John McGill, MBA, CPA, JD
Under the current tax law, Congress has gradually been phasing doctors into the electronic tax-deposit filing system through the end of this year. Doctors with more than $50,000 of employment tax deposits during calendar years 1995, 1996, or 1997 were required to begin depositing these funds electronically, beginning Jan. 1, 1999. Doctors who failed to comply with the electronic tax-deposit rules faced a penalty equal to 10 percent of the taxes deposited.
Reacting to strong criticism from doctors and other small businesses, Congress and the Internal Revenue Service extended the period of time that they would waive penalties for failure to electronically deposit through June 30, 1999. Recently, the IRS has announced that it will continue to waive these penalties through Dec. 31, 1999.
Furthermore, the IRS recently issued proposed regulations which will allow thousands of doctors to continue to deposit employment taxes with their respective banks using paper coupons as in the past, without penalty. Under the new rules, the annual tax deposit threshold required to trigger the switch to electronic tax depositing has been increased from the current amount of $50,000 to $200,000, effective Jan. 1, 2000. This new threshold would apply initially to 1998 tax deposits. Doctors who exceed the $200,000 deposit threshold in 1998 would have to begin depositing electronically in the year 2000. Doctors who first exceeded the threshold in 1999 or a later year would be required to deposit electronically after a one-year grace period.
A doctor who exceeds the threshold once would not be permitted to resume making paper-coupon deposits at his/her bank if his/her deposits fell below $200,000 in a later year. More importantly, doctors currently required to deposit electronically would get a fresh start under the new rules, and thus would not have to use electronic tax deposits unless they exceeded the $200,000 threshold in 1998 or a later year.
The IRS estimates that only 9 percent of doctors who make federal-tax deposits would be required to deposit electronically under the new rules. Moreover, they estimate that the Ofresh-start rulesO would allow 65 percent of doctors currently subject to electronic filing to resume making paper-coupon deposits with their bank, beginning in the year 2000. However, the IRS says it is confident that most doctors will continue to deposit electronically on a volunteer basis.
Clipping and referring to Dental Economics? comprehensive 2000 Tax Calendar will help you file tax deposits, payroll taxes, and estimated payments in a timely manner.
The final quarterly installment of 1999 estimated individual income tax (including self-employment tax) is due. You have a choice: either pay now or skip this payment, file your Form 1040, and pay the balance by Jan. 31. Make a note of the payment due because you will receive no bills from the IRS to jog your memory. If you paid installments last year, use the preprinted installment vouchers showing your name, address, and Social Security number that are part of the Form 1040 ES worksheet that should have come with your tax-return forms. You can obtain these vouchers from your local IRS office.
Complete Form 8109 (Federal Tax Deposit-Withheld Income and FICA Taxes) and deposit the taxes if you are a monthly depositor under the IRS tax-deposit rules. Under these rules, if the practice?s total withheld income and FICA taxes for the 12 months ending June 30, 1999, were $50,000 or less, the practice must deposit taxes withheld during a calendar month by the 15th day of the following month. If the total exceeded $50,000, the practice must make semiweekly deposits. Under the semiweekly deposit rules, if a payroll is paid on Wednesday, Thursday, or Friday, the payroll deposit is due by the following Wednesday. If payroll is paid on Saturday, Sunday, Monday, or Tuesday, the payroll deposit is due by the following Friday.
Today is the deadline for furnishing 1999 Form 1099 information returns (Copy B) to recipients of $10 or more in dividends/interest or $600 or more in rents, legal fees, interest, royalties, commissions, fees, medical-savings-account distributions, prizes, and other compensation to nonemployees. Your IRS Center must receive Copy A of Form 1099, with the accompanying 1096 Transmittal Forms, by Feb. 29.
Each employee must be furnished with a W-2 Form showing wages paid and taxes withheld in 1999 ? that?s Copy B for the employee?s Form 1040 and Copy C for his or her records, as well as copies of the forms for any state or city returns. By Feb. 29, you?re expected to file with the Social Security Administration the original copy of all W-2 Forms (Copy A) that you gave to your employees, along with a W-3 Form (Transmittal of Income and Tax Statements).
