Dental Practice Purchase Checklist

Here is a helpful checklist of the things that a dentist needs to consider when buying a dental practice. For more information, see our new website: www.dentalpracticepurchase.com

Dental Supply Companies and Labs Raising Their Rates Due to Medical Device Excise Tax - How to Question those Increases

We have heard from our clients and others in the dental community that supply and lab companies are raising their rates at least 2.3% across the board due to the new medical device excise tax. This across the board raise may be nothing more than a move to use this new tax as an excuse to pad their profits. We are suggesting that dentists who receive such a notice to challenge these companies and ask them to furnish the FDA list of those products that are subject to this excise tax to verify their claim that they are subject to the tax.

For more information, please contact info@dentalcpas.com

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Preliminary Thoughts on 2.3% Medical Device Excise Tax

We're starting to see much of the same confusion from dentists concerning their read of the final regulations on the 2.3% medical device tax as they had from the proposed regulations.

First and foremost, we have not read the final regulations yet, however, we have seen a few editorials summarizing the regulations and quite frankly it doesn't sound like there is much difference as it relates to dental practices. However, after we do read them, we'll post back if there are any substantial differences we find. So the following comment is based solely on our reading of the proposed regulations along with other editorials written by well-versed professionals and their interpretation of the final regulations.

Here is the position we've taken with ALL of our clients as we go through our year end planning meetings (which is why I have very little time to read the final regulations at this time):

Generally, the dental practice itself will NOT need to directly deal with the medical device tax. Even the milled Cerec crowns may not need the dental practices to track and pay the excise tax for manufacturing the crown, we'll reserve final comment until we read the final regulations ourselves. However, ALL dental practices will be impacted by this new tax as their upstream vendors, supplies, producers and manufactures will have to pay the tax and as already noted, they will certainly pass the cost onto the dental practices.

In my opinion, the cost associated with this new tax should only warrant an increase in practice fees similar to what they have done in prior years and were planning to do in 2013.

For example, if an item that they sell to the practice for $100 is subject to the tax, they will have to pay $2.30 on that item. So they may sell you that item for $103 to cover their additional costs. Consider this when deciding how much to raise your fees:

Suppose a practice does $1,000,000 in revenue with $600,000 in total OH leaving you with $400,000 in profit. Of that $600,000 OH, $150,000 is lab and supplies. Let’s pretend every bit of it is deemed a medical device. If your upstream vendors increase their prices by 3% to cover the additional cost, your lab and supply cost will now be $154,500.

So now your total OH is $604,500 or 60.45%. This means you will now have profit of only $395,500. How much would you have to raise your fees to cover that cost? Well, your revenue will now need to be $1,004,500 to get BACK to $400,000 in profits. 

So my math says that's a fee increase of .45%

You should still consult with your CPA as well. 

Happy year-end tax planning!

For more information, please contact info@dentalcpas.com

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Protect The Goodwill It’s Taken Years to Build — Before, During and After the Sale of Your Dental Practice

This is a guest post from Dr. Phil LoGrippo of ADS Florida.

The most valuable component of the price of a dental practice is the portion allocated to “goodwill.” Goodwill represents the intangible assets of a business—the difference between an established, successful business and one that has yet to achieve success. In an established dental practice, goodwill consists largely of the name, reputation and skill of the dentist and team, which have led to a strong, loyal patient base and consistent inflow of new patients. For the buyer, goodwill greatly increases the likelihood of continued cash flow from retention of that patient base and from new patients.

For you, the seller, preservation of the goodwill of your practice is paramount to a successful transition. A young dentist who purchased an established practice in Southwest Florida recently said, “The goodwill of the seller in my transition was priceless. His vote of confidence to our patients has increased retention and allowed me to succeed on a level I never would have been able to do otherwise.”

Keep on Building Goodwill

In order to assure that you retain goodwill not only prior to selling but also through the critical transition time during and after the sale, you should maintain your reputation and good name within the practice and community at all times. Through the transition process and even afterward, remain involved in study clubs, the local dental association, community organizations and volunteer groups such as Rotary. This not only will help ensure that you receive proper compensation for your years of practice building, but also that your buyer receives full value. Even after you retire, positive support and praise for the new dentist (such as in social settings) will go a long way toward continued retention of  patients in the new practice.

