I would say the biggest mistake is failing to plan spend a lot of time, they go and buy a car, they spend time, they do research. When it comes to taxes, they kind of don’t plan. They set aside money, but they don’t plan for ways that they could actually reduce their liability, become proactive. So that’s probably the biggest mistake we see. After that, I would say choosing the wrong entity.
How do you mean as far as that? I know a lot of dentists are … I mean, it runs the gambit. For instance, I’ve been an S-corp. Ryder, are you an LLC?
I’m an S-Corp, but I had a brother-in-law that’s an LLC. Troy, I think you might be an LLC if I’m not mistaken.
Yeah, we’re a PLLC. Professional limited liability company.
Well, professional, that’s questionable at best.
Well, it really is.
So you can be an S-Corp, you can be a self proprietor, you can be a C-corp, which you don’t really see too often. You could be an LLC tax business corp. And the savings can be significant. I was working on a tax claim today for a dentist and the different between him being an LLC and an LLC taxed as an S-corp is over $6,000 a year in taxes.
Can be significant.
Yeah, put that towards his loan every year, how much quicker he’d pay that off.
Yeah. When you plan that over 30 years of a career, that really adds … Wow, that’s amazing.
So that’s the importance of planning. See what you can do, what you could change, and how you could do it a little bit differently to take advantage of it.
So is it best to, right when you get out of school, grab an accountant like yourself and get planning those taxes immediately? Because I think a lot of dentists and dental students, they get out of school and think, “I’m gonna make some money, I wanna get going on that first and then we’ll do some tax planning, retirement planning afterwards.”
But it sounds like it’s best to get this planning going ASAP.
It’s always best if you do it before. You could always go back and clean up whatever was done maybe a little bit … I won’t say incorrectly, but not tax efficiently. But if you’re going to do it, why not do it straight from the beginning?
Sure, makes sense.
Yeah, do you see a lot of dentists that do their own taxes? I hear so many people saying, “I saved a lot of money by not having an accountant,” and this and that. My father-in-law was a dentist and I remember talking to him and he said, “You know what? An accountant may be expensive, but they’ll get you back that much plus some in the planning.”
So do you see a lot of dentists trying to do their own taxes and business taxes?
We see more dentists trying to do their own accounting versus their taxes. But up in my office on the wall, I have a bone sore, so I can actually cut an arm or a leg off. But I probably wouldn’t do it right. So just because you can go out there and buy Turbo Tax or something, it’s probably not the best way to go. It’s not the best use of your time, versus having a professional that this is what he does for a living.
Yeah, every dentist’s practice and situation isn’t the same. So it’s best to get that unique perspective and somebody who can really cater to your unique situation. Is that correct?
Correct. Because even your personal situation plays into how you should plan.
Number of children, your goals, all those kind of things.
Exactly. Are you single, are you married, do you support your parents? Because there are different things you can do depending on the entity size choice you are that effects all those different things that you might want to do.
But yeah, there’s probably not a lot of accountants out there doing their own dentistry, so if you’re a dentist, please try not to do your own accounting. It just doesn’t make sense.
There’s a lot that try to do it though, I think to try and save a buck.
Right, but it’s kind of like, honestly, people look at the CPA as a cost item. And I look at it as an income. What you’re paying me and what I’m able to save you, you’re making money rather than doing it yourself and just having it a tax liability. So it definitely makes sense. I like to say no matter what you’re doing, have a professional do it and let it be done right. But there are a lot of people that prefer to do it themselves, and so be it.
YOU SHOULD REVIEW THE THE NEW TAX LAW CHANGES WITH YOUR CPA BEFORE IMPLEMENTING ANY TAX PLANNING STRATEGIES.
Get your free copy of my book Ten Biggest Tax Mistakes That Cost Business Owners Thousands!
Listen to the full version of the Dental Realist Podcast.