Holiday Cheer and Tax Year Fear: Navigating Year-End Tax Strategies

Announcer:
Hello, everyone. Welcome to the Millionaire Dentist Podcast, brought to you by Four Quadrants Advisory. On this podcast, we break down the world of dentistry, finances, and business practices to help you become the millionaire dentist you deserve to be. Please be advised we do speak with an honest tongue and may not be safe for work.

Casey Hiers:
Hello and welcome. This is Casey Hiers, back at the Millionaire Dentist Podcast in studio with co-host Jarrod Bridgeman.

Jarrod Bridgeman:
Casey, how are you today?

Casey Hiers:
I'm feeling strong.

Jarrod Bridgeman:
Are you? You've been working out?

Casey Hiers:
Not just because I got a B12 shot yesterday.

Jarrod Bridgeman:
Okay.

Casey Hiers:
But more so because of our guest.

Jarrod Bridgeman:
Oh.

Casey Hiers:
Anytime Steve Levy is in the house-

Jarrod Bridgeman:
Pipes?

Casey Hiers:
Yes.

Jarrod Bridgeman:
Yeah.

Casey Hiers:
Yeah. CPA, JD, attorney, knows how to do taxes.

Jarrod Bridgeman:
Stud.

Casey Hiers:
Singer. We just had our corporate Christmas party, and there might've been an impromptu happy birthday that could only be led by one person.

Jarrod Bridgeman:
That's right.

Casey Hiers:
Steve, AKA "Pipes," Levy, who graciously came up and belted it out.

Steve Levy:
Well, I do what I can.

Casey Hiers:
Welcome. Good to see you again, and thank you for gracing us with your presence and, more importantly, giving our listeners some really good expertise.

Jarrod Bridgeman:
Something beyond just Casey and I just jabbering, so this is pretty exciting.

Steve Levy:
Okay, yeah.

Casey Hiers:
We're mid at jabbering, but you really elevate it. We've got a 28-part podcast today. Kind of joking. No, Steve's good at detail, and that's appreciated. So we kind of have a six-parter. It all is going to flow together today, but Jarrod and I are probably just going to play tennis or ping pong and keep bouncing back different topics and things that you're all going to just tie into a beautiful, beautiful podcast for us.

Steve Levy:
You know it.

Jarrod Bridgeman:
Steve, I wanted to start off today, not that long ago you came on here, did a podcast with us about BOI. Can you give me a quick refresher on what BOI stands for and why you're wanting to bring this up today?

Steve Levy:
I started using more deodorant. I listened to that podcast-

Casey Hiers:
That's just BO.

Jarrod Bridgeman:
Oh, yeah.

Steve Levy:
Never mind. I should-

Jarrod Bridgeman:
Body Odor Intelligence, right?

Casey Hiers:
That's it.

Steve Levy:
I shouldn't have shared that. Yeah, so BOI reporting. So just as a recap, BOI is the Beneficial Ownership Information reporting, and that basically entails that any entity that is registered with a state's Secretary of State needs to file this. That's really the rule there, and-

Jarrod Bridgeman:
This was a newer thing that just within the last couple of years or thereabouts.

Steve Levy:
Yeah. Really, just this year.

Casey Hiers:
I.e., any practice owner whose practice is a business would fall into this.

Steve Levy:
That, the LLC where the property is being held, and the LLC, you name it. Really, if it's organized, it needs to file, essentially. And so what we're coming up with is the deadline for filing your initial report by pretty much the end of the year if you existed prior to 2024.

Casey Hiers:
A percentage of our listeners just turned up the volume and said, "Wait, what? There's a deadline, and I've not heard of this?"

Steve Levy:
There's a deadline and hefty penalties. You can go back, we talked about that. It's about $500 per day each day you haven't filed it. Now, here's a wrinkle for this. Just about a week ago in Texas, there was a federal court that, while a case is going on that is kind of against this filing, they ruled a temporary injunction to kind of stop the requirement to file, which of course, Department of Treasury is appealing, because they want to enforce this rule.

Casey Hiers:
Because they're greedy. They want more of We, the People's money.

Steve Levy:
Now here's the scary thing.

Casey Hiers:
Sorry, Jarrod.

