepared for Tennessee Society of CPA’s Healthcare Conference
Captive Insurance Companies - 831(b)
Medical Practice
Physician Owners
Physicians or Family
Members
CIC
Provides insurance coverage for various risks
$350K* to $1.2 million of annual insurance
premiums*Practical not statutory
Premium $’s
CIC Assets Protected
Dividends(Tax Savings)
If Owners Are Family Members(Wealth Transfer)
![Page 16: Gates Advocates for Proactive Tax Planning for Medical Practices](https://reader036.vdocument.in/reader036/viewer/2022062702/554b817cb4c90574668b496a/html5/thumbnails/16.jpg)
Page 16December 2, 2013
Prepared for Tennessee Society of CPA’s Healthcare Conference
CIC team of Advisors
• Knowledgeable attorney
• Actuary
• CPA (need tax return and audit)
![Page 17: Gates Advocates for Proactive Tax Planning for Medical Practices](https://reader036.vdocument.in/reader036/viewer/2022062702/554b817cb4c90574668b496a/html5/thumbnails/17.jpg)
Page 17December 2, 2013
Prepared for Tennessee Society of CPA’s Healthcare Conference
Cost for Establishment andMaintenance of CIC
• $80,000 to establish
• $55,000 annual maintenance
– Audit fee of $8,500
– Tax Return fee of $2,500
• Capitalization
– Cash or letter of credit
![Page 18: Gates Advocates for Proactive Tax Planning for Medical Practices](https://reader036.vdocument.in/reader036/viewer/2022062702/554b817cb4c90574668b496a/html5/thumbnails/18.jpg)
Page 18December 2, 2013
Prepared for Tennessee Society of CPA’s Healthcare Conference
Greater Tax Deferral Using
Cash Balance Plans
![Page 19: Gates Advocates for Proactive Tax Planning for Medical Practices](https://reader036.vdocument.in/reader036/viewer/2022062702/554b817cb4c90574668b496a/html5/thumbnails/19.jpg)
Page 19December 2, 2013
Prepared for Tennessee Society of CPA’s Healthcare Conference
Why Cash Balance and Why Now?
1) The new tax targets• >$250,000
2) Catch-up• Make up for 401(k) losses• Make up for QDRO’s
![Page 20: Gates Advocates for Proactive Tax Planning for Medical Practices](https://reader036.vdocument.in/reader036/viewer/2022062702/554b817cb4c90574668b496a/html5/thumbnails/20.jpg)
Page 20December 2, 2013
Prepared for Tennessee Society of CPA’s Healthcare Conference
401(k)
Profit Sharing
DefinedContribution
Qualified Plans
DefinedBenefit
TraditionalHybrid
CashBalance
![Page 21: Gates Advocates for Proactive Tax Planning for Medical Practices](https://reader036.vdocument.in/reader036/viewer/2022062702/554b817cb4c90574668b496a/html5/thumbnails/21.jpg)
Page 21December 2, 2013
Prepared for Tennessee Society of CPA’s Healthcare Conference
How Does Cash Balance Differ from a DB Plan?
• Complex formula (contribution is actuarially determined)
Defined Benefit Plans Cash Balance Plans
• Account balance,
$100,000
• Unfamiliar/archaic • Familiar: 401(k)
• Age-sensitive • Less age-sensitive
![Page 22: Gates Advocates for Proactive Tax Planning for Medical Practices](https://reader036.vdocument.in/reader036/viewer/2022062702/554b817cb4c90574668b496a/html5/thumbnails/22.jpg)
Page 22December 2, 2013
Prepared for Tennessee Society of CPA’s Healthcare Conference
401(k) with Tax
Age Profit Sharing Cash Balance TOTAL savings*
60 - 65 $56,500 $220,000 $276,500 $110,600
55 - 59 $56,500 $201,000 $257,500 $103,000
50 - 54 $56,500 $153,000 $209,500 $83,800
45 - 49 $51,000 $117,000 $168,000 $67,200
40 - 44 $51,000 $90,000 $141,000 $56,400
35 - 39 $51,000 $68,000 $119,000 $47,600
30 - 34 $51,000 $52,000 $103,000 $41,200
*Assuming 40% tax bracket, taxes are deferred
2013 Contribution Limits
401(k) Profit Sharing & Cash Balance Plans
![Page 23: Gates Advocates for Proactive Tax Planning for Medical Practices](https://reader036.vdocument.in/reader036/viewer/2022062702/554b817cb4c90574668b496a/html5/thumbnails/23.jpg)
Page 23December 2, 2013
Prepared for Tennessee Society of CPA’s Healthcare Conference
How Do Cash Balance Plans Work?
