Showing posts with label dental tax planning. Show all posts
Showing posts with label dental tax planning. Show all posts

Friday, April 7, 2017

Tax Savings for Dentists


Could you be paying too much in taxes for your dental practice? Below are five areas where you may be overspending.
Deducting Business Expenses
Other than the typical business expenses you’re probably aware of, like meals and entertainment and mileage, there are other deductible business expenses that could save you more on taxes. These include business insurance premiums, retirement plans, employee pay, medical benefits, rent, tax preparation services, and more. The key is if the business expense is ordinary and necessary.
Entity Type
Your dental practice’s business structure can also be a source of tax savings. For example, if you’re structured as a Limited Liability Corporation (LLC) or Sole Proprietorship, you’re paying the full amount of self-employment taxes, which are about 15 percent. If your practice is an S-Corporation, on the other hand, you only pay the employer’s share of self-employment taxes, or about 7.5 percent.
There are other savings in business structure, too. You could consider more than one entity type. For example, patient and insurance receivables go through an S-Corporation, which saves money on self-employment taxes. You also avoid the double taxation characteristic of a C-Corporation. Your secondary entity, a C-Corporation, is used for management and administrative expenses. Or, you can elect to have your LLC taxed as an S-Corporation, whereby only the owner’s salary is subject to full self-employment taxes.
Income shifting can be a complicated but very effective tax savings strategy.
Employee Benefits
Offering employee benefits is a win-win: you create a more engaged, productive work environment and you can typically write off the costs. A sample of employee benefits you can deduct is below.
  • Medical
  • Retirement
  • Fringe Benefits, including:
    • Transportation costs
    • Insurance (disability, life, etc)
    • Dependent care
    • Education reimbursement
There is added value with employee benefits, since they’re not counted as taxable income (unless your staff pays a portion of fringe benefits).

Check out these 20 U.S. companies with the best employee benefits.


Medical Benefits
Because this can be such an overlooked area of tax savings, medical benefits merits its own section.
In general, you can write off the costs of the following payments on your dental practice’s taxes:
  • Group health insurance premiums
  • Health savings accounts (HSAs)
  • Health reimbursement arrangements (HRAs)
An HRA option for smaller dental practices that do not offer group medical insurance is a Medical Expense Reimbursement Plan (MERP). MERPs allow you to cover a portion of your staff’s medical costs, including copayments, deductibles, and qualified medical expenses. In doing so, you can write off those medical expenses. MERPs can be useful for dental practices structured as sole proprietors or LLCs with less than 50 full-time and full-time equivalent employees. Although MERPs previously did not conform to ACA standards, updated regulations permitting MERPs took effect after December 31, 2016.
Note: if your dental practice is a sole proprietorship, maximizing medical benefits will be more difficult.
Year-End Tax Planning and Projections
There are few better ways to manage your tax burden than planning ahead. If you schedule a year-end planning session with your CPA, you can look at paying certain known expenses in December or making a charitable donation before year-end, both of which result in tax deductions. You will also get an idea of your income in the next year, and plan quarterly estimated payments. This saves money because if you underpay your taxes, you’ll incur a penalty come Tax Day.
We’re here to help manage your taxes. With tax season nearly over, now is a great time to plan for the rest of 2017. Contact our office to schedule an appointment.

Wednesday, March 15, 2017

Are You Ready For Tax Season?

If you haven’t already, it’s time to skim through your tax documents to ensure you are well prepared for filing. Here are some important items to remember:
  1. Check your records for invoices of single item purchases of more than $2500. These fixed assets need to be capitalized. Review your invoices to make sure nothing is coded as an asset that should be an expense or the other way around.
  2. Gather all your year-end loan, bank, and credit card statements so you can tie down balances as of 12/31.
  3. Review receipts of meals and entertainment to see if anything should be coded to employee expenses. Often, there’s a good number of items that are really lunch for the employees which have a great tax benefit.
  4. Review your records of gifts distributed in 2016. Gifts that were either for marketing or employee purposes should be correctly coded for them to potentially be considered a deductible expense.
  5. If you participate in an employer match program, ensure that all payments are made before you file your return.
For more information or answers to questions specific to your practice's situation, call our office at 844-DENT CPA(336-8272).

