Mid-Point Tax Planning for 2012

May 24, 2012
Here's some tax-planning suggestions to get the biggest bang for your hard work and plan for the future.

by Ken Metsky, CPA

It is never too early, nor too late, to start effective tax planning. Most dental practitioners are busy enough just handling their production and staff schedules, let alone their own tax planning. Now that we are approaching the mid-way point in 2012, what can be done to get the biggest bang for your hard work and plan for the future? The following are suggestions that can help:

Pension and retirement plans
The IRS increased many pension plan limitations for 2012. For employers who participate in 401(k) plans, the elective deferral or contribution amount has increased from $16,500 to $17,000. The catch-up contribution for those 50 and over remains the same at $5,500. If you already have a qualified retirement plan for your business, you should at least review your current provisions to see if you can increase your tax deductions. Factors such as number of employees as well as their ages and compensation may factor into possibly amending your current plan to provide you with greater contributions.

Estate planning and lifetime gifting
Make sure your estate plan is up to date. When 2012 comes to a close, so does the opportunity to gift up to $5 million of your estate without incurring the federal gift tax. The limit is currently set to revert to $1 million in 2013. Large gifts, such as real estate or stocks, may make sense. Any appreciation of transferred assets, post-gift, are not included in your estate. All of us have different financial goals, but why not keep the most for yourself and your family. Planning today can have tremendous economic benefits for your family in the future. Be proactive, not reactive.

Small employer health insurance credit
Small employers that contribute at least 50 percent of the cost of health insurance premiums may qualify for a credit of up to 35 percent of the employer's portion of the health insurance premiums. Small employers are defined as those with 25 or fewer full-time equivalent employees with average annual wages of less than $50,000. The credit begins to phase out for employers with more than 10 employees and/or average annual wages over $25,000. The rules do change slightly after 2012.

Capital purchases and accelerated depreciation
The accelerated depreciation method under Section 179 is $139,000, and the threshold for equipment and software that can be purchased is $560,000 for 2012. The bonus depreciation for assets placed into service during 2012 is 50 percent of such purchases. If you are in the market for new equipment, the time may just be right. Always discuss with your advisors the correct approach for your office.

Entity selection
Do you operate your professional practice under the correct structure? There are many business options: C corporations, S corporations, LLC entities (single and multi members), sole proprietorships, as well as partnerships can be a confusing choice for many. Make sure the structure is correct for you and your long-term goals. If you decide that a change in business entity is correct for you, have your professional advisors discuss all such ramifications before a change is made. No one wants a large tax liability for making a hasty decision.

Document checkup
Patients come in for either a routine three- or six-month checkup. When was the last time you reviewed your shareholder agreement or partner agreement and/or buy/sell agreements? Are they current and effective given the changes in your practice from both a practical standpoint as well as under current tax laws?

Ken Metsky, CPA, is a partner in Citrin Cooperman’s Springfield, New Jersey, office. With over thirty years of experience, he specializes in tax planning, management advisory services, mergers and acquisitions, profitability planning, and estate planning Metsky also frequently speaks on tax legislation, real estate, and health-care matters to realtors and health-care practitioners. He has also served as an arbiter with the American Arbitration Association. He is a member of the American Institute of Certified Public Accountants and the New Jersey Society of Certified Public Accountants.