It's nearly that time of year again for your fiscal year-end and personal tax planning appointment. This appointment's purpose is to review your 2013 income and make an accurate projection of any tax liability that you may owe on April 15th, 2014. If you do owe, Mike and Tammy will work with you to minimize your tax liability as much as possible.
We will be scheduling these appointments starting October 21st through December 20th, so if you have a day and time in mind that you would like to meet with Mike Haas or Tammy Reaney, please feel free to give our office a call at 707-603-4227 or email Hannah at email@example.com to set up your appointment. She will also be sending out emails in the next few weeks about setting up appointments as well.
If you haven't already sent in your tax organizer and documents to our office, please be sure to do so as soon as possible so that we can prepare your personal tax return and efile it by Tuesday, October 15th.
The corporate and partnership tax return extensions are good through Tuesday, September 16th. The personal tax return extensions are good through Tuesday, October 15th.
If you have any questions about either, please don't hesitate to contact our office! We are happy to assist!!!
Howard Speaks: Why Isn?t Your CPA a Dental Specialist?
This month, Dentaltown Magazine Publisher Dr. Howard Farran encourages dentists to work with a dental CPA.
Why Isn?t Your CPA a Dental Specialist?
by Howard Farran, DDS, MAGD, MBA, DICOI, Publisher, Dentaltown Magazine
Back before the Renaissance and before Gutenberg?s press, just about everyone farmed. They did everything; raising cattle, chickens, sheep, wheat, corn and potatoes. They made butter and milk and every single farm was the most inefficient operation on the planet. Then people started getting educated, and when people started getting smarter, they started specializing. So rather than focusing on raising cattle and pigs and corn and all the rest of that stuff, they?d modify their entire farm to produce only wheat or whatever would best be produced on their patch of land ? and productivity would go through the roof!
Think about health care, now. Even as soon as 1900 you had one doctor doing everything. He delivered your baby. He treated your cysts. He amputated your arm or your leg if you got an infection. He treated your gout. He did everything, and he sucked at all of it. Now look at where we are. In 2000, health care was 14 percent of the GDP, and about half of all practicing physicians are specialized. There is somewhere around 40,000 health journals published monthly around the planet, each one dealing with some specific part of the body or dreadful malady. If you have prostate cancer, you?re not going to see a doctor who treats all different kinds of cancer like breast, liver or pancreatic, you?re going to see a doctor who specifically treats prostate cancer and who has seen thousands of cases of prostate cancer. You?re a dentist. You?re a physician of the mouth. You know that doc who works next door to you who studied ears, noses and throats doesn?t know a single thing about the mouth.
With professions specializing as much as they have ? even in the last decade ? why are most of you working with a run-of-the-mill Certified Public Accountant (CPA) who literally only has one dentist as a client: you! OK, I?ll try to be fair here; it is likely that your CPA works with one or two other dentists, but you know what that means? Your CPA still doesn?t know a single thing about dental practices. When you?re looking for advice on equipment, purchasing, remodeling or expansion, you?re going to get a crappy, uninformed answer.
In the last 10 years, we?ve seen an evolution in accounting and there are now hundreds of CPAs who are highly specialized and focused solely on the dental profession. Those of you who are on the message boards of Dentaltown.com are likely aware of the most famous one ? Tim Lott (firstname.lastname@example.org). I?m really pleased that Tim is going to be speaking at the 10th Annual Townie Meeting, April 25-28, at The Cosmopolitan of Las Vegas, Nevada. Tim is part of the Institute of Dental CPAs (www.indcpa.org). This group has CPAs across the country who only work for dental practices. You also have another specialized group of dental CPAs called the Academy of Dental CPAs (www.adcpa.org) ? founded October 17, 2001, in Scottsdale, Arizona ? and they cover just about every geographical area of the United States. One of the larger CPA firms I?m aware of that works solely in dentistry is Cain Watters & Associates, PLLC, out of Dallas, Texas (www.cainwatters.com). For the best interest of yourself and your practice, I suggest you ditch your current know-nothing CPA and hook up with one of these cats.
(As an aside: Maybe your first step should be to ask your CPA how many dentists he/she works with. There?s a small percentage of you already working with a dental CPA, and for that you should be commended! But maybe some of you are working with a CPA who has 50 other dental practices as clients ? and at least that guy might get you in the ballpark. I?ll write this again: if you?re the CPA?s only dentist, get out. Then again, if you?re the CPA?s only dentist and only cousin, that?s a bigger problem and I wish you the best of luck over the holidays.)
http://www.towniecentral.com/images/Dentaltown/magimages/0112/hs02.jpgThere are far too many variances between dental practices for a non-dental CPA to be able to give you any reasonable advice. When we look at overhead for dentists there is a huge variance from practice to practice. A solid comparison depends on whether you are in a small, rural farming village of less than 5,000 people in the Midwest or if you?re in a highly saturated urban area like San Francisco or Manhattan. You really can?t compare overhead in a rural area to an urban area. Same thing goes for rent or mortgage. It is so common in rural America for the rent or mortgage on your practice to be one to two percent of sales. It is very common for rent in Manhattan and San Francisco to be seven to 12 percent of sales. Dental CPAs know this. They track the variances and can give you a solid apples-to-apples comparison of your practice to others. And here you are using a CPA who only works with one dentist. You are crazy (maybe not as crazy as someone who isn?t working with a CPA at all, but still? crazy, man).