Wednesday, December 7, 2016

End of the Year Tips to Minimize Your 2016 Taxes

As many dentists know, the upcoming year end is always the time to consider minimizing your taxes. Here are a few tips from the CPAs at the Dental CPAs.

  1. Maximize your contributions to retirement plans. Contribute more to your 401k by the end of the year to reduce your taxable income and your tax bills.

  1. Consider using a credit card to prepay expenses that can generate deductions for this year such as supplies. 

  2. If possible, defer your income. Take capital gains in 2017 instead of 2016.  This move only will be beneficial if you think you will be in the same or a lower tax bracket next year.

  1. Consider bonus depreciation, it’s a way to write off the cost of an asset purchased for business use. The Section 179 2016 deduction limit is $500,000, which can be used on new and used equipment and off-the-shelf software. To qualify for the deduction, the equipment must be financed or purchased and put into service by the end of the day on December 31, 2016.
Remember to keep records of the equipment or software purchases that you plan to claim for the Section 179 deduction, including where it was purchased, the date it was acquired, and the date it was placed into service.

  1. Give away your money. If you were planning to give a lot of money to someone, utilize your annual gift exclusion of $14,000. This is not an income tax savings strategy but rather is an estate reduction strategy.  If you are concerned about having a large taxable estate, don’t miss the opportunity to utilize your annual gift exclusion each year.

  2. Finalize your records. If you plan to deduct mileage on your personal car, make sure your mileage logs are complete.  Review how long you need to keep your paperwork before throwing out any records.
  3. Sell investments such as stocks and mutual funds to realize losses. Then use those losses to offset any taxable gains you have realized during the year. Losses offset gains dollar for dollar.

  1. If possible, contribute the maximum to your retirement account ($18,000 for 2016, $24,000 if you are age 50 or over). These accounts can grow to a substantial sum because they compound over time free of taxes.

  1. Fund your IRA.  If you cannot make a deductible IRA contribution, consider whether you should make a non-deductible IRA contribution as it could become a possible future Roth IRA conversion for retirement or estate planning purposes.  You have until APRIL 15, 2017 to make IRA contributions for 2016 but the sooner you get the money into the account, the sooner it has the potential to start to grow tax-deferred.


  1. Do an alternative minimum tax (AMT) analysis. If there’s a chance that you will be subject to AMT, analyze your deductions to see if you are better off waiting to make some of the above moves. Once AMT comes into play, some of the end of the year tax moves will have no tax benefit.  Deductions such as state income taxes and real estate taxes are always an AMT deductibility issue.

Thursday, November 12, 2015

Getting A 2nd Opinion On Your Tax Return

Our Dental CPA team recently reviewed the 2014 income tax returns for a prospective client and were shocked at some of our findings. Had we been engaged for a year-end tax planning meeting well in advance of 12/31/14, this doctor would have saved almost $35k in taxes and other areas. Here’s what we found:
–         Owner Wages Too High
The client paid themselves wages of $130k which created an S-corp loss of $30k!(Yikes). The problem is they did not have a basis in their S-corp so the $30k loss was NOT deductible. Instead, what they should have done is kept their wages at no more than $100k and the S-corp income would have been $0 which would have lowered their income tax bill by at least $10k.
–         Spouses Wages Too High
We learned that they also paid their spouse to help manage the practice, which is a good idea, however, instead of a wage of $60k they should have kept it around $30k and saved $4,500 in payroll taxes on $30k of wages. In addition, they had S-corp losses from prior years to use up so the additional S-corp income of $30k that would have resulted would NOT have been taxed, saving another $10k in income taxes.
–          Not Reporting All Expenses
There were expenses missing or almost non-existent on the client’s corporate return such as meals, entertainment, automobile expense, travel expense, etc. We were told that these expenses existed, however, their preparer told them they were too risky to take even though we knew they could be substantiated. By failing to report these expenses, the clients likely missed out on at least $5k of deductions costing them around $2k in taxes.
–         Owner Occupied Rental Activity Loss
The Corporation rents the space they practice out of which the doctor owns personally thru an LLC. The activity generated a loss of $2,500 on the individual tax return which was not deducted and as owner-occupied real estate and making the proper election they were entitled to that deduction costing them $800 in taxes.
–         Other Unaddressed Issues
There were a couple other issues with the returns resulting in an additional $1,500 in taxes that could have been avoided. They also had the wrong retirement plan that likely cost them around $5k in unnecessary employee contributions.
Do yourself a favor and contact our Dental CPA team. We are happy to provide 2ndopinions on tax returns as a courtesy. There may be something that you can do BEFORE the year ends to lower your tax liability for 2015. Our team is here to guide you through the necessary steps. Contact us at 844-DENTCPA (336-8272) or email info@dentalcpa.com.