Steve Levy:
The scary thing is there's probably about a third of these filings that have actually been filed of the entire population that needs to file it. And so we're getting to kind of a scary point, and this injunction, while maybe feels like it might push things along, if it gets appealed, it's back on, the deadline is, and end of year, file it or penalties start accruing. So the safe thing to do, it's really fast filing, all you need is name, address and tax identification number of your entity as well as of any owner that is 25% or more of that entity, their driver's license, you have to upload a copy, and their address and their official name.

Jarrod Bridgeman:
They're the government. Don't they already have our driver's license?

Steve Levy:
Not this little database. They could get it, but this is probably a way to kind of connect the dots a little more. It's really fast. We've done it for our clients. Just do it. Be on the safe side, so you don't have to worry about it.

Casey Hiers:
So for non-client listeners, then, they should reach out to their accounting professionals to do this for them, ideally, but they can do it themselves if-

Steve Levy:
They can do it themselves. There are many that are sending solicitation letters, attorneys, CPAs, organizations you've never heard of that say we're the BOI people that are taking advantage, really, I feel of this really simple filing.

Jarrod Bridgeman:
Oh, man. I missed a business opportunity here. I could have launched something with you.

Steve Levy:
That's why we're getting a lot of questions, like, "Hey, I got this. What do you think?" I'm like, "Well, we already took care of that." But just take care of it however you want to do it, so you don't have to sweat it and worry.

Casey Hiers:
Now, Steve, you said one-third have done this, so you're saying two-thirds of people that should have not done this according to official numbers from the Department of Treasury? Is that accurate?

Steve Levy:
Estimates, I'd say on that.

Casey Hiers:
Wow. So a lot of people are asleep at this, unaware.

Jarrod Bridgeman:
Yeah. There's only a couple of weeks left.

Casey Hiers:
Yikes.

Steve Levy:
So just do it, take care of it, so you don't have to worry about it.

Casey Hiers:
Wow. People just got their money's worth right there. We're just going to sign off.

Jarrod Bridgeman:
Let's wrap it up.

Steve Levy:
Yeah. Good stuff.

Jarrod Bridgeman:
Good night, everybody.

Casey Hiers:
No, I appreciate you bringing that up. Even though we have touched on this topic before, it's a good public service announcement. If you're a Millionaire Dentist Podcast listener, there you go. Make sure your BOI reporting is-

Jarrod Bridgeman:
And if you're not one, what are you doing here?

Casey Hiers:
And tell your friends.

Jarrod Bridgeman:
That's right.

Casey Hiers:
So the holiday season, a lot of fun, a lot of stress. I just went to your old stomping grounds on The Circle, the Indiana Symphony. What's that venue called?

Steve Levy:
Well, Hilbert Circle Theatre downtown.

Casey Hiers:
Yeah, Yuletide.

Steve Levy:
Yeah, sure.

Casey Hiers:
Sandi Patty. Never-

Steve Levy:
Sandi Patty, [inaudible 00:07:02]

Casey Hiers:
I just got drugged there, not drugged, I got dragged, drugged to it.

Steve Levy:
All right.

Casey Hiers:
And I had no idea what it was. It was beautiful.

Steve Levy:
It's a big deal, absolutely.

Casey Hiers:
It was a great time. They had sugar cookies at the concession stand that were excellent. But holiday time, a lot of practice owners like to take care of their staff and team, which is excellent, as we know staff and team are hard to find good ones, and loyal ones, you want to take care of them. Holiday bonuses, payroll reporting, those are great things to do. Now caveat, if your overhead's 90%, you probably shouldn't be focused on giving a bunch of bonuses out, because you're going to drive your business into the ground, which benefits no one. That's a sidebar, but holiday bonuses and payroll reporting, you would wanted to touch on that, and I'm wildly curious to hear more.

Steve Levy:
Yeah. So like you said, a lot of practice owners want to be generous around the holiday time and give cash, gift certificates, whatnot. Well, the caveat with that is that it's not a pure gift, because it's an employer-employee relationship. So anytime you give anything pretty much to your employees, that's considered compensation.

Casey Hiers:
How about if duffel bags are just randomly left around the office? Is that a gray area, or is that frowned upon?