When you ask dental CPAs, ?Should I expand? Should I remodel? Should I add an operatory?? they have spreadsheets and oodles of information at their fingertips that they can use to show you the return on investment, the difference between the return on assets and the return on equity, and how all of it would affect your tax schedules.
Let?s have another look at CAD/CAM. Every single dentist has considered this technology, but what exactly does it do. It lowers your lab bill at the outset, sure, but when you first get it, you might be taking two hours to mill a crown, eating into the time you could be spending with another patient. But then you have to take into consideration, if you keep working with CAD/CAM in your practice, you?re going to get better at it, and what took you two hours to accomplish might only take you one hour in a couple years. By then you?ll be making bank, drastically lowering your overhead and increasing your net income. Your dental CPA can help you make decisions that will positively impact your practice like that. They have the data from all of their dental clients that can aid you in making an informed decision. This is called benchmarking.
Toyota, Honda, Ford, Nissan, Kia and General Motors are all obsessed with what each other are doing. They benchmark each other to death! Benchmarking is done in pro sports and every other industry ? even in dentistry. You compete with the guy down the street for your patients? business. Don?t you want to know how you rate? Don?t you want to know where you excel and where you need to improve? Stop using a general CPA and get with one who is specifically involved with dental practices.
Guys, I see the traffic on Dentaltown.com. I know what you?re into. You really want to learn how to do fillings and crowns and root canals and you?re completely obsessed with the ?make something? part of business. You all know you have problems with the ?sell something? part and as for the ?watch your numbers? part, you?re horrible at it. Usually if I ask a dentist, ?Who watches your numbers?? I hear, ?Oh, it?s my brother-in-law,? or, ?It?s my cousin. He gives me a good deal.? You get what you pay for, gang. Since you?re bad at watching your numbers, you need someone who?s going to hold your hand and help you through it. You need to go to a dental CPA who can sit you down and tell you how your practice rates based on information he?s gleaned from working with hundreds or thousands of other practices.
When you?re working with a dental CPA, they can tell you exactly what you need to do to become more profitable because they can compare your practice to all of the practices with whom they work ? successful and non-successful alike. Your dental CPA can tell you if you?re spending way too much on hygiene labor (or not enough), if you?re too high on supplies, if you?re low on assistant labor, if you should purchase CAD/CAM to lower your burgeoning lab bill and how much cash you should be socking away for your future in case you ever feel like it?s time to retire.
It?s time to wake up, gang. We know how much we like making dentistry; it?s what we spent eight years in school for, it?s why we take CE courses to maintain our licenses and improve how we practice, and it?s what gets us out of bed every day. But we all know how much we collectively suck at selling to our patients what we do (that?s another column completely), and we?re fully aware how much we abhor watching our numbers to ensure that what we?re doing is keeping our practices thriving. So if you?re not going to watch your numbers, get someone on your team who will, and make damn sure he or she is as in tune with dentistry as you hope.
As 2012 comes to an end, we would like to thank you for your business throughout the year and look forward to working with you during the year ahead. We would also like to sincerely thank you for your referrals as they really validate your confidence in us. We wish you Happy Holidays and all the best in the upcoming year.
Due to the impending fiscal cliff, it is possible that any of the information included in this newsletter could change. Please refer to our website, www.haascpa.com, periodically for any updates to these tax issues.
2013 Payroll Tax Rates
Beginning January 1, 2013, the following rates and limits apply to payroll checks issued:
FICA* 6.2% of wages up to $113,700
*May revert to 4.2%
MEDICARE 1.45% of all wages
MEDICARE 0.9% of wages exceeding $200,000
SDI 1% of wages up to $100,880
401K $17,500 maximum contribution
$23,000 for over the age of 50
SIMPLE $12,000 maximum contribution
$14,500 for over the age of 50
1099 and W-2 Information
Just a reminder for our payroll clients: please send your December work to us in early January so that we can prepare your year-end payroll tax returns promptly.
S-Corp. Officer's Health Insurance
If you are an officer of an S-Corporation, please be sure to contact your payroll service or include in your QuickBooks payroll the amount paid in the current year for your health insurance so that it is reported on your W-2 at year-end. This applies to employee spouses as well.
