Virjee Consulting, PLLC

As we move into the last Quarter of 2018, this is a great time to review your tax strategy with your Dental CPA. You should make sure your Dental Independent Contractor Business or your Dental Practice is taking advantage of the tax deductions available to dentists. Below are some Year End Tax moves to consider.

Dentists working as Independent Contractors

• If you haven’t done so already be sure to consider if a S Corp strategy can save you thousands in taxes.
• If you already have a S Corporation, consider adopting an Accountable Plan that can help deduct business use of Cell Phone, Mileage driven to and from the practice and Home Office
• If you pay for Health or Disability Insurance, check with your adviser on how this can be reported on the company payroll tax returns to achieve a much higher tax deduction.
• Be sure to keep track of business related expenses such as CE Courses, Mal Practice Insurance, License Fees and Supplies or Equipment you may have purchased.
• Consider setting up a 401k or SEP for your S Corp and the optimal amount. This should be discussed with your advisor to ensure the that in trying to save taxes you don’t end up over paying in SS or Medicare
• Calculate and see if you are able to take advantage of the new TCJA business deduction.

Dental Practice Owners

• Consider timing of equipment purchases and whether Section 179 or full Depreciation.
• Consider Reasonable Salary consideration
• Is a Turbo Charged Retirement Plan the best option for you?
• Does an Income Splitting strategy work for your situation?
• How can you tie in an Accountable Plan to your strategy?
• Can you prepay Vendor invoices
• Calculate and see if you are able to take advantage of the new TCJA business deduction.
• Optimize Vehicle Deduction using the Accountable Plan

This year proves to be the most interesting with the current tax changes. If you are a Virjee Consulting client we will already be reviewing the strategies listed above in addition to other moves. If you not a Virjee Consulting client, feel free to reach out to us to see if we can help provide you the tax and business consulting needed to maximize your tax savings and cash flow for your Dental business.

Here’s to your best financial future ever!

Written by Omar Virjee, CPA. For more information on our services, please feel free to contact one of our Dental CPA team members by calling 713-396-3172 or emailing omar@virjeeconsulting.com

Disclaimer- Advise in this blog should not be taken as tax advise. Each person’s tax circumstance is different and unique. Using these strategies without full knowledge of the current IRS rules and regulations regarding the specific items discussed can result in heavy fines, penalties and interest. Please discuss the guidance in this document with a tax expert before making any decisions.

As most of you have probably heard, President Trump signed the Tax Reform Bill rolling out some of the largest Tax Reform since the Reagan Administration. The key question is how will this impact dentists operating their own practice and/or working as Independent Contractors.

Dental Practice and Dentists working as Independent Contractors are considered Businesses providing Professional Services.

Impact on Income Tax

Most dentists will see their income tax rates decrease 1%-2%. However there are many dynamics at play, for example if you have children and dependents, you no longer get exemptions which were used to lower the overall tax owed.

If you are single and you did not itemize your deductions in the past you will see a bigger standard deduction this year ($12,000 for vs $6,300 for 2017 ).

Each scenario will be different, as we do tax planning throughout the year we will look for opportunities that will maximize the return.

Section 199A Business Tax Deduction

Under the new law businesses now get a 20% Tax Deduction.  This is huge! However before we get excited there are specific restrictions on businesses that perform “professional services”, such as dentists. (By the way Accountants are in the same bucket so we feel your pain.)

 

The Rules (Summary and Simplified Version)

**The Pass Through Deduction is 20% of net qualified business income. (Lesser of the 2 calculations Below)

• 20% of the Tax Payers Qualified Business Income
• Greater of 50% of the W2 Wages Paid Out or the sum of 25% of the W2 Wages paid plus 2.5% of the value of all qualified property.

But Not Greater than:

• 20% of Taxable Income

Here is the kicker for Dentists.

If you are Single and your Business Income is less than $157,500- you may qualify for the full deduction. For Income between $157,500 and $207,500, the tax deduction is reduced in a linear manner. if your over $207,500, than the deduction is zero. So if your a single contractor that earns $150k a year and we run payroll for your S Corp of $60,000 per year- You could get a $30,000 tax deduction, which is a little over $5,000 in tax savings. Huge! However if you earn $215,000 a year you get nothing.

