2023

Article Dean Dorton

This article provides a general overview of planning opportunities for reducing 2023 income taxes. We recommend you consult your tax advisor if you believe your situation may be impacted by unusual circumstances.

Maximize Pre-Tax Deductions

Determine if you are on track to have 2023 maximum amounts withheld from your paycheck for your retirement plan deferrals, HSA contributions, dependent care benefits, and other pre-tax options with your employer. If you are not going to maximize these, consider having additional amounts withheld from year-end bonuses, if possible. Also, consider increasing these amounts for 2024.

Capital Gains & Losses

If you have realized net capital gains during 2023, consider realizing capital losses before the end of the year to offset the gains. Remember that net long-term losses can offset net short-term capital gains, which otherwise would be taxed as ordinary income. Also, be aware of the “wash sale” rules if you are inclined to reinvest in a security you sell at a loss.

Bonus Depreciation & Section 179

Businesses should consider these tax breaks related to fixed asset acquisitions:

  • Special “bonus depreciation” allowance. Beginning on January 1, 2023, bonus depreciation has begun to phase out by 20% each year over the next four years. Bonus depreciation will completely phase out by January 1, 2027, without any new legislation. For 2023, 80% of the cost of qualifying property (including used assets) is deductible if the property is placed in service by year end. This deduction can create or increase an existing business loss.
  • Section 179 depreciation deduction. In 2023, individuals and business entities can elect to deduct up to $1,160,000 of qualifying business property cost in the year the property is placed in service. The deduction is reduced dollar-for-dollar for qualifying property cost greater than $2,890,000. This deduction is available only to the extent of positive business taxable income.

Self-Employed Retirement Plan

If you have self-employment income and do not have a retirement plan in place to shelter any of it, you may qualify to use a Simplified Employee Pension (SEP) plan. A SEP contribution deduction is allowed for 2023, even if the SEP is created and funded at any time up to the due date, including extensions, of your 2023 income tax return filed in 2024. Depending on the amount of self-employment income, you could fund (and deduct) up to $66,000 for 2023.

Required Minimum Distributions (RMDs)

Individuals with traditional IRAs and most individuals with employer-sponsored qualified retirement plan accounts are required to take minimum annual distributions from the account upon reaching a certain age, most recently changed to 73. It may be beneficial to consider a qualified charitable distribution (QCD) before year-end. QCDs allow individuals to transfer up to $100,000 to charity tax-free each year. In some situations, this may be more beneficial than making the donation in a traditional fashion.  Also, for those over age 72, QCDs count towards the RMD for the year.

Charitable Contributions

Depending on your situation, it may be beneficial to accelerate planned 2024 charitable contributions into 2023 or to defer 2023 contributions into 2024 to bunch them into the same year for greater tax savings. The deduction limit on cash charitable donations is 60% of adjusted gross income for contributions made in 2023. Contributions of most non-cash assets remain limited to 30% of adjusted gross income. Consider making donations of long-term appreciated assets/securities directly to charities.  By doing so, capital gains tax that would otherwise be paid if the security was sold is eliminated and the tax deduction is equivalent to the fair market value of the security.

Annual Gifting

You may give your children and others up to $17,000 in 2023 without any gift tax consequences. Married couples can give up to $34,000 free of gift taxes. This annual exclusion is calculated on a per donee basis and no carryover is allowed for the unused exclusion. Consider making year-end gifts to fully utilize this year’s annual exclusion. Also, please note that payments made directly to a college for tuition and payments made directly to a health care provider for medical expenses do not count toward the annual limits.

Roth IRAs

With individual tax rates at the lowest levels in recent memory, consider conversion of IRAs to Roth IRAs. The current tax cost from a conversion done now may turn out to be a small price to pay for completely avoiding potentially higher future tax rates on the account’s earnings. Also, consider making a backdoor Roth IRA contribution, if your current income level is too high to make a direct Roth IRA contribution. A backdoor Roth IRA contribution consists of making a nondeductible IRA contribution followed by a conversion of the contributed funds to a Roth IRA. The rules regarding this are very particular so please consult with your tax advisor regarding this strategy.

HSAs & FSAs

Health Savings Accounts (HSAs) and Flexible Savings Accounts (FSAs) are two separate tools, each helping convert your dollars spent on medical expenses from post-tax into pre-tax, potentially saving you over 40% of the cost. An HSA is a bank account set up to pay for medical expenses and must be paired with a high-deductible health plan. FSAs allow you to direct some of your wages into a pre-tax account, and your employer will reimburse you from the account for your documented medical expenses. Specific funding rules and limits apply to these accounts.

