Anderson ZurMuehlen Blog

Financial Tip of the Month: Tips for cutting medical bills

Tips for cutting medical bills

With the burgeoning cost of pharmaceuticals, doctor visits, and hospital stays, staying healthy has become an increasingly expensive proposition. In addition, health insurers are passing along more and more of their costs in the form of higher deductibles, increased premiums, and larger co-payments. Out-of-pocket costs for even one hospital stay can break a household budget, and it may take years to recover.

That’s the bad news. The good news? You can control some of these ever-increasing health care costs by following a few simple strategies:

  • Negotiate, negotiate, negotiate. You haggle when buying an automobile. Why not use a similar tactic when discussing items on your hospital bill? In fact, out-of-pocket costs for a surgery may even exceed the cost of that shiny vehicle sitting in the driveway. Fortunately, health care providers are often amenable to reducing invoiced amounts, and some may offer discounts for upfront payment. You might also research the cost of similar services in your area and use those figures as a starting point for negotiation. One place to start is
  • Scrutinize the bill. Hospitals are notorious for double billing and mischarges. When you receive the itemized bill, pore over it — line by line. Look for charges that don’t make sense ($50 charges for hospital supplies that are available for a dollar at the local department store); charges for services you didn’t receive (physical therapy that never happened); or more than one charge for the same item (separate charges for the hospital room and standard amenities like bed sheets). Examine the rates for these items as well. Your insurer may have negotiated lower rates, but you may have been charged more-expensive uninsured rates. And make sure all eligible out-of-pocket expenses are credited toward your deductible.
  • Comparison shop before you buy. Unless you’re being treated for an emergency, you may have time to locate more cost-effective health care alternatives. For example, using a stand-alone MRI imaging center may cost significantly less than the same test if offered by a hospital. A walk-in clinic or urgent care facility is generally cheaper than a visit to the local emergency room. Switching to generic drugs, when available, can save you up to 60% over name-brand equivalents.

If in doubt, call your insurer’s hotline to ask for help. Remember: insurance companies have a vested interest in your good health.

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Excel I Training, February 20, in Helena

Are you learning Excel? Anderson ZurMuehlen is offering Excel I training on Thursday, February 20, 8:30 a.m.-12:30 p.m. This interactive class will be taught by Molly Casey, Training & Development Manager.  The cost is $75 and there are only three seats left. Please contact Molly Casey  by email or call 406.442.1040 for more information or to register.

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Tax Tip of the Week: A capital gains review for your 2013 tax return

A capital gains review for your 2013 tax return

Wondering what capital gain rates will apply to your 2013 federal income tax return? The rate you pay on gain from the sale of stocks or other assets depends on the length of time you owned the asset, the type of asset, and your taxable income.

  • Length of time. The “holding period” determines whether an asset is classified as short-term or long-term. As you probably know, short-term is presently defined as a year or less, and short-term assets are typically taxed at your ordinary federal income tax rate. In contrast, the capital gain rate for assets held more than a year is generally lower than your ordinary rate.Measuring the holding period can be straightforward. For example, when you purchase publicly traded stocks, the holding period is measured by trade date. You start counting the day after you purchase the stock and stop on the date of sale.

    Assets you acquire in other ways, such as by gift or inheritance, follow different rules. For gifts, your holding period can include the ownership period of the person who gave you the gift. Inherited assets have a long-term holding period, no matter how quickly you sell them.

  • Type. Special capital gain rates apply to specific assets, such as art or coin collections, certain small business stock, and some depreciable real estate.
  • Income. When you’re in the 10% or 15% income tax bracket, the maximum rate you’ll pay on long-term capital gains is 0%. For 2013, the 15% bracket ends at $72,500 when you’re married filing jointly ($36,250 when you’re single).If your income exceeds $450,000 ($400,000 for singles), the maximum capital gain rate is 20%. When you’re in between, you’ll generally pay 15% on gains.

Please call if you sold investments or other assets in 2013 and have questions about the tax issues.

© MC 2014

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Estimate start-up costs for your new business

Building a business from scratch involves hard work, long hours, and, statistically speaking, a high probability of failure. Yet as researchers Stanley and Danko noted in their landmark book, The Millionaire Next Door, “self-employed people make up less than 20% of the workers in America but account for two-thirds of the millionaires.” For those businesses that survive, the rewards can be substantial.