401(k) Cash Balance
Interest Crediting
Rate (~5%)
ContributionContribution Earnings
![Page 24: Gates Advocates for Proactive Tax Planning for Medical Practices](https://reader036.vdocument.in/reader036/viewer/2022062702/554b817cb4c90574668b496a/html5/thumbnails/24.jpg)
Page 24December 2, 2013
Prepared for Tennessee Society of CPA’s Healthcare Conference
Plan Investments
Earnings …next year’s contribution
Earnings …next year’s contribution
7-year make-up
![Page 25: Gates Advocates for Proactive Tax Planning for Medical Practices](https://reader036.vdocument.in/reader036/viewer/2022062702/554b817cb4c90574668b496a/html5/thumbnails/25.jpg)
Page 25December 2, 2013
Prepared for Tennessee Society of CPA’s Healthcare Conference
Investment Dynamics
TARGET RETURN
Too low:• Greater expense / larger
contribution required• Underfunding limitations
Too high:
• Lower contribution• Smaller tax deduction• Potential excise tax
![Page 26: Gates Advocates for Proactive Tax Planning for Medical Practices](https://reader036.vdocument.in/reader036/viewer/2022062702/554b817cb4c90574668b496a/html5/thumbnails/26.jpg)
Page 26December 2, 2013
Prepared for Tennessee Society of CPA’s Healthcare Conference
CASE STUDY: Small Business
Plan options?
CASE STUDY: Small Practice
Owners Age Compensation
Doctor 1 62 $ 250,000
Doctor 2 41 250,000
Employees
Jones 49 $ 89,000Keeler 63 88,000Marion 31 53,000Baldwin 29 50,000Dupre 41 48,000Ophir 25 39,000Smith 33 40,000Sabotin 48 35,000Parotta 22 15,000Keebler 30 14,000
![Page 27: Gates Advocates for Proactive Tax Planning for Medical Practices](https://reader036.vdocument.in/reader036/viewer/2022062702/554b817cb4c90574668b496a/html5/thumbnails/27.jpg)
Page 27December 2, 2013
Prepared for Tennessee Society of CPA’s Healthcare Conference
Employees
All IRS-governed Plans:2 basic rules
![Page 28: Gates Advocates for Proactive Tax Planning for Medical Practices](https://reader036.vdocument.in/reader036/viewer/2022062702/554b817cb4c90574668b496a/html5/thumbnails/28.jpg)
Page 28December 2, 2013
Prepared for Tennessee Society of CPA’s Healthcare Conference
The Give to Get
Owners Age Compensation
Employees
Above the line
Below the line
The Give to Get
![Page 29: Gates Advocates for Proactive Tax Planning for Medical Practices](https://reader036.vdocument.in/reader036/viewer/2022062702/554b817cb4c90574668b496a/html5/thumbnails/29.jpg)
Page 29December 2, 2013
Prepared for Tennessee Society of CPA’s Healthcare Conference
Comparability
CASE STUDY: Basic PlanProfit TOTAL
Doctors 401(k) Sharing CONTRIBUTION
5% of pay
Doctor A $ 22,500 $ 12,250 $ 34,750
Doctor B 17,000 12,250 29,250
$ 64,000Employees 5% of pay
Jones 4,450Keeler 4,400Marion 2,650Baldwin 2,500Dupre 2,400Ophir 1,950Smith 2,000Sabotin 1,750Parotta 750Keebler 700
Subtotal $ 23,550 $ 23,550
Total $ 87,550
