Dentists, like any other business owner, have to worry about the financial aspect of their practice. This includes keeping track of their income and expenses, preparing and filing taxes, and making sure they are operating in a financially healthy manner. While some dentists may be able to handle these tasks on their own, it is often beneficial to work with a dental specialized CPA and accounting firm.
A dental specialized CPA and accounting firm has expertise in the unique financial needs of dental practices. This means they understand the specific tax laws and regulations that apply to dentists, as well as the typical income and expense streams of a dental practice. This specialized knowledge can help ensure that dentists are taking advantage of all available tax deductions and credits, and are properly reporting their income and expenses.
Working with a dental specialized CPA and accounting firm can also help dentists save time and hassle. These firms can handle all of the financial tasks for the dental practice, freeing up the dentist to focus on providing dental care to their patients. This can be especially helpful for dentists who are not trained in accounting and finance, or who simply do not have the time or inclination to handle these tasks on their own.
Another benefit of working with a dental specialized CPA and accounting firm is the peace of mind it can provide. These firms are knowledgeable and experienced in their field, and can provide assurance that a dentist’s financial affairs are being handled properly. This can help dentists avoid mistakes and costly errors that can have negative consequences for their practice.
In addition to their specialized knowledge and expertise, dental specialized CPA and accounting firms can also provide valuable guidance and advice on financial matters. This can include help with creating a budget, setting financial goals, and identifying areas where the dental practice can improve its financial performance. This type of guidance can be invaluable for dentists who want to grow and succeed in their field.
In conclusion, dentists should consider working with a dental specialized CPA and accounting firm to help manage the financial aspects of their practice. These firms have specialized knowledge and expertise that can help dentists save time, avoid mistakes, and ensure their practice is operating in a financially healthy manner. In addition, these firms can provide valuable guidance and advice to help dentists grow and succeed in their field.
Questions? Please email us at mail@cpa4dds.com or call us at 425.216.1612
3015 112th Ave NE, Suite 210
Bellevue, WA 9804
STUDY CLUBS
If you would be interested in having us speak at one of your upcoming Study Club events, we would be happy to do so. Online meetings are available. Contact our office for more details: mail@cpa4dds.com
Bookkeeping is an essential aspect of running a successful dental practice. It involves keeping track of the financial transactions of the business, including income, expenses, and profits. Proper bookkeeping allows dental practices to monitor their financial health, make informed decisions, and meet their financial obligations.
Bookkeeping for dental practices typically involves recording transactions in a system of accounts, such as a general ledger or accounting software (we utilize QuickBooks Online). This is a separate system from the office’s patient management system (think Dentrix or Open Dental). While the patient management system records production and collections, the QuickBooks Online accounting system is synced with bank, credit card and loan accounts. It’s best practice to have separation of accounting functions in an office- never let an office manager have direct access to your private bank information. Using a modern cloud accounting system like QuickBooks Online (QBO) allows dental practices to classify and organize their financial information into categories, such as revenue, expenses, and assets.
One of the key aspects of bookkeeping for dental practices is tracking income. This includes recording payments from patients, insurance companies, and other sources of revenue. It is important to accurately record income in order to properly calculate the profitability of the practice. Some of this information is recorded in both the patient management system, and again in the QuickBooks Online accounting software. The final collected revenue in these two separate systems should reconcile (match) at the end of the year.
Expenses are another important aspect of bookkeeping for dental practices. This includes tracking the costs of running the business, such as dental supplies, rent, salaries, and utilities. By tracking expenses, dental practices can monitor their spending and identify areas where they can save money. Salaries are the largest expense line item in running a practice and one that the owner has the most control over. Sometimes an owner will “over staff” their office by mistake, which will result in lower profitability. Partnering with a skilled dental practice business advisor like us can help discover if you have a “right-sized” staff model for your revenue level.
