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Tag Archives: my professional CFO

Warren Buffett, Small Captives and the IRS "Dirty Dozen"

What does Warren Buffett have to do with small captive insurance companies and the IRS “dirty dozen” list? Until this week, my answer would have been, “very little.” However, after addressing the IRS placing small captive insurance companies (CICs) on its “dirty dozen” list in last week’s edition of Captivating Thinking, the Oracle of Omaha, as Buffett is affectionately known, provided even more evidence in support of our already overwhelming arguments against the Service’s pronouncement.

Remember that the IRS has often attempted to argue that only “core insurance” or replacing third party commercial insurance constitutes real insurance. In their “dirty dozen” write-up, they suggested, insurance “policies [that] cover ordinary business risks or esoteric, implausible risks,” are not real insurance. As we noted last week, the esoteric and implausible threats they describe are often the existential threats that can completely wipe out small and mid-market companies (examples include cyber attacks, business interruption, terrorism, pandemic disease outbreaks, power grid failure, biological and nuclear attacks, etc.)

Last week, we noted the both the U.S. Tax Court and FEMA (Ready.Gov) disagree with the IRS on what constitutes real risk and real insurance. And, this brings us to Warren Buffett, the billionaire mega-investor who released his 31 page annual shareholder report this week. His report was summarized by Liz Claman of Fox Business Network, and she pointed out that while the report was characteristically optimistic about America and Berkshire Hathaway’s future, she was struck by Buffett’s biggest worry. In her words:

And those fears? It’s not all sweetness and light in Omaha. Buffett expressed his biggest worry in the letter: “There is, however, one clear, present and enduring danger to Berkshire against which Charlie and I are powerless. That threat to Berkshire is also the major threat our citizenry faces: a “successful” (as defined by the aggressor) cyber, biological, nuclear or chemical attack on the United States. That is a risk Berkshire shares with all of American business.”
Buffett may be an optimist but if he’s anything, he’s reasonable. And having covered him for years, I’m guessing Iran and ISIS have him up at night, drinking Cherry Coke and … thinking. Thinking more.

Notice what Liz says…”if he’s anything, he’s reasonable.” We agree. Ready.gov and the U.S. Tax Court agree as well. Perhaps Mr. Buffett would sleep better if he knew the IRS doesn’t consider his concerns to be real or insurable threats.


My Professional CFO, LLC, is a Business Management firm providing the highest level of service in three key areas of importance to Independent Contractor Physicians, Small Business Owners and Entrepreneurs.

We specialize in Corporation filings and ongoing Compliance, Accounting and Payroll, and Investment Management. Our professionals will assist you in forming the appropriate type of company for your situation and work with you to make sure your company remains compliant. We provide ongoing Accounting and Payroll services to make certain all bills are paid and necessary tax forms and withholding payments are made in a timely manner, as well as the set up and management of your retirement accounts.

We are not simply a document filing service; we are here to help you with the part of the business that you have to do, so you can focus on what you love to do.

Alan Conner, MBA – President of My Professional CFO, LLC has nearly 2 decades of experience working with professionals and small business during both the start-up and ongoing management. He has written countless business plans and has managed assets for both institutions and high net worth clients.

Email us with any questions or call us at: 1-800-517-0CFO (1-800-517-0236)

For a Limited Time, get FREE Incorporation with our Accounting/Payroll Services! Submit your e-mail for more information, or schedule a quick phone call with me here.

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Preventing Financial Mistakes Independent Contractor Physicians Make: Reducing Your Tax Bill

When a physician is transitioning from receiving a modest salary as an Intern/ Fellow / Resident to being paid as a board certified physician, there are a myriad of financial mistakes that are often overlooked, but that can be very easily prevented. This critical point is the time to make these decisions, and not after the consequences have reared their head.

Incorporate: Form an Inc. / PA / PC / LLC

Aside from any possible asset protection benefits, the simple act of incorporating will save you money. This will allow you to receive some of your compensation in the form of dividends, rather than earned income. The simple math is that if you receive $100,000 in dividends, rather than as salary or Schedule “C” income, you will save $2,900 in taxes annually.

