Need to Issue 1099′s? Here are the 2011 Requirements

Lauren N. Blaies, Tax Associate

With all the chaos surrounding the health care laws (Affordable Care Act) and the repeal of them, there has been a lot of confusion with what is still enacted and what has actually been repealed.  In reference to the 1099 reporting requirements, everyone thought it was completely repealed by the senate vote on April 5, 2011. In reality, it repealed the requirement of incorporated businesses receiving 1099s. People with a Schedule C (sole proprietorship), Schedule E Page 1 (rental property), or Schedule F (farm) who actively participate in the trade or business must now conform to the 1099 rules.  The rules require all of these entities to issue 1099s for all non-employee compensation for any payments and rent paid over $600, and all payments made to attorneys. 

Some typical examples of payments that would require 1099s are:

1. A rental property and the owner pays a maintenance worker over $600 to do random repairs around the property.
2. A lawn company (that is not incorporated) to cut the grass and do the landscaping for the year.
3. A sole-proprietor who is an electrician, pays independent contractors over $600 for work completed on a job.
4. A hairdresser pays rent to the shop owner for booth rental, if the owner is not incorporated, they will need to issue them a 1099. 
5. Any of these pay an accountant over $600, or any sum of money to an attorney for their services.  This affects almost all Schedules C, E (page 1), and F.   

It is important to get the necessary 1099s out to the individuals or non-incorporated companies by January 31, 2012 and copies accompanying Form 1096 to the IRS by February 29, 2012.  There are penalties of $30-$100 for each form that is not properly filed, and penalties of at the minimum $250 if the IRS can prove that the form(s) were intentionally disregarded.  

Also, the 2011 tax forms for schedules C, E, and F have been amended to include two additional questions in regard to 1099s:

1. Did you make any payments in 2011 that would require you to file Forms(s) 1099?
2. If “Yes,” did you or will you file all required Forms 1099?  

These questions are possibly “red flags” to the IRS Auditors for this tax year. 

The information needed to prepare 1099s includes, an individual or company name, as well as their “DBA” doing business as name, address, and social security number or employee identification number. These are not as easy to obtain as one might think. It is very beneficial to have anyone who you would need to issue a 1099 to fill out form W-9.  Also, Schedule C business’ maybe receiving more 1099s then before due to these new requirements.  One may want to apply for an EIN rather than providing their social security number. 

With these changes it is very important to talk with your tax provider as soon as possible. They have the means of helping you figure out who needs to be issued 1099s as well as file them for you.

Professional Healthcare Organizations, which is right for you?

Many times we run across the question of whether our clients should participate in one or more of the many professional organizations that are available to medical executives today.  If so, is there one better than the other?  

To help you make the decision, here is a list of several organizations and a brief description of their purpose: 

MGMA - Medical Group Management Association
www.mgma.org
MGMA is national, state, and local, although separate dues are required for each level.  The primary focus is management of medical practices.
The organization offers educational programming, support and resources to practice management professionals, with an opportunity to become certified. 

HFMA - Healthcare Financial Management Association
www.hfma.org
HFMA is a national, state and local organization.  The primary focus is healthcare executives engaged in financial leadership within the hospital and healthcare environment.                       

ACHE - American College of Healthcare Executives
www.ache.org
ACHE is national and local.  ACHE is an international organization with a focus on executives in hospital and other healthcare systems. 

AHIMA - American Health Information Management Association
www.ahima.org
AHIMA is national, state, and local.  AHIMA’s primary focus is EHR, coding and Health Information Management.                               

AAHAM - American Association of Healthcare Administrative Management
www.aaham.org
AAHAM has local and national membership.  The organizations primary focus is on patient accounts management in the hospital environment 

Professional organizations hold their weight in gold if they are active, structured organizations with seasoned members involved in the planning of meetings and content.  Observably, an organization can be an invaluable resource in one area of the country and a waste of energy in another.  So do your research.  Go to a couple of meetings as a nonmember before committing to a membership.  At the meeting(s), ask yourself:

• Do you mesh well with the other members?
• Will this organization help you and your facility grow?
• How often does the organization meet?  Do the meeting times work with my schedule?

Does the organization provide resources primarily in the areas you need?

Seven Things to Double Check before Filing Your Own Tax Return

Brent R. Robbs, Tax Associate

So you’ve decided to file your own tax returns?  You’ve followed the instruction booklets and filled out the forms.  Before you seal the envelopes and drop the returns in the mail, here are seven items you might want to double check. 

