January Newsletter

We have posted our January Dental CPA newsletter.

Happy reading!

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Dentist has Questions about Quarterly Taxes

I'm a new graduate and this is my first time sending in my quarterly taxes. I started working Sept 2011 and my IE income for 2011 (Sept 2011-Dec 2011) is around $25K. How much percent of $25K should I send in for my Jan 2012 quarterly tax stub? 30%? 33%? I don't have a CPA yet and will probably find one end of Jan 2012 but it would be too late to figure out what to send in for the January deadline. Considering $25K is a low amount would 30% of $25K be okay? FYI I'll be filing a W2 for my other PT job.

Can you give a poor guy a clue? I don't want to underestimate and get fined either.

Did you have a tax liability for 2010? If so, what was it and have you had ANY taxes paid in 2011 through any other W-2 jobs? What are you other sources of income in 2011? What about deductions?

You will pay tax on your NET earnings and hopefully that's a lot lower than your gross earnings. Without knowing anything else, 33% should be more than enough to keep you penalty free. There's just not enough info to help guide you any better.

The payment isn't due until January 15th so you still have plenty of time to chat with someone early in January to make sure you pay the right amount.

This first appeared on Dentaltown.

For more information or to sign up for our newsletter, please contact arose@dentalcpas.com

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Compensation for Staff at Recently Purchased Dental Practice Questions

First, let this post help those with staff compensation issues as well as those that are or will purchase a dental practice. So some of these comments are not about what should have been done, it'll be a teaching moment for those that MIGHT be buying a practice in the future:

Hello, I just purchased a practice from a retiring dentist. The employees are hounding me to give them a handbook. I am trying to decide on their benefits. As of now I have two hygienists who make $36/hr and an office manager that makes $28/hr.

What are the market rates for the area?

The previous owner also gave 20, yes 20 vacation days to the hygienists paid and he paid 100% of their health insurance.
OK. How long have they been employed to "earn" the vacation days? Did he give them to every new employee? Big difference. I would agree that the 100% of health insurance is generous this day and age, depending on how their hourly rates compare to the market.

... I plan to keep salaries where they are. However what should I do concerning health insurance? I do not want to pay 100%.
You need to consider their entire compensation package as a whole though...

...How about if I would agree to pay max of $300 month to any full time employee that wishes to sign up and employee is responsible for the rest?
That's not a bad idea and one that is very typical today.

Also when dentist sold he paid all their accrued vacation. I think that now they should be in a 90 day trial period and paid vacation should start accruing over.
You could do that; however, in most cases the buyer will "assume" the vacation days policy for existing employees meaning, these employees will continue to get their 20 days per year, new employees will have to earn them and if these employees are truly "overpaid" in total compensation and benefits you'll simply need to "freeze" their compensation.

Paying them 20 days vacation and hiring a temp would break me.
Why? Wasn't this factored into your due diligence analysis before settling? Didn't the "high" compensation impact the purchase price? I don't see why continuing for these employees would break you if you were careful to consider them during the due diligence phase.

With respect to changing them now, again, you would have known this before settling on the practice and could have requested that the seller make some changes BEFORE you took over or at least informed them that the very generous ways of the past will need to change under new ownership since a new owner will also have debt service.

Tim I have no idea what the going rate is for area or how to even go about getting this information. As for due diligence, it's easy to be on the outside looking in telling others what they should have done. I can tell you it was very difficult going to this office and seeing the owner show up and become emotional each time I pulled a chart or asked a question. It was a very difficult situation.

If you read my opening comments I did not want my post to be about what YOU could have done, but what others should do going forward, that was the intent. I think I've also given you some advice on what you can do now and I know it’s not much, as they say, it is what it is and you'll learn from this as you progress in your career.

Your post will certainly help others .

You’re right but I don’t know what could have been done different anyways. It may have caused me to start off with no employees on day 1.

Maybe, maybe not.

I just had a buyer that settled on a practice within the past two weeks. The employees were treated VERY well: hygienist was being paid 45% of their revenue, almost unheard of. The seller and employees BOTH knew he was being WAY generous.

The buyer asked seller to talk to the employees and he did and they understood. Tthe staff knew they couldn't get what they were getting anywhere else. These employees knew their compensation was going to be reduced as soon as the buyer took over. What they also knew is that their revised compensation was still very fair for the area.

Again, not much you can do now unless the employees know they have it great, if they do, still others can learn from this. 

