Deducting Dental Disability Expense on Tax Return?

I am a new associate. What are things that I can claim as a business expense? I have in the past included my malpractice insurance amount.

To deduct or not is certainly a personal choice. I won't deduct mine.

The tax savings on a few thousand dollars of premiums is a couple hundred dollars in tax savings. Sure, over 30-40 years those savings could add up, however, the potential tax cost on potential benefits paid over a year or two would likely eat those savings up.

I have a client that's been collecting over $140k in disability for 20 years now, at an average tax rate (fed & state) of +-25%......

The tax cost over 2 years is approx. $70,000, thank goodness he didn't deduct his premiums.....

This post first appeared on DentalTown.

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

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Dental Tax Break? Renting Equipment from Wife and Kids?

What is the tax advantage of putting equipment, etc. in your children's/wife's names and then renting it back? I ran across a practice for sale where the owner does no draw to himself but rents everything from his kids/wife.

There's absolutely nothing wrong or illegal with this set-up. It's no different than owning the real estate your practice is in and renting it back, is it?

I'm guessing the seller is older and the kids are probably older as well. I say this because before the kiddie tax & then the more recent tightening of the kiddie tax rules, this was a very common strategy for businesses to shift income from the higher income tax brackets of the parents to the lower income tax brackets of their children. Why the wife's name is involved, I'm not sure, it might also be a move to NOT have assets in the name of the doctor in case of patient lawsuits...

As long as the rent being paid is fair & the income is being reported on another tax return the IRS can't say a thing about it.

What a prospective buyer needs to do is to make sure they consider these expenses when analyzing the target practice financials to narrow in on the REAL practice expenses.

This post first appeared on DentalTown.

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

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Who Should Pay for Dental CE Expenses?

If I'm taking a course and paying for hotel, etc what is the best way to benefit? Is it best to have my employer pay my CE and deduct from my pay check before taxes? Or is better for me to write a check for the CE and list it at the end of the year during taxes? How do people go about this?

Here's the deal:

You're better off letting the employer pay. You save both income AND payroll tax and you're employer saves their share of the payroll tax. Win\win.

IF you pay it personally you could list it as an unreimbursed employee business expense and you may lose a portion of it depending on your adjusted gross income OR you could be subject to AMT where you actually lose the benefit of the deduction.

If the employer pays you, you avoid all those what-if's & are GUARANTEED the income tax savings AND the payroll tax savings to boot.

This post first appeared on DentalTown.

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

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Who Should Pay Lab Cost on a Dental Redo?

I pay my associate 40% of production and I pay all lab.

This past month my associate had to remake a denture for a patient. He just made this denture the previous month. Now there was a second lab bill. Since the patient doesn't pay for the second lab bill, who do you think should swallow that extra cost, me as the owner or should the associate pay for the second lab bill?

And yes I know I should be paying on collections, not production. But that’s the arrangement we had, I just took over his practice and when I was associating with him he paid me 40% of production as well.

When we structure the compensation of an associateship agreement we always have the lab (whether 100% or some partial %) come off the top (prior to the computation). A short math example will show why:

Lab taken off the bottom line:

$10,000 -- Monthly Collections per Assoc.
<$500> - refunds or reductions (varies)
_______
$9,500
X 35% - Compensation % (varies)
_______
$3,325 - Calculated Compensation
<$450> - 50% of incurred lab bill
________
$2,875 - Monthly compensation

Lab taken off the "top":

$10,000 -- Monthly Collections per Assoc.
<$500> - refunds or reductions (varies)
<$450> - 50% of incurred lab bill
________
$9,050
x 35% - Compensation % (varies)
_________
$3,167.50 - Calculated Monthly Compensation

As you can see from the illustration, it is rather advantageous to the Associate to have the Lab, and/or rework (if they are going to be required to cover it, which should be spelled out in the associateship Agreement) be reduced prior to the computation - to the tune of $292.50.

Your math is the way it is because in the 2nd example you've only charged the assoc 17.5% (35% of 50%) of their lab instead of 50% as in the first example.

IF the employer wants to charge the same % of lab as the employees comp, say 35%, example #2 should look like this:

$10,000 -- Monthly Collections per Assoc.
<$500> - refunds or reductions (varies)
<$900> - lab bill (100% mind you)
__________
$8,600
x 35% - Compensation % (varies)$
__________
3,010 - Calculated Monthly Compensation

IF the employer wants to charge a different % lab compared to comp, say charge them 50% of the lab & pay them 35% of their NET collected production then your example #1 is right on.

This post first appeared on DentalTown.

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

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Collecting Money From a Dental Patient

I have a patient that owes me $2500. She was denied by Care Credit. Her ability to pay me is questionable. So here is my solution. Co-sign with her on Care Credit. I get my money. She pays them. If she defaults, I pay the balance to Care Credit then I begin billing her and add the interest to her bill. She likely will default with me as well, but now we are back to where we started plus some interest. What do you think people? Let's not address how I got myself in the situation of her carrying such a large balance without a prior financial arrangement......we will save that for another day.

....then she tells two friends, they tell two friends, they tell two friends & all of a sudden you have all these new patients wanting you to co-sign for them......hey, is that a great marketing idea or what ?

I vote crazy......

This post 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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