April 21, 2025 • 35 mins
You might be missing out on tens of thousands in tax savings and not even know it. But all that can change with the help of a dental CPA. Mike Bark of Bull Moose Financial joins me today to talk profitability, tax mistakes and strategies that dentists overlook far too often.
We dive into the tax landscape of dentistry, explore what a good dental CPA can do for your practice, and unpack how shifting your tax entity could be the smartest move you make this year. If you want to save more next tax season or find out how to benchmark your practice’s performance, this episode is packed with insights you won’t want to miss!
Topics discussed in this episode:
- Why you should hire a dental CPA
- Common tax mistakes in dental practices
- S corporation vs. C corporation vs. LLC
- Rising staff costs and labor shortages
- Business deductions: home office, vehicles kids on payroll
- Bull Moose Financial’s approach to dental services
Connect with Mike Bark:
https://www.bullmoosefinancial.com/
mbark@bullmoosefinancial.com
(414)-759-9629
Special offer: Mention the Dental Practice Heroes to waive the $2,500 onboarding fee at Bull Moose Financial!
Text us your feedback! (please note: we cannot respond through this channel))
Check out www.relevanceonlinemarketing.com if you want to get the same great marketing results as Dr. Etch. Mention DPH and get your first month FREE!
Take Control of Your Practice and Your Life
I help dentists take more time off while making more money through systematization, team empowerment, and creating leadership teams.
Join the DPH Hero Collective and get the tools, training, and support you need to transform your practice:
- Team and Doctor Training for every aspect of Practice Management
- Comprehensive Training: Boost profit, efficiency, and team engagement.
- Live Q&A Sessions: Get personalized help when you need it most.
- Supportive Community: Connect with practice owners on the same journey.
- Editable Systems & Protocols: Standardize your operations effortlessly.
Ready to build a practice that works for you? Visit www.DentalPracticeHeroes.com to learn more.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
You could be missing out on tens of thousands in tax
savings without even realizingit.
Actually, most dentists are,but it's not because they're
doing anything wrong, they justaren't getting the best advice.
Well, today you can startchanging that.
Tax season has just ended andtoday I'm joined by dental CPA
Mike Bark and we're covering thebiggest mistakes.
Dentists make tax planningmoves that can save you money
(00:25):
and strategies to help you keepmore of what you earn and build
a stronger, more profitablepractice.
You are listening to DentalPractice Heroes, where we help
you create and scale your dentalpractice so that you are no
longer tied to the chair.
I'm Dr Paul Etcheson, author oftwo books on dental practice
management, dental coach andowner of a $6 million group
practice in the suburbs ofChicago.
(00:46):
I want to teach you how to growand systematize your dental
practice so you can spend lesstime practicing and more time
enjoying a life that you love.
Let's get started.
Hey everyone, welcome back toDental Practice Heroes Podcast.
I am your host, dr Paul Edgison, and I'm very excited for my
guest.
This is my previous dental CPAand you're like why isn't he in
(01:09):
your CPA anymore?
And it's because I partnered upwith MB2 and it was included,
but this is somebody I'd stillbe working with.
I worked with for a long timewhen I had my dental practice
all by myself before I went withthe DSO route.
But this is a CPA from BullMoose Financial, the founder,
and he's still doing taxes andstill helping Dennis, mike Bark.
What's happening, mike?
How you doing man?
Speaker 2 (01:29):
Well, great to talk to you, Paul, In the middle of
tax season.
We were sorry to see you go atthe time.
You were a good client.
Speaker 1 (01:35):
Now, you know, when I opened my practice I didn't
know what to do.
Like man, does anyone know agood accountant?
And then one of my buddies waslike this is who does my taxes
every year?
And this is who I started with.
And then eventually, as mypractice grew maybe two, three
years into it I realized thismight require a little bit more
of a maybe dental-specific CPAor something with just a little
bit more caliber than what I wasworking with.
(01:56):
I know this is a common thingthat a lot of dentists do is
they start with some personalaccountant that they've been
using year after year?
Why would anyone want a dentalCPA?
And what does a dental CPAbring that the normal mom and
pop accountant doesn't?
Speaker 2 (02:10):
Sure, I think the first thing is dentists need to
realize right from the get-gotheir business is in a unique
position in that they're not amicro business where you can
just rely on a compliancepackage, if you will, from a CPA
like an H&R Block or a JacksonHughes who's just going to do
the return, and they're notquite big enough to have an
internal controller or CFO intheir business.
(02:32):
So there's a lot going on withthe business that they need, in
my opinion, somebody who's ableto look out for their taxes, for
their financial statements.
It's usually not a corecompetency of dentists.
Sometimes I know when I'mtalking numbers of dentists, you
can see them glaze over aswe're talking about it.
So I think it's an area wherethey have to spend a little bit
(02:54):
of money on it.
It's not an area where theyneed to be gouged by any stretch
of the imagination, but I'mdoing a valuation right now for
one of my clients.
They're targeting a specialtypractice.
The specialty practice is doing$1.4 million in profit and
we're looking at the financialstatements and the tax returns.
(03:15):
First thing we notice is theyown their own building and
they're not paying themselvesrent.
I'm like, well, that's unusual,both from a liability
standpoint and even a taxsavings standpoint.
So this is a small change ofpaying themselves.
Rent would net them $2,000 ayear.
Then we notice well, why areyou a Schedule C for tax
purposes?
You know it's a stable owner,solo practitioner.
(03:38):
Given their level of incomethey should for sure be an S
corporation.
That for them would be another$30,000 to $35,000 a year in tax
savings.
Finally, they could have beenpaying their state taxes at the
entity level.
That would have netted them,based on where they were located
, another $40,000, $45,000 oftax savings.
(03:59):
So all in, you know, $75,000,$80,000 of tax.
I mean that's an extremescenario, but we looked at their
accounting fees every year andthey were paying $3,500 a year.
The tax returns were correctbut there was no planning, there
was no advice.
This person is having my buyerput together a valuation because
(04:20):
they have no idea what theirpractice might be worth.
Wow, because they have no ideawhat their practice might be
worth Wow.
So where a dental CPA can comein is would he reach those
decision points of your business, be it bringing in an associate
selling to a DSO, bringing inan associate to see your
business expanding your practice.
All of our clients have beenthere and done that, and that's
(04:44):
important because we've seenwhat they've done well, what
they haven't done well, we'llhave connections in terms of
banks, builders, attorneys,other people who could do a
really good job on your accountand be able to guide you through
those decision points as youcome through them, because we've
seen them a million times.
Speaker 1 (05:02):
Totally.
I remember working with myperson that worked before you
and I'd asked him I said is mybusiness like really profitable?
He goes, your business is soprofitable and I wanted to know,
like, what about like dentaloffices?
And I think that's awesomebecause, like when I switched to
you, I got to, I was able tosee, I mean, at least like how,
like my numbers compared toother dental offices.
I find a lot of dentists justdon't even know how to use their
(05:25):
P&L like what it's even usefulfor.
They'll send me their profitand loss and I start going
through it and I ask themquestions about it and they have
no idea.
They can't tell like where anyof their money's going or what
their profit is.
Speaker 2 (05:36):
Yeah, and I'm for a very simple financial statement
that we want our clients to beable to look at four different
numbers, maybe within theirfinancial, and know whether or
not they're doing well.
So I mean, the first thingthey're going to take a look at
is the overall staff expense.
That's the biggest cost and Ithink every dental practice we
have with the exception of maybeendodontists, who will
(05:56):
sometimes spend a little more onsupplies, supplies and labs
should be together and should beevaluated as its own number.
Then you have your general andadministrative costs.
So these are the costs thataren't going to change relative
to your production all that muchAdvertising, continuing
education, computer expense,insurance, meeting expense,
(06:17):
office supplies, professionalfees.
Then you look at your occupancyexpense.
So occupancy is your rent, yourutilities, your repairs and
maintenance, real estate taxes,if you have to pay them, and all
those numbers will come down towhat's called operating income,
and operating income isimportant because if you take
that number minus 100%, that'syour overhead and then we'll
(06:39):
have items that are what we callbelow the line.