Steve Levy:
I don't know the circumstances behind that, so I can't give an opinion, so I don't know what that's about.

Casey Hiers:
Just deny. Yeah, yeah.

Steve Levy:
So anytime you give anything to your employees because of the relationship, it's considered compensation, and what does compensation need to have happen to be reported under payroll? Now a lot of times, and really the easiest thing to do is tell your payroll provider, "Okay, I've given these amounts or gift certificates in this value to my employees. Here's what they got, here's what each of them received. Can you kind of cover the FICA tax for them?" And what that means is you've got already the net amount. So what you should do is have them gross it up so that the actual amount-

Jarrod Bridgeman:
So if you wanted to give someone $100, you would technically give more, so the taxes taken out than equals the $100 that they-

Steve Levy:
Exactly.

Jarrod Bridgeman:
Okay.

Steve Levy:
And you're pretty much covering the tax in that way. They're not paying the tax. You're covering both their share and your share of that FICA tax.

Jarrod Bridgeman:
And this is because it's a bonus, it's taxed differently than compensation, a little bit more, sometimes?

Steve Levy:
Yeah. It's a unique situation where it's not on a regular compensation schedule, but it is compensation. And if you don't report it as compensation, then it could be non-deductible, so that's also a drawback on that. And the quicker you can get this information to your payroll provider, the quicker you can make sure that it's timely reported there so that you don't have any changes later on.

Jarrod Bridgeman:
Is there a point of no return on terms of reporting that?

Steve Levy:
No. You can amend the [inaudible 00:10:14].

Jarrod Bridgeman:
Well, all you're doing is making it more complicated, too.

Steve Levy:
Yeah, exactly.

Jarrod Bridgeman:
Okay.

Steve Levy:
You can have it amended. They would be issued their W-2s, and then have amended W-2s and that kind of mess. So just go ahead and report it, have it grossed up. You're covering the FICA tax on it, and everybody's good.

Jarrod Bridgeman:
Steve, going off of that, Casey mentioned earlier that we had our corporate holiday party over this past weekend, and I'm sure a lot of practice owners and people out there are also having their own company holiday parties. So-

Casey Hiers:
Chris Christmas party.

Jarrod Bridgeman:
Chris, Chris, Christmas? Holiday. Happy Kwanzaa, everybody.

Casey Hiers:
Hanukkah.

Jarrod Bridgeman:
And Hanukkah, thank you. I'm assuming there's some kind of tax situation that goes on with throwing on a holiday party.

Steve Levy:
Yeah. It's kind of the exception to a lot of the rules for deducting things like meals and entertainment. So it's pretty much the one time you can 100% deduct entertainment. Otherwise, you wouldn't be able to deduct it at all. So let's say you had a group outing that you took your employees to a show. Those tickets normally wouldn't be deductible at all, but in that kind of group outing where you've got your employees coming with you, or you bring in a karaoke host, right? So that-

Jarrod Bridgeman:
I'll give out your cell phone number later.

Steve Levy:
Yeah. Go for that. So that's situation, 100% deductible. Also meals, that is another 100% deductible situation. That's a real carve-out for just this particular kind of ... Also, it's for holiday. It's also if it's for a summer outing. You bring a whole company to a ball game, get tickets, meals, a company outing, really.

Casey Hiers:
So I shouldn't feel bad for ordering a medium rare filet over a hot dog or a piece of chicken, because it's all getting deducted?

Steve Levy:
Yeah, that's correct.

Jarrod Bridgeman:
Were you feeling bad?

Casey Hiers:
Not really.

Steve Levy:
Okay, okay.

Casey Hiers:
Not really.

Steve Levy:
Yeah, just go for it. So that's a carve-out there.

Jarrod Bridgeman:
But for that to be the case, it has to be the entire company?

Steve Levy:
Yeah.

Jarrod Bridgeman:
So everyone invited.

Steve Levy:
Not everybody has to show. You can't-

Jarrod Bridgeman:
But if you had a departmental outing, front staff versus the hygienists, if you only took out your front desk staff, that would not count towards this?

Steve Levy:
Yeah, exactly. It's kind of-

Casey Hiers:
Over the year, if every department did it the same amount of times, is that a curveball I just threw you?

