Talking Tax Deductions You Don’t want to Miss with Dr. Howard Farran

 

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Tax Deductions Dentists Make

Howard: So what would you say if someone said what are the three biggest tax deductions dentists miss that lose them thousands, what would you say?

Craig: Back to failing to plan, amortization, and depreciation. Not to beat a dead horse but that, and another one we didn’t talk about is for the… we’re talking about the dentist in practice. Setting up a management company to manage the different things that he has going on at different businesses. Let’s just say you’re in a forty percent or the thirty-three percent tax bracket Federally. You set up a management company and the spread between the first fifty thousand in net  income and your forty-three percent is about twenty-eight percent, and you’re saving fourteen thousand dollars a year.

Howard: Nice.

Craig: And then you use that money to invest in other pieces of real estate, or business, or just invest it in the market.

Howard: So this is what you’re talking about where number one problem was they don’t plan. They need to be proactive. They need to talk to their CPA and set up proactive tax plan strategies. As opposed to getting caught up in the news and finding out that your taxes are due April 15th, and you only got to this weekend. You got to set aside some time this weekend to hurry up and get your taxes done. Or you fly down to… or you run down to the corner… what is that H&R Block. I went to dental school in Kansas City, that’s where H&R Block was from. And the founder that had this beautiful home out there and on the way to Johnson County but… yeah. So what you’re saying is, if you’re going to  wait to the last minute to go to H&R Block and file your taxes. Then you’re not going to have a lot of proactive strategy that you thought about in advance.

Looking in the Rearview Mirror

Craig: You’re strictly going to be looking in the rearview mirror and the idea is to look forward and keep more of what you make.

Howard: Yeah. By the way, what would your… what would your tax advice be if… what would you say if she comes out of school and says, ‘look I’m five hundred thousand dollars in debt’. And you used to be a New York City police officer. How much debt would they have to have before, as a police officer, you recommend they just flee to Canada, or Brazil, or Australia, and just say adios.

Craig: I don’t know if there’s enough debt to make me flee the country.

Howard: So what’s more stressful? Being a police officer being afraid of criminals or being afraid of the IRS?

Craig: I think if you ask the general person being afraid of the IRS. Nobody likes to get a letter from the IRS.

Howard: Yeah. So what was it like being a New York City police officer for seventeen years?

Craig: Oh, it was great. I had a great run. I made a lot of great friends. My son is actually a third-generation police officer right now, and I had a great run. It was a great experience. I learned to deal with the people of all walks of life. And it was a good seventeen years. It was time to move on but it was a good seventeen years.

Policeman to CPA

Howard: So what was going on in your journey? I mean police officer to CPA. That’s not a very common journey.

Craig: Many go from police to attorney. Mine was a little different. When I first came on I was young right out of the college. I said if I could make fifty thousand dollars a year by the time I retire we’ll be set for life.  I used to go back to college where my friends were and you know live for the weekend on ten dollars.

My goal was I was going to move up the ranks, become a chief and its civil service, and I had a way that I was promoted relatively early. I was a sergeant and I waited ten years to be promoted to actually to be able to take an exam to be promoted to lieutenant. And I kind of figured during that time I wanted to have more control over what I do in my life and my income.

So I went back to school and I got my degree and then when I retired I went to work for an international firm for a number of years, got some good experience, and slowly went out on my own.

Howard: Wow. So you say it’s actually common for policemen to turn into lawyers.

Craig: Oh, it’s very common. Very common.

Howard: Really?

Craig: At least… I come from a police department that had thirty-five thousand members.

Howard: Thirty-five thousand? Was that Manhattan, or Brooklyn, or Queens?

Craig: All of New York City. All five boroughs.

Howard: Okay. So that’s the only time New York City comes into play.

Craig: Exactly.

Howard: Because it’s the police department.

Craig: Yes.

Where Does the Term Cop Come From

Howard: And do you know where the word ‘cops’ comes from?

Craig: Copper. They use to have a copper badge.

Howard: That’s right. And it’s the emblem of the New York Yankees, right?

Craig: They have a NY. They have the NY.

Howard: Yeah. I learned that on Ellis Island that the original police officer’s badge but the badge they showed it look like the Yankees logo.

