DEADLINES

January 31, 2023:

  • Deadline for all Forms 1099-NEC filing including e-filed forms
  • Deadline for all payroll tax reports, W-2’s & W-3

February 28, 2023:

  • Deadline for 1099-MISC if paper filing

March 15, 2023:

  • Deadline for filing S-Corp and Partnership Tax Returns or Extensions

March 31, 2023:

  • Deadline for 1099-MISC if e-filing

QUICKBOOKS

QuickBooks Pro 2023 is now available for purchase.  Please update to QuickBooks 2023 if you are currently using 2021 or older.  Or talk with us regarding switching to QuickBooks Online – this may be the best option for most!

IRS STANDARD AUTO MILEAGE RATE

The standard reimbursement rate for automobiles is 62.5 cents per mile for 2022 (post July 1) and 65.5 cents per mile for 2023.

WA LONG TERM CARE TAX

Washington implemented an additional payroll tax in 2022 to cover a long-term medical care program. With many complaints about the program, it was delayed shortly after going into effect with amounts withheld returned to employees.

The tax is set to go into effect again starting July 1, 2023. Most major payroll providers should already be prepared for this, but it might not hurt to reach out them before then. You may also want to remind your employees that they will see an additional 0.58% withheld from their paychecks later this year. As with the previous implementation, employers do not pay any of the tax.

Employees can opt out of the program, but they must have purchased their own long-term care coverage from a private insurer prior to December 31, 2022. The only remaining ways for employees to opt out is if they:

  1. have a permanent residence in another state,
  2. are working in Washington under a temporary visa,
  3. are the spouse or registered domestic partner of an active-duty military member, or
  4. are a veteran with a 70% or greater service-connected disability

SALARY SCHEDULES FOR OFFICERS

Salary schedules for corporate officers have been mailed out for the year 2023. Please be sure you have changed your salary and withholding per this schedule with your payroll company. If uncertain, please contact us as soon as possible.

PAYROLL TAX RATE NOTICES

State Unemployment and L&I Rate notices for 2023 have been mailed by the State. Please be sure to forward these to your payroll company as soon as possible.

UNANIMOUS CONSENT FORMS FOR CORPORATIONS

If you have received any correspondence from your attorney regarding unanimous consent or annual minutes for your business entity, please be sure to forward it to us. We prepare the information as we complete the business return and will provide that to you for signature and return mailing to the attorney.

FORMS 1099-MISC (Those you receive)

All Dental Practices will receive Forms 1099 from third party payers. In most cases, you need only collect these and keep them in a safe place. However, there are instances where the payer may withhold federal income tax from the payment they make to you and that withheld tax will be reported on Forms 1099. You may want to peruse your 1099s to be sure tax is not reported and to make sure that there are no interest or dividend 1099s mixed in with your healthcare services 1099s. Interest and dividends will need to be reported on your applicable tax return. If you find any 1099s with withholding and/or any types of 1099s other than healthcare services, please be sure to forward these to us so that we can report it on your tax return and contact that payor to correct their records, so they no longer withhold tax from your payments.

BONUS DEPRECIATION AND SECTION 179

Part of the tax reform changes of 2018 greatly enhanced the opportunities for businesses to write off the entire cost of fixed assets in the year of acquisition.  Absent this provision, the deductions would come in the form of depreciation over the life of the asset.  This 100% bonus depreciation expired on January 1, 2023, and you can now deduct only 80% of the asset in the year of acquisition. As we have seen, the further out we project, there is always a chance that tax laws could change.  But as it stands now, here is a reminder of the amount of bonus depreciation you can claim:

 

Asset placed in

service through

Bonus

Depreciation

December 31, 2022

100%

December 31, 2023

80%

December 31, 2024

60%

December 31, 2025

40%

December 31, 2026

20%

Section 179:  Similar to bonus depreciation is Section 179, which allows the full cost of an asset to be written off in the year of purchase.  Now that bonus depreciation is no longer 100%, many businesses will instead choose to claim Section 179 depreciation.

 

However, there are limits to how much can be claimed under Section 179, and a business must have positive income to get any 179 benefits.  Certain types of assets, such as real estate, may qualify under one method but not the other.  Furthermore, you can pick and choose which assets to apply Section 179 to, but bonus depreciation must be applied to all assets within a given class (or none, if you opt out).

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Questions?  Please email us at mail@cpa4dds.com or call us at 425.216.1612

3015 112th Ave NE, Suite 210

Bellevue, WA  9804

 

STUDY CLUBS

If you would be interested in having us speak at one of your upcoming Study Club events, we would be happy to do so. Online meetings are available.  Contact our office for more details: mail@cpa4dds.com

UPCOMING DEADLINES

Fourth Quarter 2022 Estimated Tax Payments are due by Tuesday, January 17, 2023.  (see below)

INCOME TAX RETURNS

Partnership and S-Corporation tax returns are due Wednesday, March 15, 2023.  Individual and C-Corporation tax returns are due Tuesday, April 18, 2023.

