Cheating on CMEs: or, How to get Terminated

[lowbudget]

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Have you ever sold anything without declaring the profits? How about forgotten to declare any gifts you have received? Did you know that any time you buy a book online where you don't pay tax for it you have to declare it to your state so that you do pay the tax?.

I do my math. Which means, you have to understand the formula. Which obviously, these residents didn't. If it's small/negligible, I don't bother. If it's large, yes. The definition of "small" & "large" is a matter of opinion. For some people, avoiding $1 million in taxes is "small".

I don't declare gifts unless it's from dead people. I don't declare state sales taxes on books bought online because in my state I don't pay state income taxes.

I would hire the best lawyer I could get and sue the **** out of the program. I would also contact the local politicians/press and let them know what's going on. How do you think the public is going to feel about firing these potential doctors who in turn not only will not pay a lot of taxes to the city/state because of their high future income, but will also declare bankruptcy and cost the taxpayers several millions dollars all because of program malignancy.

I'd love to see this happen just to watch a circus. The public has a huge appetite and incredibly very little tolerance for doctors who screw up. As Americans we love watching successful people screw up. It makes great stories/TV. Nobody cares about the societal cost of losing a future doctor. The public doesn't care about protecting whom they consider the "privileged".

There are thousands of students across the US who sell their textbooks online every quarter. How many do you think report their so called income??.

Bad example. Students (college/medical) don't make any substantial income worth taxing the additional income. As residents, you do.

Now think about this: if you think that the residents should have paid tax on that income of $500, then it does not matter for what purpose they used the $500. The income tax would have to be paid anyway, if in fact it was income. This is up to the residency program to classify it as income or non-income. If it is income, then the 500 is going to be reported to the government and the tax automatically deducted. If it is not an income, then there is no tax issue at all..

Agreed. The problem in this case was that the program didn't know residents were taking $500 in cash home as post-tax income.

On the program's books, CME is considered an employee benefit and therefore is treated like a business expense. If the program wanted to give the residents the cash, they would report it on the resident's W-2 and withhold taxes.

The residents bought books, submitted receipts (I'm assuming) for reimbursement, then returned it, and pocketed the cash. This transaction leaves the program out of the loop and therefore never triggered the right reporting.

On the program's books, they've booked it as a business expense. If the residents are going to take the money, the program MUST book it as wages and pay the appropriate taxes.

If IRS got a hold of this irregularity, they don't care if the residents "didn't mean to do harm". No one cares. It triggers an audit. And the residency risks losing their tax exemption as a not-for-profit if the IRS decides that the program was being fraudelent (which it wasn't). IRS can do whatever they want. They giveth... and taketh.

And for you record, $500 is nothing in terms of taxes. The smart businessmen out there automatically claim a $500 charity deduction every single year even though their donation ranges more like from $0 to $50 at most. Tricks like these are the reason that millionaires pay a lower income tax than the middle class. Ironically the tax % is sometime even lower than for the citizens bordering on poverty.

Again, bad example. By not reporting taking the cash, they reduced their adjusted gross income by $500. Because this is additional income, we apply their marginal tax rate (at resident's salary, it's ~32%). So they underpaid taxes by $160. (You can imagine if all 30 residents did this, the program under reported by $4800...)

The tax benefits from charitable donations caps out. And most residents don't have enough stuff for them to do itemized deductions anyways, so they mostly take the standard deduction. When you take the standard deduction, charitable donations don't make any tax impact.

So by returning the books, they got a guaranteed $160 tax benefit. Had they tried to reduce their taxable income by donating cash, they would have to... uh, donate money (cash out of pocket)... AND they may not even get a tax benefit because they're going to take the standard deduction anyways!

If any of this confuses you, you should do your own taxes by paper and pencil on your own during residency so that you understand the math. It then becomes very clear when you start playing with the math. Once you understand how it all works, it'll make you smarter in terms of what you can get away with... and what you can't.

 

[Taurus]

It's not always this bad. Residents who are fired from one program can find positions in other programs. It really depends on what happened. Honestly, I'm surprised that the residents on this thread were terminated for this event, unless this is a pattern of behavior. If not, some other program will likely be willing to take them and finish their training. It will be hard work to find one, but I'm sure there's a program out there. This is better than failing out of a program due to lack of clinical skills.

If you're in IM or FP, you can probably find another IM or FP program that will allow you to finish out your residency, after much hard work.

However, if you're in anything competitive like derm, rads, ENT, etc, I highly doubt that you will be able to resume your field. You'll be lucky to get a spot in IM or FP.

That's what I find incredibly unfair about this process. It's a crock if you ask me.