Profit and loss statements, also known as income statements, are a crucial tool for dental practices to monitor their financial performance. These statements show the practice’s income, expenses, and net profit (or loss) over a given period of time. By regularly reviewing these statements, dental practices can make adjustments to improve their profitability.
Another important aspect of bookkeeping for dental practices is tax compliance. This involves accurately tracking income and expenses in order to properly report taxes to the government. Dental practices must also keep records of their financial transactions in case they are audited by the Internal Revenue Service (IRS). Income tax audits can become huge issues if you don’t have clean and accurate bookkeeping records. We recommend owners follow strict guidelines for keeping business and personal expenses separate. The IRS has increased funding and will be pursuing more audits in the next decade.
In conclusion, bookkeeping is an essential part of running a successful dental practice. It allows practices to track their income, expenses, and profits, and make informed decisions about their financial health. By properly managing their bookkeeping, dental practices can ensure their financial stability and compliance with tax laws.
Questions? Please email us at mail@cpa4dds.com or call us at 425.216.1612
3015 112th Ave NE, Suite 210
Bellevue, WA 9804
STUDY CLUBS
If you would be interested in having us speak at one of your upcoming Study Club events, we would be happy to do so. Online meetings are available. Contact our office for more details: mail@cpa4dds.com
December 1, 2022 – Distribute a notice of eligibility to all eligible employees (for 401k Plans)
RETIREMENT PLAN LIMITS
Type
Max Deferral
IF 50+
SIMPLE
$14,000
$17,000
401k
$20,500
$27,000
IRA
$6,000
$7,000
The 2022 maximum total contributions to a defined contribution plan (401k/Profit Sharing, SEP) is $61,000 or $67,500 with an over 50 catch-up contribution.
We encourage our clients to review their retirement plan every few years to be sure they are utilizing the most advantageous plan available.
YEAR END ITEMS TO BE ON THE LOOK OUT FOR
Reporting of Self-Employed Health Insurance Premiums for S Corporation Shareholders: the total premiums paid must be reported as wages on Form W-2. We will be in touch early December to be sure you have reported for 2022.
2023 Salary Schedules for S Corporations or Family Members on Payroll: For those whom we provide recommended salary and withholding levels, updated schedules will be sent to you in mid-December. Be sure to watch for this important document and have it established with your payroll company for the first payroll run in 2023. (We do not automatically enter this data to your payroll provider so you or your bookkeeper will need to do so).
Depreciation Schedule Clean-Up: Near the end of the year, we will be sending you a copy of your most recent depreciation schedule, which lists all the assets currently in use by your practice. Reviewing this and letting us know of any assets that are no longer in service – whether sold, scrapped, broken, obsolete, etc. – is key to making sure we capture all depreciation deductions. If we prepare your annual Personal Property Affidavit, this is also the same schedule that the county uses to assess your personal property taxes.
Deferred payroll taxes
For those who took advantage of the pandemic assistance that allowed some employers to defer 2020 payroll taxes, the time is almost here to pay in all such taxes. The temporary relief allowed for 50% of the deferred amount to be paid back by December 31, 2021, and the remainder is due on December 31, 2022. Most payroll companies do not automatically process these payments, so it is up to the employer to make sure these are paid back in full by the final deadline.
HHS Reporting – Round 3
Yet another reminder of the reporting requirements for those who received funds from the HHS Provider Relief Fund. Round 3 of the reporting is for those who received funds between January 1, 2021, and June 30, 2021. Most dentists received funds under the program in an earlier period, so this will only apply to a small number of our clients.
The next reporting phase opens on January 1, 2023, but again it would be very rare for any dentists to fall under this window.
ASSET PURCHASES AND TAX DEDUCTIONS
Year-end tax planning is a crucial step in managing your tax bill for 2022 and establishing your safe harbor required tax payments or withholding for 2023. Many dentists are aware that fixed asset purchases along with accelerated depreciation is a useful tool to reduce your taxable income. This year it is especially important, as bonus depreciation will no longer be 100% of the asset starting January 1, 2023. It will reduce to 80% in 2023, 60% in 2024, and continue to reduce another 20% each year.