Establish a Regularly Scheduled Payroll

Setting up a regular payroll will allow you to establish a monthly budget that you will be able to adhere to. This process will also make sure that you are making your regularly scheduled tax payments. Failure to do cause you to deposit your “gross earnings” (Form-1099 earnings) into an account that will then be used to pay for your lifestyle. The saying goes, “If you deposit your gross dollars, you will spend your gross dollars”. There will be a day of reckoning, and that will typically arrive every year on April 15th when the funds are not there to make your tax payments and the related penalties. The cost of a payroll service is far less than the penalty charged by the IRS for not making quarterly payments.

Open a SEP-IRA

Unlike a 401(k) that you would have as an employee, you, as the owner of your physician corporation, are permitted to have a SEP-IRA. The difference is that the contribution to this account is an expense to the business, and not subject to FICA/Medicare taxes. A $50,000 annual contribution would save you at least another $1,450. Pay yourself first, and be able to pay yourself more.

Hire a Physician Business Manager

Hiring a physician business manager who has the experience to guide you through the process is well worth the expense. After all, the savings alone are greater than the annual cost. As a physician, you have spent countless hours honing you knowledge and skills. Why would you want to spend your valuable time doing accounting and filling out forms?

Don’t let yourself get caught in the tax trap of missing filing deadlines, and not making payroll tax payments at the appropriate time. Take the steps necessary early, rather than having to deal with tax liens and legal bills later. Remember, it is easier to start out with a lower salary, and gradually increase it, rather than to start out spending it all, and having to cut back.

My Professional CFO, LLC, is a Business Management firm providing the highest level of service in three key areas of importance to Independent Contractor Physicians, Small Business Owners and Entrepreneurs.

We specialize in Corporation filings and ongoing Compliance, Accounting and Payroll, and Investment Management. Our professionals will assist you in forming the appropriate type of company for your situation and work with you to make sure your company remains compliant. We provide ongoing Accounting and Payroll services to make certain all bills are paid and necessary tax forms and withholding payments are made in a timely manner, as well as the set up and management of your retirement accounts.

We are not simply a document filing service; we are here to help you with the part of the business that you have to do, so you can focus on what you love to do.

Alan Conner, MBA – President of My Professional CFO, LLC has nearly 2 decades of experience working with professionals and small business during both the start-up and ongoing management. He has written countless business plans and has managed assets for both institutions and high net worth clients.

Email us with any questions or call us at: 1-800-517-0CFO (1-800-517-0236)

For a Limited Time, get FREE Incorporation with our Accounting/Payroll Services! Submit your e-mail for more information, or schedule a quick phone call with me here.

5 Tips for Independent Contractors: Biz Start-up, Outsource Accounting, Reducing Self Employed Taxes

As an Independent Contractor, you literally have the best of both words. Not only do you get to determine how much money you want to make, and how hard you want to work, but also you can never be laid off. The downside to this, is that there are things that you have to do that can actually take as much or more of your time to complete than you actually spend generating income, and unfortunately, failure to perform these regular tasks can result in quite the headache, resulting in tax liens and perhaps even the loss of your business. If you are interested in maximizing the time you spend creating income, and reduce the time you spend on the other business related activities, while reducing self-employment taxes, read on.

Start Your Own Business

As the owner of a business, the IRS allows you a variety of tax advantages. The best way to take advantage of these is to step outside your role as an Independent contractor, and formalize the way you conduct business. This will enable you to shield yourself from potential personal liability, and allow you to take a salary and profits, rather than self-employed income. This alone will reduce your annual tax bill, and allow you to keep more of what you work hard to earn. You can even deduct that new laptop or iPad as a business expense. What typically stops people from going the next step is they do not know how to incorporate.

