If your CPA doesn’t provide dental-specific accounting, by managing tax liability throughout the year, painful tax surprises will arise.
If you're a dental practice owner, tax uncertainty doesn't have to be your tax reality. Bad tax planning also means you won't save money consistently.
WHAT DO DENTAL TAX SURPRISES LOOK LIKE?
A tax surprise is any tax refund or taxes owed over $10,000 in a given year. If this is happening to you, something is broken and your current tax advisor or accounting system is hurting your practice.
- FLAWED TAX ESTIMATES
Most accountants calculate your current estimated taxes based on your prior year profits. This works great for the Q1 payment, but most accountants also fail to evaluate business profitability throughout the year. What happens if you have decent growth and a drop in expenses in a given year?
In a practice that collects $1 million a year your practice's net profit can easily swing more than $100,000. This translates into a $40,000 surprise your accountant didn’t detect.
- INFREQUENT RECONCILIATION OF BOOKS
Most dentists are lucky to meet with their accountant once or twice a year. And when they typically have the “tax-planning meeting” late in the year, much of the opportunity to spot and avoid tax surprises has passed. A semi-annual or quarterly reconciliation won’t cut it.
Outdated numbers lead to a lack of monitoring. This lack of monitoring means your accountant didn’t catch the $100,000 in profit. Instead of celebrating this growth, you now have little time to put together an additional $40,000 to cover a tax surprise.
- IDENTIFYING PROBLEMS TOO LATE
An unexpected increase in profit means new taxes to worry about. Your accountant didn’t identify this problem and now new problems arise. Just as you pay for the mistakes of last year, you will also have to pay the estimate for Q1 this year—the proverbial “double-whammy” of tax season.
HOW DO MOST PRACTICE OWNERS DEAL WITH TAX SURPRISES?
Many dentists deal and accept poor tax planning, but don’t realize how it keeps them from consistently saving enough money for retirement.
In a desperate attempt to cover tax surprises, many owners hoard cash in advance as they prepare for the worst.
- Others just ride the peaks and valleys of thick and thin monthly income waves. They’ll cut THEIR OWN PAY to cover expenses or run the practice accounts thin and this is damaging to everyone. These are cashflow rollercoasters you, your employees and your family should not be subjected to.
HOW CAN FOUR QUADRANTS HELP?
At Four Quadrants Advisory, we plan to avoid tax surprises and calm tumultuous cashflow waves.
- No matter who you are or what you produce, your focus should be to build long-term wealth.
- Our goal for every client is to help them save $100,000 or more each year for retirement by stabilizing their practice income and getting in front of any major expense—like tax surprises.
Interested in learning more? Book your free 30-minute strategy session.