The Importance of Quarterly Tax Estimates for Your Dental Practice

Hosts Casey and Jarrod welcome special guest Kevin Rhoton, a seasoned CPA and MBA, to delve into the world of quarterly tax estimates. Listeners will gain valuable insights into why these estimates are crucial for practice owners, how to calculate them accurately, and common pitfalls to avoid

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Episode Transcript

(00:03):
Hello, everyone, Welcome to theMillionaire Dentist Podcast, brought to you by
Four Quadrants Advisory. On this podcast, we break down the world of dentistry,
finances, and business practices to helpyou become the millionaire dentist you deserve
to be. Please be advised wedo speak with an honest tongue and may
not be safe for work. Helloand welcome. This is Casey Hires back

(00:26):
at the Millionaire Dentist Podcast in studiowith co host Jared. I was like,
what's the pause there? Just buildingup suspense. I love it.
Hi, Casey, how are youdoing well. We've also got Kevin Rotten
in the house. Hello, NBACPA. Generally nice guy, Kevin.
You you helped with our tax team, task management, tax planning, onboarding

(00:49):
anything tax. Yeah. I'm withthe accounting text team and I specialize with
onboarding our new clients. He alsospecializes in barbecuing and smoking meats and making
jerkys I do. It's very nicewhen he makes quote unquote too much and
he brings it in. I'm abig fan of when that happens. Jared
loves a free lunch. I suredo. I probably owe you one.

(01:11):
Actually, I've taken so many meetingsjust to get a lunch out of it.
I do have somebody you want meto bring it into me? Yes,
that'd be great. Thank you.Paying off already, paying off already.
But as you said, Kevin islike he's like a CPA tax kind
of genius. It's like our rainMan with numbers, but smarter on the
front end. I guess again,I don't know how to take that.

(01:34):
Not a compliment or it's kind ofmeant to be a compliment. I just
the Rainman. Well, actually it'sfrom the Hangover when gillifanakish and doing the
rain Man with the numbers going throughthe head. And you know, anyway,
you're really smart. That's what I'mtrying to say. Thank you.
Yes, and you came here todayto talk to us about tax right estimates,

(01:55):
tax projections and estimates. What whathe knows for? Well, if
you do not like writing five digitchecks to the irs when you file your
tax returns, then you probably wantto listen to this. So if you're
a practice owner who you pay yourtaxes all year and then you have to
pay ten, twenty thirty, fortyfifty sixty thousand more, still pay more?

(02:19):
And actually if you get the refund, it's still bad. But we'll
just talk about the estimates. Okay, yeah, Jared, drive us home
today, pal Okay, So interms of estimates and tax projections, and
if it's not handled well enough,as you said, some of the uh,
you know, bad things that couldhappen is writing a large check yes,
the end of the year. Whyisn't it. Why don't traditional CPA

(02:43):
or accounting firms already do that?Four people? Yeah, most are lazy.
Sorry, go ahead, Kevin.Yeah, most traditional CPA firms probably
a lot of practice owners experiences whereyou really only talk to them once twice
a year leading into tax season.They'll get all of your information, prepare

(03:04):
your tax returns, file them,and then you don't hear them for nine
to ten months, don't check inwith you, anything like that. And
so it's as part of like whata traditional CPA firm does. This is
a term I've heard thrown around.I'm going to be straight up honest.
I get kind of the concept.I'm not sure what it is. What

(03:24):
is a safe harbor? What isit? And how does that work?
Yeah, so, most traditional CPAfirms will prepare safe harbor estimates when they
prepare your tax returns. So giventhe example that we've just come out of
file the twenty twenty two tax returns, they automatically do maybe a safe harbor

(03:50):
twenty twenty three estimates, quarterly estimates, and all safe harbor is is the
IRS says you need to pay aninety percent of your twenty twenty three tax
liability or one hundred percent of yourtwenty twenty two tax liability to keep you

(04:10):
out of paying any under payment penalties. And that's it. That doesn't mean
anything about any type of fluctuations.So if you had a really good year
or a really bad year, oryou know, there is a medical issue
in your home a lot, it'sit's just what happened whatever you did two
years ago or last year. Yeah, last year, that's all it means.
So, yeah, you could havea fifty thousand dollars tax bill,

(04:33):
but as long as you paid inone hundred percent of last year's taxes.
Hey, I just tuned out.But is the answer is because they're lazy?
Like yes, sure, short andsweet, they're lazy. So this
is more of a let's prevent penalties. Yeah, that's all it is.