Foreign Financial Asset Disclosure Form 8938
Any U.S. taxpayer who, during the tax year, holds an interest in a "specified foreign financial asset" must attach to his or her income tax return for that tax year the "required information" for each such asset on Form 8938 if the aggregate value of all the individual's specified foreign financial assets exceed certain dollar thresholds. Foreign Real Estate is not required to be reported on Form 8938. Form 8938 does not replace the FBAR. Unlike the FBAR that requires a separate filing, this information report will be filed with the taxpayer's federal income tax return. The penalty for failure to disclose is $10,000.
Any U.S. person must report annually to the IRS certain information about a foreign bank or financial account if the following conditions apply:
· The U.S. person has a financial interest in or signature authority (or other authority that is comparable to signature authority) over any financial account in a foreign country; and
· The aggregate value of all foreign financial accounts exceeds $10,000 (as measured in U.S. currency) at any time during the calendar year.
The FBAR is a separate filing requirement from Form 8938 and is due by June 30th, following the calendar year that the report holder meets the $10,000 threshold. No extensions for filing the FBAR are available, even if the income tax return for the same calendar year is on extension.
Section 529 Plans
Visit the Morningstar website below to review Section 529 Plans by state, plan rating, etc:
Electronic Fund Transfer Penalties
The FTB will begin assessing EFT penalties on certain individuals who fail to make tax payments electronically. The penalty equals 1% of the amount that was not paid electronically, unless the failure was due to reasonable cause and not willful neglect. All payments made by an individual must be remitted electronically to the FTB after the individual either has:
· Made a single estimated tax or extension payment greater than $20,000; or
· Filed an original return with a tax liability greater than $80,000.
How to Pay: Taxpayers may make their required EFT payment by using the FTB's Web Pay at:
Reporting New Workers to the EDD
*Requirements for Independent Contractors: Any business that pays Independent Contractors is required to report the existence of a contract by completing EDD Form DE 542, Report of Independent Contractors, either when a contract is established or when $600 is paid or is expected to be paid to the worker. The worker must be reported each year within 20 days of either making payments to them totaling $600 or more or entering into a contract with them for at least that amount. Only individual taxpayers with a Social Security Number need to be reported. The EDD may assess a penalty of $24 for each failure to timely report the contractor.
*Requirements for New Employees: A similar requirement exists for new employees, who must be reported within 20 days of hire, regardless of the amount of compensation. These employees are reported using EDD Form DE 34, Report of New Employee(s).
The purpose of both of these requirements is to help locate and collect unpaid child support for parents who are delinquent on such payments.
Annual Filing: Employees need only be reported once, when they are hired. Independent Contractors must be reported each year.
How to File: The reporting of both forms can be done on paper or via the EDD's e-Services Web site:
Dentists and Managed Care
The dental profession has been fortunate to have avoided the erosion of profitability and practice values that have plagued the medical professions. Unfortunately, managed care plans continue to make inroads in dentistry. As the economy continues to limp along, the insurance companies are becoming more confident and brazen. Delta Dental of California now requires dentists signing up for Delta Premier to also accept the Delta PPO. The increased penetration of PPOs will likely lead to drops in practice profitability and practice sale values. What should dentists be doing to cope with the new reality of decreasing profitability and overall practice values? This will be a combination of increasing revenue and cutting costs. Here are some ideas:
· Understand the ins and outs of the insurance plans you do accept and be sure to code for all the procedures performed.
· Focus on your fees.
· Focus on managing expenses and patient flow.
0.9% Additional Medicare Tax on Earned Income
Beginning in 2013, individuals will pay an additional 0.9% Medicare Hospital Insurance (HI) tax on wages and self-employment (SE) income on amounts earned above the following threshold amounts:
· $250,000 for joint returns;
· $125,000 for married filing separate; and
· $200,000 for all others.
3.8% Additional Medicare Tax on Investment Income
Beginning in 2013, the law imposes an additional HI tax on individuals, estates, and trusts. To the extent that the amount of income exceeds the following thresholds, the taxpayer must pay 3.8% additional HI tax on the lesser of net investment income or the excess of modified adjusted gross income (MAGI) over the threshold amount:
· $250,000 for joint returns;
· $125,000 for married filing separate; and
· $200,000 for all others.
Net investment income is investment income reduced by deductions properly allocable to such income. Investment income includes:
· Gross income from dividends, interest, annuities, royalties, and rents, less allocable deductions unless these items are derived in the ordinary course of a trade or business to which the HI tax does not apply;
· Other gross income derived from a trade or business to which the HI tax applies; and
· Net taxable gain attributable to the disposition of property other than property held in a trade or business to which the HI tax does not apply.
A taxpayer may be subject to both the 0.9% additional HI tax on earned income and the 3.8% additional HI tax on investment income.