So that's doctor's pay,associate pay, Some clients will
have kids on their payroll,some clients will do some things
that are a little more taxmotivated, if you will, that
will drop below the line or theymay have a one-time consulting
fee.
Speaker 1 (06:56):
So as far as, like, staff expense goes, I mean, this
is a really hot button issuethat's come out in the past like
two, three years, as we sawjust.
The market rate for dentallabor has increased
significantly and I think mostdentists are PPOs where they
don't get the correspondingincrease in the fees that
they're getting to increasetheir income to offset that.
What are you seeing as far asstaff expense, like non-doctor
(07:19):
staff expense right now as apercentage of collections?
Speaker 2 (07:21):
So what it used to be is most of our clients were 24%
or less.
So that included the payroll,payroll taxes, retirement
contributions, if you had healthinsurance or any employees,
staff benefits, uniforms,temporary labor was 24% or less.
Since COVID it got as high forour clients as just under 30%.
(07:43):
We're starting to see that comeback down for our average
client, where we're just a shadeover 28% right now.
In my opinion, even looking atour industry and accounting and
how hard it is to hire somebody,my belief is if you're a
professional service, you'regoing to have to be able to do
or be compensated more with lessresources than he had in the
(08:05):
past.
If my $12 an hour dentalassistant quits, no worries,
another one's right up the block, I'll get them in here.
If my hygienist who's making$28 an hour quits, no worries,
there's this wealth of them.
That's not the case.
I think we have a long-termlabor shortage in this country.
They called it the baby boomfor a reason.
Those people are retiring.
(08:26):
There's not as many Gen X ormillennials coming up behind.
So big thing dental practicesare going to have to look at is
if they are a network and theyhave a waiting list to get in to
see them.
First thing you need to belooking at is getting out of
network.
We have seen over the past twoyears about 30% of our clients
(08:46):
exit, being preferred providersand going out of network, and
the good thing is we can tellpeople who are going to go out
of it.
Yes, you can still come here asa patient, because you have to
understand as a patient.
If I get a letter saying you'regoing out of network, I'm going
to assume I can't come to youand that's not the case.
They're still going to use myinsurance.
It just may mean if I likegoing to you, I'm going to have
(09:08):
to pay a little bit out ofpocket every time for that
experience, that level ofservice.
And what clients are finding istheir collections now are
starting to go up as a result ofgetting out of it, and now they
are starting to see the staffcosts go back down to normal
levels.
And what we're trying to tellpeople is if that old model was
(09:30):
a million dollars and you werewriting off 25%, you still would
do a million dollars ofdentistry.
So why don't we just get it towhere we're doing a million
dollars of dentistry and gettingpaid for a million dollars?
Speaker 1 (09:39):
or as close to it as possible.
You mentioned 30%, and thenyour staff expenses started
coming down recently.
Was that due to anything otherthan going out of network?
Were there some otherstrategies that dentists were
using, or just getting moreefficient?
Speaker 2 (09:53):
No, I think for the most part it was people getting
out of being in network.
We haven't really seen areduction in headcount yet, but
what we've encouraged clients todo is, if somebody does quit
their office, really make adetermination.
Is that person really needed?
Are you able to either leveragetechnology or some other
resources to not have to fillthat position?
(10:13):
But by and large, they're stillgoing to as best they can fill
it.
So it has been people leaving.
Insurance Collections arestarting to go up.
We have seen a flattening inwages.
It seemed two, three years agothere was a hygiene shortage
that was coming.
I think even pre-COVID.
When I first started, everyhygienist was 55, 60 years old.
(10:36):
Started, every hygienist was 5560 years old.
And the problem there washygienists when I first started,
way back in 2000, made 28 to 30dollars an hour.
Fast forward to about 2016,they were still making 28 to 30
dollars an hour.
So I think a lot of people whowould have went into that
profession chose well, maybeI'll be a nurse or I'll be
something different with this,because I can get paid a lot
(10:59):
more to do it.
But we went through a period oftime where we saw hygiene went
from 30, also it was 35.
You blink and it was up to 40.
You blink again, it was 45.
And it has seemed to havesettled in somewhere between 45
to $50 an hour for a hygienist.
I think the hope there is nowthat those wages have come up to
probably what reality is,you'll see more people in the
(11:21):
pipeline who want to go throughhygiene school.
Speaker 1 (11:24):
Have you seen any lessening of the admin staff in
dental offices due to the recentcoming and popularity of AI
software and administrativestuff?
Speaker 2 (11:34):
No, I think that's an area where our clients are
going to be slow to adapt to.
I mean, we are seeing clientswho are using recall procedures
that are a little moreinnovative than what they have
in the past, but we have seenthose wages essentially flatten
out too.
I think people have taken moreof an approach that if I could
get a person with a goodpersonality, I can train them to
(11:54):
be an admin.
But what I would tell anybodyis if you look at the base level
wage in this country, we wereat a place called Quick Trip,
which is a huge gas stationchain in Wisconsin yesterday.
Their entry level is $21 anhour Wow.
So if their entry level is $21an hour, what they're looking
for at Quick Trip is, yes, it'sknown for being very friendly.
(12:14):
It's known for being verycustomer service orientated.
Well, okay, that means thebaseline in a professional
dental office is going to besomewhere north of $21 an hour
in most cases.
So again, I think that's wheredentists really need to consider
their insurance relationshipsand starting to go hey, if I'm
going to run a private practice,I need to be paid 100% of what
(12:36):
it is I'm producing, Wow.
Speaker 1 (12:38):
I just did a YouTube video that I recorded and I was
talking about how we need tostart hiring outside of
dentistry for front desk,because for the admin people,
because there's just not enoughpeople and it's hard to find
great attitudes when you'relimiting yourself to people with
only dental experience.
And I had said on my video thatI mean someone that's working
down at the store at some fastfood place or some restaurant
that maybe wants to get theirnights and weekends back.
(12:59):
They might be making $15 anhour and I had no idea that.
I mean, is that $21 an hour?
Is that common?
Speaker 2 (13:05):
That's common.
I mean, big national gasstation Buc-ee's is moving into
our area.
You can be the car wash managerthere and make $175,000.
Jeez, they're paying people whoare again.
I mean, they're trying tocreate a good experience.
You're going to have tocompensate people accordingly If
you want somebody coming in todo that job.
Who's going to be friendly withtheir staff responsible.
Speaker 1 (13:27):
Yeah, that's interesting.
I mean we dropped Delta about ayear and a half ago and what I
mean we were at capacity, butwhat prompted it is that I kept
raising my staff wages and itgot to the point where it's like
this doesn't make sense and Iwanted friendly people that take
great care of people.
But the problem was I couldn'tkeep them because they were
going somewhere else for anextra like $2 to $5 an hour and
(13:50):
eventually I'm like, well, Idon't have money to give to
raise it, and we just had to doit, and I think we did the same
thing.
Our payroll actually went up toabout 32%.
Right now it's about 29%, andit boggles my mind just how
quickly all that change happened.
Let's talk about, like youmentioned, the S-corp versus the
C-corp thing.
I know this comes up a lot fordentists.
What does that mean and why?
(14:11):
How do we know what we shouldbe?
Speaker 2 (14:27):
Sure.
So most dentists willincorporate as an LLC or a PLLC
based on their state and thoseare what are called disregarded
entities.
So it means you have the choicein how you want to be taxed.
Going forward corporations,somebody forms their LLC and
they make that S corporationelection right away.
And what they did a factor intoall this is in 2018, when the
tax law changed and introducedthe qualified business income
tax deduction that in a lot ofcases they'd be better off as
(14:51):
just a sole proprietor taxed orLLC taxed as a sole proprietor.
So again, it's just an areawhere, if they're not getting
advice and their situation's notbeing looked at, they will jump
the gun on that election.
S-corporations also have theissue of taking distributions in
excess of basis, meaning if youtake money out and you do not
(15:14):
have enough money that you putin or enough past profits, you
have capital gains taxes.
So young practices struggle tobe an S corporation.
