Wednesday, February 22, 2012

What Dental Expenses Can Be Deducted?

If I paid for CE in 2011 that I am going to actually take in 2012, do I deduct it out of my 2011 taxes or my 2012 taxes?  I also paid for 2012 membership dues in AGD in 2011, which tax year would that deduction fall under?

You're a cash basis tax payer so generally you deduct your expenses in the year you paid them.

Also, when attending CE, what can you deduct?  Flight, food, etc? Or just the cost of the course?
of course, travel like air-fare, train-fare, rental car, lodging, taxis, tips, meals while traveling for business, etc.

When I was looking for employment last year, can I deduct flights/car rentals used to travel to where I now work for interviews?
Job hunting expenses are deductible.

Can I deduct any of: DEA, licensing, board fees if I just graduated and they are NOT renewals?
Generally, yes.

I am not receiving ANY benefits and am paying for health, life, malpractice, disability insurance all on my own.  Is any of that deductible for 2011 or 2012?
Yes, some of it is: malpractice as a business expense, health as medical expense.

I am still looking for a CPA, so I only have all of your wealth of knowledge to fall back on right now...

Please advise.

Get a CPA NOW!

Thank you.

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Tuesday, February 14, 2012

Dental Practice Purchase Checklist

Are you considering purchasing a dental practice?

If so, here is a hot off the intertubes version of our digital dental practice purchase checklist.

We'd love to get your feedback.

Did we forget anything?

Let us know your thoughts.

Respondents are eligible for a Dental CPAs calculator.

Monday, February 6, 2012

What is a Reasonable Dental Salary for an S-Corp?

I own an S-Corp. I use to think that all you had to do was pay yourself a salary that was reasonable for a dentist and then take the rest in dividends.

That is the general "rule".

So if my office profited 250,000, then I would pay myself 110,000 in salary (a fair salary for a dentist in my area) and then take out the remaining 140,000 in dividends. I think this somehow saves me taxes.

My accountant recently told me that it is more a percentage of the total amount of profit for your office and not a reasonable salary for a dentist.  So if my office profited 400,000, i can't just pay myself 110,000 salary and take out 290,000 in dividends. I would have to increase my salary, since my office profited much more.

Is my accountant right?   Please tell me what you think.
Well, I don't believe you'll find anywhere in the tax code that defines "reasonable" as a percentage of the practice "profit", so this may be what they use as their guide to avoid potential problems.

By the same token, you won't find a definition in the code for reasonable as "fair salary for your area" and that doesn't make you wrong.

It's a judgment call. While $110,000 may be a "fair" salary in your area, if a doctor is producing $1 million would you expect a "reasonable" salary for them to be $110,000? Probably not.

Consider this: what do you think is a "reasonable" salary is for an OS specialist making $1.5 million BEFORE their W-2 comp and S-Corp dividend and producing nearly $3 million?

In my opinion taking $110,000 as W-2 comp and $1.390 million as S-Corp dividend is begging for trouble if audited. There's simply no way I could support that $110,000 for this doctor was "reasonable" in this situation.

Point being, each situation is different with its own set of facts and circumstances. So, until the IRS comes out with a definition for "reasonable" you use your best judgment and keep your fingers crossed.

This first appeared on Dentaltown.

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Wednesday, February 1, 2012

How to Handle Dental Office Transition to New Dentist


I am (finally) in the final stages of the transition where I become the sole owner of the practice.  Currently, everything is in my partner's name on all accounts since he is still the majority owner.

So, I am trying to come up with a list of all different companies that will need to be contacted as soon as the closing is complete, and here is my list so far:

1) All dental supply vendors
2) Utilities: Electric, Gas, Water
3) Phone company
4) TV/internet provider
5) Creating new business accounts at bank
6) ADP for payroll

Yes, #3 and #4 are currently separate, but I’m looking to change that.

My partner owns the building so just have to sign the lease for that.

So to be clear, there's an entity which you own a percentage of and after settlement you will own 100% of that entity correct? You're not forming a new entity, correct? 

Currently I own 10% of the entity.  Upon completion of the buy-out I will own 100% of the entity.  I will not be creating a new entity.  I will just be renaming it.

When you say everything is in your partner’s name, you just mean HIS name is used in the entity\practice name, correct? 

Yes.  All accounts are in his name.

What type of entity is it? 

C-Corp but I will be making it into an S-Corp according to my accountant.
Thanks Tim!  

From talking to some of the vendors already, the creating of new accounts is not a problem; it's just some paperwork to fill out on their end.  I just want to try to have everything lined up ready to go so that once the closing is complete, the vendors can put all the information through; and I just want to make sure I'm not missing anyone on my list.

Ok, that's clear now. So you're keeping the corporation with the same ID number so all you're doing is notifying everyone of the name change. If that's the case, have a form letter ready to go with all the bills you'll be paying over the next year that come to you in the old name.

You'll also have to notify the IRS of the name change so it matches up with the TIN number. I believe the insurance companies will require a W-9 with the new name as well so they can match it up to the TIN# they have on file as well.

Good luck.

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