Craig: Maybe. I don’t think I’ve ever seen the original. It’s been a long time since…

Howard: Well the one on Ellis Island, I mean I’m not a local expert, but it looked pretty much like the New York Yankees. And they were made out of copper so that’s where the name come from.

Craig: Yeah.

Howard: I love word origination. So, yeah, but I got to tell you growing up in Kansas. Wichita, Kansas with tall those things, green silo… I’ll never ever forget, my entire life, the first time I went to New York City. I was with a classmate of mine Craig Steichen. And if you grow up in Kansas the first time you see New York City that is the most shocking, I mean it took my breath away when I was looking out the window and I finally realized that that thing up there was a canyon of buildings and we went there.

The funniest thing Craig a friend he’s a dentist in Albuquerque, and we went there together. We threw her luggage on the bed, we were at the Sheraton in Manhattan, and we ran out outside. We started walking down the street and the next thing I said to Craig is, ‘Craig, I don’t know why but my feet actually are hurting. I wonder what’s going on’. And he goes, ‘Well dude it’s three in the morning. We’ve been walking crazy for six hours. I mean that’s… you walk for six hours that’s a marathon’.

Craig: Right.

Howard: And we could not believe it was three in the morning. I mean, that was that exciting.  I mean, it was just God, Manhattan. It’s just the coolest thing. And I also love this statistic. Did you know that if all seven and a half billion Earthlings lived at the same density as Manhattan we would all fit on New Zealand?

Craig: Wow. Wow. That’s interesting.

Howard: So did you learn anything being a police officer that you applied to accounting?

Craig: Yeah, I learned how to communicate with people. It’s all about communication and I learned how to communicate. I was lucky I did a lot of interesting things. I worked in impoverished area and I worked in midtown. You learn you need to treat everybody right. And that comes into play when you’re dealing with your employees. And you learn just how to communicate with people. So it was a great experience.

Howard: And what percent of everyone you ever arrested, at the end of the day it all had to do because they were drinking too much in Manhattan?

Craig: Probably not a whole lot. Okay.

Howard: Really? Really, not a whole lot?

Craig: Yeah. No, not a whole lot, no. Back in the day, which is probably when you were walking around midtown Manhattan, I had a foot-post and between 7th Avenue and 8th Avenue, there was six of us on one side of the street and it was six of us on the other side of the street. That’s how crazy it was back in that time. Now we walk down Times Square and it’s beautiful. But crime was rampant back in those days. But alcohol definitely fuels family disputes and people doing stupid things.

Howard: Because whenever you see those cop shows it seems like… it seems like almost all of them are drunk or drunkards. I mean it’s like most of the stuff that’s on those cop TV shows isn’t anything you’d ever do sober.

Craig: Right. And a lot of it is family disputes.

Howard: Yeah.

Craig: So that’s what you see on TV.

Howard: And what percent of the family disputes have alcohol involved?

Craig: Probably ninety-five percent of them.

Howard: Yeah. Yeah, I mean yeah. So I want to go back to terminology, because these kids have been saying algebra, geometry, trig, and the periodic table. What is the difference between a CPA and a CFO?

Craig: So a CFO was a Chief Financial Officer. Okay. Right? And that’s when we actually offer that service to certain clients. You don’t have to be a CPA to be a CFO. We offer that service because when we have a client that has a bigger practice, or multiple practices, or multiple businesses. Instead of hiring a CFO at  some crazy number, he could hire us at a much reasonable number. With the advent of the internet, it’s just like you’re in a room next door and you could provide cost-effective really efficient services.

Howard: And how often should a dentist actually talk to their CPA?

Craig: At least monthly.

Howard: Really?

Craig: At least monthly.

Howard: And what percent of the dentist you think talk to the CPA monthly?

Craig: Less than five percent.

Howard: Yeah. But you really think once a month the dentist should call their CPA and say, ‘what up Craig?’

Craig: Whether… it does not have to be a phone call. Could be email back and forth. Okay. Some kind of communication. Yeah. Because there’s all these things going on and you don’t know what you don’t know. People go and they do things, or they’re going to do things. And if you don’t communicate with them, you don’t know what they’re doing. They may be doing it wrong and you help them do it the right way. So we have a staff attend and we communicate with all clients on a regular basis you have to.

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