Choose the Right Broker

Working with an experienced and ethical transition broker is also invaluable in preserving goodwill and value. The right broker will perform a legitimate appraisal and value the practice in a manner that reflects the true anticipated cash flow following the sale, rather than telling you what you may want to hear and subsequently luring a buyer into a bad deal that destroys goodwill. The right broker will also work to find a buyer who is an appropriate fit for the practice, one whose abilities, ethics and practice style match your own, preserving your reputation and the reputation of the practice. Additionally, the right broker will guide the entire process, working with lenders, accountants, and counsel who are knowledgeable in dental transitions. The right broker will also work toward the ultimate goal of having a satisfied seller and buyer, preventing negative interactions that can sometimes occur when working with an inexperienced or self-serving advisor.

For more information, please contact info@dentalcpas.com

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Dentist has Questions about S-Corp Meeting Minutes

I am the only member of an S Corp. I need help with regards annual corporate meeting and keeping of minutes. 

What do you do in an annual corporate meeting when you are the only member? 

What makes up the agenda/minutes of these meetings?

Does an attorney need be present?

I have read that the annual CPA meetings could count as the corporate meeting, any one with a different view?

Thanks

I've often said that the minutes we prepare for our client meetings have sufficed under IRS audit and should suffice as "corporate" minutes. That said, this is for IRS purposes when they audit and want to make sure the taxpayer is treating their corporation as they should.

I can't speak for any other legal purpose like a lawsuit; however, we have had clients with legal actions, domestic, partnership issues, etc., and when "minutes" have been requested these have been provided and it's never been a problem, meaning, there's never been a response to say these aren't proper minutes or not in proper form.

The minutes we prepare are on our letter head, have clients name (LL, PCL, PLLC, PA, PC, Inc., etc) location, date, time, and attendees. Then we either attach or note agenda and what was discussed, decided, tasks assigned, etc.

Some of the items we have on every agenda: year-to-date results, projections, year-to-year comparisons, other corporation matters, individual tax projections and other practice-business issues. Of course with each client there can be other issues added to the agenda based upon their specific needs.

Again, if asked to produce for an IRS audit these have sufficed. It’s the same with other legal issues I mentioned above. Check with your attorney and\or CPA to make sure they are comfortable with this.

The purpose of doing minutes is to act like you're a corporation since you created one and reporting taxes as one.

For example, if a taxpayer has reported their income as an S-Corporation for 10 years and saved payroll taxes on S-Corporation dividends of say $50k over those 10 years and they were audited and found to NOT be in compliance, i.e., acting like a sole proprietor, then the IRS could take the position that they really weren't an S-Corporation and assess the $50k in taxes plus penalties and interest.

The bottom line is, if you're going to create and report your taxes as a corporation, make sure you do the things a corporation is supposed to do.

This first appeared on Dentaltown.

For more information, please contact info@dentalcpas.com

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The Top Ten Mistakes Dentists Make Filing Their Taxes

Lance Jacob of the Dental CPAs has compiled a list of the top ten most common tax filing mistakes that he sees his dental clients making. If you don't have a dental CPA, contact Lance.    

 

1.      Filling out tax forms with an incorrect Social Security number. The IRS computers will automatically reject your deductions and credits if your Social Security number is wrong.[i] This mistake seems careless and trivial, but it is paramount to have the right Social Security number when filing your taxes.  Your social security number is your tax ID number, which is linked to numerous transactions such as income statements, savings account interest, and retirement plan contributions. It is also vital to claiming tax credits.   

2.      Double dipping on dependents for divorced taxpayers. Ill repercussions could result such as additional taxes, penalties, and interest charged.[ii]  A child can ultimately meet the rules to be a qualifying child of only one person.[iii] Once divorced, your children do not duplicate out of thin air; therefore they cannot be claimed twice in taxes.  The IRS does not allow both divorced taxpayers to claim a child as a dependent. 

3.      Not reporting non-deductible IRA contributions.  Any contribution to an IRA, whether it is deductible or non-deductible, should be reported on Form 8606, so when you withdraw it you are not taxed on it.  Plain and simple, all contributions to an IRA must be reported.

4.      Incorrectly reported estimated tax payments.  If your accountant instructed you to make quarterly estimated tax payments, be sure to let him or her know the details of the payment for each installment.  Provide the check numbers, dates of payment, and the amount of each payment.  What often happens is people claim they made the payments as their accountant told them, but did not keep any records and inadvertently forgot a payment or two.  If the accountant includes all of the estimated payments on the return when they all were not really made, the IRS or state government will send a notice of tax due with penalties and interest.