PAYROLL REPORTING

Forms 1099-NEC, W-2, and W-3 are due Tuesday, January 31, 2023.  Forms 1099-MISC are due Tuesday, February 28, 2023 (paper-filed) or Friday, March 31, 2023 (e-filed).

Getting ready for tax filing season

“EXTENDED” FILING DEADLINE:  With the weekend and federal holiday, the filing deadline for individual income tax returns this year is pushed back to April 18th.  As always, the earlier you get your documents to us the better, so please send us your W-2s, 1099s, K-1s, etc. no later than February 15th.  Most should be delivered to you in late January or early February.

TAXCADDY:  We will continue to use TaxCaddy as our document delivery system.  For clients that are new to the Dental Accounting Group, you will receive a separate email with instructions on how to setup your account.  It is a secure portal that allows us to request specific documents, and you can even upload them by taking pictures with your phone.  Once your return is complete, it is also the place where you will receive your digital copy of the return.  If you have not received your invitation by early February, please let us know.

ID THEFT PIN: If you have been the victim of identity theft in recent years, the IRS will likely mail you a PIN number which must be included with your filed tax return.  Do not forget to include that letter with your tax documents.

2023 LIMITS AND UPDATES 

With recent inflation, several IRS amounts received significant increases for 2023.

Amount

2022

2023

401(k) deferral max

20,500

22,500

401(k) catch-up if 50+

6,500

7,500

SIMPLE deferral max

14,000

15,500

SIMPLE catch-up if 50+

3,000

3,500

FICA wage base

147,000

160,200

Business mileage rate

62.5 cents/mile

65.5 cents/mile

Standard deduction (single)

12,950

13,850

Standard deduction (married joint)

25,900

27,700

While the individual tax rates remain the same ranging from 10% to 37%, the brackets within which each rate begins have been adjusted upward as well.

FORM 1099-K REPORTING 

Form 1099-K has been around for several years and is used by payment processing companies (credit cards, PayPal, Venmo, etc.) to report certain transactions.  In prior years, they were only required if a recipient received more than $20,000 and 200 transactions in a year. That was set to change to $600 and no transaction minimum for tax year 2022. This would result in millions more 1099-Ks being issued to individuals who had never received one before.

After many complaints, the IRS acquiesced at the last minute to delaying the change for another year, so the lower threshold will go into effect this tax year, with the first such 1099-Ks issued in January 2024.

It is important to note that the actual taxation of such transactions has not changed. If you receive payment for services through Venmo or sell something on eBay, you are required to report the income (if the sale results in a gain; a loss is likely a non-deductible personal loss and is not reported). The only change surrounds who is issued a 1099-K.

The backlash related to scenarios such as splitting the bill at a restaurant and reimbursing a friend through PayPal. That remains a non-taxable event. But the payment processing company likely does not know what the payment was for and will issue a 1099-K if your annual total exceeds $600. While still a little unclear, the likely result in that scenario is to show the “income” on your individual income tax return, then back it out as non-taxable. Failing to report the income at all could result in a notice from the IRS that you underreported income.

NEW WASHINGTON CAPITAL GAINS TAX

As a reminder, Washington State enacted a 7% tax on capital gains for Washington residents with gains above $250,000 (with exceptions for assets such as real estate, property used in a trade or business, etc.).  It went into effect January 1, 2022, which, as things stand, means taxes on 2022 gains will be due by April 18, 2023.  According to the WA DOR, if the Court eventually finds the statute to be unconstitutional, any tax payments received will be promptly refunded with interest. 

We have explored this topic multiple times, but we still do not have a final decision on if it will stand.  A recent court case reversed a prior decision that barred the State from collecting the tax.  While it technically allows the State to collect the tax, it essentially just ensures that the State Supreme Court will have to ultimately decide on the tax’s legality.

Fourth Quarter 2022 Estimated Tax Payments

***THIS IS ONLY FOR THOSE THAT PAY BY QUARTERLY INSTALLMENTS***

We highly encourage that estimated payments be made online at EFTPS.gov – this very convenient site allows you to enter multiple payments and dates in advance. Call us if you need help!

However, if you still prefer to mail in a paper check:

If we have prepared your 2022 return, you will find pre-printed estimated tax payment vouchers in your TaxCaddy account or in your folder if we mailed your tax return to you. Otherwise, detach or photocopy the voucher below.

  1. Complete the name, address and social security number sections.
  2. Fill in amount (call us at 425.216.1612 if you have questions regarding the amount).
  3. Address your envelope to:

Internal Revenue Service

PO Box 802502

Cincinnati, OH 45280-2502

*** NOTE THE NEW ADDRESS – DO NOT SEND TO SAN FRANCISCO ANYMORE ***

  1. Make your check payable to the United States Treasury.
  2. Note your social security number and “2022 1040-ES” on the memo line of your check.
  3. Enclose the voucher and check in your envelope addressed to the Internal Revenue Service (see above).
  4. Mail on or before Tuesday, January 17, 2023.

estimated tax payments picture3

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Questions?  Please email us at mail@cpa4dds.com or call us at 425.216.1612

3015 112th Ave NE, Suite 210

Bellevue, WA  9804

 

