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Is That Deductible?: "The Office Christmas Party"

Dec 11, 2023

The Mom’s

With the passing of my father about a month ago, my wife and I find ourselves taking care of three mothers. They all live within a 20-minute driving radius from our home. Firstly, there is my mother, who still resides in my childhood town of Bremen. Secondly, there is my late wife's(she died of breast cancer in her early 30’s) mother, who lives in Plymouth, the county seat of our community. Lastly, we have my wife Ellen's mother, who lives in Etna Green, surrounded by corn and soybean fields in the countryside. We are grateful for all three of them and make it a priority to regularly spend time with them and provide support.

Every Monday night, after work, I join my wife's mother for dinner and some games. Ellen typically spends the entire day there, helping to manage bills and various affairs of the home. With 8 siblings, Ellen's family tree has exponentially grown to include over 140 grandchildren and great-grandchildren. As a result, there are always events, special days, and family connections to keep up with.

I have been utilizing my administrative day (Friday) to organize various tasks and financial matters for my mom, who recently became a widow. This week, we focused on social security matters, collaborated with her financial planner, and started creating a budget. I must say, I am truly impressed with our country's social security system and the compassionate workers who assist older individuals in navigating it. Our guide was incredibly helpful in guiding us through the necessary steps following my dad's passing. I am also thankful that my mom is organized and had all the necessary papers ready for the process.

On a midweek day, my late wife's mother stopped by to return some dishes from the food we had given her. We spent about an hour around the dinner table, chatting and catching up on things. We also discussed the family plans for their Christmas party. This side of the family always enjoys transforming the Christmas gathering into a multi-day party held at a state park every other year, and at our guest house every other year. The sibling group and their extended families are scattered throughout the country, making it impractical to travel into town for a half-day gathering. Therefore, the idea of spending multiple days together in one location makes sense.

The Office Christmas Party

Speaking of Christmas parties, we recently had my final (sniff-sniff) clinic staff party at a local restaurant. It was a fun-filled affair with games and delicious food for staff members and their significant others. I always enjoy dressing up in a gaudy Christmas outfit and bringing laughter to the group as we connect in non-professional roles. The entire event is generously sponsored by the providers as a way of expressing gratitude to the people who make our day-to-day patient care operations efficient.

During the years when I was a traditional employee, I had to fund this event using my personal household income, which which came out of my post tax dollars. However, as a long-term independent contractor in an employment lite agreement, I can now use pre-tax dollars from my PC to cover the event expenses. This is a much more sensible arrangement. While our NP's in the clinic are categorized as "providers," they hold diverse opinions on whether they should have any financial obligation towards the Christmas party. As a result, the doctors usually cover the costs, and the NP's have the option to contribute if they wish to do so.

And that brings me to another aspect of the "office Christmas party." The reality is that our hospital medical group includes everyone, including the providers, in the party. However, they do not allow us to host the party during the day as it would impact productivity in the clinic. Instead, they expect us to have it off-site and after hours. Additionally, they offer no financial support for an event that they require every clinic to organize. It is then expected that the employed doctors themselves cover the expenses for an event that is meant for the hospital medical group's employees.

To be honest, that kind of situation grates on me as being wrong. These employees don't work for me, like in the old private practice model. Instead, they work for the medical group, and they should be the ones offering to provide a holiday "thank you". Of course, we all know the mantra "there is no room in the budget" for this, so it falls on the doctors to make it happen.This is yet another example of the tension between employers who want employees to be loyal to the corporate brand rather than the individual doctor. However, in reality, the doctor is the centerpiece and is viewed as the small business engine by the employers, patients, and staff.

Coaching

This week, I had the opportunity to coach doctors who are part of the SimpliMD coaching program. I truly enjoy assisting doctors in fully embracing their small business potential and helping them thrive holistically. Each one of you is unique, and as a result, your professional micro-corporation is also unique. The way your micro-corporation is structured, the fringe benefits it offers, the business expenses, and your compensation all depend on your individual circumstances, including your household and professional needs.

I have had several coaching conversations with prospects this week as we explore the idea of starting a professional micro-corporation and compare it to working as a sole proprietor. What I find most interesting is that many of them receive conflicting advice from their current CPAs on this subject, and the CPAs are often reluctant to admit that a professional micro-corporation would be the best option. Typically, the reason why a tax professional chooses not to recommend the micro-corporation option over the sole proprietor selection for the doctor is because it would be difficult for them to admit they were wrong in the first place. Instead, they opt for the "safe mode" and advise the doctor not to make any changes, which puts the doctor in a challenging position. They are now faced with the task of considering business structure changes from sole proprietorship to micro-corporation, and potentially even changing CPAs. Breaking these bonds can be difficult, as with any relationship, and it often becomes easier to avoid this tension by not making any changes.

The fundamental tension lies in the question of whether tax professionals should simply file taxes annually and recommend a safe and simple pass-through structure like sole proprietorship for most small business owners, or if they should proactively work as tax planners, taking a more sophisticated approach to a high-income profession like doctors, breaking down their income into a personalized structure that includes fringe benefits and business expenses, ultimately maximizing tax efficiency beyond what a sole proprietorship can offer. As a high-income earner who pays more taxes than nearly 99% of individuals in this country, I can attest that what is needed is sophistication, not simplicity.

You need tax planning, not just tax filing. At SimpliMD, we can assist you in establishing your professional micro-corporation specifically for this purpose. We will connect you with CPAs who have a deep understanding of doctors as micro-corporations. Don't let the fear of change keep you from making the switch to a micro-corporation structure that can save you thousands of dollars throughout your career. Not only will it provide financial benefits, but it will also give you a sense of professional autonomy and control over your micro-business, ultimately enhancing your overall well-being.

The Man-Cave/Garage

More than a month ago, both my personal home's garage and my guest house were heavily damaged by a fire caused by a neighbor. Since then, I have been navigating the process of working with two different insurance groups - one for my personal property and another for the LLC-owned guest house. It has taken some time to get the adjusters to complete their work so that I can finally begin repairs on the structures. Additionally, I am still in the process of compiling an exhaustive list for the personal property claim, which is being handled by a different adjuster than the one responsible for the structure.

Anyway, I am grateful that my business enterprise portfolio includes multiple real estate businesses. As a result, I have established connections with a network of reliable contractors within our community.

My wife and I collaborated on redesigning and re imagining my garage/man-cave space. We put our ideas down on paper and reached out to our favorite contractor, who has successfully completed numerous customized room remodels in our historic house, originally built around 1870. He is familiar with all the quirks and unique wiring challenges resulting from multiple remodels and additions over the past century and a half within "this old house". Surprisingly, he was available to start right away, as we have a long-standing agreement based on a "time and material" approach to his work here. This approach works best because working on a customized project in an old house requires creativity and adaptability. This contractor is a throwback, as he mostly works alone but is capable of handling everything from plumbing and electrical work to construction and painting. I will focus on settling the insurance claim and then allocate that money towards redoing the garage.

I have another pair of contractors who have previously completed all of our work. They will be coming this week to work on the siding and roofing repairs. I feel confident and reassured knowing that we have trusted contractors handling the job.

In the end, I am grateful for the network of trusted business relationships I have built with people I have worked with over the years. Speaking of that, when I visited my local carpet business to purchase some remnant carpet for my garage/man-cave, I was pleasantly surprised when the owner generously gave it to me. This act of kindness was a result of the longstanding professional and personal projects I have entrusted to him. It was truly a blessing to receive the high-quality commercial grade carpet I needed, free of charge.