5.      Incorrect Federal ID number used on 1099 MISC.  Although your accountant can easily fix this, the less the IRS has to contact you, the better it is. The IRS matches 1099MISC and the Social Security number or Federal Identification number used. If you provide services, and the client you did the work for issues a 1099MISC, be sure they know to use the federal identification number of your business and not your social security number.  If they use the wrong number the IRS will send you a notice that you did not report income on your personal return, when in fact it was reported correctly on your business return.

6.      Exceeding the mortgage interest deduction limit on Mortgage and home equity debt in excess of $1.1million.  This error commonly falls as the fault of both the taxpayer and accountant.  They only deduct the amount reported of the mortgage interest statement, Form 1098, and do not bother to check the amount of mortgage the taxpayer has.  The tax laws limit the amount of deductible interest to the interest on the first $1,000,000 of home mortgage debt and $100,000 of home equity debt[iv].  So if you have a mortgage of $2 million, you can only deduct mortgage interest related to the first $1.1 million in total debt.   

7.      Standard mileage vs. actual expenses.  Mistakes in this area come from inconsistent use of methods.  If your car is for business purposes only, then the entire cost of its operation can be deducted.  However, if the car is used for both business and personal use, only the cost of its business use can be deducted. The amount of your deductible car expense can be found using either the standard mileage rate method or the actual expense method. [v]  Some people will qualify for both methods but you must choose only one method when you start using the vehicle and continue with that method until you replace the vehicle.  Be sure to figure your deduction with both methods initially to see which gives you the larger of the deductions.

8.      First-Time Homebuyer Credit recipients unaware of the fine print.  Those who received a First-Time Homebuyers’ Credit towards their purchase of a home settled on prior to 12/31/08 must begin repaying that money on 2010 tax returns. Now is the time to take a good hard look at the details of this credit. Many who accepted the $7,500 credit may not realize that it was in fact a loan, and the government will begin not-so-politely asking for the money back over the course of the next 15 years starting with 2010 individual tax returns. As with any federal money however, there is a lot of fine print to read into on this one.[vi]

9.      Forgetting to tell your tax preparer you took an early distribution on an IRA; therefore, failing to calculate the early distribution penalty of 10%.  If you are under the age of 59.5, a distribution on an IRA (including employer matching and profit sharing) is considered early, and subject to a 10% additional tax.  This tax is in addition of other taxes that apply to the distribution.[vii]

10.  Forgetting your signature on your return! If you were an artist, you wouldn’t forget to sign your masterpiece upon its completion, would you? You must sign your taxes for the IRS to process your taxes.  Filing your taxes electronically is a foolproof way to ensure your taxes will not go unsigned.  These software packages do not allow documents to be sent unless every step is completed. 

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[i] http://www.walletpop.com/taxes/most-common-taxpayer-mistakes/

[ii] http://taxes.about.com/od/dependents/a/Dependents.htm

[iii] http://www.irs.gov/individuals/article/0,,id=218767,00.html

[iv] http://www.irs.gov/publications/p936/ar02.html

[v] http://www.irs.gov/taxtopics/tc510.html

[vi] http://money.cnn.com/2009/09/24/pf/expert/home_buyer_credit.moneymag/index.htm

[vii] http://www.irs.gov/faqs/faq/0,,id=199762,00.html

You can contact Lance Jacob with additional questions or comments at ljacob@dentalcpas.com or (800) 772-1065. www.dentalcpas.com

For more information, please contact info@dentalcpas.com

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Dentist Has Questions about an Audit

I'm trying to limit the amount of paperwork and receipts stashed on my attic.

So I am wondering - what happens during an audit?

Say, a typical dental office gets audited.

I don't know, what's an average now, $750K - 1M Gross, 55-65% overhead.

An audit letter comes.

What do they want?

Is there going to be an auditor coming in, or is by mail?

Do they want to look at specific categories, like meals, cars, entertainment, or is across the board?

If your supplies, labs, etc, are at reasonable percentages, do they want to examine those?

If they want to look inside your supplies or labs category, is a charge on credit card statement enough, or do they want actual invoices?

Like, if it says "Schein" or "Staples" or "Joe's Dental Lab", is that enough to convince the auditor it's a legit expense, or do they sift through the Staples or Schein invoices to make sure there weren't extra #2 pencils ordered for the home use?

I guess what I am asking, is it enough to keep only credit card and bank statements for typical purchases, or should we keep every invoice and statement?