Incorporate

When you start a new business, there are many ways you can go about incorporating. You can simply go to one of the hundreds of websites that offer to help you incorporate online. They will give you the minimum that you ask for, and will leave you to pick up the rest of the pieces along the way. Honestly, the process is not that difficult, but like most things, it can become complicated quickly if you do not follow the proper steps. This is your business we are talking about. Don´t trust your business to the lowest bidder. You may get exactly what you pay for.

Outsource Accounting

As an Independent Contractor, you are an entrepreneur. This means you must be versatile and play a number of roles, from chief salesperson and bookkeeper to head marketer and bill collector. Doing your own small business taxes and accounting does not make you any money. Outsourcing your accounting will cost you less than hiring someone part time, and give you the expertise of having your own in-house accountant.

Hire a Corporation Service Company

As the owner of your small business, you have many important decisions to make. One of the most important ones you can make is to hire a corporation service company. Not only will they assist you in making sure certain things don´t fall through the cracks, but they can also provide you with someone to talk over other important decisions. You are in business to make money. Make the right choices early on, and you won´t regret them later.

Fund Your Retirement

Retirement plans can be extremely confusing to Independent contractors and small business owners. What you need to know is that there are options available to you that will allow you to put away more money for retirement than you may have known, and also that by doing this, you are not only reducing self employment taxes, but also your income taxes. The key is to start your own pension plan, and work with someone who has your best interests in mind.
You have either just set your inner entrepreneur free, or you are about to do so.

While this can be a scary time for some, you have the ability and the drive to make it a success. Be thoughtful and deliberate about each and every decision you make, and about every dollar you spend. Make sure that before you commit to something, it should either make you money, or free up your time to allow you to spend time making more money. Also, don´t be someone else´s guinea pig when it comes to your future. Work with professionals who are working with you, not just for your money. Remember, as the owner of the business, you are the one in control, so take the wheel, and enjoy the ride.

My Professional CFO, LLC, is a Business Management firm providing the highest level of service in three key areas of importance to Independent Contractor Physicians, Small Business Owners and Entrepreneurs.

We specialize in Corporation filings and ongoing Compliance, Accounting and Payroll, and Investment Management. Our professionals will assist you in forming the appropriate type of company for your situation and work with you to make sure your company remains compliant. We provide ongoing Accounting and Payroll services to make certain all bills are paid and necessary tax forms and withholding payments are made in a timely manner, as well as the set up and management of your retirement accounts.

We are not simply a document filing service; we are here to help you with the part of the business that you have to do, so you can focus on what you love to do.

Alan Conner, MBA – President of My Professional CFO, LLC has nearly 2 decades of experience working with professionals and small business during both the start-up and ongoing management. He has written countless business plans and has managed assets for both institutions and high net worth clients.

Email us with any questions or call us at: 1-800-517-0CFO (1-800-517-0236)

For a Limited Time, get FREE Incorporation with our Accounting/Payroll Services! Click here to submit your e-mail for more information.

Plug and Play for Doctors: Forming a Corporation, PA, PC, Or LLC

Now that you have completed your Internship and Residency, you are now an independent contractor physician, and about to make more money than you have ever made before. The next question in your mind is; “How do I keep what I make, and not pay out everything I make in taxes?”

To avoid the painful consequence and get all of the benefits, here are 5 things that must be done when forming your Corporation.

• Why Incorporate – Incorporating shields you from some liability by providing you with a corporate veil. It also provides you with the ability to pay certain expenses on a pre-tax basis, while also allowing you the opportunity to fund a variety of retirement plan vehicles, thus reducing your taxable income

• Form a Corporation – Forming your corporation is done in your state, and requires the filing of Articles of Incorporation with the Secretary of State. This can be done yourself, or you can hire a physician business manager to work with you.

• Apply for an EIN Number – Your EIN Number is the social security number for your business and is obtained from the Internal Revenue Service. It is necessary for establishing any bank accounts and retirement accounts, and will also be needed for your payroll taxes and annual corporate tax return.

