Hugh F. Doherty, DDS, CFP
There are some changes for 1999 that you will need to make regarding paying your taxes on time. If you pay estimated income taxes, you may have to increase your quarterly payments this year.
The Internal Revenue Service is now requiring that taxpayers with adjusted gross incomes above $150,000 ($75,000 if married and filing separate returns) deposit 90 percent of their expected tax for the year or 105 percent of the taxes they paid in 1998, whichever is smaller. Otherwise, the IRS will levy a penalty for underpayment. Last year, the requirement was 90 percent of the expected tax or 100 percent of the 1997 taxes paid, whichever was smaller. The 105 percent calculation is scheduled to rise to 112 percent in 2001, then retreat to 100 percent of 2002 and beyond.
The worry of paying the correct amount of estimated tax can be overcome by incorporating your practice. With incorporation, you, the doctor, are an employee and your taxes are deducted and paid prior to every paycheck you receive.
Smoother switch to a new bank
Set up the new account before closing the old one. Keep enough money in both accounts to meet the minimum balance requirements. Start doing business in the new account while making sure everything clears in the old one - including outstanding checks and changes in direct-deposit instructions. Be sure to suspend automatic payments in the old account and switch them to the new one. Keep records of both accounts during the transition and report any errors you find promptly.
New mutual fund categories
The surging stock market has played havoc with how mutual funds are categorized. Terms like "small-cap" or "mid-cap" were applied to a fund based on the size of the companies in its portfolio. But with so many companies getting so big so quickly, countless funds have been jumping categories simply because their holdings got big - not because their managers changed investing style.
Likewise, the "value fund" and "growth fund" labels have been affected by developments in the equity market. Many small-cap growth funds performed so poorly that they were reclassified as value funds - regardless of what they had been calling themselves. To alleviate the resulting investor confusion, Morningstar, a major fund-rating firm, has changed the way it categorizes equity funds. Morningstar has scrapped the fixed-dollar parameters it previously used to define small-cap, mid-cap, and large-cap, and switched to a flexible system in which the cutoff points will rise and fall with the market. And Morningstar will no longer determine its value or growth labels for small-cap and mid-cap funds by comparing a fund`s performance with the Standard & Poor`s 500 Stock Index. Now it will compare small-, mid-, and large-cap funds against each other, and determine value or growth by a fund`s performance relative to its peers.
Helpful hints for wireless phones
If you are dissatisfied with your cellular phone contract or don`t yet have one, try shopping on the Internet. You`ll find out which calling plans are available in your area, as well as their rates and other features. Once you`ve narrowed the field, you can visit companies` home pages to get more details, then place your order.
While you are comparison-shopping, look at monthly access charges and free minutes included in the basic package, the rate for additional minutes, and charges for calls outside your home service area. Try to find the plan with the largest service area, shortest peak calling period, and most generous offer of free calling minutes. Among noteworthy Web sites, two offer a glossary of service-plan terms:
Hugh F. Doherty, DDS, CFP, is a national lecturer, financial advisor to the health-care profession, and CEO of Doctor`s Financial Network. For information on his personal and practice financial "Boot Camp" or to have him speak to your study club or dental society, contact him at (800) 544-9653, e-mail [email protected], or visit www.dr.hughdoherty.com.