It depends....I’ll knock on some wood before I share this....done knocking:

I’ve had 5 clients audited in the last 12-24 months, all on schedule C's. 3 were no changes and one of the 3 was a really aggressive taxpayer though their documentation was EXCELLENT. When I say aggressive I mean some business % of 4-5 cars, most expensive cars, one a Rolls Royce, not to mention a boat, several homes, etc... Again, the DOCUMENTATION was excellent... no change.

I just received a no change, letter on one where the agent had been out FOUR times and hadn't made it past revenue yet, they were scheduled to come out last week for a 5th & 6th day. I wrote a letter to the agent two weeks prior with tome supporting evidence documenting certain revenue they couldn't trace from the previous 4 visits (that's FOUR FULL DAYS) and my letter basically said look, you've been out 4 times and haven't gotten past revenue yet, each time I've had the expense category receipts ready for your review that you've asked for and you still haven't seen them. It's getting to the point of harassment and you're simply running up the taxpayer’s professional fees. I suggest you close the case with a no change letter as every other audit I've had with two agents have been out at most, TWICE. So talk to your supervisor and let me know. The day before he was scheduled to come out again he called me at 5:30 in the evening. He was surprised to find me at work answering the phone. He told me they were sending me a no change letter.

DOCUMENTATION is the key. If you keep good records and good documentation you'll be fine.

The main thing to remember is have your CPA handle the audit, don’t agree to go to the IRS office to meet with the agent no matter how friendly the request seems (I had a client learn this the hard way). As soon as you are contacted by the IRS (or any taxing agency) let them know your CPA will be handling all future correspondence, requests for information, and meetings. The CPA should schedule the audit to be done by mail or at the CPAs office. If you do have to answer questions for the agent, answer only the question asked.

I need a new car, and I need a deduction to limit my tax liability in 2012.  My advisor suggested the section 179 auto deduction to accomplish both.  I have a fairly long commute and am wondering how to make my commute a business use of the vehicle.  If I have a bank right by my house and make my nightly deposits there, will that fly with the IRS (even though there is a bank close to my office).  

My wife is on the payroll and pays the bills and orders supplies at home.  2 of my children are also on payroll and do some of their jobs at home (shredding documents, stuffing take home bags, etc…) I am still leery of the whole home office thing.

Any thoughts? 

Keep in mind the amount you can write off for a vehicle under 6,000 pounds is not going to change your tax liability all that much since depreciation on those vehicles is limited. If the vehicle is 6,000 lbs. or more (gross vehicle weight some SUVs) then you may be able to maximize your tax deduction (Section 179). The key to taking the deduction is to keep good documentation (on business usage). Above all don’t buy a car (or any asset) just for the tax deduction.

These are individualized issues and decisions. If your CPA suggested buying a car for tax reasons then you should be asking them how you go about getting the most out of that vehicle (or vehicles) and running your ideas by them. If they suggested the vehicle as a way to get business deductions they must also have some thoughts on how your vehicle(s) are used for business.

Why couldn't I just purchase the vehicle and get the loan in the business name?  That way, the car is an asset of the business and I only get to use it as the officer of the business.  I wouldn't see this as any different than someone driving a "company car".  

I bought both mine and my wife's vehicles in the business name.... we don't own the cars, the Corp owns them.  This allows auto insurance, gas, maintenance, etc. to all be deducted as well.

Any reason not to do this?

 Many times owners might want to pass their old corp car to a family member then you’re dealing with getting it out of the corp and here in Maryland, it'll cost you sales tax to do so. I've also been told auto insurance on a corp owned vehicle is more expensive than on a personal vehicle.

This first appeared on Dentaltown.

For more information, please contact info@dentalcpas.com

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How Does an Associate Dentist Deduct CE Course Cost?

I am a W-2 employee looking to do some CE courses which will likely run an excess of 2000 dollars this year.  I had read in a previous post that there is a ceiling of some sort to the deduction as an employee which is 2% of AGI.

So if I want to take a few of these CE courses which my employer will not pay for.  How should I go about documentation/setting things up to write off if possible?  One of the courses would require being out of state for a few days, an airplane trip and of course the course itself.  I know being an IC in this case would be best but what can one do otherwise?

Thank you.

When you say your employer won't pay for it, do you mean they won't pay for it in addition to your wages? If that's the case, will they pay for it and reduce your wages by the amount they pay? If they do that it's a win/win for both of you as they'll save payroll taxes as well. If they won't do that, then:

Total all of your unreimbursed employee business expenses including the cost of this CE and you may be able to deduct the amount that exceeds 2% of your AGI - IF you are able to itemize deductions on your tax return.

