Smile … New Tax Form Due Dates Are Coming

Changes, like teeth cleanings and taxes, are just a part of life, which is why you really shouldn’t be surprised to learn that many of the tax form due dates you have grown accustomed to are changing. And, if you want to avoid penalties, you will need to be ready to file your personal and practice’s tax forms on time beginning with the tax forms you file with the IRS next year (2017).

Visit Dear Drebit to learn more about the changes.

Have questions about how these due date changes impact your dental practice? Email the Bright Dental CPAs at Rea & Associates to learn more.

Filing a Tax Extension is Not a Scary Thing

Filing Tax ExtensionAnother tax season is in the books. How did it go? It seems that tax season is a busy and stressful time for any dental practice. To help ease the burden of tax season have you thought about filing for a tax extension?

Many people think that filing a tax extension is a bad thing as it will increase their chances of an audit. That is actually not the case and filing an extension may actually be a good thing for you and your dental practice.

Top reasons why you should file for a tax extension:

  1. The time of the year is very busy for dental practices.
    Taxes are not the only thing keeping you busy during this time of the year. It is the holiday season. The tax filing season is similar to school vacations for both colleges and high school. There are patients trying to get into the office during breaks and your own family might be planning a getaway as some holidays can fall before April 15th. Filing for an extension can help you better focus on your dental practice and your own family.
  2. Both you and your accountant are not rushed.
    It seems that as April 15 gets closer, there is a ton of stress coming along with it. You need to gather things you forgot to get the accountant and you just wish you could take a few more days to look everything over. The old saying ‘making sure you get every deduction is sometimes only possible if you take your time and review everything before sending to your accountant. By filing an extension, some of that stress can be removed as you and your accountant won’t feel so rushed to get your taxes done. You can have additional time to really look over everything and make sure you’re getting the best refund possible. It may be to your advantage to work with your accountant after filing season so you can focus better on what you did for them.
  3. Make sure you have the money you need set aside for your retirement.
    The extension is an extension to file your return; it isn’t an extension to have the estimated amount of taxes paid in by April 15th.  Also, an extension is an extension to pay your retirement plan contribution, such as your profit sharing plan, defined benefit, or your SEP IRA.  (NOT Traditional IRAs or ROTH IRAs).  The extension gives you more time to file your retirement plan contribution while still deducting it for tax purposes in the prior year.

Contact Our Dental Practice Professionals 

Thinking about filing a tax extension next year, but still not sure if is the best approach for your dental practice? Contact Rea & Associates. Our team of bright dental CPAs can work with you to determine the best way and time to file your taxes.

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Unconventional Tax Planning For the Young and the “Older” Dentist

Dental Tax PlanningYou may find that as you manage your dental practice, there’s always a “right way” to doing something. But when it comes to dental tax planning, that’s not necessarily the case. When you think of tax planning, you probably think about ways to save money and minimize the amount of taxes you have to pay. But did you know that doing just the opposite may provide better long-term results for you and your dental practice?   

Tax Planning for Dentists

Traditional tax planning includes two common techniques, accelerating deductions and deferred income.  These are often strategic methods used to minimize taxes, but there are two situations when doing the exact opposite may be better for you.

How Accelerating Deductions May Not Be Right for Your Dental Practice 

Recently, I began working with a younger dentist that purchased a practice a couple years ago. His previous financial advisor chose to expense all of the cost allocated to equipment in the year of purchase.  This provided a wonderful tax refund for the dentist. However, what was not discussed and planned for was the whiplash effect in future years. The purchase of the practice was nearly 100 percent financed. The huge tax expense in the year of purchase was enjoyed without actually spending any cash. Two years later significant payments are being made on the loan and the only expense available is a relatively small amount of interest.

In the first year of the practice, the dentist’s tax rate was below 15 percent. It’s now more than 25 percent. Over a five-year period he may end up having to pay more taxes overall by taking an immediate 100 percent write-off of the equipment. What’s worse is the client had no sense of the impending cash crunch.

When purchasing a significant amount of equipment, particularly when starting into the dental profession, be careful on taking a 100 percent write-off. Better tax savings and more manageable cash flow may be available by spreading the expense over a few years.

When Deferring Income May Not Be Right for You 

The second unconventional technique I’ve used recently affects the retiring dentist. The situation involves accelerating income by either taking IRA distributions or incurring capital gains. Assume you are 64 years old and have sold your practice. Your plan for the next few years is to live off savings in taxable accounts and defer withdrawing from your IRA account until you are forced to at age 70-½. If in the years between 64 and 70 you have very little taxable income, it can be beneficial to take a relatively small distribution from your IRA now and/or sell appreciated stock or mutual funds. While detailed planning needs to be done in this scenario, it is possible to get tax-free capital gains and pay 15 percent or less tax on the IRA distribution.

Why pay tax on the IRA distribution now rather than later? When you turn 70-½ years old, the size of your IRA distribution plus the tax on social security income may actually pushes you into the 25 percent bracket. This means you have to pay more taxes.

Contact Our Dental Practice Professionals 

The only way to achieve the benefits of these unconventional planning techniques is to work with a CPA that understands dental practices and is willing and able to help you plan ahead. Contact Rea & Associates. Our team of bright dental CPAs will be able to work with you to determine when and when not to use these tax planning techniques.

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As we approach the deadline to file corporate tax returns, you’re probably gathering information to give to your dental CPA. Do you have a list that you always use to help remember what to send? Or do you submit a QuickBooks file and let your CPA deal with everything? Whatever the case may be, here are some tax preparation steps you should take before meeting with your dental CPA.

1) Value your investment. Before you send your documents to your tax preparer, consider the value you get from him or her. Are they asking questions? Are they engaged year-round? Are they responsive? Do they know the dental industry? If you answered “no” to any of those questions, you might want to consider looking elsewhere instead of getting stuck in the “same as last year” routine.

2) Fast in … fast out. The sooner you get the information to your dental CPA, the sooner you will get your return completed. This oftentimes means a tax refund could be in your pocket a lot sooner. Don’t let the IRS hold your money when you could be earning interest on it. Why wait? Get your information in now!   

3) Categorize expenses properly in QuickBooks. Rather than just submitting a QuickBooks file and taking a back seat to everything, be sure you’re categorizing expenses properly, so your CPA can take full advantage of all available tax deductions. Did you know you can fully deduct meals and entertainment expenses that are used for the office? So the next time you have a staff meeting with lunch, be sure not to code this to the traditional meals and entertainment line item. By creating a new category in QuickBooks, your CPA will take the full deduction for the expense, which ultimately puts more money in your pocket. 

4) The forgotten deductions can add up. 

  • Are you paying city taxes on corporate profit?
  • Are you taking mileage or actual auto expense deductions?
  • Do you manufacture your own crowns?
  • Do you entertain referral sources or other business connections on the golf course or at a restaurant?
  • Do you pay for any business expenses personally instead of through the corporate bank account?

If the answer was “yes” to any of those questions, consult with your tax advisor to make sure you are taking full advantage of the tax deductions available for these expenses.

5) Schedule a meeting with your dental CPA.  Instead of getting your completed tax return in the mail and filing it away, try something different this year. Have your accountant walk you through the tax return and also discuss other business issues or concerns you may have.  After all, your accountant should be one of your most trusted business advisors.

Contact Our Dental Practice Professionals

Tax season is upon us. Don’t wait until the last moment to file your corporate tax return. Contact Rea & Associates. Our team of bright dental CPAs can help you get your taxes filed smoothly and ensure you are not missing any deductions for your dental practice.