However, you should also be aware of the “placed in service rule” that applies to dental equipment and other “fixed assets”. In general, fixed assets are those items expected to last longer than a year in the practice – such as dental equipment, office furniture and fixtures, etc. and cost more than $500 per unit. To be considered “placed in service” the item must be delivered and placed into a state of readiness. It is not required the item actually be used; rather, just usable.
Consider Equipment Order Lead Times: With less than three months left in 2022, if you plan to place equipment in service and deduct its cost this year, you will want to consider ordering as soon as possible. Documenting placement in service can be done with an installation receipt or photograph that includes the date (computer, cell phone, etc.)
Of course, we would urge caution against buying assets solely for a tax deduction. Such purchases should only be for items that you know you will need or have been thinking about buying. Particularly for S Corporation owners, you should also be mindful of your “tax basis” in your practice, which could potentially limit the amount of deductions you can take in a given year. Your basis increases with taxable income and money put into the company. It decreases with losses or deductions as well as distributions taken out of the company. Your basis cannot fall below zero, so if you have losses or large distributions, this could result in some unintended tax consequences. Ask your account manager if you are unsure of your basis amount.
Questions? Please email us at mail@cpa4dds.com or call us at 425.216.1612
3015 112th Ave NE, Suite 210
Bellevue, WA 9804
STUDY CLUBS
If you would be interested in having us speak at one of your upcoming Study Club events, we would be happy to do so. Online meetings are available. Contact our office for more details: mail@cpa4dds.com
Under the CARES Act, employers who received a PPP loan were not eligible for the Employee Retention Tax Credit (ERTC). This qualification was repealed with the Consolidated Appropriation Act of 2021. Below is a summary of the key provisions of the credit, reflecting changes made by the new law:
Time period credit is available
Qualified wages paid after March 12, 2020, and before July 1, 2021
Eligibility requirements for 2020
Applies to wages paid by a business with operations that were either fully or partially suspended by a COVID-19 governmental order and only for wages paid during the period the order is in force;
OR
Applies to wages paid during 2020 beginning with the any quarter where gross receipts were less than 50% of gross receipts for the same quarter in 2019, and including each subsequent quarter until after the quarter in which gross receipts are greater than 80% of gross receipts for the same quarter in 2019.
Eligibility requirements for 2021
Applies to wages paid by a business with operations that were either fully or partially suspended by a COVID-19 governmental order and only for wages paid during the period the order is in force;
OR
Applies to wages paid during the first two quarters of 2021 where gross receipts are less than 80% of gross receipts for the same quarter in 2019 (or 2020 if not in business in 2019).
Amount of credit
2020 – Credit is 50% of qualified wages paid to an employee, plus the cost to continue providing health benefits to the employee. Annual cap of $5,000 per employee.
2021 – Credit is 70% of qualified wages paid to an employee, plus the cost to continue providing health benefits to the employee. Quarterly cap of $7,000 per employee for each of the first two quarters of 2021 for a possible $14,000 credit per employee. The 2021 credit is available even if the employer received the $5,000 credit for wages paid to such employee in 2020.
Size of employer
2020 – A company with 100 or fewer full-time equivalent employees is eligible for the credit, whether or not the employee was working. A company with more than 100 employees can only take the credit for wages paid to an employee who is not working.
2021 – A company with 500 or fewer full-time equivalent employees is eligible for the credit, whether or not the employee was working.
PPP loan interplay
Employers that received a PPP loan in 2020 are now eligible to take the ERTC, so long as the same wages are not used for both the credit and PPP loan forgiveness. In other words, if there were wages paid during the PPP loan 24-week period that exceed the amount needed to achieve 100% PPP loan forgiveness, then these additional wages can be used for the ERTC as long as the business otherwise qualifies for the credit.
Kevin manages marketing & business development at Dental Accounting Professionals LLC.