All related expenses in taking the course will likely be deductible such as travel, meals, taxis, tips, lodging, etc.

Try to get your employer to pay it though in lieu of wages, that's your best bet.

How do you document costs for taxi, meals, tips etc.  Newbie here - Just hold on the direct receipts I guess?  What if you drive yourself to another state - save the gas receipt?

Receipts are always best and simply log the miles. If you can't get a receipt for a cash expense, note it on a sheet of paper where you're summarizing the trip and its purpose and it should suffice under audit as long as it's a reasonable amount.

This first appeared on Dentaltown.

For more information, please contact info@dentalcpas.com

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Preparing your Dental Practice Promotion for the First Quarter of 2013

Here is a guest blog from our friends at New Patients Incorporated (NPI).

Hit 'em hard in January (and February, and March)! Whether it's the internet, mail, print, radio, TV, or almost any other media choice, best case scenario is to get your impressions on the street between the end of the first week of January to the third week in January. Stay consistent from that point forward, each month, well into next year. There are several reasons why this makes statistical sense. Historical data  tells us so. The first reason is pent up demand from consumers NOT making choices on a new dental practice from November 15th through New Year's Day. That is just pure math. Add to that the social pressure of wanting to improve something about yourself at the turn of every new year. For some people it is about losing weight. For some people it might be a new wardrobe. For some people it might mean working less and taking more time for themselves. And yes, a certain number of people are going to finally give their smile the attention it deserves. We don't know how many people feel that way, we just know the number is greater than zero. This coming year, you also have to add on the end of the consumer election malaise that hits all markets. Yes, consumer spending slows in the quarter leading up to a presidential election. It's been happening for decades. This last election was no exception. In January, the election drama will fade in consumers' minds and more people will get back to paying attention to what has always mattered most - themselves! 

Another reason 2013 looks very much like a rebound year, is the pent up demand from the last four years! Sure the recession has hit dentistry. Of course it did. But what happens to neglected teeth after four years? Sooner or later, people that put dentistry off, are going to need a bunch of dentistry! For all of these reasons, January, February, and March 2013 are stacking up to be pretty good bets! So is the rest of 2013.

If you are trying a new medium in 2013 - start it in January

Some of you don't need to expand into alternate media to generate more new patient flow. You are at or exceeding your capacity now and your promotions are working well. But, for those of you who are expanding your promotion in 2013 - don't wait to pull the trigger! Deploy starting in January! For all of the reasons stated above, start with a new promotion project in the first quarter of 2013. 

You (statistically) will have the best chance of that new media paying off during this time frame. Using a new promotion medium can be scary. It can be scary because you don't know if it is going to work or not. Start it and track it when it has the best chance of being successful. We have seen many promotions lag in response during the first two to three months, only to build momentum further down the road and become wonderfully consistent producers of new patients.  

The 1st quarter of 2013 is going to be a great time to test a new promotion medium in your marketplace.

If you haven't already - commit to using tracking numbers in 2013

If you open and actually read these newsletters, you might be getting a bit tired of us talking about the use of remote call forwarding telephone numbers embedded into your promotions. If you are a client and already use them, well, you already know how beneficial they are.

For those of you not familiar with call tracking numbers, now is definitely the time to attach them to your 2013 external promotions. Use them on any promotion that consumes more than 10% of your annual budget.

Your promotion generates the call, your team interacts with a potential new patient, and the caller either becomes a new patient - or not. As the CEO of your dental practice, the remote call forwarding website (where all of your calls are recorded and reported) becomes a CEO Control Center. We have been working with dentists for 25 years now. We know how demanding being a dentist is or can be at times. 

We know you just want to go home and forget about the office for a while. We know you don't want to sift through piles and piles of reports to figure out how your promotions are doing. We also know the last thing you want is more stress. Stress is caused by uncertainty. Uncertainty stinks!

But that's the beauty of remote call forwarding/tracking - it easily removes uncertainty! Go home after a long day at the practice. After you relax and unwind a bit, go ahead and log into your online call tracking account. See how many calls came from each of your promotions. Listen to a few phone call interactions between potential new patients and your staff. Look at how many potential new patients called during hours with no human phone coverage. Just simply being aware of what is going on with all of your promotion and the interaction between prospective new patient and your team give you (the CEO) complete control. Awareness destroys uncertainty. Awareness allows you to make properly informed decisions. Being aware reduces stress. Marketing isn't supposed to be stressful. It is supposed to be fun!