Unfortunately, many businesses die before they get started. That’s because entrepreneurs often fail to estimate start-up costs with reasonable accuracy. As a result, the company cash account dwindles to zero before sales catch up.

If you’re preparing to launch a new business, take a hard look at the following:

  • Assets. Your company’s requirements will vary depending on the industry and market for your goods and services. But you should be able to construct a list of assets necessary to keep the business up and running for at least a year. If you’re establishing a company in a brick-and-mortar location, you’ll need to factor in equipment, furniture, point-of-sale cash registers, incorporation fees, licenses, signage, rental and utility deposits, and remodeling costs. A service-oriented firm may not carry substantial inventory, but a product-based company should estimate initial inventory costs as well. Equipment and furniture vendors should be able to provide reasonable cost estimates for such items.
  • Expenses. Costs to launch a company will also include items not found on the balance sheet — outlays to keep the company running from day to day. These might include legal fees, website development costs, expenditures for office supplies, marketing materials, and rent and utility deposits. If you hire folks to help get the company off the ground, their salaries should be included in the expense estimate as well.
  • Cash. Once you know how much your company will need for assets and expenses, it’s time to develop a budget. Estimate revenue and collections for at least three months. Be conservative. Add up the cost of assets and expected expenses, then deduct cash in the bank and projected revenue. The difference will be your cash shortfall. This is the amount you’ll need to garner from other sources, including bank and personal funds.

The more accurately you estimate the above items, the more likely your company will survive long enough to become profitable.

© MC 2014

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Home Office Deduction 101

If your use of a home office is for your employer’s benefit or because you’re self-employed, you may be able to deduct a portion of your mortgage interest, property taxes, insurance, utilities and certain other expenses, as well as the depreciation allocable to the office space. Or you may be able to take the new, simpler, “safe harbor” deduction.

Beginning with 2013 tax returns, taxpayers can use the safe harbor deduction in lieu of calculating, allocating and substantiating actual expenses. Other rules — such as the requirement that the office be used regularly and exclusively for business — still apply. The safe harbor deduction is capped at $1,500 per year, based on $5 per square foot up to a maximum of 300 square feet.

Also be aware that, for employees, home office expenses are a miscellaneous itemized deduction. This means you’ll enjoy a tax benefit only if these expenses plus your other miscellaneous itemized expenses exceed 2% of your adjusted gross income (AGI). If, however, you’re self-employed, you can deduct eligible home office expenses against your self-employment income.

Questions about deducting home office expenses? Contact us; we’d be pleased to answer them.

© 2014 Thomson Reuters

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Anderson ZurMuehlen Tax Guide

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Tax Tip of the Week

You’ll see higher standard deduction and exemption amounts on your 2013 tax return

You’ve probably heard of the consumer price index, or CPI, a government statistic that measures the change in the price of certain items over a specified time period. But you may not realize the CPI affects your tax return.

That’s because the CPI is used as a measure of inflation, and the tax code calls for mandatory inflation adjustments to many numbers, including the standard deduction and exemptions.

Here are the inflation-adjusted figures for your 2013 federal income tax return.

  • Standard deduction. The standard deduction is the flat dollar amount you can use to reduce your taxable income when you do not itemize. For 2013, when you’re single or married filing separately, your standard deduction is $6,100, an increase of $150 from 2012. If you’re married and file a joint return, or are filing as a surviving spouse, the 2013 standard deduction went up $300 from 2012, to $12,200.
  • Exemptions. Two types of exemptions are available. You can claim the personal exemption for yourself and your spouse. The dependency exemption is for qualifying children or relatives.For 2013, each exemption will reduce your taxable income by $3,900, an increase of $100 from the 2012 amount.

Inflation adjustments also increased the upper limits of tax brackets for 2013, as well as other exclusions, deductions, and phase-outs.

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File early to reduce your risk of tax return fraud

With the well-publicized security breach at major retailer Target recently, identity theft is likely on your mind. And stolen credit isn’t your only risk.In an increasingly common scam, identity thieves use victims’ personal information to file fraudulent tax returns electronically and claim bogus refunds. When the real taxpayers file their returns, they’re notified that they’re attempting to file duplicate returns. It can take months to straighten things out, causing all sorts of headaches and delaying legitimate refunds.You can reduce your likelihood of becoming a victim by filing your return as soon as possible after you receive your W-2 and 1099s. If you file first, it will be the thief who’s filing the duplicate return, not you.