Now where the savings in an Scorporation comes in, in that
example I gave earlier had adentist do about $1.4 million of
compensation.
They could have set areasonable compensation up for
(15:36):
themselves even if we were goingnuts and let's just say we were
going to pay them $700,000 ayear.
The remaining $700,000 wouldcome out without the FICA and
Medicare tax At 2.9% between theemployer and the employee side.
On that simple change, they'resaving $21,000 of taxes right
from the jump.
Wow.
(15:56):
If they wanted to be evenreasonably aggressive, they
could have said let's set ourW-2 up at 345.
That's the maximum that a 401kwill consider.
Well, now we're talking amillion dollar differential and
that 2.9% also becomes $30,000.
So S-Corporation is a greatplace to be for a doctor who's
(16:18):
going to be a sole owner.
They don't really have anyintention of having partners in
the future and has a maturepractice in that they have
previously taxed profits withinthe business.
But as they're starting outagain, they need to have a
conversation at minimum with agood tax person to discuss what
entity works best for me and wehave a few new clients and what
(16:40):
we've told them is, as we do ourtax planning meetings, it's
going to be wait and see.
We'll see how's your practiceperforming.
Are you buying a bunch ofassets that we could take
section 179 on?
What are all those things thatgo into it, to see what entity
works best for you and yoursituation?
A lot of times it's going to beS-Corporation for some partners,
c-corp's not going to workreally well.
(17:02):
In dental there's a fewisolated cases.
I could think of that it might.
The advantage of that is youessentially you don't have any
pass-throughs.
You pay a corporate level tax,which right now is 21% versus
35%.
If you are in a situation whereyou are going to have a C
(17:22):
corporation and your intentionis to build up and buy multiple
practices and conserve your cash, maybe C corporation's the best
way to go, but it's a limitedsituation.
Speaker 1 (17:34):
So how hard is it to change and bounce between the
few and change the election?
Speaker 2 (17:39):
So when you start an LLC, they default you to being a
sole proprietor.
So you have to proactively makean S-corporation election or
C-corp or partnership.
Once you make that election,you're locked for five years.
So again, you want to not onlylook at your current situation
but where do you see yourselfbeing, at least for the
foreseeable future?
(17:59):
To me, where most money getsleft on the table in terms of
tax planning is people whoaren't the right entity in a lot
of cases.
So we'll see them again.
The situation where clear-cut Scorporation they could be
saving $35,000 a year simply byfiling a different tax return,
and that doesn't even considerpaying their income taxes at the
(18:22):
state level.
Then too, yeah, that's freemoney.
That's not even exotic taxplanning, that's just 101 kind
of stuff.
Yeah.
But if you're just payingsomebody for compliance, I
empathize with that preparerbecause their business is built
on high volume.
We're going to get the workdone and we're not in the advice
giving business, which is fine.
Speaker 1 (18:44):
So around tax time we will always see a post on one
of the Facebook forums, and it'sdoes somebody recommend a good
accountant?
I feel like I'm paying way toomuch in taxes and I'm sure you
get this all the time.
What is your response to that?
Speaker 2 (18:57):
Well, let's even take a look at the $1.4 million
example.
One way or the other, thatguy's going to pay a lot in
taxes.
I mean, you get to certainincome levels and you are going
to pay a lot of taxes.
I think another thing dentistsneed to keep in mind is the tax
code is somewhat biased againstprofessional service companies,
in that once our income goesover a certain level, we don't
(19:19):
get the qualified businessdeduction.
Some of the manufacturing andresearch and development credits
that are out there don't reallyapply to professional services.
So if you're successful, you'regoing to pay a lot of taxes.
But again, in this guy'sparticular situation, okay, we
could have saved $75,000 bydoing his tax return differently
(19:40):
.
Could he have implemented acash balance plan to defer even
more tax?
Absolutely, I mean a relativelysmall staff it was a specialty
office that he could haveprobably saved another two
300,000.
But even then, at the end ofthe day, it's still going to pay
a lot in taxes.
It's just that's kind of theway it goes if you're high
(20:01):
income.
Now, that's not to say there'snot things that could be done
differently to bring that down alittle, but there's not a magic
bullet where we can go.
Hey, you're the guy making 1.4,.
Let's get you down to zero.
There's no mechanism to do that.
Speaker 1 (20:15):
Yeah, I'd like to see the accountant advertising we
don't even pay taxes, likethat's your tagline.
I mean, if I figured it out Iwouldn't be paying any.
Not to talk politics.
I don't want to go intopolitics, but you know we had
the, the beefing up of the IRS,and now we've got a change in
leadership in the federalgovernment.
I wonder, what did you guys seewith your clients?
Did you see an uptick in audits?
Speaker 2 (20:37):
I haven't had a client audit in about 20 years.
Oh, wow, that's fantastic.
Now one could say, okay, mike,it's probably because you're
telling everybody no ondeductions.
The fact of the matter is theIRS is woefully understaffed.
Wow.
So the IRS does not have themanpower, nor have they had the
manpower to audit.
Secondly, I think dentists justaren't a relatively big target.
(20:59):
They know what your revenuesare.
You're not a big cash business,so there's not a lot of
concealment of income that couldhappen.
They know your biggest expensebecause W-2s get reported to
them.
So now it comes down to if I'mgoing to come in and audit a
dentist, I'm going to audit adentist.
Are they paying their kids toomuch?
Are they doing some vacation?
Slip through the books?
It's not huge dollar amounts,so they're not big targets to
(21:23):
begin with.
But I think the problem is thathas led to the rise of the tax
newsletters coming out.
What are the tax newsletters?
What do you mean?
So I mean there's a couple ofgood ones, like the McGill tax
newsletter is one I think anydentist should look at
subscribing to.
They do a really good job oflaying out different tax issues
in plain English, very readable.
(21:45):
But there's Kiplinger's outthere, there's Wake Coat
Investor and a lot of what theywill talk about is okay, just
had a newborn baby, let's paythem $15,000 a year to be a
model.
Now they don't have to preparetax returns, they face no
preparer penalty.
That's fine, well and good andthey're probably right.
That's probably not going toget audited.
(22:05):
However, if it does, that'seliminated immediately.
Number one because you usuallydon't hire models for your
business, and it's just.
Why is a newborn making $15,000?
And they happen to have thesame last name as you do?
So they're recommendingaggressive strategies that us,
(22:26):
as CPAs.
We have what they call circular230 responsibility to our
clients to advise them as towhat the tax law is.
My fear is with some of thisstuff is as AI does get better,
I don't see it.
The IRS probably isn't going tolead the spear on this charge,
but you can see how AI could bea really powerful tool in terms
of auditing.
(22:46):
They could input tax returns,they could go run a query and go
tell me everybody who has kidson the payroll.
Speaker 1 (22:53):
I talk about the kids on the payroll.
Is that something that yourecommend and you do with your
clients?
I know that comes up a lot.
Speaker 2 (23:02):
Yeah, I mean it comes up all the time.
I would say most of our clientshad their kids on the payroll
and in time memoriam ever sinceI first started, back when the
exemption was only $4,000, therewas a whole industry of kids
who cleaned the office and madelike $3,500 a year.
What's different now is thatstandard deduction is up to
$15,000.
So you can pay a kid up to$15,000 a year and not pay any
income tax on it.
Our advice to our clients isyou have to be reasonable with
(23:25):
it.
So if you look at a dentaloffice, what are jobs your kids
could do around that office?
You know there's the bags thatevery dentist gives their
patient.
That's a toothbrush, toothpaste.
They can do that.
They can certainly shreddocuments.
They can probably.
Even if you're doing events orthings like that, they could be
there.
They can probably clean youroffice to a point where you're
(23:48):
paying your actual cleaner alittle bit less.
But be reasonable with thewages.
I mean I would not advisesomebody to put the newborn on
it.
But again, the hard part of allthis is the IRS isn't auditing
anything.
So it has led to people wantingto be aggressive and it's
ultimately the client's call.
Speaker 1 (24:06):
Are things like this if they do get audited, are they
like pay a penalty and pay thetax, or is it like go to tax
prison?