Reminder: If you paid more than $1,000 during the 1999 calendar year to a housekeeper, babysitter, or other household employee, you are liable for Social Security taxes and required to file Form 942 (Employer?s Quarterly Tax Return for Household Employees). Alternatively, the Social Security taxes (FICA) and Federal Unemployment taxes (FUTA) due on any domestic helper?s wages can be computed and paid on the doctor?s individual tax return (Form 1040), rather than having to file Form 942 each quarter and Form 940 by Jan. 31.
Using Form 940, doctors are required to file an annual Federal Unemployment tax return for practice salaries paid in 1999 by this date. If you made timely deposits in full payment of the tax, this deadline is extended to Feb. 10. Are you liable for FUTA taxes? You are if your wage payments topped $1,500 in any calendar quarter last year, if you employed one or more persons on at least one day of each of 20 or more weeks during the last year, or if you pay a household worker $1,000 or more in a calendar quarter.
Here?s a memory jogger if you chose not to pay the last installment of your estimated 1999 federal income tax on Jan. 17. File a complete Form 1040 and pay the balance of your actual 1999 income tax and the balance of your 1999 self-employment tax.
File Form 941 to pay the balance of last quarter 1999 contributions to Social Security, plus the balance of Social Security and income taxes withheld from Oct. 1 to Dec. 31. This filing deadline is extended to Feb. 10 if you made deposits on time in full payment of your Social Security tax and withholding liabilities during the preceding quarter. While it may not be an IRS requirement, it?s always a good idea to prepare and keep a reconciliation of the wages, Social Security taxes, and income taxes withheld as shown on the W-2s with the quarterly 941 Forms and your books. Retain Copy D of all W-2s.
Complete Form 8109 and deposit taxes due for January. (See Jan. 17 note.)
Ask for a new W-4 Form from each employee who claimed total exemption from withholding during the prior year. If no form is received from the employee, begin withholding income tax from the employee?s paycheck, effective Feb. 15.
File Copy A of Form 1099, with the accompanying 1096 transmittal form, with your IRS Service Center. File Copy A of all W-2 forms given to employees, along with a W-3 transmittal form, with the Social Security Administration.
Did you practice as a corporation in 1999? A corporation?s federal income-tax return Form 1120 or 1120S is due two-and-a-half months after the end of its fiscal year. March 15 is the due date if your corporation?s year ends Dec. 31; otherwise, simply transfer this entry to the proper date. You may request an extension to file until Sept. 15, but all corporate income taxes must be paid with the request for extension.
Complete Form 8109 and deposit taxes due for February. (See Jan. 17 note.)
File Form 2553 with the IRS if your corporation wants to be taxed as an S corporation effective Jan. 1, 2000. If Form 2553 is filed after this date, S treatment will become effective Jan. 1, 2001.
File your federal individual income tax return, Form 1040, if you haven?t already done so or received an extension to Aug. 15. Pay any balance you owe on your income tax for 1999. Complete Schedule SE and pay any remaining balance of your 1999 self-employment tax, if you are unincorporated.
If in a partnership, report your share of 1999 partnership earnings from Schedule K-1 on your Form 1040. Also, make sure the partnership return? Form 1065 ? is filed by this date.
Today is the deadline for filing your first quarterly estimated payment to cover your 2000 federal income tax and your self-employment tax liabilities, if unincorporated. Using Form 1040 ES, pay one-fourth of your estimated federal income tax and one-fourth of your estimated 2000 self-employment tax.
Calendar-year corporations pay one-fourth of estimated tax. Fiscal-year corporation payments are due in the 4th, 6th, 9th, and 12th months of the corporation year, using worksheet Form 1120-W.
Complete Form 8109 and deposit taxes due for March. (See Jan. 17 note.)
File Form 1041, trust or estate income tax return, if your trust or estate year ends Dec. 31. Otherwise, your return is due three-and-a-half months following the close of your year.
File Form 941 to pay the balance of your first-quarter 2000 contribution to Social Security, plus the balance of Social Security and income taxes withheld from employees? salaries during the same period. This filing deadline is extended to May 10 if you have made deposits on time and also have made full payment of your Social Security and federal withholding liabilities during the preceding quarter.
Complete Form 8109 and deposit taxes due for April. (See Jan. 17 note.)
