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Benefits of Tax Planning for Dentists
There is no doubt that accurate and efficient tax planning is vital for the success of your dental business. Operating a profitable dental practice entails more than just tax preparation. It requires the right tax planning to enable you to minimize, defer, or eliminate the amount of taxes your business owes.
Rather than take on the onerous burden for tax planning yourself, it behooves you to partner with a professional accounting firm like Drilldown Solution that caters to dental businesses. You will receive expert advice and guidance so we can potentially reduce your tax liability and you keep more of your money with your dental practice.
What is Tax Planning?
Tax planning involves putting together a strategy or plan designed to minimize your tax liability by remaining compliant with the tax laws. There are various personal and business financial aspects covered in your tax planning.
When tax planning is done efficiently, it should lower your tax burden. Tax planning uses the deductions and tax credits to their maximum use. It also creates plans like deferred income and early expense payments, etc.
Tax planning should be an essential part of your dental practice’s financial operation.
Why Tax Planning is Important to Your Dental Practice
Tax planning is intended to save your dental practice money. What’s more, it significantly impacts your retirement and wealth planning. For example, the money you save in taxes can be earmarked for investments for long-term gains. You can choose whether to dedicate these long-term investments to retirement plans, real estate investments, or fixed-income instruments.
Because the majority of dental businesses operate their practices as sole proprietorships, this entity type requires prudent tax planning for your business, as well as for your personal income taxes. Decreasing your tax liability is a complex endeavor. This truth is another reason why it makes sense to consult with a professional dental CPA firm for your tax planning.
7 Benefits of Tax Planning for Dental Practices
1) Realize Tax Savings
The primary objective of tax planning is to save your dental business money. If done properly, tax planning could yield your practice long-term savings.
Your dental business enjoys various benefits within the benefit of saving your business money. The more you save from taxes, the more you can dedicate those funds to investments. Invested funds yield multiple returns for the long-term.
2) Maximize Retirement Planning Benefits
Retirement planning is an important objective for any business professional, including the owner of a dental business. Why not leverage tax planning to optimize your retirement planning benefits?
Consider boosting your retirement planning returns by maximizing contributions to your retirement plan. Just select the appropriate retirement plan to make the most of your savings. While it is impossible to avoid paying taxes on retirement plan contributions, your tax liability could be deferred and reduced through retirement plan contributions.
3) Compliance with Tax Laws
A major objective of tax planning for dentists is ensuring compliance with regulatory laws. Nearly every year, tax regulations are being added, amended, or eliminated. That reality is why staying current with tax law changes is a complex undertaking. Competent tax planning will give you peace of mind that your dental practice will continue to be in compliance with the latest tax laws.
Within the realm of tax planning, you are afforded an opportunity to take advantage of tax provisions and temporary reliefs offered by the IRS. An example of this relief was during the economic hardships associated with the Covid-19 pandemic, the IRS permitted some tax provisions like PPP loan forgiveness.
4) Improve Personal Finances
Another benefit of effective tax planning is improving your personal finances. If your dental practice is operating as a sole proprietorship, you stand to realize the best results when it comes to your personal finances.
In most instances, your business income is considered personal income. This probability means that competent tax planning will lower the tax liability of your dental business, in addition to your personal income.
When tax planning is done well, it can assist you in building your personal wealth. For example, you might have the option of paying for your child’s education via business income in order to decrease your tax liability. That tactical change translates into saving money on some of your personal expenses, while remaining compliant with the tax laws, too.
5) Enjoy Hidden Tax Opportunities
Your dental practice is overpaying if you are paying more than 30 percent of your earnings in combined federal, state, and self-employment taxes. The good news is that tax overpayment can be corrected. Our team of tax experts at Drilldown Solution can assist your dental business in addressing any discrepancies and plan more effectively for the following tax year.
These are just some of the numerous facets of your dental practice where we can assist you in optimizing and saving:
1) Retirement Plan Selection
2) Maximizing Medical Benefits
3) Business Structure Selection and Optimization
4) Asset Depreciation and Leasehold Improvement Expensing
5) Internal Employee Opportunities
6) Save Money from Taxes by Hiring Family Members
Your dental practice could save a large amount of money by changing your practice into a family business. You may realize payroll tax deduction benefits if you take advantage of the IRS-sanctioned strategy of employing your children in your practice.
This strategy also assists in your children being able to save money for college, housing, or other expenses. It is important to know that typically children under the age of 21 do not have to pay unemployment taxes. What’s more, children who are younger than 18 are not required to pay Social Security, payroll taxes, unemployment taxes, or Medicare. When it comes to wages paid to a spouse or parent, you don’t have to pay unemployment taxes.
You could realize more tax savings by taking advantage of family tax breaks for LLCs, just as if you were a sole proprietor. It can be highly beneficial for your family to operate a husband-and-wife-owned LLC. If you and your spouse have membership in the LLC, you are able to take advantage of a tax break for hiring family members. There is just one limitation, the relationship status must apply to all members in the partnership.
7) Maximize Your Medical Benefits
If you operate your dental practice as a corporation, that qualifies you to work as your own employee and be eligible for a medical expense reimbursement plan. These plans allow you to write off medical bills as business expenses. By doing so, you can qualify for medical benefits and tax savings not available to sole proprietors or partnerships.
In this scenario, you could use pre-tax dollars to pay for your medical expenses. This approach will decrease your tax liability and optimize your business profits.
Look to Drilldown Solution for Expert Tax Planning Services for Your Dental Business
Drilldown Solution delivers a seamless tax planning and compliance process. As is the case with all of our programs, tax planning solutions are custom-made based on an individual’s needs, wants, and the goals of your business. You can expect your dental business to greatly benefit from our dedicated team of tax experts, ensuring your tax planning needs are met quickly and efficiently.
At the core of our tax planning services is the promise to you that we will devise a tax strategy aimed at reducing your liabilities and optimizing profits for your dental business.
Our Provo, Utah Tax Planning Services are just what your small business needs.
Drilldown Solution Can Help Your Small Business Accounting Needs
Our accounting services are designed to reduce your administrative and bookkeeping burdens and provide you with valuable financial benchmarks for your business. This results in keeping you updated and informed.
Our seasoned, highly skilled full-service accounting team at Drilldown Solution will remove your financial pain points with bookkeeping to make managing your money easier. DrillDown Solution has the important tools you require to track expenses, oversee cash flow, and discover financial trends so you can effectively plan for the future of your business.
We have the expert team to help any small business thrive, even under the current COVID-19 pandemic circumstances. We accomplish this outcome with a three-part system comprised of patient-experience excellence, financial focused operations, and accountability.
Our goal at Drilldown Solution is to put your small business in the best financial position possible, utilizing proactive processes and personal care!
Note: The material and contents provided in this article are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.