This first appeared on Dentaltown.

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New Year's Resolutions for Businesses

Here is a guest blog from our friend Lisa Sparks of Bowie and Jensen law firm.

New Year's Resolutions for Businesses

Here are 10 New Year's Resolutions that will get this year off to a great start:

1.     Be clear and concise about company policies.  Review your employee manual and other policies for any necessary updates.  If you don’t have one to review and update, set a firm deadline for drafting one.

2.     Green your business.  Find sustainable practices and implement them to save money and improve social responsibility.  Easy places to start are recycling programs (paper, plastics/cans, and electronics), buying re-usable, recycled, and/or biodegradable kitchen supplies, turning lights off and unplugging unused devices, printing only when necessary, and sharing documents and information electronically. 

3.     Stay on top of things.  Verify (and calendar) renewal dates and needed updates to your business filings.  These include registrations in all of the states where you do business, intellectual property protections, professional licenses, etc…

4.     Be in compliance.  Check to make sure that your state and federal labor posters are current and properly placed at all covered worksites.  Make sure that all employees are properly classified and update personnel files and tax and benefit records as necessary (an employee’s classification may change over time).  Think also about whether any new or refresher trainings are needed for safety, sexual harassment prevention, CPR/AED procedures, diversity, or conflict resolution.

5.     Get paid.  Make a plan to address and collect any unusually large or aged accounts receivable that may still be lingering. Improve billing and collection procedures if necessary.

6.     Cut costs.  Review your service contracts for upcoming renewals, needs changes, and untapped discounts.  Negotiating rates isn’t just for your cable bill at home.  Memberships in professional and trade organizations often include group discounts.

7.     Save everything that you need, but nothing that you don’t.  Review your email and document retention policies to ensure that you are adequately protected in the event of dispute or litigation.

8.     Be more prepared.  Identify major problems or emergencies that happened in 2011 and determine how to prevent or, if unavoidable, better plan for such occurrences that may happen this year.

9.     Brainstorm new marketing strategies.  Implement the best one on a trial basis and calendar a date to evaluate it.  If it worked, make it a permanent part of your marketing plan. If it didn’t, move on to another idea.

10.  Be healthier.  Emphasize employee wellness to promote a healthy work environment and keep healthcare costs down.  Hand out re-usable water bottles (that’s green too), swap out candy for fresh fruit, organize a lunch-time walking club, connect employees with information on local activities like yoga classes, or set up a corporate membership at a nearby gym.  Weight loss, nutrition, and fitness challenges can help increase wellness and morale with a little healthy competition.

To contact the incomparable Lisa Sparks, email her or call (410) 583-2400

Dentist has Questions about Qualified Retirement Plans

I’d like recommendations for the best retirement plan for my office with my specific needs...

I currently have a 401k plan in place with Safe Harbor election. I feel like I pay too much to administer it.  I would like to find a retirement plan that is lower cost to me/the office.

Basically I am looking for a low cost (possibly free) qualified plan that my staff can defer money to, without me having to pay administrative costs and me having to match any percent of income.  I am not interested in being able to defer anything myself.

What about a SEP plan?

Here was your criteria from above:

1. I am not concerned about how much I can defer personally, assume I don't have to defer anything myself.

2. I want the lowest cost (possibly free?) plan that can be run.

3. My staff does want to defer more than 5k (Simple IRA limit) per year

If I understand it correctly… if I contribute 1,2,3% (or whatever %) of my salary, then I have to contribute to everyone the same %?  What are your thoughts and pros and cons of that?

Well, you asked us to assume that you didn't want to contribute. Otherwise, you are correct, that's how a SEP works. SEPs work well when the owner is the only participant or when the owner has been "employed" longer than the other employees (read a lot of turnover) and as a last minute thought.

Who will administer the simple IRA? Can I do it through Fidelity who would house the investments?

Sort of... you'll still be responsible to make sure everything’s being handled correctly.

The 3% contribution would apply to who?

Depends on the plan.

Would they have to qualify?

Generally yes.

Would it be every staff member?

It depends on the plan and the eligibility requirements.

Is that $ fixed or subject to change?

It depends on the plan, many allow for a change from time to time if not annually

I think you need to sit down with your CPA to narrow in on what you need based upon your criteria and specific circumstances...

This first appeared on Dentaltown.

For more information or to sign up for our newsletter, please contact arose@dentalcpas.com

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