Friday, June 3, 2011

Should Dentist Reduce Hours to Save Taxes?

Just looking for confirmation that I am thinking right here... I have a couple associates that work for me out of 2 offices, and I work 5 days a week. 2010 Tax bracket made over the 33% bracket and will likely increase this year. Associates make 30%. I am thinking cutting back a day and let an associate work it. This way I would be substituting an income tax payment over the 212k threshold at 33% for a before tax payment to the associate at 30%. This is assuming production stays the same. In other words, if production for that day/ month is $10,000, and all the overhead is covered, then this is straight profit over the threshold. I could pay the associate 3000 and take the day off, or work the day and pay Uncle Sam 33%, and still take home about the same disposable income. Am I right in this thinking? Anything else that I am not thinking about?

Let’s do the math on your example:

$10,000 x 33% in tax = $3,300 so you net $6,700 to spend after tax, or

$10,000 x 30% to assoc = $3,000, $7,000 x 33% = 2,310, so you net $4,690 to spend after tax.

So those 8 hours cost you $2,010. Does that work for you?

Trying to keep it simple, you could get into a lot of details...let’s just assume the 30% covers Compensation + Expenses of associate.

This first appeared on Dentaltown.


Send your questions to Tim Lott, CPA, CVA at tlott@dentalcpas.com

For more information or to sign up for our newsletter, please contact arose@dentalcpas.com
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Thursday, July 8, 2010

When Should Dental Tax Planning be Done?

I recently took up several part-time positions, with some paying me as an independent contractor. I think one of the positions is paying me as a W2. I may have an idea of how to file taxes using W2, but I am totally clueless about how to do it as an IC.

You better KNOW!

When exactly should I go to accountant to get my IC taxes done?

Done? Sometime between Jan-Mar of 2011.

To plan properly to get them done? NOW!

My yearly income taxes were done by a local accountant for $100/yr in a NYC area. How much more expensive will it be if I were to seek out accountant services for filing my IC taxes?

It depends on who's doing them and whether or not you want to PLAN NOW, AND get them done later. Just to get them done, maybe the person that did them for $100 will do them for $150. You have to ask.

This first appeared on Dentaltown.

Send your questions to Tim Lott, CPA, CVA at tlott@dentalcpas.com

For more information or to sign up for our newsletter, please contact arose@dentalcpas.com
Follow us on TwitterFacebook and Pinterest

Thursday, October 29, 2009

Ten Tips for Year-End Dental Tax Planning

Here I am at home today hoping I didn't pick up the swine flu bug that we think my 12 yr old is just getting over. So what can I do? Write a blog of course! I thought I'd do a follow-up from my August blog about planning, now that we're preparing for our round of year-end meetings.