Speaker 2 (24:12):
You only go to tax prison like you think of Al
Capone going.
Al Capone was to prison becausehe was concealing income.
If you conceal income, if youwere doing a big cash dental
business, that's when they comein with the windbreakers and
take all your computers and yougo to prison.
If you overstate deductions,your fallout is going to be you
pay the tax, you pay theinterest on it and then you can
(24:34):
have up to a 25% understatementpenalty.
Speaker 1 (24:37):
Yeah, what are some other hot button stuff, like
maybe what is the Augusta rule?
Speaker 2 (24:42):
So what the Augusta rule is, as its name implies, is
it came about because peopleused to rent their homes during
the Masters Tournament down inAugusta, Georgia.
What the IRS actually came inand said is if you just have
this occasional thing where yourent out your home, you don't
have to pay income tax on it,you don't have to go through the
record keeping.
(25:02):
So it's really well-intentioned.
Where it evolved was taxnewsletters at some point
decided to say why don't yourent your home to your business?
And that's a tax deduction.
What's good, though, about thisparticular rule is a court case
did come down, where the courtactually affirmed its usage for
(25:23):
business purposes and basicallysaid as long as there's a
business purpose could be ashareholder meeting, could be
staff meeting, could be staffparty there are legitimate
reasons to do it.
The key thing, though, is yourreimbursement rate has to be
fair value.
In this particular court case,they were trying to claim a.
I want to say it was like a$300,000 tax deduction for
(25:46):
rental of their home, and theIRS said that's a little strong.
We're going to give you $750 aday, but if you rent your house
for less than 14 days, you cando it.
You can take the income as anindividual and your business can
deduct it.
So how we advised our clientsthis year was to here's what the
(26:06):
rule says.
Here's what the legitimate usesare.
If this occurred to you and Iunderstand, some people are just
going to probably write down ohyeah, I had 12 staff meetings
at the CASA and we're going todeduct this amount.
Again, key is be reasonablewith the reimbursement rates.
Think of what your house mightgo for as an Airbnb, or if you
(26:29):
were to rent a conference room,they'd do the same thing.
So we told clients to have $500to maybe $1,000 a day, maybe a
little bit more, depending onyour location.
Be reasonable.
Make sure you have a businesspurpose or you can document a
business purpose Awesome.
Speaker 1 (26:43):
What about the home office?
I remember this was like kindof a hot button issue at one
point.
Speaker 2 (26:47):
So the thing with home office.
Again, the old rule basicallysaid you had to be able to
replicate anything you did atyour primary job at your home
office.
So for an accountant that'spretty easy to do.
I could have a computer, Icould have a 10-key calculator
and I could do my job prettymuch anywhere.
For a dentist it was always alittle bit trickier, because
(27:09):
what are you going to do?
Are you going to set up adental chair?
Sterilization and all thosethings.
A court case did come into play.
That basically said, as long asthey're able to do an element of
your job at your home office,it's a valid deduction.
So if you think of a dentalpractice, they might be doing
record keeping, they could bedoing HR, they could be doing
their QuickBooks, they could bedoing charting, any number of
(27:31):
things that aren't related orare related to their job that
they don't feel a comfort leveldoing at their place of business
, where staff might be privy tothings.
And how that deduction works isyou take a prorated portion of
your utilities your mortgageinterest, real estate taxes,
repairs and maintenanceinsurance and you compare that
(27:54):
against the square footage ofyour home that you're using and
you generate a deduction.
It's not a massive one.
For most of our clients it's a$4,000 to $6,000 a year
deduction but, as I would tellany client, if you saw $1,000
laying there, you're going topick it up.
So it's not a massive deduction.
It's not one that is going tobring somebody way down, but
(28:17):
it's a legitimate deduction.
Again, as long as you documentit, you're fine with it.
It's not a red flag by anystretch.
Speaker 1 (28:23):
And what about the auto?
Like leasing versus buying acar or something that wants to
be a large car.
What's that?
Speaker 2 (28:30):
So there's a tax advantage to buying larger
vehicles, or what they call$6,000 curb weight on it.
The key thing in my opinion isthere should be a business use
to it and there should be apersonal use.
And it's important to eithercome up with a ratio of what
that business and personal isgoing to be or track that and
(28:51):
then add back the personal useevery year to your tax return.
We would suggest most peopleare 60 to 70% business.
The remainder is personal.
You do have to consider is ithas to be titled under your
business.
You have to take a look at yourinsurance.
Premiums in your business tendto be higher than it does for
you personally, so you have toweigh that.
(29:12):
So we have a lot of clients whosimply do mileage
reimbursements every month orhave what's called an
accountable plan where we sayall right, every month write
yourself out a check for $500and we'll do some type of true
up at the end of the year tofigure out what your mileage was
, and then that way you're kindof writing off the vehicle
anyway by doing it at thatmeasure.
(29:32):
You mentioned the AI thing.
Speaker 1 (29:34):
I've searched things on Google about taxes and I have
like hesitated and I'm like arethey going to know that?
Why am I looking at this?
What is this going to look liketo the IRS?
Speaker 2 (29:44):
No, I think it's an easy thing for them, if they
wanted to, to enforce it.
I don't know that the will isgoing to be there to enforce it
for the foreseeable future.
But again, I think, as long aspeople are reasonable with their
deductions, everybody who ownsa business has some measure of
things that in theory aredeductible.
It could be a meal that theywent out for, could be a
(30:04):
computer that they bought fortheir home that went through the
business.
There's always some element toit and the old analogy I used to
use with clients is if you'redriving 74 or less on the
freeway back when the speedlimit was 65 everywhere, you're
not going to get pulled over.
So if I'm looking at yourfinancial statements and
everything looks like it mightbe going 74, if I'm not
(30:28):
questioning it, irs is not goingto question it.
We understand everybody'sprobably has some element that
they're putting through thebusiness that isn't 100% legit,
Absolutely.
Speaker 1 (30:38):
So tell the listeners about what you guys provide at
Bull Moose Financial.
Speaker 2 (30:43):
as far as two dentists, so for our dental
clients we kind of have threedifferent levels of service.
Start of everything starts withbookkeeping and making sure we
have accurate financialstatements.
We'll give them some feedbackas to what's going on with those
financial statements.
We meet with every client atleast twice a year to go over
their financials, go over theirtax projections.
(31:04):
If a client needs to meet morethan that during the year, we
definitely take the meeting.
If they have something going on, we do all their tax returns.
We're providing them withthings like wage surveys, fee
surveys, benchmarking reportswhen we do their financial
statements so you can kind ofsee where their numbers are
lining up versus our otherclients and look for areas of
(31:25):
improvement.
And then we take on specialprojects as they come up.
You know clients needvaluations of their practice or
they want to do a business plan,Like if I get out of insurance,
what does that all?
Speaker 1 (31:37):
look like Mike.
Now correct me if I'm wrong.
Speaker 2 (31:40):
Like Bull Moose Financial only sees dental
clients, right, that's correct,and between my three partners
and I we have quite a few dentalpractices really across the
country.
I used to be a moderator onDentaltown and that started to
bring in a more nationalpresence for us.
We're able to see the numbersfrom hundreds of dental
practices a year between theones that we serve and the ones
(32:01):
that we do practice valuationsfor, and I think that gives our
clients some meaningful datathat they can use to benchmark
their performance against.
Speaker 1 (32:11):
Now, if anyone wants to reach out to you and possibly
get a consultation to work withyou, where do they find you?
Speaker 2 (32:15):
Sure, I mean they can give me a call.
My number's 414-759-9629.
My email is mbark B-A-R-K atbullmoosefinancialcom, and a
website that we're in theprocess of redoing will be at
bullmoosefinancialcom.
Speaker 1 (32:34):
Awesome, and you've got an offer for the listeners
for Dental Practice Heroes.
Speaker 2 (32:43):
Sure, what we do is we waive our onboarding fee If
they say you know they came fromthe Dental Practice Heroes
podcast, paul Etcheson.
What that means is we're goingto review your prior tax returns
and before we even give aproposal, kind of let you know
if there's anything we would bedoing differently, how the
relationship would work.