Percent to Doctors 73%
![Page 30: Gates Advocates for Proactive Tax Planning for Medical Practices](https://reader036.vdocument.in/reader036/viewer/2022062702/554b817cb4c90574668b496a/html5/thumbnails/30.jpg)
Page 30December 2, 2013
Prepared for Tennessee Society of CPA’s Healthcare Conference
CASE STUDY: New ComparabilityProfit * TOTAL
Doctors 401(k) Sharing CONTRIBUTION
13% of pay
Doctor A $ 22,500 $ 33,000 $ 55,500
Doctor B 17,000 33,000 50,000
$ 105,500Employees 5% of pay
Jones 4,450Keeler 4,400Marion 2,650Baldwin 2,500Dupre 2,400Ophir 1,950Smith 2,000Sabotin 1,750Parotta 750Keebler 700
Subtotal $ 23,550 $ 23,550
Total $ 129,050
Percent to Doctors 82%
* Assume new comparability (cross-tested) plan
CASE STUDY
![Page 31: Gates Advocates for Proactive Tax Planning for Medical Practices](https://reader036.vdocument.in/reader036/viewer/2022062702/554b817cb4c90574668b496a/html5/thumbnails/31.jpg)
Page 31December 2, 2013
Prepared for Tennessee Society of CPA’s Healthcare Conference
CASE STUDY: Cash Balance OptionsCASE STUDY: Cash Balance Options
Profit
Doctors Age 401(k) Sharing
Doctor A 62 $ 22,500 $ 33,000 $0…$ 213,000
Doctor B 41 17,000 33,000 $0… 69,000
Employees 7.5% of pay
Jones 49 $ 6,675 $ 650Keeler 63 6,600 650Marion 31 3,975 650Baldwin 29 3,750 650Dupre 41 3,600 650Ophir 25 2,925 650Smith 33 3,000 650Sabotin 48 2,625 650Parotta 22 1,125 650Keebler 30 1,050 650
Cash
Balance
![Page 32: Gates Advocates for Proactive Tax Planning for Medical Practices](https://reader036.vdocument.in/reader036/viewer/2022062702/554b817cb4c90574668b496a/html5/thumbnails/32.jpg)
Page 32December 2, 2013
Prepared for Tennessee Society of CPA’s Healthcare Conference
CASE STUDY: Cash Balance ActualCASE STUDY: Cash Balance ActualProfit TOTAL
Doctors 401(k) Sharing CONTRIBUTION
Doctor A $ 22,500 $ 33,000 $ 213,000 $ 268,500
Doctor B 17,000 33,000 25,000 75,000
Employees 7.5% of pay
Jones 6,675 $ 650 7,325Keeler 6,600 650 7,250Marion 3,975 650 4,625Baldwin 3,750 650 4,400
Dupre 3,600 650 4,250Ophir 2,925 650 3,575Smith 3,000 650 3,650
Sabotin 2,625 650 3,275Parotta 1,125 650 1,775Keebler 1,050 650 1,700
Subtotal $ 35,325 $ 6,500 $ 41,825
Total $ 385,325
Percent to Doctors 89%
Cash
Balance
Summary of Cash Balance Contribution
Doctors $238,000 92.7%
Staff – Additional PSP
11,775
Cash Balance 6,500
$ 18,275 7.3%
![Page 33: Gates Advocates for Proactive Tax Planning for Medical Practices](https://reader036.vdocument.in/reader036/viewer/2022062702/554b817cb4c90574668b496a/html5/thumbnails/33.jpg)
Page 33December 2, 2013
Prepared for Tennessee Society of CPA’s Healthcare Conference
89% to Owners
($343,500)+$112,305
No Plan Plan
60% to Owners
($231,195)
40%
tax bracket
$385,325
40% tax($154,130)
11% to employeesversus Uncle Sam
Is the Cash Balance Plan tax-efficient?Is the Cash Balance Plan
Tax-efficient?