If you practice as an unincorporated partnership or S corporation and selected a tax year ending at a time other than Dec. 31, file Form 8752 and pay the resulting required payment.
For unincorporated doctors, the second installment of your 2000 federal tax is due. Using Form 1040-ES, remit payment of one-fourth of your estimated income tax and one-fourth of your 2000 self-employment tax. If you are unincorporated and your taxable income so far this year has varied by 10 percent or more from your original estimate, you should adjust your estimated tax payment accordingly. If incorporated, your federal income tax payments should be adjusted through your withholdings.
Calendar-year corporations are to pay one-fourth of their estimated tax by this date. Fiscal-year corporation payments are due in the 4th, 6th, 9th, and 12th months of your corporation?s year.
Complete Form 8109 and deposit taxes due for June. (See Jan. 17 note.)
File Form 941 to pay the balance of your second-quarter 2000 contribution to Social Security, plus the balance of Social Security and income taxes withheld from employees? salaries during the same period. This filing deadline is extended to Aug. 10 if you made timely deposits in full payment of your Social Security and withholding liabilities during the preceding quarter.
File appropriate Form 5500 with the IRS if your practice sponsored a retirement plan or flexible spending account (cafeteria) plan in 1999 that operated on a calendar year. If your plan used a fiscal year, the return is due on the last day of the seventh month after the plan year ends.
Complete Form 8109 and deposit taxes due for July. (See Jan. 17 note.)
File your federal individual income tax return, Form 1040, if you requested an automatic four-month extension by April 17. Pay the balance owed on your 1999 income and self-employment taxes.
If unincorporated, the third installment on 2000 federal tax is due ? one-fourth of estimated income tax and one-fourth of 2000 self-employment tax. Adjust payment if taxable income varies 10 percent or more from your last estimate.
Calendar-year corporations are to pay one-fourth of their estimated tax. Fiscal-year corporation payments are due in the 4th, 6th, 9th, and 12th months of your corporation?s year.
Complete Form 8109 and deposit taxes due for August. (See Jan. 17 note.)
Now would be a good time to arrange a meeting with your tax adviser to plan year-end strategy.
File 1999 Form 1120 (regular) or Form 1120S (S corporation) return if you practiced in a corporation during 1999 and received an automatic six-month extension to file your federal corporate income tax return on or before March 15 and paid any tax due.
Complete Form 8109 and deposit taxes due for September. (See Jan. 17 note.)
If you are practicing as a corporation, make sure your total individual income tax withholding for the year, plus any quarterly payments you made, will add up to at least 100 percent of the taxes you expect to owe for 2000. If your totals fall short, be on the safe side by increasing your withholding for the remainder of the year.
File Form 941 to pay the balance of your third-quarter 1999 Social Security, plus the balance of Social Security and income taxes withheld from employees? salaries during the same period. This deadline is extended to Nov. 10 if you made deposits on time in the full amount during the preceding quarter.
Ask for a new W-4 Form for each employee whose withholding allowance will change for the next calendar year.
For more information about any advertisement in this issue, circle the appropriate number on the Reader Service Card.
Complete Form 8109 and deposit taxes due for October. (See Jan. 17 note.)
Calendar-year corporations pay one-fourth of estimated tax. Fiscal-year corporation estimated payments are due in the 4th, 6th, 9th, and 12th months of the corporation year. Complete Form 8109 and deposit taxes due for November. (See Jan. 17 note).
The percentages for 1968 and 1997 are based on a ratio of individual, corporate, and employment taxes collected to total tax collections by the Internal Revenue Service.
Individual Income Tax
Corporate Income Tax
Returns Filed All Returns Form 1040 Returns
1975 82,229,332 54,527,726
1980 93,902,469 57,122,592
1985 101,660,287 67,006,425
1990 113,717,138 69,270,236
1994 115,943,131 66,390,936
1995 118,218,327 64,774,724
1996 120,351,208 66,264,999
Returns Filed Form 1040A returns Form 1040EZ returns
1975 27,701,606 N/A
1980 36,779,877 N/A
1985 18,124,702 16,529,160
1990 25,917,288 18,529,614
1994 26,051,305 20,507,577
1995 24,463,262 21,644,177
1996 24,579,173 21,196,154
Taken from www.taxworld.org