• Become a Subchapter “S” Corporation –The amount of money you pay in income and payroll taxes is dependent on how you declare your income. By filing your “S” election form with the IRS, you are saying that your corporation will not pay income taxes, but that the profits of your corporation will be reflected as income on your personal tax return. Failure to file this form in a timely manner means that your corporation will pay taxes on its income, and you will then pay personal income taxes on this same income. The dreaded “double taxation”.

• Properly maintain your corporate records – Most people go take the steps listed in the last 3 items, and stop there. After your corporation has been filed, you then must hold an Initial Meeting of the Board of Directors, and perhaps file a fictitious name announcement if it applies in your situation.

After you have done all of this to make your corporation effective, please do not forget to do the following on a regular basis: File your Annual report, file quarterly payroll tax returns, hold regular board of director meetings and file your annual corporate tax return.

Selecting the right type of structure for your business is only the first step. Making sure you take the necessary steps to follow through and get everything done correctly the first time is paramount. So take your time, don ́t make any hasty decisions, and by all means, if you are going to hire someone to assist you along the way, use these 5 steps to help you find the partner that you can trust to be there to assist you after you pay the filing fees.


My Professional CFO, LLC, is a professional services firm providing the highest level of service in three key areas of importance to Independent Contractor Physicians and Entrepreneurs. We specialize in Corporation filings and ongoing Compliance, Accounting and Payroll, and Investment Management. Our professionals will assist you in forming the appropriate type of company for your situation and work with you to make sure your company remains compliant.

We provide ongoing Accounting and Payroll services to make certain all bills are paid and necessary tax forms and withholding payments are made in a timely manner, as well as the set up and management of your retirement accounts. We are not simply a document filing service, we are here to help you with the part of the business that you have to do, so you can focus on what you love to do.

Alan Conner, MBA – President of My Professional CFO, LLC has nearly 2 decades of experience working with professionals and small business during both the start-up and ongoing management. He has written countless business plans and has managed assets for both institutions and high net worth clients.

Email us with any questions!

How to Form a Physician Corporation: A Step by Step Guide

As a physician, you have either just signed with a contract group, or you have decided to do some shifts as a Locum Tenens. There is a chance that your contract group will require you to be an employee, but that is not often the case. Now you need to form a corporation. We are often asked why. The simple answer is that it draws a clear line between you the individual and you the professional. Another response is that as a corporation, you are afforded additional tax benefits that are not available to you via Schedule “C”. Your SEP IRA contribution for one. As a physician, your options are limited to either a PC (Professional Corporation), PA (Professional Association) or PLLC (Professional Limited Liability Company). There are subtle differences in each type of entity, but there are some specifics that you will need to keep in mind. First and foremost, your state will most likely dictate what type of entity you can form, also, some states do not allow PLLC’s. Don’t just blindly form an entity without knowing the correct type of entity for you. Also, as a physician, forming a corporation will not insulate you from civil liability. For advice related to asset protection, call us. From this point forward, we will discuss the formation of a PC/PA.

The creation of your entity:

The formation process begins with a stop at the Secretary of State office, or the division of corporations. This is where you will find the forms for your specific state, along with the filing requirements and related fees. Filing requirements for professionals differ from state to state. For example, NY requires Physicians to verify their license status with the Education department before and after filing Articles of Incorporation. This is a two-step process, and involves paying two separate fees. Find out if your state has this requirement or a similar process before you file any documents. Some online Incorporation sites do not take this step. Not only will you not get your incorporation filed, you may not get your money back. Just as a precaution, before you fill out any documents, make sure there isn’t another physician in your state with your name. This can most often be avoided by using a middle initial or middle name, but you will want to be certain. Once you have confirmed this, reserve your own name. Send two copies of these documents to the state, and request a stamped copy be returned to you in a self-addressed stamped envelope.