But typically we charge $2,500to onboard a client and set up
all their depreciation schedulesand get everything they have
(33:04):
into our system.
That gets waived.
If you mentioned Paul EtchisonAwesome or the Dental Practice
Heroes podcast, Awesome, well,thanks so much, mike.
Speaker 1 (33:13):
I really appreciate you coming on, dude, always
loved working with you and it'sa shame that we don't anymore.
But I know a lot of mylisteners like the people that I
like and they're going to loveworking with you.
If they reach out to you,appreciate it, paul.
All right, take care.
You could be missing out on tens of thousands in tax
savings without even realizingit.
Actually, most dentists are,but it's not because they're
doing anything wrong, they justaren't getting the best advice.
Well, today you can startchanging that.
Tax season has just ended andtoday I'm joined by dental CPA
Mike Bark and we're covering thebiggest mistakes.
Dentists make tax planningmoves that can save you money
(00:25):
and strategies to help you keepmore of what you earn and build
a stronger, more profitablepractice.
You are listening to DentalPractice Heroes, where we help
you create and scale your dentalpractice so that you are no
longer tied to the chair.
I'm Dr Paul Etcheson, author oftwo books on dental practice
management, dental coach andowner of a $6 million group
practice in the suburbs ofChicago.
(00:46):
I want to teach you how to growand systematize your dental
practice so you can spend lesstime practicing and more time
enjoying a life that you love.
Let's get started.
Hey everyone, welcome back toDental Practice Heroes Podcast.
I am your host, dr Paul Edgison, and I'm very excited for my
guest.
This is my previous dental CPAand you're like why isn't he in
(01:09):
your CPA anymore?
And it's because I partnered upwith MB2 and it was included,
but this is somebody I'd stillbe working with.
I worked with for a long timewhen I had my dental practice
all by myself before I went withthe DSO route.
But this is a CPA from BullMoose Financial, the founder,
and he's still doing taxes andstill helping Dennis, mike Bark.
What's happening, mike?
How you doing man?
Speaker 2 (01:29):
Well, great to talk to you, Paul, In the middle of
tax season.
We were sorry to see you go atthe time.
You were a good client.
Speaker 1 (01:35):
Now, you know, when I opened my practice I didn't
know what to do.
Like man, does anyone know agood accountant?
And then one of my buddies waslike this is who does my taxes
every year?
And this is who I started with.
And then eventually, as mypractice grew maybe two, three
years into it I realized thismight require a little bit more
of a maybe dental-specific CPAor something with just a little
bit more caliber than what I wasworking with.
(01:56):
I know this is a common thingthat a lot of dentists do is
they start with some personalaccountant that they've been
using year after year?
Why would anyone want a dentalCPA?
And what does a dental CPAbring that the normal mom and
pop accountant doesn't?
Speaker 2 (02:10):
Sure, I think the first thing is dentists need to
realize right from the get-gotheir business is in a unique
position in that they're not amicro business where you can
just rely on a compliancepackage, if you will, from a CPA
like an H&R Block or a JacksonHughes who's just going to do
the return, and they're notquite big enough to have an
internal controller or CFO intheir business.
(02:32):
So there's a lot going on withthe business that they need, in
my opinion, somebody who's ableto look out for their taxes, for
their financial statements.
It's usually not a corecompetency of dentists.
Sometimes I know when I'mtalking numbers of dentists, you
can see them glaze over aswe're talking about it.
So I think it's an area wherethey have to spend a little bit
(02:54):
of money on it.
It's not an area where theyneed to be gouged by any stretch
of the imagination, but I'mdoing a valuation right now for
one of my clients.
They're targeting a specialtypractice.
The specialty practice is doing$1.4 million in profit and
we're looking at the financialstatements and the tax returns.
(03:15):
First thing we notice is theyown their own building and
they're not paying themselvesrent.
I'm like, well, that's unusual,both from a liability
standpoint and even a taxsavings standpoint.
So this is a small change ofpaying themselves.
Rent would net them $2,000 ayear.
Then we notice well, why areyou a Schedule C for tax
purposes?
You know it's a stable owner,solo practitioner.
(03:38):
Given their level of incomethey should for sure be an S
corporation.
That for them would be another$30,000 to $35,000 a year in tax
savings.
Finally, they could have beenpaying their state taxes at the
entity level.
That would have netted them,based on where they were located
, another $40,000, $45,000 oftax savings.
(03:59):
So all in, you know, $75,000,$80,000 of tax.
I mean that's an extremescenario, but we looked at their
accounting fees every year andthey were paying $3,500 a year.
The tax returns were correctbut there was no planning, there
was no advice.
This person is having my buyerput together a valuation because
(04:20):
they have no idea what theirpractice might be worth.
Wow, because they have no ideawhat their practice might be
worth Wow.
So where a dental CPA can comein is would he reach those
decision points of your business, be it bringing in an associate
selling to a DSO, bringing inan associate to see your
business expanding your practice.
All of our clients have beenthere and done that, and that's
(04:44):
important because we've seenwhat they've done well, what
they haven't done well, we'llhave connections in terms of
banks, builders, attorneys,other people who could do a
really good job on your accountand be able to guide you through
those decision points as youcome through them, because we've
seen them a million times.
Speaker 1 (05:02):
Totally.
I remember working with myperson that worked before you
and I'd asked him I said is mybusiness like really profitable?
He goes, your business is soprofitable and I wanted to know,
like, what about like dentaloffices?
And I think that's awesomebecause, like when I switched to
you, I got to, I was able tosee, I mean, at least like how,
like my numbers compared toother dental offices.
I find a lot of dentists justdon't even know how to use their
(05:25):
P&L like what it's even usefulfor.
They'll send me their profitand loss and I start going
through it and I ask themquestions about it and they have
no idea.
They can't tell like where anyof their money's going or what
their profit is.
Speaker 2 (05:36):
Yeah, and I'm for a very simple financial statement
that we want our clients to beable to look at four different
numbers, maybe within theirfinancial, and know whether or
not they're doing well.
So I mean, the first thingthey're going to take a look at
is the overall staff expense.
That's the biggest cost and Ithink every dental practice we
have with the exception of maybeendodontists, who will
(05:56):
sometimes spend a little more onsupplies, supplies and labs
should be together and should beevaluated as its own number.
Then you have your general andadministrative costs.
So these are the costs thataren't going to change relative
to your production all that muchAdvertising, continuing
education, computer expense,insurance, meeting expense,
(06:17):
office supplies, professionalfees.
Then you look at your occupancyexpense.
So occupancy is your rent, yourutilities, your repairs and
maintenance, real estate taxes,if you have to pay them, and all
those numbers will come down towhat's called operating income,
and operating income isimportant because if you take
that number minus 100%, that'syour overhead and then we'll
(06:39):
have items that are what we callbelow the line.
So that's doctor's pay,associate pay, Some clients will
have kids on their payroll,some clients will do some things
that are a little more taxmotivated, if you will, that
will drop below the line or theymay have a one-time consulting
fee.
Speaker 1 (06:56):
So as far as, like, staff expense goes, I mean, this
is a really hot button issuethat's come out in the past like
two, three years, as we sawjust.
The market rate for dentallabor has increased
significantly and I think mostdentists are PPOs where they
don't get the correspondingincrease in the fees that
they're getting to increasetheir income to offset that.
What are you seeing as far asstaff expense, like non-doctor
(07:19):
staff expense right now as apercentage of collections?
Speaker 2 (07:21):
So what it used to be is most of our clients were 24%
or less.
So that included the payroll,payroll taxes, retirement
contributions, if you had healthinsurance or any employees,
staff benefits, uniforms,temporary labor was 24% or less.
Since COVID it got as high forour clients as just under 30%.
(07:43):
We're starting to see that comeback down for our average
client, where we're just a shadeover 28% right now.
In my opinion, even looking atour industry and accounting and
how hard it is to hire somebody,my belief is if you're a
professional service, you'regoing to have to be able to do
or be compensated more with lessresources than he had in the
(08:05):
past.
