MedEsthetics magazines offers business education and in-depth coverage of the latest noninvasive cosmetic procedures for physicians and practice managers working in the medical aesthetics industry.
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54 APRIL 2014 | Med Esthetics easy to obtain, the IRS can re-evaluate the terms every two years. When the IRS sends its collection letters to entities that have failed to fi le or pay their taxes, they will include information on taxpayers' rights outlining the various payment options. For those who want to be proactive in researching options, the IRS's collection division is the point of contact. Negotiating with the IRS Surprisingly, businesses and individuals can negotiate with the IRS when it comes to tax bills. An "Offer-in- Compromise" (OIC) is a technique that has allowed many practices to settle their tax debts for a fraction of face value. You cannot, however, initiate an OIC before the tax deadline. Only after the collection process has begun will the IRS look at the individual circumstances of the payer and process an OIC. Like any creditor, the IRS prefers a partial payment to no payment at all. Thus, it may be willing to settle a tax bill for less than the full amount if: (a) the medical prac- titioner or the practice is unable to pay the full amount, (b) there is doubt as to the tax liability, (c) collection of the liability would create economic hardship, (d) due to exceptional circumstances—such as a medical condition that prevents proper management of fi nancial affairs, or reliance on erroneous advice from the IRS, or (e) the IRS's collection of the full liability would be detrimental to the fair and equitable administration of tax laws. In fact, any practice that can demonstrate "reasonable cause" may be surprised to fi nd penalties forgiven. The IRS determines reasonable cause on an individual basis. Amending After the Fact If a practice fi les and pays its taxes, then realizes that an error or omission has occurred, changes can be made through an amended tax return. Why would anyone want to change or amend an already-fi led tax return? The answers vary widely, but include failure to properly follow annual tax law changes, retroactive law changes, overlooked income or write-offs, newly discovered records or simple errors. Correcting or amending a return because of errors and omissions, including a failure to report additional income, is encouraged by the IRS, which assures the public that changes in previously reported deductions or income will not increase the likelihood of an audit. Generally, a medical aesthetics practice—or its princi- pal—can amend its previously reported income and deductions within three years from the time the return was fi led, or within two years from the time the tax was fully paid, whichever is later. Should the refund claim involve the deductibility of bad debts or worthless secu- rities, the period is seven years. Individuals and sole proprietors use Form 1040X, "Amended Individual Tax Return." An incorporated medical aesthetics practice that fi led Form 1120, uses Form 1120X, "Amended U.S. Corporation Income Tax Return," to fi le an amended return. While S corpora- tions and partnerships check a box on the Form 1120S or Form 1065. If your taxes were fi led online, the easiest process for e-fi ling the amended return is to update the underly- ing original return by changing the items that were in error. Once the return has been updated, the required documents are attached, along with any supporting explanations, and e-fi led as an amended return. Under the rules for electronically fi led returns, an amended return is any return fi led subsequent to the original—or superseding—return and fi led after the expiration of the fi ling period (including any extensions). The process for amending e-fi led taxes is identical to the process for paper returns (see above). For Forms 1120 or 1120S, the practice should include the original tax return and any changes that were made. Preparing for 2014 Today, thanks to an extended time period in which tax returns can be fi led and an even longer period during which returns can be changed or amended, the so-called "tax season" has become a year-round event. Review- ing your taxes with your CPA can help assure that all relevant deductions have been claimed for 2013 while, simultaneously, helping you recognize and incorporate any overlooked or ignored tax strategies in your 2014 tax planning. Mark E. Battersby is a Philadelphia-based freelance writer specializing in fi nancial and tax-related topics. AFTER THE DEADLINE T h e I R S a s s u r e s t h e p u b l i c The IRS assures the public t h a t c h a n g e s i n p r e v i o u s l y that changes in previously r e p o r t e d d e d u c t i o n s o r reported deductions or i n c o m e w i l l n o t i n c r e a s e income will not increase t h e l i k e l i h o o d o f a n a u d i t . the likelihood of an audit. © THINKSTOCK A f t e r D e a d l i n e M E D 4 1 4 . i n d d 5 4 After Deadline MED414.indd 54 3 / 1 3 / 1 4 9 : 2 2 A M 3/13/14 9:22 AM