For Married the Limits are – under $315,000 income for you and your spouse- you qualify for the deduction. Over $415,000 for you and your spouse- You get zero.

With most dentists earning more than these limits, it will be a challenge to get this extra tax deduction.

Corporate Rates Dropping to 21%. Should Dentists switch to C Corporations?

The quick answer is no. C Corporations may have lower tax rate than most successful dental practices, however remember C Corporations are taxed twice. The second tax which is in the 15% range pushes the total tax paid up over the current S Corp Structure.

 

Forward looking Tax Planning Tips

• Property Tax Deductions will be limited in 2018. Prepay 2018 Property Tax in 2017 to get the deduction now.
• Charitable Deduction maybe limited due to the higher standard deduction in 2018. Prepay Charitable Contribution for 2018 in 2017, if you commonly itemize, and your itemized deductions are higher than standard deduction for 2017.  (Over $12,700)

2018 Tax Planning

If you are part of our accounting and tax planing package, we will advise on how much estimated tax payments should be for 2018, based on the new rules. Based on individual circumstances, we will advise on opportunities to lower your taxable income if you are close enough to the lower range, to qualify for the 20% Business Tax Deduction.

 

Thank you and we hope you have a Happy New Year!

Here’s to your best financial future ever!

 

 

Written by Omar Virjee, CPA. For more information on our services, please feel free to contact one of our Dental CPA team members by calling 713-396-3172 or emailing omar@virjeeconsulting.com

Disclaimer- Advise in this blog should not be taken as tax advise. Each person’s tax circumstance is different and unique. Using these strategies without full knowledge of the current IRS rules and regulations regarding the specific items discussed can result in heavy fines, penalties and interest. Please discuss the guidance in this document with a tax expert before making any decisions.

New Tax Laws have been proposed by the Republican’s last Thursday. Dentists and Dental Practices setup as S Corporations are asking, “How will this affect them” At Virjee Consulting, we have been following the proposed tax bills closely.

Below are some key points:

1. If your LLC or S Corporation provides professional services such as accounting, medical, dental, legal, ect, there won’t be any changes to the way you are taxed.
2. S Corporations for Dental Practices are considered “professional service businesses”.
3. We don’t expect major changes when it comes to personal taxes, even with the changes in the tax brackets.

What you should do?

Continue business as always.

If you are looking at a large end of year tax bill than consider making the following moves prior to year end:

• Look to pre purchase dental supplies,
• Purchase a equipment that you need for your practice
• Repair your office. Note- if you replace something in your practice it has to be deprecated over time. If you make repairs, you can deduct it the same year.
• Take your CPE
• Make sure your keeping track of business miles so you can deduct them through the Accountable Plan

We will continue to follow the proposed bill and will let our clients know if any changes will effect Dental Contractors operating as S Corporations or Dental Practices setup as PLLC and/or S Corporations.

 

Here’s to your best financial future ever!

Written by Omar Virjee, CPA. For more information on our services, please feel free to contact one of our Dental CPA team members by calling 713-396-3172 or emailing omar@virjeeconsulting.com

Disclaimer- Advise in this blog should not be taken as tax advise. Each person’s tax circumstance is different and unique. Using these strategies without full knowledge of the current IRS rules and regulations regarding the specific items discussed can result in heavy fines, penalties and interest. Please discuss the guidance in this document with a tax expert before making any decisions.

Happy February Dental Professionals

 

 

Below are a few key mistakes most Dental Professionals make that cost them thousands each year.

Mistake #1

Dentists working as Interdependent Contractors- Failing to form a S Corporation or Not using their S Corporation Correctly.