Happy Holidays to you and yours!

From all of us here at New Patients, Inc. we want to wish everyone, a healthy, happy, and warm holiday season.

If any of you need us between now and 2013, just call 866.336.8237. We will be here for you.

As always, if we (NPI) don't handle your promotion for you, you can learn the most effective ways in our latest book. We also have 7 hours of online CE for you to learn from. Of course, if you'd like us to build you a marketing plan for your practice, at no cost or obligation to you, we can do that as well. Just click this link and share information about your dental practice. You will get your marketing plan emailed to you in 4 to 5 work days.

Got questions? Want to learn more?  

You can reach Mark & Howie at:

Howie: whh@newpatientsinc.com

Mark: markd@newpatientsinc.com

  

For more information, please contact info@dentalcpas.com

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What Should Dentist Pay Periodontist?

I am planning on bringing a periodontist.  I am going to pay him a percentage of production, but he asked me about a per diem on the days that he is only doing follow-ups and new exams.  What is the going rate for a specialist coming into a GP office?

Thanks.

1. I would think follow-ups would be covered under the procedure fee, so no additional compensation for that in my opinion unless there's a procedure code you can charge.

2. Isn't there a charge for new exams? If so, that'll get included in the monthly production and you should be basing your calculations on no more frequently than monthly.

Good luck

This first appeared on Dentaltown.

For more information, please contact info@dentalcpas.com

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Grow Your Dental Practice in the Upcoming Year with a Business Plan

Below is a guest post from our friends at ETS Dental, be sure to contact them for all of your dental recruiting needs. 

The theme of my articles around this time of year always revolves around planning and goal setting.  Like it or not, we are just 60 days away from the end of 2012.  It’s in the books, and that’s all she wrote…

Practice owners: If you don’t set time aside to write out your business plan or set your personal goals by November 15 it’s probably not going to happen this year.  Thanksgiving is just a few weeks away, followed by Christmas, Hanukkah, and New Years.

Associates and practice owners: Set your personal goals for 2013 by November 15. Whether it is improving your clinical skills, planning for retirement or your kid’s college, or getting back in shape, the time to set your 2013 goals is NOW!

Hundreds, possibly thousands, of articles, books, and blogs have been written about the importance or writing a business plan and setting personal goals.  I’d like to share a few of my favorites:

Eleven reasons to write a business plan:

1. Achieve your long-term goals by developing a road map that details specific short-term goals and milestones.

2. Prove to associates, employees, family members, and bankers that you’re serious about growing your practice.  It allows them to see where they fit.

3. Share your strategy, your priorities, and your plan of action with those who will hold you accountable, such as associates, employees, your spouse, and business advisors.

4. Determine when you will have to say “no.”  There is no shortage of good ideas.  Each year it’s better to pick a few and execute them well, rather than saying yes to everything and not giving any of the ideas the effort they deserve.

5. Understand your patients, your competition, and your opportunities better in order to grow.  Writing a business plan forces you to do research on your market and the needs of your patients.

6. Make your practice more attractive to potential buyers-- five, ten, or twenty years from now.

7. Making a plan gives you a reason to stop doing things in your practice that don’t make sense anymore (or never made sense in the first place).

8. A plan determines your financial needs.

9. It allows you to assess new revenue opportunities as well as rejuvenate old ones.

10. It also gives you a chance to make mistakes on paper, or to prevent you from repeating those mistakes that you’ve already made.

11. Establishing daily and weekly goals simply makes it more fun and rewarding to come to work in the morning.

If you have never written a business plan before, you will find the following article helpful:

8 Simple Steps to Preparing a Business Plan for 2012

Twelve reasons to write down your personal goals.  (Today!)

1. Writing transforms your goals from thoughts to tangible objectives.  Once goals are written, they are easy to remember, track, and accomplish.

2. Great minds have purposes, others have wishes. (Washington Irving)

3. First you write down your goal; your second job is to break down your goal into a series of steps, beginning with steps which are absurdly easy. (Fitzhugh Dodson)

4. One worthwhile task carried to a successful conclusion is better than half-a hundred half-finished tasks. (B.C. Forbes)

5. All you have to do is know where you’re going. The answers will come to you of their own accord. (Earl Nightingale)

6. A goal is a dream with a deadline. (Napoleon Hill)

7. Goals allow you to control the direction of change in your favor. (Brian Tracy)

8. You cannot expect to achieve new goals or move beyond your present circumstances unless you change. (Les Brown)

9. A man without a goal is like a ship without a rudder. (Thomas Carlyle)

10. The path of least resistance is the path of a loser. (Phil Weltman)

11. Give me a stock clerk with a goal and I’ll give you a man who will make history. Give me a man with no goals and I’ll give you a stock clerk. (J.C. Penney)

12. You must have long term goals to keep you from being frustrated by short term failures. (Charles C. Noble). 

Written by Mark Kennedy, Owner/Managing Director of Executive Talent Search (ETS Dental, ETS Vision, ETS Tech-Ops). To find out more, call ETS Dental at (540) 563-1688, visit us online at www.etsdental.com or email Mark.