Steve Levy:
Well, there's gray area, as usual, but really, they want it to be a widespread outing situation.

Jarrod Bridgeman:
Steve, I want to bring up a pretty big keyword, buzzword that flies around a lot lately, inflation. Let's talk about the 2025 inflationary changes, if you don't mind. Federal brackets, let's say 401(k) increases.

Steve Levy:
Yeah. So each year, there's an adjustment in the federal brackets, which in that situation, a certain amount of your income gets taxed at each tax rate. So it's like buckets. For 2025 up to, if you're married, up to about $24,000 gets taxed at $10,000. And then you take away that amount of income, and then above that amount and up to, say, $97,000 gets taxed at 12%, and it keeps going like that. So it's a graduated rate system. Now each year, those ranges are adjusted for inflation and usually in a good way. Some years, they're hugely boosted, because they're trying to catch up with inflation. So from 2022 to 2023, they had a huge boost, '23 to '24. Somewhat of a boost, and then it's going to be not a boost, but not as much in '25. And that all means is that it's going to result in less taxes, because more of your income will be pushed to lower rates. So that's the gist of it for rates.

Jarrod Bridgeman:
And that's another one if you have questions about, they should probably reach out to your team or your CPA.

Steve Levy:
Yeah, absolutely. But each year, the IRS releases, kind of ahead of time, the changing rate situation.

Jarrod Bridgeman:
For the next year.

Steve Levy:
Yeah, that's right.

Casey Hiers:
Steve, I want to get you in here sometime to go over the institution of the Federal Reserve in 1913. I think we could really get into some good income tax conversations. That one might not be a published podcast, but my mind is just going, right now.

Steve Levy:
Yeah. Well, income tax started as a very limited situation.

Casey Hiers:
It was a wartime thing, right?

Steve Levy:
Yeah, it was 1913.

Jarrod Bridgeman:
There's always an emergency that's to help us, right?

Casey Hiers:
They just forgot to stop that whole income tax thing.

Jarrod Bridgeman:
Sure.

Casey Hiers:
Sure. How about 401(k) increases? We've touched on those in the past, but as federal income brackets and tax?

Steve Levy:
Yeah, so 401(k), so each year, that changes. So 2024, your 401(k) deferral was $23,000. For 2025, it just goes up $500 to $23,500. Now, if you're 50 or over, there's always a catch-up contribution you can make. That hasn't changed from 2024 to 2025, so that's still $7,500. So if you're 50 or over, the overall amount you can defer goes from $30,500 to $31,000. Now, here's a fun little change in 2025 that's never been the case. If you are between 60 and 63, you get a little extra boost of $3,750. So instead of $31,000 that you can defer up to if you're 50 and over, if you're between 60 and 63, you get to bump it up to $34,750.

Casey Hiers:
If you're one of our clients, you'd already be retired, but ...

Steve Levy:
Sure, sure, sure.

Jarrod Bridgeman:
Right. Now, if we have more questions about that, we did a previous podcast on this that explains it more in great detail. But again, I think a high point of that is this is the first time they've had kind of that weird extra bracket of 61 to 63 where you can tack on even more.

Steve Levy:
Yeah, that's the first time. And then the last thing is there is a limit to the amount of compensation that can be considered for a company match. And so that was $345,000 in 2024. It's jumped up $5,000 to $350,000 in 2025. Now, it used to jump up way more. From 2022 to 2023, it jumped $25,000, and then it was a $15,000 jump to 2024. Now, it's $5,000, and again, it's inflationary adjustments. We don't see as much inflation between these two years or not anticipating as much, so we don't get as much of a jump there.

Casey Hiers:
Hopefully, not very many of our listeners, but how many of these practice owners, they meet in November? Congratulations, you had a great year. You owe $50,000. People are trying to throw a Hail Mary to not pay taxes. It's tempting to go spend a bunch of money or go into debt to avoid taxes that we've had multiple podcasts on that. But talk about end-of-year purchases. What's your take on that? My guess is it's custom to each person's financial and tax situation at the end of the year.

Steve Levy:
Very much so. We generally feel that if you need something, you can maybe purchase it by the end of the year.

Jarrod Bridgeman:
But what if I really want it? At what point does it become a need?

Steve Levy:
Well, a business need.