As you may have already heard, the newest round of COVID-19 Stimulus was signed into law on December 27th, 2020. The new Act created another PPP loan opportunity for qualifying businesses. We believe many dental clinics will qualify for a second forgivable PPP loan. The new SBA & Treasury interim guidance was released late last night, January 6th, 2021. Some key points regarding the Second Draw PPP Loan:
Must have fewer than 300 employees
Maximum loan amount will be $2 million
Must have had a reduction of 25% or more in gross receipts (see information below regarding gross receipts) in any one quarter in 2020 over that same quarter in 2019. Most dental clients should be able to qualify with Q2 2020 vs Q2 2019.
Has used, or will use, the full amount of its First Draw PPP Loan on or before the expected date on which the Second Draw PPP Loan will be disbursed
Business has been in operation by Feb 2020 or earlier (start-ups in Q1 2020 would compare Q2, Q3 or Q4 2020 to Q1 2020 gross receipts to calculate the 25% reduction requirement)
Deadline to apply: March 31, 2021
I recommend you REACH OUT TO THE LENDER WHO HELPED WITH YOUR PPP ROUND 1 if you have not done so already. They will help you through the process to determine if you qualify. If you need a referral to a local lender, please let us know and we will introduce you to a few contacts who have been amazing to work with.
One concern that we have been discussing with our banking & legal network is what is considered “Gross Receipts.” Some dentists received sizable grants (including the HHS stimulus) during the mandated Q2 2020 shutdowns, which in some cases have increased the total income above the 25% reduction qualification. The amount of any forgiven First Draw PPP Loan shall not be included toward any borrower’s gross receipts test, however, grant money/HHS stimulus may count as gross receipts per the SBA & Treasury guidance released last night.
Per the SBA and Treasury guideline:
Ҥ 121.104 РHow does SBA calculate annual receipts?
(a)Receipts means all revenue in whatever form received or accrued from whatever source, including from the sales of products or services, interest, dividends, rents, royalties, fees, or commissions, reduced by returns and allowances. Generally, receipts are considered “total income” (or in the case of a sole proprietorship “gross income”) plus “cost of goods sold” as these terms are defined and reported on Internal Revenue Service (IRS) tax return forms (such as Form 1120 for corporations; Form 1120S for S corporations; Form 1120, Form 1065 or Form 1040 for LLCs; Form 1065 for partnerships; Form 1040, Schedule F for farms; Form 1040, Schedule C for other sole proprietorships). Receipts do not include net capital gains or losses; taxes collected for and remitted to a taxing authority if included in gross or total income, such as sales or other taxes collected from customers and excluding taxes levied on the concern or its employees; proceeds from transactions between a concern and its domestic or foreign affiliates; and amounts collected for another by a travel agent, real estate agent, advertising agent, conference management service provider, freight forwarder or customs broker. For size determination purposes, the only exclusions from receipts are those specifically provided for in this paragraph. All other items, such as subcontractor costs, reimbursements for purchases a contractor makes at a customer’s request, investment income, and employee-based costs such as payroll taxes, may not be excluded from receipts.”
Please contact Kevin Bray at Dental Accounting Pros as questions arise.
Kevin manages marketing, business development, and customer success for Dental Accounting Professionals LLC & Benton Bray PLLC. He is highly analytical, creative, and forward thinking in his approach to working with clients. His background is in commercial real estate with a focus in dental office leasing and investment sales. Kevin’s passionate about investing for the future and implementing new technologies to streamline outdated workflow processes to increase bottom line results.
As we have been working through 2020 tax projections with clients, we are seeing many offices have higher taxable income and tax liabilities over 2019 performance, despite the COVID shutdown. This is somewhat counter to expectations and a surprise to some practice owners. The causes for the added income are the PPP funds, the HHS Provider Relief Funds and other grant funds – all adding to taxable income. Tax mitigation with charitable giving, equipment purchases & retirement plans should be part of the conversation today. If your tax advisor is not going through a tax planning exercise now, you may be in for a surprise come April 2021.
