June 2017 Tax Channel
One of my clients is a doctor and the company he works for is split into two different entities. For one, he receives a W-2 and for the other he receives a K-1 form. Both companies are interrelated. What happened is that a number of doctors came ...
Jun. 26, 2017
When You Show Your Value as a Tax Pro
By Craig W. Smalley, MST, EA
One of my clients is a doctor and the company he works for is split into two different entities. For one, he receives a W-2 and for the other he receives a K-1 form. Both companies are interrelated. What happened is that a number of doctors came together to form a surgical group. It was set up as a holding company that receives the money and then pays the related company that in turn gives my client a W-2 form. This is common in the medical field because it provides a higher negotiating power with a group of doctors for insurance payments and malpractice insurance.
When the holding company issued my client his K-1 Form, he was listed as a limited partner of the holding company, which means his income is passive. However, there was an amount of self-employed income. I found this odd, as my client doesn’t work for the holding company, he works for the other company.
I emailed my client and the company that issues him a W-2. He is part of the partnership solely to provide a better negotiation power for insurance payments, and a better rate on malpractice insurance, which is very expensive for an OB/GYN. He does not work for that partnership; he is a limited partner and his income is passive.
A few emails went back and forth between myself and this accountant. I copied my client on each email. In my final message to the accountant, I summed everything up as I understood it and directed the accountant to US Tax Court Cases that prove my point.
My client then emailed me privately, outside of the other accountant’s notice, to get an explanation. I broke it down for him and told him about the additional taxes that he would be paying if we went along with the K-1. I told him that I would follow up with the accountant in a few days.
My client thanked me over and over again. The point is, when you see something that may be out of whack, ask questions. Just because this K-1 was produced doesn’t mean that it was correct. When your clients see your worth, they think of you as more than a person that fills out forms.
This Month’s Top Tax Social Media Posts:
SAMPLE, old one- Do not use. (Need 5.) Is Corporate Tax Planning Ethical? Stuart Jehan via LinkedIn: http://bit.ly/2q2og7l
Latest Tax News:
Tax Reform Could Create Opening for Marketplace Fairness Act. Federal lawmakers may be ready to implement a national sales tax, funding states that lose out on sales taxes.
www.cpapracticeadvisor.com/12333390
CPE Webinars Offered for Tax and Accounting Pros. The National Society of Accountants (NSA) has announced the latest courses in its series of ConnectED Webinars, which are approved for continuing professional education by the IRS.
www.cpapracticeadvisor.com/12334688
How to Remove Assets from a Taxable Estate. The point of a RLT is to protect your assets from probate, the long and drawn out process that can take sometimes a year to get the assets of a decedent to their intended heir.
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7 Obamacare Tax Provisions on the Chopping Block. The tax provisions included in the ACA are certainly “fair game” as part of health care legislation or any tax reforms that may be passed this year.
www.cpapracticeadvisor.com/12334310
What Economic Nexus Means for Remote Sales. With sales tax revenue dropping due to an increase in untaxed internet and catalog sales, a growing number of states have created economic nexus
laws.
www.cpapracticeadvisor.com/12334961