Jarrod Bridgeman:
Something that you use every day needs to be replaced.

Steve Levy:
Yeah. If it makes sense financially, look at it financially before the tax situation. But if you need it, you can save taxes by buying it before the end of the year. Now, there's two ways you can deduct it quicker than kind of spread it out over five years. So the Section 179 deduction, which is a familiar one, it's still pretty generous to be able to write it off completely in the year that you purchased it, and it's really not the year you purchased it, but the year you placed it in service.

Jarrod Bridgeman:
Right. So if you buy it and let it sit in the back in a box for a month-and-a-half, that doesn't count for that year.

Steve Levy:
Exactly. So Section 179 is one way, and it's still pretty much 100% with certain limitations. Now, another way you can write it off is via bonus depreciation. It's very similar. The only caveat there is that in 2023, you can only deduct 80% of it in that particular year. 2024 is 60%. Now, this will keep scaling down until it's basically phased out unless something changes with the tax law. So I won't get into Section 179 versus bonus. There are certain considerations, but it's still pretty generous that you can write off a bunch towards the end of the year if you need it. And of course, it should help your tax situation.

Casey Hiers:
If you owe some taxes, you're going to buy something in the next two to four months, educate yourself, making sure your tax situation versus what you actually need, and if there's some alignment there where you buy it and use it in December, that can be beneficial.

Steve Levy:
Yeah, absolutely.

Casey Hiers:
Yeah. How about going and just buying a big old piece of equipment just because your equipment rep says Section 179?

Steve Levy:
Yeah, they'll go for it. This is the time that there's a decent amount of aggressiveness to, "Hey, you know you need it, and it's tax time, and you're going to be paying a ton of taxes. You got to get it." So make sure it makes sense before you pony up a decent amount or going more into debt for this equipment.

Casey Hiers:
Amen.

Jarrod Bridgeman:
That may not even help your tax situation at the end, depending.

Steve Levy:
Don't chase the tax dollars.

Jarrod Bridgeman:
That's right. Steve, thank you so much for being here today. Casey, by the time this episode comes out, you and your team will be traveling to both Dallas and Austin to do some presentations.

Casey Hiers:
Everything's bigger in Texas. We've got a great audience in both locations, a double-header. We're going to have a great time. Really nice venues and covering some really, really good subject matter that is so crucial to practice owners being successful. We mentioned holiday bonuses. It's admirable that a lot of practice owners want to make sure everybody's taken care of. Then they look up, and they're the ones that aren't. Their associate makes more than them, their staff's happy, patients, and they look up, and they're like, "What? Where's the money?" Right?

Jarrod Bridgeman:
And this is where you and your team come and you speak and you show people that there is a path forward, there is a light at the end of that tunnel.

Casey Hiers:
We have a great time, but we get into some pretty heavy subject matter that they need to hear and hopefully get to that next plateau or to that next level of success, no doubt.

Jarrod Bridgeman:
Well, this is our last set of events for this year. We're going to be kicking off 2025 right away. We're going to be in Jacksonville, Florida, we're going to be in Fort Myers. We're presenting at the Yankee Dental Congress this year. We're doing a social, a fun event in Boston just before the Yankee Dental. So if you're interested in joining and learning more about us, learning how you can work on your own practice, go to fourquadrantsadvisory.com/events. I've updated everything that's ready so far to go. Please register. Please tell your friends if you know somebody out there that's also needing somebody out there to talk to, someone that understands what they're going through and all the work that we've been through.
Casey, thank you so much for being here, and you look like you wanted to say something. Do you want to talk about how much you like me?

Casey Hiers:
I was going to say well put.

Jarrod Bridgeman:
Oh, thank you.

Casey Hiers:
That was such a nice wrap. I was just so impressed. And Steve, as always, thank you for bringing your level of detail and expertise to the podcast.

Steve Levy:
Absolutely. Thanks, guys. File your BOI reporting.

Announcer:
Hello, everyone. Welcome to the Millionaire Dentist Podcast, brought to you by Four Quadrants Advisory. On this podcast, we break down the world of dentistry, finances, and business practices to help you become the millionaire dentist you deserve to be. Please be advised, we do speak with an honest tongue and may not be safe for work.