S Corporation & Partnership Losses

If your S Corporation generates a tax loss this year, consider whether you have enough basis in the stock (or in loans you have made to the corporation) to take the full loss. If you do not, additional investments should be considered. Similar considerations can arise in some situations with partnerships expecting tax losses.

Excess Business Loans

The Tax Cuts and Jobs Act (TCJA), passed in late 2017, introduced a limitation on business losses deductible by individuals and other non-corporate taxpayers (trusts and estates) against non-business income. Specifically, the TCJA disallowed net tax losses from active businesses in excess of $250,000 ($500,000 for joint filers), adjusted annually for inflation. For pass-through entities, this is calculated at the owner level, as tax-paying persons combine all business activities when determining overall net business income or loss. Disallowed losses are treated as net operating loss carryforwards to the following year. Under the TCJA, the excess business loss (EBL) limitation was effective for 2018 through 2025. The CARES Act retroactively postponed implementation of the EBL limitation until 2021. The EBL limitation for 2023, as adjusted for inflation, is $289,000 (or $578,000 for joint returns).

State & Local Taxes (SALT) Limitation

In 2023, the SALT limitation is $10,000 for married filing joint taxpayers that itemize deductions. SALT deductions include real estate taxes, vehicle taxes, and income taxes paid during 2023. To bypass these limits, some states have enacted a SALT workaround. Kentucky and North Carolina both implemented this workaround in the 2022 tax year. The most common workaround involves a pass-through entity paying tax at the entity level. The tax payment will be treated as a deductible expense of the pass-through entity and the partner or shareholder will receive a credit for their share of taxes paid by the entity that can be claimed on the individual tax return. Please consult your tax advisor if you have ownership in pass-through entities and believe this election may be beneficial to you.

1099s

Third party payment processers (i.e., PayPal, Cash App, and Venmo) are required to issue 1099-Ks to individuals who receive over $20,000 and have more than 200 transactions with the processor during the year. The processer may not know if the transaction is a personal transaction or a transaction for goods and services that is taxable. Please consult your tax advisor if you are unsure if income reported on a 1099-K is taxable or not.

Tax Credits

The Inflation Reduction Act of 2022 modified several credits related to energy efficiency. The energy efficient home improvement credit applies to the installation of energy efficient windows, doors, certain heating and cooling systems, and certain heat pumps. The residential clean energy credit is available for taxpayers who install qualified solar electric property, qualified solar water heating property, qualified fuel cell property, qualified small wind energy property, geothermal heat pump property and qualified battery storage technology. The Inflation Reduction Act also modified the clean vehicle credit. This credit applies to taxpayers who purchase certain electric and fuel cell vehicles. Finally, the Inflation Reduction Act added a new credit that applies to used clean vehicles purchased after December 31, 2022. Business entities may also benefit from these credits. These credits are complex so please consult with your tax advisor if you believe you may be eligible for one of these credits.

Article Dean Dorton

1. Begin the process early
Some commercial insurance credentialing processes can take up to 120 days to complete.  Start compiling all the necessary information as soon as you can to protect against potential delays and unpaid claims.

2. Attention to details matter
Because credentialing is intimately connected to cash flow, make sure all necessary information is complete and accurate.  Missing or incomplete information will delay the process.  Some of the most common errors or omissions may include:

  • Incomplete provider work history – Include current and all prior professional work history since graduating medical school. Work history must include MM/YYYY format on all start/end dates.
  • Malpractice Insurance – Include the current policy and up to 10 years policy history. It’s also recommended to include the past 10 years malpractice claim history
  • Hospital Privileges – Providers must have admitting privileges to an in-network hospital to participate with a health plan. If that doesn’t exist, then another in-network physician will need to supply in writing an admitting arrangement attesting that he/she will agree to admit any patients on provider’s behalf.  Also, a list where the covering physician has privileges will be needed.
  • Covering Colleagues – Providers are responsible for providing coverage for patients 24/7 and will need to disclose which colleagues may provide coverage during times of absence. This is particularly important for solo practitioners.
  • Attestations – Fully answer all yes/no questions on each application and provide complete details for response when necessary.

3. Stay Current With CAQH
A current CAQH profile is an important part of commercial  some state Medicaid plans.  Make certain that a provider’s CAQH profile is current with all personal details, attestations, and signed attestation page.  An incomplete profile will cause delays in the process.  CAQH must be attested for insurance plans to be able to view it.

