Dental Accounting
Produce More, Profit More, Stress Less.
At TaxFD, we specialize in working with the specific tax needs of dentists. Dentistry, unlike most professions, has significant nuances that require industry specific tax preparation, planning, and advisory services.
Due to our extensive focus in the dental profession, we are constantly staying up to date with the latest trends in technology, practice management, consulting, and financial strategy. We apply this deep dental profession knowledge and tax expertise to our dentist clients throughout all career stages from associateship through ownership.
Dental Solutions We Offer:
Associate
As an associate dentist, you likely have many questions about your future income trajectory and tax liability. As an employee dentist, you may have access to employee benefits through the practice that can have substantial tax benefits to you as an employee. There are also tax savings strategies, such as the Backdoor Roth IRA that must be considered on an annual basis.
Associate dentists often have power to negotiate with their practice on reimbursement for many items that can result in substantial tax savings for both you and the practice. It is important to speak with a dental specific CPA before you sign your associateship agreement, or upon any windows for renegotiation to find tax optimized strategies that can be coordinated with your practice owner.
We answer questions like:
- How much will I save in taxes if I buy a house?
- How does getting married or having kids impact our tax bill?
- How can future practice ownership impact our tax decisions?
- My practice does not have any benefits, can I receive tax benefits for purchasing them myself?
- Is my CE, professional dues, or licensing costs tax deductible?
- What are the tax implications of my student loans?
- Are there tax credits from dental school I can receive?
Independent Contractor
As a 1099 Independent Contractor dentist, you have many unique tax opportunities compared to W-2 Employees. As an independent contractor, you can receive tax incentives and deductions for your qualifying dental business expenses, including meals, CE, licensing costs, equipment, supplies, auto expenses, and more. As dental accountants specializing in independent contractors, we have found the potential tax deductions minimize the overall tax liability for independent contractor dentists as compared to comparable employee dentists.
Along with the tax benefits, comes tax compliance requirements. As an independent contractor, you will not have Federal, State, FICA, Medicare, Unemployment, and Local taxes deducted from your pay automatically, and you will not receive typical employer payments towards these taxes.
This dynamic makes tax planning for independent contractor dentists essential. You need to maintain accurate records, establish a tax plan, and process required tax payments year-round to receive the benefits of being an independent contractor.
We answer questions like:
- What is an independent contractor?
- I heard being an independent contractor is illegal. Is this true and can I get in trouble?
- Should I form my business as an S-Corp or LLC?
- Do I need a business bank account?
- What tax deductions can I receive? How do I track them?
- Can I open a retirement plan? (Hint: Yes, 401(k) plans are very accessible to establish and should always be considered)
- How and where do I find health insurance? Is COBRA Tax Deductible?
- How do student loans impact my work as an independent contractor?
- Should I hire a family member?
- Should I buy a dental practice?
- How much will I owe in taxes?
Start-Up
Congratulations on starting your dental practice. This is an exciting, challenging, and complicated time for every dentist. As a Start-Up Dental Practice, it is extremely easy to get so caught up in the business that you ignore the financial considerations and build bad habits. As dental accountants specializing in Start-Up Dental Accounting, we help you understand the financial responsibilities you have as a practice owner.
- Tax Planning & Preparation — As a new business owner, you have significant opportunity to maximize your tax effectiveness in your first year of operation. We need to consider Roth Conversions, timing of depreciation recognition, capital gain harvesting, business loss carryforwards, and student loan optimization. This planning needs to begin well before the practice opens to maximize first year tax benefits.
- Accounting — Even as a start-up you still have significant business compliance requirements – in fact, it is the same (if not greater) than in established practices. You need to create accurate financial records through ongoing bookkeeping and generate dental-specific financial statements. Many times, this is a requirement from your lender.
- Payroll — You need to process payroll for your employees and account for all required tax withholdings. While there are many online payroll processing companies, startup dental practices need to have professional oversight into the payroll functions of the practice to ensure compliance.
- Entity Formation — As you are opening your practice, you have key considerations behind entity formation decisions. In many states, dentists are required to work as professional corporations or professional LLCs, which strip away many liability protections for clinical negligence or malpractice. If you remain as an associate as you ramp up the practice, we also must consider the overall business and entity level planning decisions with multiple sources of income. Lastly, your initial entity formation election and timing will have a significant impact on your tax bill for years to come.
We answer questions like:
- What business tax deductions do I qualify for?
- What is the breakeven point for the practice? What do I need to generate in production to reach my income goals?
- Am I on track? If not, how do I get on track?
- Do I need to work as an associate? Is the additional income ‘worth it’ after taxes?
- What is the optimal business entity structure to maximize deductions and maximize student loan interest subsidies?
- How much will I owe in taxes?
- Should I hire a family member for tax benefits?
- What benefits should I set up through the practice versus personally?
- Can I open a 401(k) plan to save for retirement?
- Are there specific dental start-up tax opportunities in my first year of ownership?