We want to give the Washington Academy of General Dentistry a special thanks for all of their hard work during this ongoing pandemic. They went above and beyond during the mandated COVID shutdown this year by providing virtual CE for free to dentists across the country. They dedicated a huge amount of time and resources towards serving the needs of the industry during a time of great uncertainty. The wealth of information the AGD broadcast was invaluable. We participated in that cause to provide insight from our CPA team on the CARES Act, PPP Loans and additional stimulus for dentists. We saw firsthand how much effort the team at the Washington AGD put forth. A round of applause for the AGD team and volunteer colleagues that did a fantastic job. As you know, the WAGD is a non-profit organization. That means your donations to the AGD are tax deductible. The AGD needs our support now more than ever! So please consider a donation to your association and get a bonus tax deduction.
Temporary suspension of limits on charitable contributions in 2020 as part of the CARES Act
If you take the standard deduction on your 2020 tax return (the one that you’ll file in 2021), you can claim a brand new “above-the-line” deduction of up to $300 for cash donations to charity you make this year. Normally, you would have to itemize on Schedule A to get a tax break for charitable donations.
If you itemize deductions on your tax return, you can claim a deduction for your charitable donations. However, the amount you can deduct for cash contributions is generally limited to 60% of your adjusted gross income (AGI). Any cash donations over that amount can be carried over for up to five years and deducted later. The CARES Act lifts the 60% of AGI limit for cash donations made in 2020 (although there’s still a 100% of AGI limit on all charitable contributions). That means itemizers can deduct more of their charitable cash
contributions this year. If your taxable income is higher than expected, consider bunching (pre-paying) some of your 2021 charitable donations into 2020.
Equipment Purchases
The various depreciation rules available to business owners allows for the rapid deduction of capital expenditures for equipment and office remodels by permitting the entire write-off of the capital investment, even if financed. The trigger for the write-off is getting the asset in-service by year-end. If your practice is in need of some equipment upgrades or added technology, make those investments and get the new equipment delivered and installed by year-end for an immediate tax write-off.
Additional Retirement Planning with a Cash-Balance 401k
If you are a high-income practice owner and want to accelerate your retirement saving plans (and save even more on taxes!), this is a strategy to consider. With a traditional 401k/401k profit sharing plan, your contributions are capped at $57,000 (or $63,500 if age 50 or older). With a cash-balance 401k your contribution limit is significantly increased. It’s based on an actuarial calculation, but in many cases an owner can contribute over $150k+ each year. Remember, this is a pre-tax contribution! The deadline to setup a Cash-Balance 401k plan for tax year 2020 has been extended because of COVID. Traditionally you had to have the plan formed by the end of the calendar year. Now you have until the due date of your tax return (including extensions). You also do not have to fund the contributions until the extended due date of your return (September 15th or October 15th, 2021). This allows ample time to plan and set money aside with future cash-flow and get a 2020 tax deduction.
In conclusion, every practice owner should be setting aside time now to act on tax mitigation strategies. This year has proven to be hard for business owners across the country, but especially for non-profits since the traditional fundraising events have been cancelled. Remember to support your local charities & non-profits (including the Washington AGD)!
Kevin manages marketing, business development, and customer success for Dental Accounting Professionals LLC & Benton Bray PLLC. He is highly analytical, creative, and forward thinking in his approach to working with clients. His background is in commercial real estate with a focus in dental office leasing and investment sales. Kevin’s passionate about investing for the future and implementing new technologies to streamline outdated workflow processes to increase bottom line results.
There is more to our profession than “dropping numbers in boxes”
There is more to our profession than “dropping numbers in boxes” and filing tax returns once a year. We are more than your average accountant, CPA, EA or Bookkeeping professional. We pride ourselves in our bench of knowledge, client obsession and proactive approach. We are students of the business of dentistry. Through working with only dentists and staying up-to-date with compliance rules, best business practices and industry trends, we are able to consult with our practice owners and help guide them to greater financial success.