If my $12 an hour dentalassistant quits, no worries,
another one's right up the block, I'll get them in here.
If my hygienist who's making$28 an hour quits, no worries,
there's this wealth of them.
That's not the case.
I think we have a long-termlabor shortage in this country.
They called it the baby boomfor a reason.
Those people are retiring.
(08:26):
There's not as many Gen X ormillennials coming up behind.
So big thing dental practicesare going to have to look at is
if they are a network and theyhave a waiting list to get in to
see them.
First thing you need to belooking at is getting out of
network.
We have seen over the past twoyears about 30% of our clients
(08:46):
exit, being preferred providersand going out of network, and
the good thing is we can tellpeople who are going to go out
of it.
Yes, you can still come here asa patient, because you have to
understand as a patient.
If I get a letter saying you'regoing out of network, I'm going
to assume I can't come to youand that's not the case.
They're still going to use myinsurance.
It just may mean if I likegoing to you, I'm going to have
(09:08):
to pay a little bit out ofpocket every time for that
experience, that level ofservice.
And what clients are finding istheir collections now are
starting to go up as a result ofgetting out of it, and now they
are starting to see the staffcosts go back down to normal
levels.
And what we're trying to tellpeople is if that old model was
(09:30):
a million dollars and you werewriting off 25%, you still would
do a million dollars ofdentistry.
So why don't we just get it towhere we're doing a million
dollars of dentistry and gettingpaid for a million dollars?
Speaker 1 (09:39):
or as close to it as possible.
You mentioned 30%, and thenyour staff expenses started
coming down recently.
Was that due to anything otherthan going out of network?
Were there some otherstrategies that dentists were
using, or just getting moreefficient?
Speaker 2 (09:53):
No, I think for the most part it was people getting
out of being in network.
We haven't really seen areduction in headcount yet, but
what we've encouraged clients todo is, if somebody does quit
their office, really make adetermination.
Is that person really needed?
Are you able to either leveragetechnology or some other
resources to not have to fillthat position?
(10:13):
But by and large, they're stillgoing to as best they can fill
it.
So it has been people leaving.
Insurance Collections arestarting to go up.
We have seen a flattening inwages.
It seemed two, three years agothere was a hygiene shortage
that was coming.
I think even pre-COVID.
When I first started, everyhygienist was 55, 60 years old.
(10:36):
Started, every hygienist was 5560 years old.
And the problem there washygienists when I first started,
way back in 2000, made 28 to 30dollars an hour.
Fast forward to about 2016,they were still making 28 to 30
dollars an hour.
So I think a lot of people whowould have went into that
profession chose well, maybeI'll be a nurse or I'll be
something different with this,because I can get paid a lot
(10:59):
more to do it.
But we went through a period oftime where we saw hygiene went
from 30, also it was 35.
You blink and it was up to 40.
You blink again, it was 45.
And it has seemed to havesettled in somewhere between 45
to $50 an hour for a hygienist.
I think the hope there is nowthat those wages have come up to
probably what reality is,you'll see more people in the
(11:21):
pipeline who want to go throughhygiene school.
Speaker 1 (11:24):
Have you seen any lessening of the admin staff in
dental offices due to the recentcoming and popularity of AI
software and administrativestuff?
Speaker 2 (11:34):
No, I think that's an area where our clients are
going to be slow to adapt to.
I mean, we are seeing clientswho are using recall procedures
that are a little moreinnovative than what they have
in the past, but we have seenthose wages essentially flatten
out too.
I think people have taken moreof an approach that if I could
get a person with a goodpersonality, I can train them to
(11:54):
be an admin.
But what I would tell anybodyis if you look at the base level
wage in this country, we wereat a place called Quick Trip,
which is a huge gas stationchain in Wisconsin yesterday.
Their entry level is $21 anhour Wow.
So if their entry level is $21an hour, what they're looking
for at Quick Trip is, yes, it'sknown for being very friendly.
(12:14):
It's known for being verycustomer service orientated.
Well, okay, that means thebaseline in a professional
dental office is going to besomewhere north of $21 an hour
in most cases.
So again, I think that's wheredentists really need to consider
their insurance relationshipsand starting to go hey, if I'm
going to run a private practice,I need to be paid 100% of what
(12:36):
it is I'm producing, Wow.
Speaker 1 (12:38):
I just did a YouTube video that I recorded and I was
talking about how we need tostart hiring outside of
dentistry for front desk,because for the admin people,
because there's just not enoughpeople and it's hard to find
great attitudes when you'relimiting yourself to people with
only dental experience.
And I had said on my video thatI mean someone that's working
down at the store at some fastfood place or some restaurant
that maybe wants to get theirnights and weekends back.
(12:59):
They might be making $15 anhour and I had no idea that.
I mean, is that $21 an hour?
Is that common?
Speaker 2 (13:05):
That's common.
I mean, big national gasstation Buc-ee's is moving into
our area.
You can be the car wash managerthere and make $175,000.
Jeez, they're paying people whoare again.
I mean, they're trying tocreate a good experience.
You're going to have tocompensate people accordingly If
you want somebody coming in todo that job.
Who's going to be friendly withtheir staff responsible.
Speaker 1 (13:27):
Yeah, that's interesting.
I mean we dropped Delta about ayear and a half ago and what I
mean we were at capacity, butwhat prompted it is that I kept
raising my staff wages and itgot to the point where it's like
this doesn't make sense and Iwanted friendly people that take
great care of people.
But the problem was I couldn'tkeep them because they were
going somewhere else for anextra like $2 to $5 an hour and
(13:50):
eventually I'm like, well, Idon't have money to give to
raise it, and we just had to doit, and I think we did the same
thing.
Our payroll actually went up toabout 32%.
Right now it's about 29%, andit boggles my mind just how
quickly all that change happened.
Let's talk about, like youmentioned, the S-corp versus the
C-corp thing.
I know this comes up a lot fordentists.
What does that mean and why?
(14:11):
How do we know what we shouldbe?
Speaker 2 (14:27):
Sure.
So most dentists willincorporate as an LLC or a PLLC
based on their state and thoseare what are called disregarded
entities.
So it means you have the choicein how you want to be taxed.
Going forward corporations,somebody forms their LLC and
they make that S corporationelection right away.
And what they did a factor intoall this is in 2018, when the
tax law changed and introducedthe qualified business income
tax deduction that in a lot ofcases they'd be better off as
(14:51):
just a sole proprietor taxed orLLC taxed as a sole proprietor.
So again, it's just an areawhere, if they're not getting
advice and their situation's notbeing looked at, they will jump
the gun on that election.
S-corporations also have theissue of taking distributions in
excess of basis, meaning if youtake money out and you do not
(15:14):
have enough money that you putin or enough past profits, you
have capital gains taxes.
So young practices struggle tobe an S corporation.
Now where the savings in an Scorporation comes in, in that
example I gave earlier had adentist do about $1.4 million of
compensation.
They could have set areasonable compensation up for
(15:36):
themselves even if we were goingnuts and let's just say we were
going to pay them $700,000 ayear.
The remaining $700,000 wouldcome out without the FICA and
Medicare tax At 2.9% between theemployer and the employee side.
On that simple change, they'resaving $21,000 of taxes right
from the jump.
Wow.
(15:56):
If they wanted to be evenreasonably aggressive, they
could have said let's set ourW-2 up at 345.
That's the maximum that a 401kwill consider.
Well, now we're talking amillion dollar differential and
that 2.9% also becomes $30,000.
So S-Corporation is a greatplace to be for a doctor who's
(16:18):
going to be a sole owner.
They don't really have anyintention of having partners in
the future and has a maturepractice in that they have
previously taxed profits withinthe business.
But as they're starting outagain, they need to have a
conversation at minimum with agood tax person to discuss what
entity works best for me and wehave a few new clients and what
(16:40):
we've told them is, as we do ourtax planning meetings, it's
going to be wait and see.
We'll see how's your practiceperforming.
Are you buying a bunch ofassets that we could take
section 179 on?
What are all those things thatgo into it, to see what entity
works best for you and yoursituation?
A lot of times it's going to beS-Corporation for some partners,
c-corp's not going to workreally well.