Acquisition
Congratulations on your decision to acquire a practice and explore practice ownership. This is a massive step in your career. As a practice owner, you’ll find yourself spending less and less time on the clinical matters and expand your responsibilities into management and operations. This change leads to a potential increase (or decrease) in your income based on how well your practice is run on every level.
When acquiring a dental practice, key financial management and accounting considerations must be understood. Breaking out structural versus variable expenses for the practice will allow us to pinpoint key areas to improve financial performance of the practice post acquisition, and determine if production growth, expense reduction, or keeping the status-quo will help you achieve your practice goals.
At TaxFD, we specialize in helping dentists acquiring a practice understand all of the financial metrics of the practice, tax reporting and filing considerations, entity formation decisions, and tax savings opportunities.
- Tax Planning & Preparation — As you are acquiring a practice, you have significant opportunity to maximize your tax effectiveness in your first year of operation. This year will be a huge change in income and, while you are buying an established income stream, your income will likely be less than in future years. We need to consider Roth Conversions, timing of depreciation recognition, capital gain harvesting, business loss carryforwards, and student loan optimization. This planning needs to begin well before the actual acquisition date to maximize first year tax benefits.
- Accounting — Even as a start-up you still have significant business compliance requirements – in fact, it is the same (if not greater) than in established practices. You need to create accurate financial records through ongoing bookkeeping and generate dental-specific financial statements. Many times, this is a requirement from your lender.
- Payroll — Payroll is one of the most important functions when acquiring a practice. Nothing kills employee morale like missing the first payday! You will need to process payroll for your employees and account for all required tax withholdings. As you are establishing payroll procedures, it is important to have professional oversight over all of the payroll functions to ensure proper setup and compliance, continuation of any benefit programs, and accurate payroll tax filings.
- Entity Formation — As you are acquiring a dental practice, you have key considerations behind entity formation decisions. In many states, dentists are required to work as professional corporations or professional LLCs, which strip away many liability protections for clinical negligence or malpractice. The decision to incorporate will impact your accessibility for many tax planning strategies such as family member staffing, student loan optimization, and deduction qualification for owners.
We answer questions like:
- Am I buying a good practice? What should I expect to make?
- How much should I be spending on dental supplies?
- Are employees being paid too much?
- What corporate structure should I institute?
- Can I afford to buy new equipment in the practice? In what year should I buy it?
- Can I buy the building? Is it a worthwhile investment?
- How long can I afford to keep the selling doctor on staff?
- What business tax deductions do I qualify for?
- What is the breakeven point for the practice? What do I need to generate in production to reach my income goals?
- What is the optimal business entity structure to maximize deductions and maximize student loan interest subsidies?
- How much will I owe in taxes?
- Should I hire a family member for tax benefits?
- What benefits should I set up through the practice versus personally?
- Can I open a 401(k) plan to save for retirement? How can I structure it to retain employees?
Established Practice
As experienced dental accountants, we establish a comprehensive tax plan that uncovers dental specific tax deductions, maximizes take home pay, and minimizes the financial stress on the doctor. Most dentists are familiar with many of the typical tax deductions available, but true tax planning intersects personal goals with business tax benefits.
We work with established dental practice owners to first get the books in order and optimize payroll. From there, we understand all managerial aspects of your practice and determine key areas for improvement. This often results in significant expense savings and production increases. Lastly, we develop a tax minimization plan that coordinates your practice objectives, personal lifestyle goals, and family needs.
- Tax Planning & Preparation — As a practice owner, you have significant opportunity to maximize your tax savings. Coordinated business and personal tax planning. Depending on career stage, this can mean setting up a 401(k) retirement plan, establishing Defined Benefit Pension plans, retaining cost segregation studies, creating holding and management companies, or hiring family members on staff. Your tax management strategy is not something that should be reviewed in April, instead it should be reviewed many times throughout the year, and its impact measured over your lifetime tax savings, not just year by year.
- Accounting — You need to create accurate financial records through ongoing bookkeeping and generate dental-specific financial statements. This approach will help you manage your practice in a financially optimal manner and become the foundation for creative tax minimization strategies.
- Payroll — Payroll is one of the most important functions when acquiring a practice. Nothing kills employee morale like missing the first payday! You will need to process payroll for your employees and account for all required tax withholdings. As you are establishing payroll procedures, it is important to have professional oversight over all of the payroll functions to ensure proper setup and compliance, continuation of any benefit programs, and accurate payroll tax filings.
We answer questions like:
- Should I buy or lease a car through my practice?
- Should I buy my practice building or continue leasing?
- How much should I be spending on dental supplies?
- Are employees being paid too much?
- Is my corporate structure optimized for tax and future ownership considerations?
- Can I afford to hire an associate?
- Can I afford to buy new equipment in the practice? In what year should I buy it?
- How will my finances be impacted by bringing on a partner?
- What business tax deductions do I qualify for? Have I been claiming everything and how can I retroactively claim them?
- How much will I owe in taxes?
- Should I hire a family member for tax benefits?
- What benefits should I set up through the practice versus personally?
- Can I open a 401(k) plan to save for retirement? How can I structure it to retain employees?