For more information, please contact info@dentalcpas.com

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When Should Dentist Begin Paying Rent?

Hypothetical situation....well not really.

Say you and your partner are expanding your office.  Say your partner owns the building.  Say you are splitting the cost of the furnishing and equipping of said office.

How would you split the cost of construction? 

It depends on the nature of the construction. The portion of the construction that the landlord might generally incur will be paid 100% by the landlord, improvements generally done by the tenant is paid 100% by the practice.

Or, determine a reasonable landlord TI allowance for the area, say $50/square foot and that's the cost the landlord covers.

Or, a combination of both if the "construction” includes things like cabinetry, etc.

How would you/wouldn't you have this influence the new rent? (obviously it will increase, but would you tie this to construction cost?)

It seems to me you've already established a fair rental rate when you bought into the practice, so I wouldn't expect it to deviate much from the current “per square foot” rent you're already paying. If you select a TI allowance which the landlord pays I don't think it impacts the construction cost. If the landlord is funding 100% of all improvements above an allowance, they'll generally include the tenant financing on top of the base rent so you, the tenant winds up paying for it anyway.

 When should rent increase?  When construction starts?  When you occupy the space fully?

When the space is done and the tenant occupies it. Don't forget that sometimes the landlord will offer free rent for several months as an incentive for the tenant signing a long-term lease. The tenant may also be able to negotiate a lower rent “per square foot” for more space. Has the rental market decreased in your area since you bought in?

Give me some advice.  I'm sure I will have more questions as we discuss.

Thanks!

If you can, see if you can find a commercial real estate rental agent who you can consult with either together with your practice partner or individually to represent you more or less. George Vaill may also be able to assist you in what might be "fair" (I know he hates that word) based on all the lease negotiations he's been involved with.

Good luck.

This first appeared on Dentaltown.

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Should a Dentist Take Section 179 - First Year Expensing Election in 2012?

I hate to sound like an equipment sales rep, for that I apologize, however, this question keeps coming up about a couple of tax breaks that are set to expire at the end of 2012.

Through the end of 2012, a business can elect to expense this year up to $139,000 of most furniture and equipment that is purchased AND placed in service in 2012. If your purchases exceed that, you can also take an additional bonus depreciation of 50% of the cost, again, if purchased AND placed in service in 2012. 

Now, JUST because it is available does NOT mean it makes sense to take these deductions in 2012. You really need to consider your 2012 income tax brackets compared to the brackets you expect to be in for 2013 (and beyond) in addition to the additional taxes you might be subject to (like the new 3.8% tax in future years.)

For example, taking a $100,000 deduction (or expense) this year in a blended 15%\25% income tax bracket could save you $20,000 in federal income taxes. However, if you expect to be in the 35%+ income tax bracket in 2013 and beyond, that $100,000 deduction could be worth $35,000+. You have to decide if it is worth waiting for an additional $15,000+ in tax savings (I think it may be worth the wait.)

Keep in mind the new 3.8% tax will hit next year and joint filers with adjusted gross income over $250,000 might be subject to this tax (single filers will be hit at a lower AGI) . So the other benefit of spreading out the deduction over future years or waiting to purchase items in 2013 will be the potential for you to remain near or below the $250,000 AGI threshold to avoid or minimize this new tax.

Higher income earners will get hit hard starting in 2013, so anything you can do to try to keep your income down in future years will make sense....even if that means NOT taking advantage of these expiring tax breaks right now.

Happy tax planning to all!  

Tim Lott, CPA, CVA
tlott@dentalcpas.com
www.dentalcpas.com 

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Listening to Dental Customers

“Customers who engage with companies over social media spend 20% to 40% more money with those companies than other customers.” Bain & Company

Your customers are talking.  Telling others about their experience – both good and bad – with your organization.  As Bain & Company discovered in their research, if customers are invested enough to spend time to talk on social media, they are investing their money with you as well.  And they are influencing others which makes their voices are more powerful than ever.