1. Social Security numbers.  Make sure all SSN’s are correct.  It’s easy to transpose two numbers.  If you have incorrect SSN’s you will definitely receive a notice from the IRS.
2. Claim the right number of dependents.  Don’t forget to add or remove dependents as necessary.  This could greatly impact your tax or refund due.
3. Standard vs Itemized deductions.  Even if you’ve always taken the standard deduction, you should always take a look at Schedule A and compute your itemized deductions.  Don’t forget any charitable contributions!
4. Missed tax credits.  Make sure you understand each tax credit.  These can be confusing with many criteria and phase out limits.
5. Wrong filing status/tax table.  Use the correct filing status and corresponding tax table.  The wrong status or table will significantly affect your tax.
6. Math mistakes.  When completely finished, recalculate all lines of the return.
7. Mail to the correct addresses and sign your returns.  Even if you do everything correct, you’ll encounter all sorts of problems if you forget either one of these things. 

Double checking these items should help you avoid that dreaded IRS notice and the headaches that come along with it.

First Impressions in a Physician Office

Chastity Werner, Health Care Consultant

We have to remember every new patient is a first impression.  As we know “first impressions” last forever.  These impressions can become one of your strongest marketing tools or one of your worst nightmares.  Depending on their condition or reason for visiting your office, more than likely your office will become one of the hot topics during a family get together and other social event in the next several weeks.  Here are a few pointers to ensure the patient leaves with the best first impression: 

• Make sure to be observant of your tone and dialogue while scheduling the appointment.  Make sure your tone is upbeat and your dialogue reflects the fact that you are “glad they chose your practice”.
• After you finish recording the patient demographics, give the patient a briefing on what will happen at the appointment and make sure they know where your office is located.
• When the patient arrives, greet them as if they were coming to your house for dinner.  “Hello, Mrs. Smith!  Do you have your paperwork with you today?  Great!  Please have a seat and we will be with you momentarily.”
• Make eye contact and smile, smile, smile! If the patient is talking to you make sure to look them in the eye while they are doing so.  If they are talking, stop and listen!
• When putting them in the room, if they are going to have a bit of a wait then let them know. 
• After their appointment, as they check out make sure to tell them “thank you for choosing our practice.  Have a Good Day”.
• Send them a thank you card. 

The best compliment you can receive is a referral!  Appreciate your patients and they will appreciate you!

Construction Companies Look to Marketing to Bolster Growth

Jane M. Groeteka, Tax Associate

The beginning of a new year means it’s time to be executing those New Year’s resolutions.  When most people think of New Year’s resolutions, they think of their personal resolutions such as getting fit and eating healthy.  Have you ever considered expanding resolutions to include shaping up your business?  The Certified Financial Management Association (CFMA) annual survey can be a good resource for developing resolutions that relate to the real estate and construction industries. 

The CFMA recently published its 2011 Construction Industry Annual Financial Survey that includes the results of the hot topic survey, “Solutions from a Tough Economy – Best Practices for Moving Forward.”  The results identify the measures that worked best over the past three years to reduce costs and boost revenues for the respondents.  Implementing one or more of these measures could get you started on the right path for your business’ resolutions.  

The top five strategies that more than 50% of the respondents implemented are:

• Enhance or establish website or web presence.
• Increase efficiencies by using new technologies or automating existing systems.
• Partner with minority or woman-owned firms.
• Increase marketing/advertising expenditures.
• Add new product/service offerings. 

If you are interested in finding out more about the Certified Financial Management Association or the annual survey, visit their website at www.cfma.org. 

If you have any questions or are seeking assistance in planning solutions for your business, contact our Real Estate and Construction Services Group.

Spend a Little, Save a Lot with Ameren’s Business Energy Efficiency Incentive Program

Jane Groeteka, Tax Associate 

What’s better than lowering your utility bills by making the most of energy efficient products in your business?  Getting paid to implement the changes!  This is exactly what Ameren is looking to do for its customers. 

Ameren Missouri launched a new Business Energy Efficiency Incentive Program effective January 3, 2012 – May 31, 2012 that provides incentives for the purchase and installation of energy efficient equipment.  This program offers both standard and custom incentives when retrofitting lighting, HVAC, and refrigeration for businesses. 

The incentives range from $150 to $15,000 depending on the existing and updated energy equipment purchased and installed.  There are many opportunities to qualify for these rebates, but a pre-approval from Ameren is required for both the standard and custom incentive rebates before the equipment can be purchased.  Take the proactive approach if you are considering going green because applying for these rebates can result in additional dollars saved. 