Tips

• If you have not formed a S Corporation you are possibly over paying taxes by several thousand each year.
• Use S Corporation structure to take advantage of lower self employment taxes, employee reimbursement of home office and miles driven, structuring a 401K to shelter your income from high taxes during your young years.
• Work with a Dental CPA that will advise you on how much salary your S Corporation should pay you from your contractor income
• Plan out your tax payments through out the year so you do not end up owing thousands in taxes when you file your taxes

Mistake # 2

Dentists Starting a new Dental Practice using a S Corporation Structure

• Using a S Corp Structure to purchase a new practice or building a new practice
  • A S Corporation  is not the best structure to purchase or build a practice. There are key deductions a new practice can take when it comes to equipment and build out. These deductions are limited under a S Corp based on how much basis you have in the business.
• A good team of advisers can be your greatest investment as they will save  your more in taxes along with help increase your practice profitability, much more than you would pay in fees.

   

  Virjee Consulting is a CPA firm that focuses on the Dental Industry. We work with dentists across the country at every point during their career. We have built our practice on the mission to help dentists save taxes, improve practice productivity and retire successfully.

  Here’s to your best financial future ever!

  

  Written by Omar Virjee, CPA. For more information on our services, please feel free to contact one of our Dental CPA team members by calling 713-396-3172 or emailing omar@virjeeconsulting.com

  Disclaimer- Advise in this blog should not be taken as tax advise. Each person’s tax circumstance is different and unique. Using these strategies without full knowledge of the current IRS rules and regulations regarding the specific items discussed can result in heavy fines, penalties and interest. Please discuss the guidance in this document with a tax expert before making any decisions.

There are several ways a owner can improve the profitability of their dental practice. Despite what most dental practice owners want to believe, when you own your own practice you are running a business. It is near impossible to run a business with out having good solid numbers to guide your decision making. Below are some great tips practice owners should consider for the new year.

1: Clean Record Keeping:

With out clean records not only are you driving in the dark but you open your self up to many other issues. Your Quick books file should balance to your tax return. Most dentists depend on selling their practice as part of their retirement. It’s important to remember that a buyer and their advisers will want to comb through your quick books file. If your Quickbooks file is a  mess, your practice will sell for considerably less. This is because the buyer has no way of knowing the true profitability of the practice they are purchasing. If your practice is worth $600,000 and the offers you are getting are $540,000, that is a significance loss in value simply because you cant prove the profitability of your practice. This is something we see very often in the industry.

 

2. Goal setting and Bench marking

This is a important business process. You should set quarterly if not monthly goals for production and collection and benchmark them against what most practices do. The goals you set for Production, collection, overhead expenses, lab costs, dental supplies and other categories should be shared with your team. The team should be given a goal and incentive’s to reach that goal as a part of a broader goal for the practice. Lets say your currently collecting 80% of your production, if you set the goal with the team as 85%- a practice producing $600,000 in production that increases their collections by 5% is $30,000 that falls straight to your bottom line and therefore into your pocket. This is the power of bench marking and goal setting.

 

3:Have a solid team of advisers

No business owner becomes a success with out a solid team to support them, as everyone has their own expertise. Your team of advisers should include a CPA that concentrates on the dental industry, a Certified Financial Planner that works with dental and medical professionals to map out a financial and retirement plan for you and your practice. Having professionals such as these allow you to have clean numbers to run your practice, tax strategies to lower the tax on you and your practice, retirement plan strategies to put more money from your practice into retirement accounts with out paying tax on them. If structured correctly many practices can save $5,000-$25,000 in taxes alone if a proactive plan is put into place. 

A good team of advisers can be your greatest investment as they will save  your more in taxes along with help increase your practice profitability, much more than you would pay in fees.

 

Virjee Consulting is a CPA firm that focuses on the Dental Industry. We work with dentists across the country at every point during their career. We have built our practice on the mission to help dentists save taxes, improve practice productivity and retire successfully.

Here’s to your best financial future ever!

Written by Omar Virjee, CPA. For more information on our services, please feel free to contact one of our Dental CPA team members by calling 713-396-3172 or emailing omar@virjeeconsulting.com

Disclaimer- Advise in this blog should not be taken as tax advise. Each person’s tax circumstance is different and unique. Using these strategies without full knowledge of the current IRS rules and regulations regarding the specific items discussed can result in heavy fines, penalties and interest. Please discuss the guidance in this document with a tax expert before making any decisions.