(04:53):
Why wouldn't they take into account again? Is it just because they touch one
time a year? Even so,let's say you're the traditional CP over here,
I give you my tax info.You see that, Hey, you
were up two hundred thousand dollars comparedto last year. Why wouldn't you adjust
that or change that for or isit too late by that point? It's
too late by that point, Imean because they're looking at your twenty twenty

(05:16):
two books in first part of twentytwenty three. So before let's say,
because you know you, hey,you work with us, obviously you work
here and you work with all ofour clients. Do you find when people
come in for the first time asa client or even as in a consultation,
they're frustrated with those year to yearswings with a lot of prospects that
come in. We see that alot of fluctuations in taxes, I mean

(05:41):
from one year to the next.Looking at prior year returns, you know
they'll oh a whole lot one yearand then turn around and get a refund
the next year. And a refundthere's not always a good thing, right,
No, it's just a poor useof your money. You're giving Uncle's
giving the federal government a interest freeloan. See, now these are things

(06:03):
I didn't know before coming to workhere too much, because I remember being
in college and getting a nice littletax refund and went straight to you know,
booze, let's be honest. Butnow it's like, I rather would
have that money month a month,or you know, week to week,
whatever it comes down to. Yeah, Kevin sees this firsthand as he's onboarding
new new folks that get to workwith our firm. Most of the time

(06:24):
they start out thinking that their taxsituation is is okay, or maybe it's
just maybe not as proactive as theywould like, and then ultimately they get
pissed off because they a lot oftimes we find a lot of error's mistakes
issues, things that they just didn'tknow because they like their accountant, they're
a nice person, or it's beenso many years. I think that's the

(06:46):
norm. This is what I think. It's the norm. And there are
other fourteen friends who use the sameCPA. They all have different degrees of
mediocrity when it comes to their accounting, so they don't know any different until
the proverbial blindfolds lifted off and theygo, wait, what you mean I
didn't have to pay sixty thousand dollarsand I can do this or that,
and I mean you see that allthe time all the time. So how

(07:10):
do we hear at four quadrants dothat differently than say in the traditional firm.
So right off, we have Iguess a leg up. You would
say, we work with practice ownerson a monthly basis. We reconcile their
bank accounts, update their quick books, and we're generating monthly financial statements for
them. So you're elbow deep inthe process. Yeah. Yeah, so

(07:33):
we're able to provide up to datetracking on their tax will income. So
you're in the practices accounts and lookingand they're quick books and all that stuff
on a monthly basis. From there, where does it go? Yeah,
So that leads right into being ableto prepare a customize quarterly estimate for our
clients each quarter. We actually havea proprietary tax projection method that we go

(08:01):
through for every one of our clients. And it's really about it probably about
a ten step method that pretty muchlooks at every aspect of our clients in
anything that might affect their taxes.We take a look at that and incorporate
that into their quarterly tax projection,and each time if there if something pops

(08:22):
up, you're right there to askthem a question like what is this?
Where did this come from? Okay, so someone's trying to cook the books,
we know sure. Well more importantlyin buzzle when when you which is
a practice owner, you probably shouldn'tbe spending hours of your time doing this
stuff. But for our clients,when you have a team and everything all
the time, there's no chance forembezzlement or uh no chance of it.

(08:48):
Yeah, no catching it right away. But but from what I understand,
most folks, they only get thesafe harbor estimate, which is last year
I did X divide by four.There's the payments. Best to luck.
We'll talk to you November. Yep. The extra parts are we with our
clients forecast out the next year?Correct? So we might say that is
that correct? That's correct? Yeah? So well maybe one of our female

(09:13):
clients, maybe they're gonna have ababy. Well guess what you can actually
plan and forecast for that novel things. A lot accounting firms won't do that
because they're not talking, because they'regetting nickel and dimed. Don't get me
started. But the safe harbor aforecast and then the monthly and the quarterly
tweaking changing being in there adjusting thatthat's the recipe. It drives us nuts

(09:33):
because it's not it's not like thehardest thing to do, and so few
people have a accounting firm that doesthat. Yeah, I mean, think
about all the swings that happen justin one year in practices you have dealing
with ups and downs with revenue,employee wages, I mean they're mostly going

(09:56):
up, but major equipment purchases,we have practice owners. All the time
piece equipment goes down, they dohave to purchase that replacement. We've just
seen all kinds of ups and downs. And then not to mention everything that
affects taxes outside of the practice,personal investments, you know, home sales,

(10:18):
home purchases. Kids like Casey hadsaid all that, Yeah, I'm
blame with crypto. I mean yes, actually, well yeah, and this
all ties into you know, rightnow, there's people listening that in June
have no idea that for the firstsix months of the year something was not
accounted for, and when are theygoing to hear from it about it?
In November? Not even they'll hearabout it in April of twenty twenty four.

