TAX ALERT 2014

The president signed a one-year extension of more than 50 expired tax breaks. Some of the extended provisions include:

For Individuals:
• Deductions for certain expenses of eligible school teachers
• Deductions for state and local general sales taxes
• Deduction of qualified tuition and related expenses
• Tax-free charitable contributions from IRAs

For Businesses:
• Research and development credit
• Section 179 – enhanced expensing deductions
• First year bonus depreciation
• Work opportunity tax credit
• Reduced recognition period for the built-in gains of S-corporations

The reinstatement of more than 50 expired tax breaks is a positive thing for 2014 for individual and business taxpayers. Please refer to a recent William Vaughan Company blog for last minute actions to further reduce 2014’s tax liability.

Contact your William Vaughan Company professional for additional information on the specific provisions that could benefit you.

Thinking About Hiring Your Children In Your Dental Practice?

Generally they will be in a lower tax bracket than you. Therefore, you can shift income from your higher tax bracket to your children’s lower tax rates.

In order to qualify as a deductible business expense, there are four criteria that must be met.

1. The compensation must be shown as an ordinary and necessary expense connected with the practice.
2. The pay must be reasonable, defined as the amount normally paid for similar services.
3. The services must actually be provided.
4. The compensation must be paid.

Your child is eligible to contribute up to $5,000 to an individual retirement account (IRA). Thus, in 2014, your child can earn $11,200 without paying any Federal income tax if they contribute the full $5,000 to an IRA.

They could also decide to contribute up to $5,000 to a Roth IRA. They would then pay about $500 of federal income tax, but all the qualified distributions from the Roth IRA would be then tax-free.

Is Your Dental Practice Paying Proper Sales Tax?

As a provider of personal services, a dentist’s services are exempt from sales tax. However, if your practice sells to patients items such as mouthwash, whiteners and toothbrushes, sales tax must be collected on these items.

In addition, dentists can be consumers of tangible personal property and services as well. Your practice is responsible for paying sales tax on purchases of supplies and equipment, including items that are consumed when rendering your services. For example, crowns, braces, brackets and implants. If the vendor you purchased these items from did not charge sales tax, you must pay use tax to the Ohio Department of Taxation. One of the most common trends we see are orders from out-of-state dental labs or equipment companies which are not properly charging sales tax.

The opposite of a sales tax is a use tax which is imposed when you purchase a taxable item, but don’t pay sales tax on it. As a result of the rapidly rising deficits, state taxing authorities are looking closely at dental practices for unpaid use tax for items purchased from vendors that have not charged sales tax.

Experience has shown us that many dental practices have no idea that they are at risk of exposure to this tax. If you have never filed sales or use tax returns, the state can audit your practice all the way back to the date it started business. The magnitude of unpaid sales and use taxes, plus interest and penalties, could be enormous.
If you haven’t addressed sales and use tax in your practice, now is the time to do so!

Visit our website, http://www.wvco.com or contact our dental accounting team if you have questions about these taxes (419) 891-1040.