Not all CPA’s are created equal. We focus on business, specifically the business of dentistry. We also work with high net-worth family groups and real estate owners through our affiliated company, Benton Bray PLLC. Through this experience, we are able to bring an extra layer of advisory and estate planning to our engagements. We are fortunate to have curated an awesome team of accounting professionals. We collaborate daily and are always working hard to level up our skills and knowledge base.
We build communication into our engagements and perform a mid-year and year-end tax projection so there are no surprises. We are also available as-needed to additional business advisory meetings. If we also partner with other industry consultants to support our clients.
If you are ready to take your practice to the next level, contact our team to schedule an intro Zoom meeting to discuss.
Kevin manages marketing, business development, and customer success for Dental Accounting Professionals LLC & Benton Bray PLLC. He is highly analytical, creative, and forward thinking in his approach to working with clients. His background is in commercial real estate with a focus in dental office leasing and investment sales. Kevin’s passionate about investing for the future and implementing new technologies to streamline outdated workflow processes to increase bottom line results.
Since March 17th, we have been proactively distributing information to our clients and the larger dental community through our partnership with the Washington Academy of General Dentistry.
We’ve invested thousands of dollars worth of our billable hour time on these webinars. Our team has read the 800+ page CARES Act statute and additional SBA & Treasury Department guidance as it becomes available. We’ve held numerous meetings and discussions internally and externally with industry attorneys and bankers. We are working hard to help our clients navigate this crisis. Information changes every week as more guidance from the SBA & Treasury Department gets released.
Here are links to our previous webinars and Prezi presentations regarding the CARES Act.
Disclaimer: What follows next is general information and not legal or accounting advice. We are not your attorney or CPA and every situation is different. You should call your attorney or CPA for specific advice with regards to the topics of this presentation. If you are not receiving the guidance you need, we can entertain bringing you on as a paying client.
Since our last update on April 15, 2020, we have received additional guidance from the Treasury Department & SBA in regards to PPP loans and state governments across the country are outlining phased opening of the economy.
Today we are going to cover:
A. Paycheck Protection Program Loans: Additional Regulatory Guidance B. Paycheck Protection Program Loans: Forgivable Loan Calculations C. Unemployment Benefits for Owners and Self-Employed: Dealing with Application Headaches D. Getting Back in Business: Covid 19 Safety Protocols & Overcoming Patient’s Safety Concerns
Kevin manages marketing, business development, and customer success for Dental Accounting Professionals LLC & Benton Bray PLLC. He is highly analytical, creative, and forward thinking in his approach to working with clients. His background is in commercial real estate with a focus in dental office leasing and investment sales. Kevin’s passionate about investing for the future and implementing new technologies to streamline outdated workflow processes to increase bottom line results.
Disclaimer: What follows next is general information and not legal or accounting advice. We are not your attorney or CPA and every situation is different. You should call your attorney or CPA for specific advice with regards to the topics of this presentation. If you are not receiving the guidance you need, we can entertain bringing you on as a paying client.
Since our last update on April 1, 2020, the CARES Act PPP loan program has launched and we have received additional guidance from the Treasury Department.
Today we are going to cover:
A. Paycheck Protection Program (PPP) Loans B. Unemployment Benefits for Owners C. EIDL Grants D. Extended Tax Deadlines E. General Update on: Retirement Plan Distributions, Status of Add-On Relief Legislation, and When Will Businesses Reopen
Kevin manages marketing, business development, and customer success for Dental Accounting Professionals LLC & Benton Bray PLLC. He is highly analytical, creative, and forward thinking in his approach to working with clients. His background is in commercial real estate with a focus in dental office leasing and investment sales. Kevin’s passionate about investing for the future and implementing new technologies to streamline outdated workflow processes to increase bottom line results.