(10:41):
So with the traditional accounting firm,a lot of times people don't find
out, let's say November of thatyear, that there's been poor accounting done
and that they owe a bunch ofmoney, and so you have what five
weeks to correct that. Well,that's not enough time. So then what
did they say, Section one seventynine, Go buy some stuff, go
by, go by a ninety thousanddollars truck because all because it's letting him

(11:03):
off the hook, yes, orthey go behind your back and get you
a shareholder loan. We talked aboutthose a lot that right, that's right
Kevin doing it, doing it thepoor quadrants way and getting proper and methodical
quarterly estimates done. Besides maybe notowing a bunch come tax time, what

(11:26):
are some major benefits that someone cansee from that. Yeah, definitely two
major ones besides just the fact ofnot owing a tax pumbly is it helps
avoid those tax aprizes when you goto file your tax returns. Again,
probably practice owners out there that everyyear they kind of have that dread in
the pit of their stomach of whentheir accountant calls your taxes done, you

(11:52):
owe insert huge dollar amount. Theyhate this that time of year. So
and they're giving themselves all sorts justthinking about it. Yeah yeah, and
then they're spending money to the doctor. That's more money. Yeah, that's
the whole thing here. And tonsof the prospects that we talk to that
they hate that thing. Yep Ihad a tax surprise, yep I hated

(12:15):
it. More money out the door. Was anybody ever surprised they had to
pay taxes in general? One ofthe lines. One of the lines I
hear as well, it's not reallya surprise because it's always jacked up some
way, Like if it was,hey, you o four hundred and seventy
five extra dollars, that would bethe surprise, because it's never very consistent,
right, And and taxes get peopleto move. That gets people frustrated.

(12:39):
And when they wake up and realizethat it shouldn't be like that,
then they make a nice change.Some people there their tax situation. Maybe
it's not it's not as glaring aswe're talking about here, But Kevin and
his team do a good job findingdetails, find getting in the weeks,
finding minutia things that it can justbe better. Yeah, And I mean
I guess a little bit to tutour own is every year there'll be a

(13:01):
couple of clients, a few clientsthat we'll get probably within one hundred dollars
of zero on filing the return,whether it's owed or refund We can get
that close. Will you do mytaxes too? Absolutely? Absolutely? What's
another great benefits that we can see? I feel like it may have somebody

(13:24):
with having just more cash in handout the year. Absolutely. So talked
about avoiding tax abilities, talked aboutavoiding that tax surprise, but also kind
of on the other end, isyou know, helping with cash flow if
we are able to lower your estmatewho wants to give the government an interest
free loan, Yeah, I wouldn't, So what would you What could be

(13:48):
done with that money instead? Themain thing is put it in retirement,
let it let it earn interest foryou, or if you need it for
new equipment. I know plenty ofuses a practice owner would just in the
practice or personally, maybe there's ahome improvement that they're wanting to do or
Kevin, I want to thank youfor coming on. Is there any last

(14:11):
words you have, not like adeath sentence. But is there anything else
that you went on? Your team'sdone? Just so yeah, I mean
right now, the second quarter taxestimates are due June fifteenth, and quarterlybe
every three months. Yeah, soafter June fifteenth, when would you say
the next September fifteenth, it's quarterthree. Quarter four will be January sixteenth,

(14:33):
and then of course you're ten fortiesdue on April fifteenth and twenty twenty
four. And really my last commentwould be, if you're not talking to
your tax prepare around those dates,then come talk to us. That's right.
Pisted our website or give us acall. We do offer free tax

(14:54):
assessments as if you just want tocome on and see, like you know,
we'll spend a little bit of timeon Why would we do that?
Honestly, I would say, thegoodness of our hearts, No, that's
a lie. Two reasons. Numberone, so many people's tax situation is
not very good, even when theythink it is. But number two,
when we point that out with alittle bit of information and a little bit

(15:16):
of time, that builds credibility forpeople to go, well crap. If
they just found that in thirty second, imagine what they can do to help
us in a broader way. Let'sinvestigate if that should happen. Right,
that's why we do it. It'sright, but we do find a lot
of issues and taxes and we offerthat complimentary as a springboard to potentially talk
to somebody. Right, that's fulldisclosure, right, I mean we're pretty

(15:37):
straight juice here, that's right,and it's listen again. It's free reach
out and we would love to takea look at your stuff and see what
we can do to help. Yeah, all right, take a look at
it. Kevin. I want tothank you so much for being on here,
and thank you laughing at my jokes. It's always appreciated. Casey,
you did amazing as usual. Muchlove. That's all the time we have

(16:03):
today. Thank you to our guestsfor their insight and for sharing some really
great information. And thank you toyou the listener for tuning in. The
Millionaire Dentist podcast is brought to youby Four Quadrants Advisory to see if they
might be a good fit for youand your practice. Going over to four
Quadrants Advisory dot com and see whyyear after year they retain over ninety five
percent of their clients. Thank youagain for joining us. And we'll see
you next time.