4. Include the provider during the process
Providers are responsible for completing the credentialing process for all the payers with which your organization participates.  Although burdensome, it is critical that the provider assist throughout the process and provide all necessary credentialing data points.

5. Know Your Key Payers
Know which payers represent key revenue sources to your business so that you can prioritize credentialing processes accordingly.  You can selectively schedule patients for your new provider based on which plans have been completed until the new provider is fully credentialed with all networks and plans.

Credentialing can be burdensome, time-consuming and tedious.  Details matter.  Expertise and follow-up are critical to proper enrollment and protecting cash flow.  Contact us today to explore how Dean Dorton Healthcare Solutions can help simplify your credentialing.

Lee Ledford | Client Experience Manager
lledford@deandortonhs.com
502.916.3130

Article Dean Dorton

On January 30, 2023 the Biden Administration announced the anticipated ending of the Public Health Emergency declarations. These declarations are set to expire on May 11, 2023. Due to heavy reliance on 1135 Waivers throughout the time that the Emergency extended, the ending of the Public Health Emergency will have a large impact on Hospitals. 1135 waivers are used to waive various administrative requirements to increase access to medical services during a time of national emergency. Now that the emergency is coming to an end, healthcare entities should take steps to ensure their compliance with laws and regulations while returning to normal operations.

It will be important for hospitals to review their policies and procedures to ensure compliance with regulations and standards that will be changing and to update these policies if necessary. It is important to note that some waivers end at the conclusion of the Public Health Emergency, while others end 151 days following the conclusion of the Public Health Emergency.

Prior to May 11th, administration and leaders in each department throughout hospitals should be asked the following questions in order to ensure that they are prepared for the coming changes:

  • Is your department currently relying on any waivers that are still in effect?
  • Is your department currently relying on any waivers that have expired?
  • Has your department developed a plan and sent out communications to wind down any reliance on waivers by the expiration date?
  • Does your department understand state laws in areas that will be affected when waivers default back to state laws after expiration?

CMS and others have released guidance on the current 1135 waivers and on the end of the Public Health Emergency in order to help prepare practices. For hospitals that are highly reliant on 1135 waivers, this guidance will be key to preparing for a return to normal operations. Linked below are a few articles that will provide support in this area.

COVID-19 Emergency Declaration Blanket WaiversCoronavirus Waivers & FlexibilitiesUnwinding & Returning to Regular Operations after COVID-19

Adam Shewmaker | Healthcare Consulting Director
ashewmaker@ddafhealthcare.com
502.566.1054

Article Dean Dorton

Well, I checked again today and normal is still missing from the dictionary for most of us. Post-COVID-19 pandemic has taken its place and in the space for definition, there’s a big, bold question mark! A lot is still in flux. Nonprofit organizations continue to deal with upheaval in staffing, accessibility, and resources. Federal and state funding assistance related to the pandemic has dried up and mandatory loan repayments are upon us. Economic uncertainty and rising costs seem to be significantly spooking the small to mid-sized donor pool.

The current economic situation is creating a cash crunch for many nonprofits, with the potential of a future cash crunch to impact many more. The time to prepare is now!

Gain control of the situation and better position your organization with the following action steps:

Secure a line of credit that will cover 2-3 months of payroll & benefits

Providing service is what you do, so providing employees with stability is essential to a speedy recovery from slumps in cash receipts. If you have an established and positive banking relationship, start by contacting your relationship manager to understand that institution’s application process and associated fees. All banks and financial institutions are not created equal when it comes to lines of credit for nonprofit organizations. Some require collateral or a personal guarantee. Some will charge an annual maintenance fee or a fee for failing to use the line periodically. Therefore, research options at other financial institutions even when you have a strong local relationship and consider the relationship as just one variable in your final decision. Leverage the influence of your board. Ask board members for referrals to their financial institutions. Reach out to state and national organizations that support nonprofits, like KNN, for referrals to resources known to be generous and fair to organizations your size. Established nonprofits can generally qualify for an unsecured line of credit that is sufficient to cover 2-3 months of payroll and benefit expenses. If denied in a first pass, ask why and continue to shop around while you work on eliminating the barriers to your success.AMA – 2023 Code changes and descriptors