Tax Status and Employer ID Number (EIN):

Once you have completed the Incorporation process, you will need to become legal in the eyes of the IRS. First, you will need to request a Tax ID# or Employer Identification Number. This is essentially the social security number for your business. This can be obtained online, or via fax. Simply fill out the form and submit. Now you need to address the tax status of your entity. All new corporations are seen as “C” corporations until you request to be taxed as an “S” or “Subchapter S” corporation. The difference is simple and straightforward. Do you wish to be taxed on your income twice, or only once? Most of our clients are “S” corporations. The “S” election form can be found on the IRS website, and must be filed with the IRS as soon as possible. You will receive a letter of acceptance once the IRS has approved your status. This must be completed prior to filing your first tax return. Our suggestion is to file this the same day you receive your EIN number. Send this certified mail to make sure you have proof.

Acting Like a Corporation:

Now that you are a corporation, you will have to begin acting like one. What this means is that when you do something business related, you will need to document it. First you will need to establish Bylaws. This will be the blueprint for the way you run your corporation. Sample Bylaws can usually be found on the website for the state where you incorporated. It will define what title you will have, how many times a year your board will meet, and any means to alter the nature of your entity. You will also need to have regular meetings of your Board of Directors, yes, even if you are the only one. When you hold these meetings, you will also need to keep details of what you decided to do. Whether that is opening a bank account, or entering into a contract for employment. In these minutes, you will also document how you will be compensated by your entity, and any employee benefits you will receive. You will now have to keep all of these in one place. That is why you have a Corporate Book. A corporate book can be purchased online from a variety of vendors. Within this book, you will keep the certified copy of your Articles of Incorporation, the acceptance letter of your Subchapter “S” filing, the notification letter for your EIN number, a copy of your bylaws, and each and every set of minutes from all of your Board meetings. This is the first thing that will be requested if your corporation is ever sued.

Reducing Your Taxes:

This is the primary reason you are putting yourself through this. The first reason is that as a Corporation, rather than a Sole Proprietor, you are able to make a SEP IRA contribution up to 25% of your salary versus only 20%. If you pay yourself enough to make the maximum contribution, that would be a salary of $212,000 in order to make a SEP contribution of $53,000. As a Sole Proprietor, you would only be able to contribute $42,400 at the same salary. Not contributing the additional $10,600 just cost you an additional $3,710 if you are in the 35% tax bracket. If your state has an income tax as well, you saved even more. Also, as a corporation, you can establish a Defined Benefit Plan for yourself. This can allow you to put away $100k or more annually, thus accelerating the tax savings.

Tax returns and Annual Reports:

This is where your corporation will save you money, and make all of this worth it. Your corporation will have to file a tax return each year (Form 1120S), and you will receive a form K-1, which is the shareholder profit and loss, (think of it as your 1099 as an owner of your entity.) Regardless of whether or not your state has an income tax, you will still need to file tax returns for your corporation. No taxes will be due, as those will be paid on your personal return, but pay special attention to whether or not your state levy’s a “filing fee”.

The state will also require an annual report from you, although some are every other year, but you pay twice as much. This is simply informing the state that you are still in business along with your current address.

Summary:

You can do this. Just like most things that look complicated, it is more about following the process step by step. There are no shortcuts. If you decide you need some assistance, or simply feel that you would rather work with someone who does this all the time, we would be honored to add you to our list of satisfied clients.

My Professional CFO, LLC, is a Business Management firm providing the highest level of service in three key areas of importance to Independent Contractor Physicians, Small Business Owners and Entrepreneurs. We specialize in Corporation filings and ongoing Compliance, Accounting and Payroll, and Investment Management. Our professionals will assist you in forming the appropriate type of company for your situation and work with you to make sure your company remains compliant. We provide ongoing Accounting and Payroll services to make certain all necessary tax forms and withholding payments are made in a timely manner, as well as the set up and management of your retirement accounts. We are not simply a document filing service; we are here to help you with the part of the business that you have to do, so you can focus on what you love to do. For more information visit our website www.myprofessionalcfo.com!

Email us with any questions, or Call us at: 1 (800) 517-0CFO           1 (800) 517-0236