Issue link: https://viewer.e-digitaledition.com/i/992813
2 0❱❱❱❱❱ A C C O U N T I N G The New Income Tax Law and Physicians BY JIM RICE, CPA A S MY FIRM CONTINUES TO PREPARE INCOME TA X RE TURNS FOR OUR PHYSICIAN CLIENTS AND THEIR MEDICAL PR ACTICES, MANY OF OUR PHYSICIAN CLIENTS ARE SEEING A NICE REDUCTION IN THEIR PROJECTED INCOME TA X LIABILIT Y FOR THE 2018 YE AR AND IF THERE ARE NO MA JOR CHANGES TO THE TA X L AWS JUST PA SSED, THE Y WILL CONTINUE TO SEE A NICE REDUCTION THROUGH THE YE AR 2025. WITH THAT IN mind, 2018 quarterly estimated payments and income tax with- holding on salaries should be calculated with the reduced tax rates in mind. There is no need to give the IRS extra money that must be returned with no interest earned. One of the major components of the new tax law, other than the reduced tax rates across the board, is the Qualified Business Income (QBI) deduction. This deduction essentially reduces a taxpayer's certain specifically defined and qualified taxable income by a straight 20 percent, thus mak- ing the highest tax rate for this taxable income go from 37 percent to 29.6 percent. If it sounds too good to be true, then I am proud of you. For physicians operating under a regular "C" corporation, their salary is excluded from this deduction. Additionally, the Q BI deduction comes with a very complicated set of rules that needs more clarification and guidance from the IRS. However, for physicians operating as sole proprietors, "S" corpora- tions, PLLCs or partnerships, there is the potential to take advantage of the QBI deduction. In most of the ta x a r ticles that hit the media about the QBI deduction, the concept that physicia ns ca nnot ta ke advantage of this deduction is repeated. However, if a married physician's taxable income is below $415,000, then there is the possibility of taking all or a portion of the QBI deduction. The main step for these married physicians whose taxable income is below $415,000 is to make sure they run their medical practice as a pass- through business (sole proprietor, PLLC, S corporation or partnership).