Coaching and Micro-Business Compliance
One of the benefits that my micro-business coaching clients receive is micro-business updates and coaching on how to use guardrails to comply with various business and tax laws that interface with small business owners.
In this context, there are published Federal, State, and IRS documents for small business owners that align with what we refer to as "standards of care" in medicine. In medicine, we inform our clinical decision-making with standards of care, but we also include our experiences and shared knowledge through what are known as published "case reports". These narratives provide us with valuable information on how to manage emerging or unusual medical conditions. This combination of these information sources leads to the application of our medical knowledge to patients in what is commonly known as the art of medicine.
In the small business world, there are similar case reports that are filtered through tax and legal professionals as they file IRS audits and monitor court cases. In turn, these case reports inform how federal, state, and IRS officials are interpreting the application of various standards with small business owners. It’s this combination of guidelines/laws/IRS code and the experiences/case reports that inform professionals on how to guide their small business clients.
At SimpliMD, we are dedicated to closely monitoring the ever-evolving and ever-changing business and tax laws. Our commitment is to stay up-to-date and well-informed on matters that directly impact physicians and their micro-corporations. We take great pride in sharing this valuable knowledge with our physician clients.
This is one of the areas that sets us apart as an agency that offers physician business consultation, courses, and coaching to our community. It's what makes us truly unique. The ever-changing nature of small business laws, regulations, and tax codes emphasizes the importance of having a professional agency to monitor these factors and assess their impact on your financial well-being. This is especially crucial for doctors and their micro-corporations. We are a niche agency and online community solely focused on your unique life as a doctor.
I hear it over and over again in our SimpliMD community, Due to your high income, tax planning, and strategies are a significant concern for all of you. This is particularly true for those of you who are traditionally employed as W-2 workers. But the W-2 planning also affects micro-business owners because they too receive W-2 income—in the form of salary from their own business.
So, keeping in mind that both traditional workers and self-employed doctors interface with W-2 tax planning, let's take a global perspective and remind ourselves of the tax planning options available for W-2 workers.
Helping W-2 Employees
Generally speaking, high-income income-earning W-2 workers have fewer options for tax planning. However, there are still some effective methods that can be utilized, including:
Maximize your opportunities for itemized deductions.
Maximize your retirement accounts
Take advantage of pre-tax contributions and employer matches.
Use after-tax contributions such as a Roth, or for most doctors a Back-Door Roth.
Open an HSA account—make sure it is maxed out because it’s essentially a stealth IRA.
Rental properties— these can be a powerful tool to accelerate your wealth and minimize your tax burden. I highly recommend a Semi-Retired MD to resource you in this area.
Start a small business—the easiest and most natural option is to start your professional micro-corporation. However, any small business can be helpful.
Helping Professional Micro-Corporation Owners
As I work with various types of doctors, I have noticed a growing trend of doctors engaging in job stacking. This involves combining a W-2 job with 1099 side jobs. Those doctors will utilize all the tax planning strategies mentioned above. However, by utilizing a micro-corporation for their 1099 income, they will unlock numerous additional tax planning options. It's beyond the scope of this blog to delve into those options, but suffice it to say, that it typically involves the wise utilization of pre-tax business deductions.
Coaching Corner & Dwelling Unit Reimbursement Program (DURP)
I had a quarterly coaching meeting with a client whom we helped convert to a PC-Employment Lite program a few years ago.
He is extremely pleased with his transition from traditional employment. One of the tax-saving business expenses we incorporated into his micro-business structure is what we refer to as a Dwelling Unit Reimbursement Program (DURP), commonly known as an Augusta Rule. It's an excellent opportunity to generate income from your business to your household through the periodic rental of your home to your business. However, it's important to consider the legal, tax, business, and documentation aspects to ensure proper execution. At SimpliMD, we offer comprehensive guidance to our business consultation clients in navigating these considerations and also work with our legal network to ensure that your dwelling unit rental plan is properly embedded into your corporate bylaws. Both elements are essential to have in place as a matter of compliance.
One component of our program is to review our clients' DURP meeting minutes for compliance adequacy, paying close attention to any evolving federal, state, or IRS changes.
When it comes to DURP interpretation from the courts and IRS, there have been some recent updates, and here is a glimpse of what I discussed with my coaching client.
DURP Compliance Update
After collaborating with our legal & tax professional network and based on recent IRS cases that have scrutinized DURP meetings in the small business community, we recommend the following considerations:
General considerations that have not changed:
Schedule Meetings at Your House
Take Corporate Minutes
Invoice the Business
Pay the Expense
Document Income/Expense Write Off
New clarification for a DURP meeting includes a required disinterested person who must physically attend the meeting at your dwelling for a business purpose. A disinterested person refers to someone who is neither related nor subordinate to the business owner(s) involved. This means that owners, employees, and family members who attend your business meeting do not qualify for this designation.
- If you are SimpliMD business client we will provide you with clear guidance on who qualifies as a disinterested person and a list of potential business purposes for a meeting. Please contact me if you are interested in engaging with SimpliMD Business Consultative Services to assist you with this. Otherwise please reach out to your own legal or tax professional to help you.
As a professional micro-corporation owner it is important for you to comply with all Federal, State, and IRS rules and regulations. I suggest you use an physician centric agency like SimpliMD to connect you with a network of professionals who will assist you with compliance this rather than winging it yourself.
I do not want you view this post as specific legal or tax advise in these matters, because I am qualified to do so. My goal is to inform you about the dynamic nature of operating a professional micro-business and then help connect you to a network of trusted professionals that can help you. Today’s coaching story is proof of this need.
I hope you have found this information helpful, especially if you are utilizing the DURP meetings in your micro-business.
If this DURP concept is new to you and you would like to use it as a great tax planning strategy in your micro-corporation, let our network help you with a SimpliMD business consultation.
If you are already using a DURP, but after reading this, you realize that you need a professional to help beef up your by-laws, let SimpliMD's network help you with a business consultation.
If you are looking for ways to optimize your micro-corporation, please reach out to me here for a FREE-minute business consultation to review your particular situation.
Lastly, if you don't have a professional micro-business coach, I highly recommend signing up for my popular micro-business 4-pack coaching program here—our community members love it. It’s worth noting that it’s tax-deductible to your micro-corporation:)