Monitor working cash reserves each week

Determine what the monthly average total cash out is for the organization. This doesn’t need to be precise or require a sophisticated accounting system. If your payments are issued from one primary operating checkbook, just see how much went out of the checking account for the past year and divide it by 12. Apply common sense to the result. If it seems too high, make sure there wasn’t an unusual transaction or a bank transfer/adjustment that was mistakenly captured in your numerator and rework the math. If it seems too low, perhaps you have a second bank account used for payroll or other primary expense and the same exercise needs to be applied to that account to get a final result. Once you have confidence in the monthly average spend of the organization, determining working cash reserves is a quick calculation. Begin with cash in the bank. Add any investment that you can cash out within a week (in the event of an emergency) and subtract the bills you currently owe. Divide the result by monthly spend. If the organization has less than 3 months of working cash reserves, measures should be taken to move the needle.

Vet expenses before they occur

Budgeting is an important part of long-term sustainability. A cash crunch, however, is not the time to fall back on “it’s in the budget” as justification for incurring a cost. Each commitment should be laid up against the simple outcome of short-term mission sustainability. Invest in paying the bills that keep the organization open and aligned with its core commitment to the community it serves. Nonprofits depend on public trust. Breaking that trust by failing to deliver on the mission will only jeopardize future cash flow and could create a negative cycle that can’t be remedied. Now is the time though to delay expenditures that go above and beyond the core commitment and those that are intended to create organizational growth. The investment in those expenses will result in better returns when they can be initiated from a place of cash stability. Be patient and focused in expense management until the organization is beyond its cash crunch.

Become a master of timing

Know when bills are due and what the consequences are for late payment. Avoid incurring interest and late payment penalties but also don’t be tempted to pay anything early because it’s small or there is money in the bank at the time bills are being paid. Having the cash available right now is of greater value than a minimal discount or the slight goodwill gained by early payment. Take the time to know your recurring vendors and negotiate for better terms or payment plans whenever you can. If you cannot pay all your bills by their due date, pay in full those that cannot be delayed without penalty and then negotiate a plan to pay those that remain within a reasonable period of time. Try to avoid drawing on the line of credit for accounts payable so that you have confidence in the organization’s ability to manage payroll.

Examine your cycle of cash receipts. Are there any gifts, grants or sales that you can encourage an earlier payment on with prompt or accelerated reminders, invoices or phone calls? Take that action. If you need to draw on the line of credit, repay that balance as quickly as you can to maintain its availability and mitigate finance charges.

Do the deep thinking and act

Is this cash crunch a timing issue or a systematic one? Consider revenue sources and their sufficiency to generate the cash needed to cover cover investment in the expansion of your mission beyond current payroll and operating expenses. Expanding the mission may mean service to a wider base or diversification of services currently offered. It may mean developing the infrastructure to pivot more quickly to the changing needs of your specific community. Regardless of what it means to your organization, just enough isn’t a healthy long-term vision for cash management. Review receipts and expenses for the past several years and determine if your post-pandemic receipts can realistically outpace the organization’s basic cost of operations. If not, consider promptly engaging the board in strategic planning to sustainably reframe the organization.

If timing is the issue, take action to move further away from the cash crunch cliff. Make reserves part of the budget until you’ve reached a cushion equal to 6-12 months of monthly average spend. This reserve and the line of credit should give you the bumper you need to weather typical economic cycles and cost increases while you retool your revenue model. To get there faster, consider a special sustainability campaign or solicitation, a targeted grant or partnership that will displace unrestricted resources so they can be set aside for the future. Share resources with other organizations. Expenses like staffing, fixed assets, and marketing can often be leveraged by partnering with a complimentary organization or a for profit that is looking for a sponsorship opportunity. Engage in solid, legally vetted agreements with clear oversight to keep these relationships healthy and beneficial to both parties. Finally, recognize that every new initiative has an element of overhead and draws resources (time) from core operations. Be sure that new ideas can clearly advance your mission and be funded before going too far into the process of can become planning and implementation. In the absence of feasibility and measurement, great ideas leading drain on cash and are difficult to unwind in a cash crunch.

Remain optimistic

Colin Powell said, “Perpetual optimism is a force multiplier.” Don’t underestimate the power of that math.

A cash crunch is unfortunate, but it’s a risk of doing business. As they say “cash is king!” Pay attention to your organization’s spending. Be good stewards with the resources you control. Pay attention to your organization’s key revenue streams. Be hone st with your board about your organization’s cash situation. Don’t be afraid to ask for help. By managing resources and relationships well, you will be able to successfully outsmart a cash crunch.

