Well everyone, good morning, good afternoon, wherever you’re at, we have a freaking awesome show. Dental CPA Craig Cody from New York is joining us tonight, talking business. A little bit of taxes, a little bit of things dentists need to watch out for, how to save money. Welcome Craig Cody, to the show.
Well guys, thanks for having me, really psyched.
Yeah, thanks for being here.
We’re so thankful for the men and women who sacrifice, like yourself, every day, so thank you for that. Craig, you’re in the CPA business, you also have some different certifications we can talk about. Your kind of company, you work with medical professionals. What’s different? How did you get into helping medical professionals in this business?
In my book, you guys all run a business. While dentistry is dentistry, when you get to the business part of it,it’s not that much different than other professions. There’s those nuances, but you need to figure out ways where you can keep more of what you make.
Typically, are you working with really established people in their offices? Do you work with any younger dentists with a lot of student debt? Maybe some that are actually employees? Trying to get a practice, and working with them with their taxes as well?
Purchasing a Practice
Pretty much, people come to us when they’re either about to buy a practice, or about to go solo, or they’ve been in a practice for a couple years, and they’re kind of not happy with the communication they’re getting from their current CPA, and they’re looking for some more help. Somebody that’s going to give them some guidance.
Do you work with a lot of younger dentists that may be out a year or two, and looking to buy a practice, pretty much right after school? Is that something that y’all are working with?
We haven’t worked with a lot of dentists that are just looking to…we’ve talked to dentists where they’re currently working some place as a W2 employee, and they want to do something down the road. We kind of have conversations with them, we don’t work actively with them, because until they are actually ready to get into it, we can’t provide them with a lot of value.
Let’s kind of do a scenario here. Because most of our listeners are kind of in the same spot I’m in, and for one, right now, CPA wise, I don’t have a CPA, we have someone do our taxes, I don’t personally have one, I know I need one, here’s my situation. I’m an employee, right now, and in less than a year, I’m going to be a business owner. I have a lot of student debt, and I have a decent size income right now, one that I’ve never had before. What are things that you know for a fact I’m going to trip up on probably, and lose money this year that maybe a CPA could help me say, “Oh, you should do this with your money, instead of do this right now.”
As a W2 employee, there’s not a whole lot of planning you could do, unfortunately. For you, it’s basically, put as much of it away in your 401K as you can, if you have kids, and you can do an HSA, a health savings account, or a flexible spending account, do those kind of things. But there’s not a whole lot of planning, other than okay, let’s think about, okay you’re ready to buy this business, are you going to start from scratch? What type of entity should you have? What’s going to really work out the best for you? What expenses are deductible, and what’s not deductible? Those are the conversations you want to have. Because when you start moving forward, you want to know what you can do, and what you can’t do.
I’ve heard for W2 employees, I know some people try to become maybe independent contractors instead of doing that. What’s your experience on those kind of things?
We see that a lot. While I can help that independent contractor, a lot, from the practice owner’s perspective, at some point the IRS is going to come in, and they’re going to put the kibosh on that. There’s a whole set of rules you have to follow if you really are an independent contractor, and it’s really hard to follow those rules. If you are controlling when a person works, where they work, and stuff like that. It’s more of an issue of the practice owner than an independent contractor.
But we like to make sure everyone’s aware of, hey, this is the deal. It won’t really affect you too much if something happens, but you should just be aware of this.
We see that a lot more in the big corporate dental practices, versus the individual owner that might have a couple practices.
So Craig, what would you say are a few things, again a lot of our audience is new dentists, or about to be new dentists, in our situation, let’s say we are about to transition into ownership. Right now we might be an associate or resident, and looking at purchasing a practice. What are some things you would say to be prepared for tax breaks or whatever it may be as you’re moving into ownership to have some things lined up that will put you in a better situation than if you didn’t do those things.
Some of the things you want to look at, what type of entity should I be? That’s probably the biggest mistake that people make, because they basically talk to the attorney, the attorney says do an S-Corp, or do an LLC. They don’t really think about, okay what type of tax planning should we be doing? Which entity is best for us tax planning wise. That’s the big thing. Figure out okay, should you be an LLC, should you be an S-Corporation, can you make an election, are in you in an LLC, and make an election and be taxed as an S-Corporation, what way do you want to go about it? Which is going to be really tax efficient for you? So, you want to have that conversation, so you know, okay, alright, I’m going to be this.
If you are buying a practice, what are you actually buying? What part of that can you write off? How fast can you write it off? Those are what we call non cash expenses, so you get a deduction for them, but you’ve already laid the cash out when you bought the practice. Or you finance the practice. Is the interest on the practice, is that deductible? How much interest is that going to be?
I get questions all the time, okay I’m taking Continuing Ed, I want to go to a conference, can I deduct that? Of course, yes, you can deduct that. Those are a lot of the questions I get. The mistakes I see, are when people have bought the practice and there’s a portion of when you buy that practice that goes into the, let’s call it the equipment, and then the difference goes to something called goodwill. Sometimes we find out, and you get to amortize that over 15 years. And we see, nobody is amortizing. Could be a big number too. That’s a missed deduction.
So these things that, kind of going back to the first thing you said, finding out what kind of entity you want to be, we don’t know anything much about this besides dentistry. We do dentistry, we went to school for eight years to be dentists, how am I going to decide what kind of entity I am? Who do I talk to?
Right. Exactly. I expect you to be able to have a professional that you deal with that’s willing to communicate with you. Because you’re going to have a ton of questions. We don’t know what we don’t know. You want to be able to have a back and forth with somebody that’s going to give you those answers.
YOU SHOULD REVIEW THE THE NEW TAX LAW CHANGES WITH YOUR CPA BEFORE IMPLEMENTING ANY TAX PLANNING STRATEGIES.