Also, if you did shop at Target during the security breach, be sure to check your bank and credit card accounts frequently, and consider signing up for the free year of credit monitoring the retailer is offering potential victims.

If you’d like to file your tax return early this year, please contact Erin Stockwell, Senior Manager, at 406. 727. 0888. We’d be happy to help. Also let us know if you have questions about protecting yourself from tax return fraud and identity theft.

© 2014 Thomson Reuters

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Regaining Tax-Exempt Status After Automatic Revocation

By Kendra Freeck, CPA, Manager

If your organization received an automatic revocation of its tax-exempt status for failure to file Form 990, Form 990-EZ (Short Form Return of Organization Exempt from Income Tax) or Form 990-N (e-Postcard) for three consecutive years, there is a way to reinstate your tax-exempt status.  Effective January 2, 2014, Rev. Proc. 2014-11 provides three pathways for reclaiming your tax-exempt status.  Here are your choices:

Forms 990-EZ and 990-N

  1. A streamlined retroactive reinstatement of exempt status is available to organizations that received an automatic revocation and have not had their tax-exempt status revoked automatically before.  The process involves submitting an application for reinstatement (IRS Form 1023 or Form 1024) along with appropriate fees.  The application must be submitted no later than 15 months after the date of the IRS revocation letter.

Forms 990-EZ, 990 and 990-PF

  1. Organizations that don’t meet the qualifications for a streamlined retroactive reinstatement may still be able to regain their tax-exempt status.  An application for reinstatement (accompanied by the appropriate fees) must be submitted no later than 15 months after the date of the IRS revocation letter.  In addition to the application, the organization must file annual returns for all tax years in the consecutive three-year period that it was required to file, a statement confirming that it has paper filed the proper returns, and a Reasonable Cause Statement.  The Reasonable Cause Statement must explain why the organization failed to file at least one of the three consecutive year’s returns.
  2. The final method for reinstatement is for those organizations that are beyond 15 months from the date of the IRS revocation letter.  The procedure is the same as described in item B above, except the organization must include a separate Reasonable Cause Statement for failing to file required returns for all three years that it failed to file.

For all three procedures, the IRS will not assess any failure to file penalty if the organization is successfully reinstated.  If you think your organization may have had its tax-exempt status automatically revoked and you want to seek reinstatement, please call one of the professionals at Anderson ZurMuehlen and we can help you evaluate whether your organization qualifies for reinstatement under the new rules.

To search a listing of automatically revoked entities please see  For more information contact Kendra Freeck, CPA, Manager, at 406.245.5136.

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Are you meeting the ACA’s additional Medicare tax withholding requirements?

Under the Affordable Care Act (ACA), beginning in 2013, taxpayers with FICA wages over $200,000 per year ($250,000 for joint filers and $125,000 for married filing separately) had to pay an additional 0.9% Medicare tax on the excess earnings.

Unlike regular Medicare taxes, the additional Medicare tax doesn’t include a corresponding employer portion. But employers are obligated to withhold the additional tax to the extent that an employee’s wages exceed $200,000 in a calendar year. The $200,000 amount doesn’t include the employee’s income from any other sources or take into account his or her tax filing status.

In November 2013, the IRS released final regulations regarding the additional Medicare tax and the employer withholding requirements. The only substantial change from the proposed regulations is that employers no longer have access to relief from payment liability for any additional Medicare tax that was required to be withheld but that they didn’t withhold — unless the employer can provide evidence that the employee in question has paid the tax.

Please let us know if you have questions about the requirements. We’d be happy to answer them and help you ensure you’re in compliance with these as well as other ACA requirements. Contact Kyla Stafford, Shareholder, at 406.556.6160 for more information.

© 2014 Thomson Reuters

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Learning World 2014

Staff from across the firm participate in Learning World, internal training courses held three times a year. Here is a picture from the January 9th class. During this training, staff learn about business transactions, networking, preparing tax returns, audit services and much more.

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