Do you currently have ways to hear the customer’s voice?  Do you directly ask your customers what they think about your organization and their experience?  Do you know all the ways customers try to tell you what is going right and what could improve to make their experience better?  Consider all the ways you can find and listen to the customer’s voice.  

Ask your people.  Anyone who has direct contact with the customer knows the most about how and what they are trying to accomplish, what upsets them, what delights them and what drives them to stay with your company.

Go online.  Find feedback emails to your contact center. Use online survey tools, ask questions on Facebook, poll them on your website, observe their online behavior, and many other ways your customers are telling you what they want.

Find the hidden voices.  Reviewing comment cards, listening to customer service logs and technical support calls, and doing a little “secret shopping” yourself (for example, being with customers in a retail location and listening to conversations) can all help you understand their perspective.   

Talk to them. Pick up the phone and really dig deep into what customers like and don’t like about your business.  You will discover ways to serve them better, listen to their ideas about how you can make their experience easier and more enjoyable.

Confirm you heard them.  Encourage feedback by responding to it.  If you don’t listen and confirm what you heard, they will stop talking and take their business elsewhere.  Give them updates about what you are doing to respond to their issues or overall changes to your products and services.

Share it.  The customer voice is one of the most powerful things to change your organization.  We often become very inwardly focused about our goals and forget theirs.  Everyone in your organization should put on the customer’s shoes and understand their experience.

Reaching out and listening to customers is a critical activity.  It is an ongoing and consistent way to provide valuable insights into how customers experience your organization.  Their voice is the springboard for insights and actions which can lead to financial results. Go find their voice and find the next opportunities for your organization. 

Diane Magers is a team member at the Interactions Group, who help organizations develop and implement customer-focused strategies to improve business performance.

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District of Columbia "use" Tax Impacts Dentists

For DC businesses there is a new requirement under the DC Code regarding so-called “use” taxes. Beginning with the 12-month period ending September 30, 2012, any employer that is required to file a DC withholding tax return, but is not required to collect and remit sales taxes, is required to file an annual use tax return. The return, Form FR-800A, must be filed on or before October 20th of each year, and any use taxes due must be remitted with the return.

               

Most States imposes a “use tax” on certain personal property purchased for use in their state.  The use tax complements the sales tax by taxing the use of goods inside the State on which no sales tax has been paid. Typically, this is property that was purchased from a seller outside of the state.

               

Unlike sales taxes, which are charged and collected by the vendor, the use tax is self-reported by the purchaser.

               

You should contact your tax advisor for advice on your specific situation.

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Is Charitable Dental Care Deductible?

Several dentists have asked us about what deductions may be eligible for the volunteer dental work they do for the community. We looked at a few scenarios and have come up with some guidance.

A charitable deduction is not allowed for contributing services (time) for dentist (or anyone else) but they can deduct unreimbursed out-of pocket expenses that they incur when they render services to a (qualified) charitable organization.

Examples of deductible expenses include the cost of uniforms that are required to be worn while performing the donated services (clothing that is not suitable for everyday use), and supplies used in performing the donated services.  Other examples include equipment, copying charges, office supplies, long distance charges, and postage.

A dentist can also deduct “reasonable” expenses meals and lodging while they are away from home. “Away from home” for purposes of charity is the same as “away from home” for business. In other words, the trip has to require the taxpayer to sleep or rest outside of their home in order to continue to do the charitable work. The cost of child care that someone incurs while providing the charitable services can’t be deducted even if the person can’t do the volunteer work without paying the child care expense.

The expenses have to be non-personal (i.e. no pleasure trips, entertainment costs etc.) and directly connected to performing the services for the charity. If they are primarily for the benefit of the taxpayer they are not deductible. The unreimbursed expenses are treated as being paid directly to the charity.

For auto expense a dentist can deduct 14 cents per charitable mile or actual expenses (gas and oil directly related to the use of your car for volunteer activities) but you can’t deduct general expenses such as depreciation, lease payments, license and registration or insurance. Parking and tolls directly related to the charitable work can be deducted whether you use the mileage or actual expense method.

Treat this advice as general guidelines and consult you CPA for specific guidance related to your particular situation.

Lance Jacob, EA, is a principal with the Dental CPAs. ljacob@dentalcpas.com (410) 453-5500. The Dental CPAs have been providing accounting, tax planning, practice purchase assistance, bookkeeping, practice management services and other advice to the dental community for over 50 years.

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