STUDY CLUBS

If you would be interested in having us speak at one of your upcoming Study Club events, we would be happy to do so. Online meetings are available.  Contact our office for more details: mail@cpa4dds.com

News You Can Use - The Successful Dentist


Updated October 12, 2022

UPCOMING DEADLINES

  • October 17, 2022 – Extended personal tax returns Form 1040 are due
  • October 31, 2022 – Personal Property and Real Estate Taxes are due
  • October 31, 2022 – Unclaimed Property Reporting deadline – for more information visit https://ucp.dor.wa.gov/app/submit-a-report
  • December 1, 2022 – Distribute a notice of eligibility to all eligible employees (for 401k Plans)

RETIREMENT PLAN LIMITS

 

Type

Max Deferral

IF 50+

SIMPLE

$14,000

$17,000

401k

$20,500

$27,000

IRA

$6,000

$7,000

The 2022 maximum total contributions to a defined contribution plan (401k/Profit Sharing, SEP) is $61,000 or $67,500 with an over 50 catch-up contribution.  

 

We encourage our clients to review their retirement plan every few years to be sure they are utilizing the most advantageous plan available. 

YEAR END ITEMS TO BE ON THE LOOK OUT FOR

Reporting of Self-Employed Health Insurance Premiums for S Corporation Shareholders: the total premiums paid must be reported as wages on Form W-2.  We will be in touch early December to be sure you have reported for 2022.

2023 Salary Schedules for S Corporations or Family Members on Payroll: For those whom we provide recommended salary and withholding levels, updated schedules will be sent to you in mid-December.  Be sure to watch for this important document and have it established with your payroll company for the first payroll run in 2023.  (We do not automatically enter this data to your payroll provider so you or your bookkeeper will need to do so).

Depreciation Schedule Clean-Up: Near the end of the year, we will be sending you a copy of your most recent depreciation schedule, which lists all the assets currently in use by your practice.  Reviewing this and letting us know of any assets that are no longer in service – whether sold, scrapped, broken, obsolete, etc. – is key to making sure we capture all depreciation deductions.  If we prepare your annual Personal Property Affidavit, this is also the same schedule that the county uses to assess your personal property taxes.

Deferred payroll taxes

For those who took advantage of the pandemic assistance that allowed some employers to defer 2020 payroll taxes, the time is almost here to pay in all such taxes.  The temporary relief allowed for 50% of the deferred amount to be paid back by December 31, 2021, and the remainder is due on December 31, 2022.  Most payroll companies do not automatically process these payments, so it is up to the employer to make sure these are paid back in full by the final deadline.

HHS Reporting – Round 3

Yet another reminder of the reporting requirements for those who received funds from the HHS Provider Relief Fund.  Round 3 of the reporting is for those who received funds between January 1, 2021, and June 30, 2021.  Most dentists received funds under the program in an earlier period, so this will only apply to a small number of our clients.

Reporting for this window was due by September 30, 2022.  However, if you missed the deadline, there is a process for late reporting, which can be done at: https://www.hrsa.gov/provider-relief/reporting-auditing/late-reporting-requests

The next reporting phase opens on January 1, 2023, but again it would be very rare for any dentists to fall under this window.

ASSET PURCHASES AND TAX DEDUCTIONS

Year-end tax planning is a crucial step in managing your tax bill for 2022 and establishing your safe harbor required tax payments or withholding for 2023.  Many dentists are aware that fixed asset purchases along with accelerated depreciation is a useful tool to reduce your taxable income.  This year it is especially important, as bonus depreciation will no longer be 100% of the asset starting January 1, 2023.  It will reduce to 80% in 2023, 60% in 2024, and continue to reduce another 20% each year.

However, you should also be aware of the “placed in service rule” that applies to dental equipment and other “fixed assets”.  In general, fixed assets are those items expected to last longer than a year in the practice – such as dental equipment, office furniture and fixtures, etc. and cost more than $500 per unit.  To be considered “placed in service” the item must be delivered and placed into a state of readiness.  It is not required the item actually be used; rather, just usable.

Consider Equipment Order Lead Times:  With less than three months left in 2022, if you plan to place equipment in service and deduct its cost this year, you will want to consider ordering as soon as possible.  Documenting placement in service can be done with an installation receipt or photograph that includes the date (computer, cell phone, etc.)

Of course, we would urge caution against buying assets solely for a tax deduction.  Such purchases should only be for items that you know you will need or have been thinking about buying.  Particularly for S Corporation owners, you should also be mindful of your “tax basis” in your practice, which could potentially limit the amount of deductions you can take in a given year.  Your basis increases with taxable income and money put into the company.  It decreases with losses or deductions as well as distributions taken out of the company.  Your basis cannot fall below zero, so if you have losses or large distributions, this could result in some unintended tax consequences.  Ask your account manager if you are unsure of your basis amount.

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Questions?  Please email us at mail@cpa4dds.com or call us at 425.216.1612

3015 112th Ave NE, Suite 210

Bellevue, WA  9804

 

STUDY CLUBS

If you would be interested in having us speak at one of your upcoming Study Club events, we would be happy to do so. Online meetings are available.  Contact our office for more details: mail@cpa4dds.com