(17:02):
In dental there's a fewisolated cases.
I could think of that it might.
The advantage of that is youessentially you don't have any
pass-throughs.
You pay a corporate level tax,which right now is 21% versus
35%.
If you are in a situation whereyou are going to have a C
(17:22):
corporation and your intentionis to build up and buy multiple
practices and conserve your cash, maybe C corporation's the best
way to go, but it's a limitedsituation.
Speaker 1 (17:34):
So how hard is it to change and bounce between the
few and change the election?
Speaker 2 (17:39):
So when you start an LLC, they default you to being a
sole proprietor.
So you have to proactively makean S-corporation election or
C-corp or partnership.
Once you make that election,you're locked for five years.
So again, you want to not onlylook at your current situation
but where do you see yourselfbeing, at least for the
foreseeable future?
(17:59):
To me, where most money getsleft on the table in terms of
tax planning is people whoaren't the right entity in a lot
of cases.
So we'll see them again.
The situation where clear-cut Scorporation they could be
saving $35,000 a year simply byfiling a different tax return,
and that doesn't even considerpaying their income taxes at the
(18:22):
state level.
Then too, yeah, that's freemoney.
That's not even exotic taxplanning, that's just 101 kind
of stuff.
Yeah.
But if you're just payingsomebody for compliance, I
empathize with that preparerbecause their business is built
on high volume.
We're going to get the workdone and we're not in the advice
giving business, which is fine.
Speaker 1 (18:44):
So around tax time we will always see a post on one
of the Facebook forums, and it'sdoes somebody recommend a good
accountant?
I feel like I'm paying way toomuch in taxes and I'm sure you
get this all the time.
What is your response to that?
Speaker 2 (18:57):
Well, let's even take a look at the $1.4 million
example.
One way or the other, thatguy's going to pay a lot in
taxes.
I mean, you get to certainincome levels and you are going
to pay a lot of taxes.
I think another thing dentistsneed to keep in mind is the tax
code is somewhat biased againstprofessional service companies,
in that once our income goesover a certain level, we don't
(19:19):
get the qualified businessdeduction.
Some of the manufacturing andresearch and development credits
that are out there don't reallyapply to professional services.
So if you're successful, you'regoing to pay a lot of taxes.
But again, in this guy'sparticular situation, okay, we
could have saved $75,000 bydoing his tax return differently
(19:40):
.
Could he have implemented acash balance plan to defer even
more tax?
Absolutely, I mean a relativelysmall staff it was a specialty
office that he could haveprobably saved another two
300,000.
But even then, at the end ofthe day, it's still going to pay
a lot in taxes.
It's just that's kind of theway it goes if you're high
(20:01):
income.
Now, that's not to say there'snot things that could be done
differently to bring that down alittle, but there's not a magic
bullet where we can go.
Hey, you're the guy making 1.4,.
Let's get you down to zero.
There's no mechanism to do that.
Speaker 1 (20:15):
Yeah, I'd like to see the accountant advertising we
don't even pay taxes, likethat's your tagline.
I mean, if I figured it out Iwouldn't be paying any.
Not to talk politics.
I don't want to go intopolitics, but you know we had
the, the beefing up of the IRS,and now we've got a change in
leadership in the federalgovernment.
I wonder, what did you guys seewith your clients?
Did you see an uptick in audits?
Speaker 2 (20:37):
I haven't had a client audit in about 20 years.
Oh, wow, that's fantastic.
Now one could say, okay, mike,it's probably because you're
telling everybody no ondeductions.
The fact of the matter is theIRS is woefully understaffed.
Wow.
So the IRS does not have themanpower, nor have they had the
manpower to audit.
Secondly, I think dentists justaren't a relatively big target.
(20:59):
They know what your revenuesare.
You're not a big cash business,so there's not a lot of
concealment of income that couldhappen.
They know your biggest expensebecause W-2s get reported to
them.
So now it comes down to if I'mgoing to come in and audit a
dentist, I'm going to audit adentist.
Are they paying their kids toomuch?
Are they doing some vacation?
Slip through the books?
It's not huge dollar amounts,so they're not big targets to
(21:23):
begin with.
But I think the problem is thathas led to the rise of the tax
newsletters coming out.
What are the tax newsletters?
What do you mean?
So I mean there's a couple ofgood ones, like the McGill tax
newsletter is one I think anydentist should look at
subscribing to.
They do a really good job oflaying out different tax issues
in plain English, very readable.
(21:45):
But there's Kiplinger's outthere, there's Wake Coat
Investor and a lot of what theywill talk about is okay, just
had a newborn baby, let's paythem $15,000 a year to be a
model.
Now they don't have to preparetax returns, they face no
preparer penalty.
That's fine, well and good andthey're probably right.
That's probably not going toget audited.
(22:05):
However, if it does, that'seliminated immediately.
Number one because you usuallydon't hire models for your
business, and it's just.
Why is a newborn making $15,000?
And they happen to have thesame last name as you do?
So they're recommendingaggressive strategies that us,
(22:26):
as CPAs.
We have what they call circular230 responsibility to our
clients to advise them as towhat the tax law is.
My fear is with some of thisstuff is as AI does get better,
I don't see it.
The IRS probably isn't going tolead the spear on this charge,
but you can see how AI could bea really powerful tool in terms
of auditing.
(22:46):
They could input tax returns,they could go run a query and go
tell me everybody who has kidson the payroll.
Speaker 1 (22:53):
I talk about the kids on the payroll.
Is that something that yourecommend and you do with your
clients?
I know that comes up a lot.
Speaker 2 (23:02):
Yeah, I mean it comes up all the time.
I would say most of our clientshad their kids on the payroll
and in time memoriam ever sinceI first started, back when the
exemption was only $4,000, therewas a whole industry of kids
who cleaned the office and madelike $3,500 a year.
What's different now is thatstandard deduction is up to
$15,000.
So you can pay a kid up to$15,000 a year and not pay any
income tax on it.
Our advice to our clients isyou have to be reasonable with
(23:25):
it.
So if you look at a dentaloffice, what are jobs your kids
could do around that office?
You know there's the bags thatevery dentist gives their
patient.
That's a toothbrush, toothpaste.
They can do that.
They can certainly shreddocuments.
They can probably.
Even if you're doing events orthings like that, they could be
there.
They can probably clean youroffice to a point where you're
(23:48):
paying your actual cleaner alittle bit less.
But be reasonable with thewages.
I mean I would not advisesomebody to put the newborn on
it.
But again, the hard part of allthis is the IRS isn't auditing
anything.
So it has led to people wantingto be aggressive and it's
ultimately the client's call.
Speaker 1 (24:06):
Are things like this if they do get audited, are they
like pay a penalty and pay thetax, or is it like go to tax
prison?
Speaker 2 (24:12):
You only go to tax prison like you think of Al
Capone going.
Al Capone was to prison becausehe was concealing income.
If you conceal income, if youwere doing a big cash dental
business, that's when they comein with the windbreakers and
take all your computers and yougo to prison.
If you overstate deductions,your fallout is going to be you
pay the tax, you pay theinterest on it and then you can
(24:34):
have up to a 25% understatementpenalty.
Speaker 1 (24:37):
Yeah, what are some other hot button stuff, like
maybe what is the Augusta rule?
Speaker 2 (24:42):
So what the Augusta rule is, as its name implies, is
it came about because peopleused to rent their homes during
the Masters Tournament down inAugusta, Georgia.
What the IRS actually came inand said is if you just have
this occasional thing where yourent out your home, you don't
have to pay income tax on it,you don't have to go through the
record keeping.
(25:02):
So it's really well-intentioned.
Where it evolved was taxnewsletters at some point
decided to say why don't yourent your home to your business?
And that's a tax deduction.
What's good, though, about thisparticular rule is a court case
did come down, where the courtactually affirmed its usage for
(25:23):
business purposes and basicallysaid as long as there's a
business purpose could be ashareholder meeting, could be
staff meeting, could be staffparty there are legitimate
reasons to do it.
The key thing, though, is yourreimbursement rate has to be
fair value.