Kaydee Ruppert | Associate Director & Nonprofit Industry Advisor
kruppert@deandortonstg.wpenginepowered.com
859.425.7730

Article Dean Dorton

The law applies to entities doing business in California or collect personal information from California consumers and meet any one of the following criteria:

  • As of January 1, of the calendar year, the company exceeded $25 million in gross revenue in the preceding calendar year.
  • The company buys, sells, or shares the personal information of 100,000 or more consumers or households.
  • The company derives 50% or more of its annual revenue from selling or sharing consumers’ personal information.

If the criteria is met California residents have the following rights to:

  • Opt-out of sharing personal information
  • Opt-out of certain used and disclosures of sensitive personal information, examples: SSN, DL, geolocation, race, health data
  • Correct inaccurate personal information
  • Know more details of business’s information practices
  • Have options regarding automated decision-making

Increased obligations on businesses include:

  • Requirements related to data retention, data minimization, purpose limitation.
  • Requirements to pass deletion requests to service providers, contractors, and third parties the business has sold or shared information.
  • Requires additional contract provisions with service providers, contractors, and third parties.
  • Possibly increasing auditing requirements, performing annual cybersecurity audits, and providing the California Privacy Protection Agency with regular risk assessments.

The enforcement and penalty goes beyond and modifies the California Consumer Privacy Act (CCPA) in the following areas:

  • Creates and transfers rulemaking and enforcement from the California attorney general to the California Privacy Protection Agency, which is a new state agency.
  • Removes the 30-day cure period.
  • Triples penalties for violations involving minors under 16.
  • Expands the types of data breaches that are considered within scope of the data breach privacy right of action to include: breaches of a username or email address combined with a password or security question and answer that would permit access to an online account.

California may be leading in data privacy laws, but other states are moving in this direction. Other states include Colorado, Connecticut, New York, Utah, Virginia and Washington.

To meet various state data privacy requirements, we suggest doing the following:

  • Know your data – where is it, what is it, who has it.
  • Have a holistic data privacy program. Identify the highest bar (likely CPRA) and use this measure for all privacy processes.
  • Ensure a plan is in place or has been executed to meet the more stringent privacy requirements.
  • Stay well-informed of changes to laws.

Subscribe to Dean Dorton Insights to stay up-to-date with the latest regulatory changes.

Kevin W. Cornwell | IT Audit Associate Director
kcornwell@ddaftech.com
502.566.1011

Article Dean Dorton

On December 6th, CMS released the proposed rule outlining systematized prior authorization pathways for healthcare services rendered by providers and hospitals. The proposed rule outlines the goals to improve the prior authorization process and drive more transparency and efficiency to all stakeholders involved including payers, providers, vendors, and patients. Current prior authorization processes have created  burden on payers and providers and is a major source of burnout for providers, thereby possibly impacting the health inefficiencies of patients in the potential delay of care

The burden of prior authorization has been well documented in the American Medical Association (AMA) Study released in December 2021.  The study indicated not only had there not been an increase in prior authorization efficiency, it had actually become worse.1  The study outlined the operational time, human capital and lack of technology impacts that negatively effect the efficient delivery of care.1   Furthermore, physicians reported that most prior authorizations are completed via phone calls and faxes, with only 26 percent reporting that they have access to an EHR system that supports electronic prior authorization for prescription medication.2

The proposal currently outlines requirements that would be applied to payers:

  • Build and maintain a Prior Authorization Requirements, Documentation, and Decision (PARDD) API to automate the process for providers to determine whether a prior authorization is required, identify prior authorization information and documentation requirements, and facilitate the exchange of prior authorization requests and decisions from providers’ electronic health records (EHRs) or practice management systems
  • Include a specific reason when they deny a prior authorization request
  • Send prior authorization decisions within 72 hours for expedited (urgent) requests and seven calendar days for standard (non-urgent) requests
  • Publicly report certain prior authorization metrics annually by posting them on their website or through publicly accessible hyperlinks3

CMS is seeking comment related to the proposal, including alternative time frames for prior authorization decisions. Comments on the rules are to be received March 13, 2023.

Federal Register Publication

1American Medical Association (2021). AMA Prior Authorization (PA) Physician Survey Results.
2American Medical Association  (2021). AMA Measuring Progress in Improving Prior Authorization.
3AMGA Advocacy News

Eric Riley | Healthcare Consulting Director
eriley@ddafhealthcare.com
859.425.7704