![Page 34: Gates Advocates for Proactive Tax Planning for Medical Practices](https://reader036.vdocument.in/reader036/viewer/2022062702/554b817cb4c90574668b496a/html5/thumbnails/34.jpg)
Page 34December 2, 2013
Prepared for Tennessee Society of CPA’s Healthcare Conference
Practical Illustration
Cash Balance Adjusted Total Hypothetical Additional Cash Balance Total Profit for Account Cash for Account for both
Sharing %'s Balances Balance Balances %'s Plans %'s Summary Practice 1 Totals Doctors $105,750.00 56% $ 150,000.00 - $ 150,000.00 92% $ 255,750.00 73% Staff 82,846.29 44% 11,200.41 1,623.66 12,824.07 8% 95,670.36 27% Total $188,596.29 100% $ 161,200.41 1,623.66 $ 162,824.07 100% $ 351,420.36 100%
Practice 2 Totals Doctors $198,000.00 42% $ 300,000.00 - $ 300,000.00 89% $ 498,000.00 62% Staff 271,082.97 58% 34,381.80 4,123.55 38,505.35 11% 309,588.32 38% Total $469,082.97 100% $ 334,381.80 4,123.55 $ 338,505.35 100% $ 807,588.32 100%
Combined Doctors $303,750.00 46% $ 450,000.00 - $ 450,000.00 90% $ 753,750.00 65% Staff 353,929.26 54% 45,582.21 5,747.21 51,329.42 10% 405,258.68 35% Total $657,679.26 100% $ 495,582.21 5,747.21 $ 501,329.42 100% $ 1,159,008.68 100%
![Page 35: Gates Advocates for Proactive Tax Planning for Medical Practices](https://reader036.vdocument.in/reader036/viewer/2022062702/554b817cb4c90574668b496a/html5/thumbnails/35.jpg)
Page 35December 2, 2013
Prepared for Tennessee Society of CPA’s Healthcare Conference
Why Cash Balance Plans Appeal to Medical Practices
1. There is direct tracking of contribution (what goes in, plus interest, comes out).
2. Portable: If doctor retires or leaves the practice, rolled to IRA or the new plan
3. There can be contribution flexibility among partners.
4. Liability among partners can be minimized.
5. There are options if cash flows decrease.
![Page 36: Gates Advocates for Proactive Tax Planning for Medical Practices](https://reader036.vdocument.in/reader036/viewer/2022062702/554b817cb4c90574668b496a/html5/thumbnails/36.jpg)
Page 36December 2, 2013
Prepared for Tennessee Society of CPA’s Healthcare Conference
Seven Basic FeaturesYou Need to Know You Need to Know
![Page 37: Gates Advocates for Proactive Tax Planning for Medical Practices](https://reader036.vdocument.in/reader036/viewer/2022062702/554b817cb4c90574668b496a/html5/thumbnails/37.jpg)
Page 37December 2, 2013
Prepared for Tennessee Society of CPA’s Healthcare Conference
Feature #1
The cash balance contribution is required.
![Page 38: Gates Advocates for Proactive Tax Planning for Medical Practices](https://reader036.vdocument.in/reader036/viewer/2022062702/554b817cb4c90574668b496a/html5/thumbnails/38.jpg)
Page 38December 2, 2013
Prepared for Tennessee Society of CPA’s Healthcare Conference
$
Cash BalancePlan
IRA
Other QualifiedPlan
Rollover
Assets are portable.
Feature #1Feature #2
![Page 39: Gates Advocates for Proactive Tax Planning for Medical Practices](https://reader036.vdocument.in/reader036/viewer/2022062702/554b817cb4c90574668b496a/html5/thumbnails/39.jpg)
Page 39December 2, 2013
Prepared for Tennessee Society of CPA’s Healthcare Conference
Feature #2
Doctors can have different amounts contributed for them.