Other Business and Residential Energy Initiatives offered through Ameren are available for both Illinois and Missouri taxpayers.  Check out Ameren’s overview of the rebate program at http://www.actonenergy.com/state-selection?rq=/. 

Please also keep in mind that this program will be phased out once the limited energy savings goal has been reached, so act fast!

What Happens to Social Security Payroll Tax in March?

Dan Schindler, Tax Associate

On December 23, 2011 Congress passed a two-month Social Security payroll tax cut extending through February 2012 using the 2011 tax rates.  However, as March rolls around, taxpayers earning a salary will see a slight reduction in their paychecks even if their salary remains the same.  As of now, the Social Security tax rate for the remainder of 2012 will increase to 6.2% for employees as opposed to 4.2%.  Self-employed individuals will incur a Social Security tax rate of 12.4% instead of 10.4%.  Additionally, the wages subject to Social Security tax is increasing from $106,800 to $110,100, marking the first increase since 2009. 

Under the terms negotiated by Congress, this extension includes a new 2% ‘recapture’ provision, which applies only to those employees who receive more than $18,350 (which is the prorated portion of the $110,100) in wages during the two-month period.  However, this provision will only apply if the payroll tax reduction is not extended for the remainder of 2012.  And if you make more than $110,100, don’t forget any excess is free from Social Security taxes. 

As for self-employed individuals, estimated tax payments may need to increase for 2012 to account for the increase in self-employment tax.  Consult with your personal accountant to make proper estimated payments to avoid a surprise tax penalty at the end of the year. 

AMD will pay close attention to keep individuals aware of future legislation changes.

QuickBooks Class-What does it Mean to Your Business?

Kristie S. Galati, Manager 

The terminology in QuickBooks accounting software can sometimes be confusing. Take “class” for example.  The word “class” in QuickBooks is defined as a way to track the different segments of your business.  Using the class feature in QuickBooks gives business owners a tool to track the income and expenses for any given period.  The result?  A huge return for little effort. 

Let’s Look at How it Works in this Scenario:

A medical practice with four doctors can track the monthly income each doctor brings in as well as the monthly expenses related to that doctor, resulting in the monthly net income or loss for that doctor.  Reports can be generated by individual doctor or for the entire medical practice. 

Another example would be a contractor who performs new construction and remodel projects.  Reports can be generated by individual class or for the total construction company.  The use of classes is unlimited to the variety of business segments. 

Where do you Find “Class”?
The class feature is in the QuickBooks software but goes unnoticed until it is turned on.  One it is turned on:

• Use preferences to gain access to the field.
• Use list to define the “classes” or aka cost centers.
• Assign a class for every revenue and expense transaction entered.   

Reap the Rewards
To reap the rewards of your efforts go to:

• Reports; Company and Financial; Profit and Loss by class.
  You will have the ability to modify the date range and select the classes to report. 

Now you can identify where you are making (or loosing) money, where to increase revenue or decrease expenses. 

For more information regarding QuickBooks Class please contact us.

Red Flags for IRS Audits

Lauren Blaies, Tax Associate

Every taxpayer’s biggest fear is getting the dreaded IRS Audit Notice in the mail.  Although reporting the following do not guarantee that you will be audited, they are items that the IRS tends to evaluate for audit purposes: 

1. Failure to report taxable income that has been reported to the government.  This will typically cause a notice, but can cause a full blown audit if there is significant information missing. 
2. Claiming large charitable contributions on Schedule A relative to your total income is a major red flag.  If you are a wonderful philanthropist that contributes a significant portion of your income to charities, be sure to keep excellent documentation and records to support the donations, such as receipts and letters with corresponding check stubs and credit card statements. So, in the event you do get audited, you have proof to support the amount on your return.
3. Many expenses trigger IRS audits:
   1. Home Office Deduction if you have an office outside the home.  Since the requirements are difficult to meet to have the office being strictly used for business, this is a continuous red flag.
   2. Large deductions for businesses meals, entertainment, and travel in comparison to related revenue can trigger an audit as well.  This is another item where documentation is key. 
   3. Vehicle deductions that seem very high.  Be sure to keep a log book of appointments and other business related miles to have adequate documentation in the instance you do get audited.  
   4. A primarily cash collections business, such as hairstylists, bars, restaurants, etc.  This IRS has strict audit guidelines that are followed for these businesses, since it is so easy to not report cash income.
4. Another large trigger is the failure to report a foreign bank account.  If the IRS discovers an offshore account that was not reported, it is almost a guaranteed audit of the rest of your return.
5. Claiming unusually high Schedule A deductions, similar to the charitable contributions.  Just be sure to have adequate documentation to support in the deductions claimed.
6. Schedule D has also been an IRS trigger lately.  For people who buy and sell frequently during the year and claim large losses, they need to have proper proof of the basis for these sales. 
7. Last but not least, simple math errors can be the trigger of an audit.