Erik Parrish CPA wrote a great blog about ROTH IRA's and the planning opportunities that are just around the corner in 2010. However, just before the corner is year-end 2009 and there's plenty of time left to review where you are so far in 2009 and what you might want to do to finish out the year to position yourself in the best possible income tax "light". Here are just a few ideas that we'll be discussing with our clients prior to 12/31/09:

1. For LLC's, PLLC's and sole proprietors, is it time to elect to be taxed as an S-corp? C-corp?

2. For those w/o a practice retirement plan what options remain for 2009 and when do you need to make a decision? Will that plan still be the best option for 2010? If not, what does the client need to do as of Jan. 1st and when do we discuss a different retirement plan for 2010?

3. For those with 401k/PS plans, what are the minimum & maximum amounts you can contribute and what makes the most sense. For 2010 and the 401k portion should you do the traditional deferral or the ROTH deferral?

4. For those clients that started or purchased a practice in 2009, when do we need to decide what type of depreciation we take for 2009? Do we take as much deductions we can in 2009 or hold off and use the in future years where they may be more valuable?

5. For those considering ROTH conversions inn 2010, what can/should they do in 2009 to plan for that conversion? What about those clients I mention in #4 above?

6. For clients looking to expand soon and given the option of doing it in 2009 or 2010, which would be better?

7. Are the clients taking full advantage of all the "perks" that the practice of dentistry provides, how do those deductions "compare" with their peers?

8. How is 2009 looking compared to prior years, compared to your peers 2009 numbers? What about specific key performance indicators, how do they compare with prior years and your peers for 2009?

9. Take a look at any other issue that could impact their business income tax picture for 2009, 2010 and beyond.

10. Review their individual income tax projection for issues that may impact them in 2009, 2010 and beyond like other income, potential capital gains & losses, itemized deductions, rental or vacation properties, 2nd homes, other tax favored investments like oil/gas partnerships, annuities, etc.

Each client really is different and while there are many tax strategies that nearly all clients should consider, there are very specific strategies for each client based upon their individual situation. An example of that are children, those clients that have them may have some additional tax strategies they should consider vs. those clients without kids.

I stopped at 10, there are so many more. Every one of us should make sure we review our own situation to ensure you're paying the least amount of tax under the law this year and in future years.


This first appeared on NewDocs.

Send your questions to Tim Lott, CPA, CVA at tlott@dentalcpas.com

For more information or to sign up for our newsletter, please contact arose@dentalcpas.com
Follow us on TwitterFacebook and Pinterest

Monday, August 17, 2009

Lack of Planning Can Lead to Dental Practice Tax Surprises - Do You Like Surprises?

DEPENDS ON THE SURPRISE DOESN'T IT ?

This time of year is when we go through our "round" of mid-year meetings with the majority of our clients. These are multi-purpose meetings where we discuss many aspects, from the performance of their practices, to projecting the remainder of the year, to the income tax impact to whatever the client wantsneeds to discuss with us.

One of our primary goals with all of our clients is to help them avoid the bad surprises, you know, a surprise like finding out in late March or early April that you owe $25,000 in income taxes and you had no idea. Once you're in that position there's little else you can do to avoid it and it leaves a very bad taste in your mouth.

There is a phrase I use in many of my lectures, i'm not sure where I heard it, "failing to plan is planning to fail". We believe very strongly that as business owners, you must always maintain a "planning" mindset. Now is the time every practice owner should be evaluating where they are with respect to their practice results, where they're going, areas they need to improve upon in the next 12-24 months and areas that need immediate attention.

Make the time to review these things and to get a handle on your financial situation, both practice and personal and plan accordingly. Don't wait until it's too late to get one of those surprises that none of us like to get.

From an income tax perspective, between now and the end of the year, run the numbers so you can decide what you want your income tax picture to look like and take the necessary steps to ensure that you've put yourself in the best possible tax position that's right for you and your situation.

Do you like Surprises? If not do something about it.

This first appeared on NewDocs.

Send your questions to Tim Lott, CPA, CVA at tlott@dentalcpas.com

For more information or to sign up for our newsletter, please contact arose@dentalcpas.com
Follow us on TwitterFacebook and Pinterest