PBMares Accounting Blog

Costs Related to Extraordinary Reviews of Unsettled Overhead Costs

Posted by Neena Shukla, CPA, CFE, CGMA, FCPA on Mar 16, 2017 8:28:00 AM

On September 28, 2016, DCAA removed Chapter Seven from the Contract Audit Manual (CAM) and released a new seventy-five chapter document entitled “Selected Areas of Cost Guidebook: FAR 31.205 Cost Principles”. It can be found on the DCAA website at http://www.dcaa.mil/SelectAreasCost.html.

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Topics: Government Contracts

Why nonprofits need continuity plans

Posted by Edward T. Yoder, CPA, MSA on Mar 15, 2017 4:40:43 PM

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Topics: Not-for-Profits, NFP Bites

Income Distribution – Deciding How to Split the Pie

Posted by Marilyn Kitchens, CPA on Mar 15, 2017 12:04:52 PM

Having partners in a medical practice definitely has its advantages. You have peers to share the workload and to share costs, which often drives up your revenue and drives down your overhead costs.  You have partners that can help make business decisions about practice growth, employee matters and clinical protocols.  But when you split the responsibility, you must also split the pie.  The income pie, that is. 

Mathematically, splitting income and expenses equally is the easiest method to apply. Inevitably, questions and discontent arise between partners over variances in work production and how overhead costs are shared.  Splitting the pie fairly involves making decisions about how to allocate your patient income and each of the practice’s costs.  Here are some things to consider when developing your practice’s income distribution agreement. 

Allocating Receipts by Rendering Provider

Allocating receipts by rendering provider, whether you use charges, RVUs worked or payments received, is the most often used method of allocation in independent medical practices where there are no ancillary services or multi-disciplines.  A perfect example is primary care.  Even in specialty care, you can allocate income from direct patient encounters and procedures performed to the rendering physician. 

But what if you have ancillary services like nuclear stress testing or retail sales, like skincare products or optical frames? Some of the income from these types of services is not the result of direct physician contact.  You may have a technical component that is allocated directly to the physician, but the remaining income might be equally shared by all the partners.  

If you and your partners are operating in an S-Corp, any income not allocated through physician compensation must be shared equally. Make sure your tax planning takes into account any residual income that may be left at the end of the year.

A Look at Categorizing Practice Expenses

Practice expenses are often broken down into three categories: direct physician expenses, fixed operating costs, and variable operating costs. 

Direct physician expenses like dues, continuing education, malpractice, and even direct staff salaries, like scribes, are allocated to each physician when they incur the expense. 

Fixed operating costs like rent and other facility expenses can be allocated based on square footage used or days in the office.  This method comes in handy when you’re trying to assign facilities expense to ancillary departments like nuclear testing or retail sales.  You’ll need to consider how fixed depreciation costs for equipment will be shared if not all physicians are using the equipment.  It seems appropriate to assign costs associated with expensive equipment to the physicians that are getting credit for the income generated by the equipment’s use. 

Variable operating costs increase or decrease based on how much work is performed.  Medical supplies, staff salaries and basically all other practice expenses that can’t be carved out as either direct or fixed fall into this category.  These costs can be allocated in the following ways:

  • By production (applying the method used to allocate income),
  • By calculating the costs as a percentage of total income and allocating each physician a share of the costs, or
  • By sharing these expenses equally or in any other way agreed to by the partners.

There are multiple ways to allocate income and expenses between you and your partners. Finding and agreeing upon a fair income distribution agreement allows you to realize the advantages of group practice while ensuring you’re taking home your equitable share of the pie. 

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Topics: Medical Practice

The Sandwich Generation – taking a bite out of the burden

Posted by Louise Clayton-Kastenholz on Mar 10, 2017 1:53:39 PM

They call us the Sandwich Generation, the middle layer between grown or growing children who depend on us and parents who also depend on us.   Being in this position can sap a family’s resources physically, emotionally, and, of course, financially. 

Fortunately, if you are providing for an elderly parent or other family member, there are some potential tax breaks available to help ease the burden. First of all, there is the dependency exemption, allowing a deduction of up to $4,050 per dependent.  For a family in the 25% tax bracket, that translates to a savings of just over $1,000.

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Topics: Tax Planning, Estate Planning

Interested in Becoming a Small Business Government Contractor?  Find Out if You Qualify, Then Apply

Posted by Neena Shukla, CPA, CFE, CGMA, FCPA on Mar 6, 2017 2:06:21 PM

 

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Topics: Government Contracts

Tangible property safe harbors help maximize deductions

Posted by Jennifer French, CPA on Mar 1, 2017 1:03:20 PM

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Topics: Tax Bites, Tax Planning

Do you need to file a 2016 gift tax return by April 18?

Posted by Donald Knotts, CPA on Feb 23, 2017 9:30:00 AM

Last year you may have made significant gifts to your children, grandchildren or other heirs as part of your estate planning strategy. Or perhaps you just wanted to provide loved ones with some helpful financial support. Regardless of the reason for making a gift, it’s important to know under what circumstances you’re required to file a gift tax return.

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Topics: Tax Bites, Tax Planning

Make sure your nonprofit’s bylaws are on point

Posted by Bo Garner, CPA, MBA on Feb 22, 2017 11:17:10 AM

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Topics: Not-for-Profits, NFP Bites

Whistleblower policies protect nonprofit staffers — and their employers

Posted by Edward T. Yoder, CPA, MSA on Feb 21, 2017 2:46:39 PM

Individuals who report illegal or unethical practices may risk their careers, or take other kinds of risks, when they do. Whistleblower policies help protect them. No federal law specifically requires not-for-profits to have such policies in place, but several state laws do. And IRS Form 990 asks nonprofits to state whether they have adopted a whistleblower policy.

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Topics: Not-for-Profits, NFP Bites

New Item on the Vacation Planner - Pay Taxes

Posted by Louise Clayton-Kastenholz on Feb 16, 2017 8:15:38 AM

It's February and you're thinking about that dream vacation to an island in the sun, or an exciting discovery of another country's history and culture.   That's great, but before you book that ticket and renew your passport, make sure that you are up to date on your taxes.

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Topics: Tax Planning