Cash Balance Contribution
Doctor 1, age 50: $112,000
Doctor 2, age 50: $0
Contribution flexibility among partners
Feature #3
![Page 40: Gates Advocates for Proactive Tax Planning for Medical Practices](https://reader036.vdocument.in/reader036/viewer/2022062702/554b817cb4c90574668b496a/html5/thumbnails/40.jpg)
Page 40December 2, 2013
Prepared for Tennessee Society of CPA’s Healthcare Conference
Feature #3
Contribution amounts can change, but use caution.
What are doctors most concerned about
these days?
Feature #4
![Page 41: Gates Advocates for Proactive Tax Planning for Medical Practices](https://reader036.vdocument.in/reader036/viewer/2022062702/554b817cb4c90574668b496a/html5/thumbnails/41.jpg)
Page 41December 2, 2013
Prepared for Tennessee Society of CPA’s Healthcare Conference
Feature #3
What if the cash flows decrease?
1. Reduce 401(k) and/or Profit Sharing.
2. Amend plan to change contribution amounts. (3 years)
3. Freeze plan.
1/1 12/31
Plan amendment deadline(1,000 hours/~June 15)
Feature #4 - Continued
![Page 42: Gates Advocates for Proactive Tax Planning for Medical Practices](https://reader036.vdocument.in/reader036/viewer/2022062702/554b817cb4c90574668b496a/html5/thumbnails/42.jpg)
Page 42December 2, 2013
Prepared for Tennessee Society of CPA’s Healthcare Conference
Feature #4
Funding of the Plan
1/1/13 12/31/13
Funding deadline
3/15/14
Plan year
9/15/14
Funding extension
Filing of the practice tax return
Feature #5
![Page 43: Gates Advocates for Proactive Tax Planning for Medical Practices](https://reader036.vdocument.in/reader036/viewer/2022062702/554b817cb4c90574668b496a/html5/thumbnails/43.jpg)
Page 43December 2, 2013
Prepared for Tennessee Society of CPA’s Healthcare Conference
• 40% of eligible participants- Example: 8/20 = 40%
OR
• 50 total
Feature #5
Participation requirement
(How many people need to be in the CB Plan?)
Feature #6
![Page 44: Gates Advocates for Proactive Tax Planning for Medical Practices](https://reader036.vdocument.in/reader036/viewer/2022062702/554b817cb4c90574668b496a/html5/thumbnails/44.jpg)
Page 44December 2, 2013
Prepared for Tennessee Society of CPA’s Healthcare Conference
Feature #6Non-discrimination testing primarily satisfied in theProfit Sharing Plan
(gateway contributions 5%-7.5%)
Feature #7
Profit TOTAL
Owners 401(k) Sharing CONTRIBUTION
Doctor 1 $ 22,500 $ 33,000 $ 213,000 $ 268,500
Doctor 2 17,000 33,000 25,000 75,000
Employees 7.5% of pay
Jones 6,675 $ 650 7,325Keeler 6,600 650 7,250Marion 3,975 650 4,625Baldwin 3,750 650 4,400Dupre 3,600 650 4,250Ophir 2,925 650 3,575Smith 3,000 650 3,650Sabotin 2,625 650 3,275Parotta 1,125 650 1,775Keebler 1,050 650 1,700
Subtotal $ 35,325 $ 6,500 $ 41,825
Total $ 385,325
Percent to Owners 89%
Cash
Balance
![Page 45: Gates Advocates for Proactive Tax Planning for Medical Practices](https://reader036.vdocument.in/reader036/viewer/2022062702/554b817cb4c90574668b496a/html5/thumbnails/45.jpg)
Page 45December 2, 2013
Prepared for Tennessee Society of CPA’s Healthcare Conference
Conclusion:
• See What Arrows Are In Your Quiver.
• Pull Them Out To Suit Clients Needs.
Be Proactive!