In this particular court case,they were trying to claim a.
I want to say it was like a$300,000 tax deduction for
(25:46):
rental of their home, and theIRS said that's a little strong.
We're going to give you $750 aday, but if you rent your house
for less than 14 days, you cando it.
You can take the income as anindividual and your business can
deduct it.
So how we advised our clientsthis year was to here's what the
(26:06):
rule says.
Here's what the legitimate usesare.
If this occurred to you and Iunderstand, some people are just
going to probably write down ohyeah, I had 12 staff meetings
at the CASA and we're going todeduct this amount.
Again, key is be reasonablewith the reimbursement rates.
Think of what your house mightgo for as an Airbnb, or if you
(26:29):
were to rent a conference room,they'd do the same thing.
So we told clients to have $500to maybe $1,000 a day, maybe a
little bit more, depending onyour location.
Be reasonable.
Make sure you have a businesspurpose or you can document a
business purpose Awesome.
Speaker 1 (26:43):
What about the home office?
I remember this was like kindof a hot button issue at one
point.
Speaker 2 (26:47):
So the thing with home office.
Again, the old rule basicallysaid you had to be able to
replicate anything you did atyour primary job at your home
office.
So for an accountant that'spretty easy to do.
I could have a computer, Icould have a 10-key calculator
and I could do my job prettymuch anywhere.
For a dentist it was always alittle bit trickier, because
(27:09):
what are you going to do?
Are you going to set up adental chair?
Sterilization and all thosethings.
A court case did come into play.
That basically said, as long asthey're able to do an element of
your job at your home office,it's a valid deduction.
So if you think of a dentalpractice, they might be doing
record keeping, they could bedoing HR, they could be doing
their QuickBooks, they could bedoing charting, any number of
(27:31):
things that aren't related orare related to their job that
they don't feel a comfort leveldoing at their place of business
, where staff might be privy tothings.
And how that deduction works isyou take a prorated portion of
your utilities your mortgageinterest, real estate taxes,
repairs and maintenanceinsurance and you compare that
(27:54):
against the square footage ofyour home that you're using and
you generate a deduction.
It's not a massive one.
For most of our clients it's a$4,000 to $6,000 a year
deduction but, as I would tellany client, if you saw $1,000
laying there, you're going topick it up.
So it's not a massive deduction.
It's not one that is going tobring somebody way down, but
(28:17):
it's a legitimate deduction.
Again, as long as you documentit, you're fine with it.
It's not a red flag by anystretch.
Speaker 1 (28:23):
And what about the auto?
Like leasing versus buying acar or something that wants to
be a large car.
What's that?
Speaker 2 (28:30):
So there's a tax advantage to buying larger
vehicles, or what they call$6,000 curb weight on it.
The key thing in my opinion isthere should be a business use
to it and there should be apersonal use.
And it's important to eithercome up with a ratio of what
that business and personal isgoing to be or track that and
(28:51):
then add back the personal useevery year to your tax return.
We would suggest most peopleare 60 to 70% business.
The remainder is personal.
You do have to consider is ithas to be titled under your
business.
You have to take a look at yourinsurance.
Premiums in your business tendto be higher than it does for
you personally, so you have toweigh that.
(29:12):
So we have a lot of clients whosimply do mileage
reimbursements every month orhave what's called an
accountable plan where we sayall right, every month write
yourself out a check for $500and we'll do some type of true
up at the end of the year tofigure out what your mileage was
, and then that way you're kindof writing off the vehicle
anyway by doing it at thatmeasure.
(29:32):
You mentioned the AI thing.
Speaker 1 (29:34):
I've searched things on Google about taxes and I have
like hesitated and I'm like arethey going to know that?
Why am I looking at this?
What is this going to look liketo the IRS?
Speaker 2 (29:44):
No, I think it's an easy thing for them, if they
wanted to, to enforce it.
I don't know that the will isgoing to be there to enforce it
for the foreseeable future.
But again, I think, as long aspeople are reasonable with their
deductions, everybody who ownsa business has some measure of
things that in theory aredeductible.
It could be a meal that theywent out for, could be a
(30:04):
computer that they bought fortheir home that went through the
business.
There's always some element toit and the old analogy I used to
use with clients is if you'redriving 74 or less on the
freeway back when the speedlimit was 65 everywhere, you're
not going to get pulled over.
So if I'm looking at yourfinancial statements and
everything looks like it mightbe going 74, if I'm not
(30:28):
questioning it, irs is not goingto question it.
We understand everybody'sprobably has some element that
they're putting through thebusiness that isn't 100% legit,
Absolutely.
Speaker 1 (30:38):
So tell the listeners about what you guys provide at
Bull Moose Financial.
Speaker 2 (30:43):
as far as two dentists, so for our dental
clients we kind of have threedifferent levels of service.
Start of everything starts withbookkeeping and making sure we
have accurate financialstatements.
We'll give them some feedbackas to what's going on with those
financial statements.
We meet with every client atleast twice a year to go over
their financials, go over theirtax projections.
(31:04):
If a client needs to meet morethan that during the year, we
definitely take the meeting.
If they have something going on, we do all their tax returns.
We're providing them withthings like wage surveys, fee
surveys, benchmarking reportswhen we do their financial
statements so you can kind ofsee where their numbers are
lining up versus our otherclients and look for areas of
(31:25):
improvement.
And then we take on specialprojects as they come up.
You know clients needvaluations of their practice or
they want to do a business plan,Like if I get out of insurance,
what does that all?
Speaker 1 (31:37):
look like Mike.
Now correct me if I'm wrong.
Speaker 2 (31:40):
Like Bull Moose Financial only sees dental
clients, right, that's correct,and between my three partners
and I we have quite a few dentalpractices really across the
country.
I used to be a moderator onDentaltown and that started to
bring in a more nationalpresence for us.
We're able to see the numbersfrom hundreds of dental
practices a year between theones that we serve and the ones
(32:01):
that we do practice valuationsfor, and I think that gives our
clients some meaningful datathat they can use to benchmark
their performance against.
Speaker 1 (32:11):
Now, if anyone wants to reach out to you and possibly
get a consultation to work withyou, where do they find you?
Speaker 2 (32:15):
Sure, I mean they can give me a call.
My number's 414-759-9629.
My email is mbark B-A-R-K atbullmoosefinancialcom, and a
website that we're in theprocess of redoing will be at
bullmoosefinancialcom.
Speaker 1 (32:34):
Awesome, and you've got an offer for the listeners
for Dental Practice Heroes.
Speaker 2 (32:43):
Sure, what we do is we waive our onboarding fee If
they say you know they came fromthe Dental Practice Heroes
podcast, paul Etcheson.
What that means is we're goingto review your prior tax returns
and before we even give aproposal, kind of let you know
if there's anything we would bedoing differently, how the
relationship would work.
But typically we charge $2,500to onboard a client and set up
all their depreciation schedulesand get everything they have
(33:04):
into our system.
That gets waived.
If you mentioned Paul EtchisonAwesome or the Dental Practice
Heroes podcast, Awesome, well,thanks so much, mike.
Speaker 1 (33:13):
I really appreciate you coming on, dude, always
loved working with you and it'sa shame that we don't anymore.
But I know a lot of mylisteners like the people that I
like and they're going to loveworking with you.
If they reach out to you,appreciate it, paul.
All right, take care.
Popular Podcasts
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com
On Purpose with Jay Shetty
I’m Jay Shetty host of On Purpose the worlds #1 Mental Health podcast and I’m so grateful you found us. I started this podcast 5 years ago to invite you into conversations and workshops that are designed to help make you happier, healthier and more healed. I believe that when you (yes you) feel seen, heard and understood you’re able to deal with relationship struggles, work challenges and life’s ups and downs with more ease and grace. I interview experts, celebrities, thought leaders and athletes so that we can grow our mindset, build better habits and uncover a side of them we’ve never seen before. New episodes every Monday and Friday. Your support means the world to me and I don’t take it for granted — click the follow button and leave a review to help us spread the love with On Purpose. I can’t wait for you to listen to your first or 500th episode!