A great way to diminish your chance of an audit is to hire an accounting firm with a great reputation to prepare your return.  They have the knowledge and ability to defend your return in the case of an audit or notice, and are aware of all these pitfalls as well as common mistakes and errors.

Bridging the Physician-Patient Communication Gap

Brian D. Meyers, CPA, Tax Supervisor

After a recent trip to the Mayo Clinic in Rochester, Minnesota, I understand the communication gap in a very real way.  My father was diagnosed with small cell lung cancer a few years ago and was at Mayo for a checkup when a scan showed a small blotch.  This blotch was later determined to be a different type of cancer and the course of action was surgery.  My father is now resting comfortably at home during his recovery, but my family’s unfamiliarity with the procedures led to many questions.

Luckily, the doctor was gracious with his time and answered every question my mother, brothers, and I had regarding the diagnosis, the surgery, and the recovery.  It is a well-known fact that today’s medical practices are busy and medical professionals are pressed for time.  However, patients and their families must remember to ask questions and get clarity before leaving.  This is the most effective way to close the communications gap.

Here is an article from Physicians Practice which talks about the ways in which patients and providers can misunderstand each other.  The author provides good insight about how to close the gap.

The Communication Gap

By Sue Jacques | August 3, 2011

On countless occasions when investigating a sudden death it would become painfully apparent that the person’s demise wasn’t that unpredictable after all. Yet, despite the evidence of a medicine cabinet full of cardiac meds and coronary arteries full of plaque, the families I dealt with would often be flabbergasted to hear that the cause of death was heart-related.

The same confusion can apply to a patient’s understanding of a simple lab test or surgical procedure. Why? Because what’s commonplace for medical professionals usually isn’t as straightforward for patients.

You and your staff are fluent in the language of medicine, but the majority of your patients are not. They take your word as gospel, and even when they have no idea what you’re talking about, most people won’t question you for fear of appearing to be naïve. Plus, they know you’re in a hurry.

The results of medical misunderstandings can be inconvenient at best, disastrous at worst. Every morning, in hospitals around the world, people show up for surgery after eating a full breakfast because they didn’t understand the NPO order. That’s a costly inconvenience. But more expensive is a life lost over situational semantics.

A misinterpretation that leads a patient to insert a suppository in the wrong orifice is one thing, but one that leads them to repeatedly inject a double-dose of heparin(Drug information on heparin) is quite another. That’s what happened to my uncle when he had a DVT. He thought it was okay to play catch-up with his anticoagulant after somehow forgetting a few doses. Though his INR was all over the map, thankfully he suffered no serious consequences. The fact that his thrombus was even diagnosed in the first place was a miracle, because he didn’t want to “bother” his physician. He only mentioned his swollen, warm, red calf as an afterthought when he went to get a prescription for a completely unrelated ailment.

The biggest opponent of clinical clarity is time. A busy medical practice simply doesn’t provide practitioners with the luxury of explaining every last detail of a diagnosis, test result, or prescription.

How can you efficiently communicate your medical messages with clarity?

Here are five CLEAR tips for making sure that your patients really hear what you’re saying:

C ― Clarify your messages by using lay terms as much as necessary to ensure comprehension
L ― Listen carefully to questions and concerns voiced by patients
E ― Explain things in a different way if patients are confused by what you’ve told them
A ― Ascertain that patients understand what you’ve said by asking them to repeat it
R ― Recap the conversation in a single “bottom line” sentence

The next time you’re tempted to tell someone that they have the heart of a 20-year-old or they’re as healthy as a horse, think twice. Patients and their loved ones will take you at your word. Make sure it’s accurate.

Sue Jacques is The Civility CEO™, a veteran forensic death investigator turned corporate civility consultant who helps individuals and businesses gain confidence, earn respect and create courteous corporate cultures. She can be reached at editor@physicianspractice.com or www.TheCivilityCEO.com.