April 15, 2025

Year-End Tax Planning & Financial Strategies for Dental Practices

Episode Description

Join dental-specific CPA Holden Sours-Thompson as she shares critical year-end tax planning strategies, retirement options, and financial insights for dental practices. Learn about maximizing deductions, implementing effective retirement plans, and understanding recent tax law changes that impact dental practitioners.

Episode Navigation

  • 00:00 – Introduction and welcome
  • 00:47 – Year-end planning fundamentals
  • 04:01 – Retirement planning strategies
  • 10:46 – Practice fee increases and inflation
  • 14:59 – Research and development credits
  • 17:40 – Audit frequency and considerations
  • 27:11 – Essential year-end tax strategies
  • 32:04 – Health Savings Accounts discussion
  • 34:17 – Vehicle deductions and closing tips

Key Takeaways

Tax Planning Essentials

  • Implement consistent business expense tracking through business accounts
  • Consider pass-through entity tax opportunities for state tax deductions
  • Review retirement plan options including 401(k) and cash balance plans
  • Evaluate fee structures multiple times per year due to inflation

Financial Benchmarks

  • Staff wages typically 30% of collections
  • Supplies and lab costs around 15% of collections
  • Consider dental-specific chart of accounts for better tracking

Meet Our Guest

Holden Sours: A dental-specific CPA who works with small businesses, specializing in tax strategy and financial planning for dental practices. Experienced in helping dentists optimize their tax positions and implement effective financial strategies.

Featured Discussion Topics

  • Year-end tax planning strategies
  • Retirement plan options
  • Practice expense benchmarking
  • Insurance participation considerations
  • Health Savings Accounts
  • Vehicle deductions
  • Children employment strategies
  • Audit considerations

Connect With Simplify Dentistry

  • Website: simplifydds.com
  • Facebook Group: Simplify Dentistry Community

Topics: dental accounting, tax planning, practice management, retirement planning, dental practice finances, expense management, tax strategy, financial planning, dental business, practice profitability

Transcript

00:00:00
Dr. Murtuza Shah-Khan
Welcome back to the Simplify Dentistry podcast. I’m Dr. Murtuza Shah-Khan. Today I’m with my co host Dr. Richard Offutt and we’re pleased to have Holden Sours with us. Holden is a dental specific CPA who also works with small businesses. Holden, thank you so much for joining us.
00:00:16
Holden Sours-Thompson
Thank you guys for having me.
00:00:17
Dr. Richards Offutt
Nice to meet you.
00:00:17
Holden Sours-Thompson
Hold taxes.
00:00:18
Dr. Richards Offutt
It’s all good.
00:00:19
Holden Sours-Thompson
You as well.
00:00:19
Dr. Richards Offutt
What did you say? Death and taxes. We can’t start there. That’s no good.
00:00:23
Dr. Murtuza Shah-Khan
Skull and crossbones with all this.
00:00:25
Dr. Richards Offutt
That’s right.
00:00:26
Holden Sours-Thompson
Good way to start the talk. Right, Exactly.
00:00:30
Dr. Murtuza Shah-Khan
So, you know, right now it’s, you know, towards the end of the year. So simple things that, you know, all dentists and everybody dealing with their taxes and small businesses are thinking of as year end planning. Any big tips, any changes that you see moving forward, stuff that people should think about.
00:00:47
Holden Sours-Thompson
Yeah. So one of the things we say is this is the perfect time of year to start reviewing those things because you can’t do much come April, you know, you’ve got a big number, it’s tough to do anything. Kind of like what you see with a dental practice, you know, if someone comes in with a lot of work, well, you can help them. But it would have been a lot better if they came in six months ago. Sure. Same thing here. The first thing we talk about is just the boring stuff, you know, the routine things you’re going to do every year, maybe not the things you’re going to tell somebody about at a dinner party, say, hey, look what my accountant did. Hey, look what’s going on here. It’s just the things you’re going to do consistently.
00:01:25
Holden Sours-Thompson
So that’s making sure any expenses that might be business related, you’re really paying for it through the business account, not running through a personal account. Those are things like your home Internet, your cell phone. You need all those to run a business. Maybe not practice dentistry, but run a business.
00:01:42
Dr. Murtuza Shah-Khan
Right.
00:01:43
Holden Sours-Thompson
So consistently those kind of things are important. But I’d love to hear from you guys, what are things you’ve heard people talk about before that kind of struck a nerve? Like, does that really make sense?
00:01:53
Dr. Richards Offutt
Well, the consistency thing I think is what dentists tend to struggle with is to consistently provide their accountant the information they need in a timely manner. Right.
00:02:05
Dr. Murtuza Shah-Khan
I mean, Holden knows firsthand. Lack of a time limitation.
00:02:11
Dr. Richards Offutt
I practiced for 40 years and I don’t think I was ever consistently on.
00:02:15
Dr. Murtuza Shah-Khan
Time, you know, to deliver the nicest emails to me when I’m like, does.
00:02:21
Dr. Richards Offutt
She use emojis and Stuff, no emojis.
00:02:23
Dr. Murtuza Shah-Khan
We’re not good quite to that level of friendship.
00:02:25
Holden Sours-Thompson
Maybe soon, maybe after this.
00:02:27
Dr. Murtuza Shah-Khan
Yeah. But it’s definitely like, you know, hold on. I’m sorry I’m late with this. It’s okay. Lots of other people have done this too.
00:02:33
Holden Sours-Thompson
Yeah. Yeah. But I’d say that is probably one of the most important things you can do is just kind of stay on top of it because there’s no way to really plan if you don’t know what you’re planning for.
00:02:43
Dr. Richards Offutt
So let’s think about that quarter on quarter as you build the year.
00:02:47
Holden Sours-Thompson
Right.
00:02:48
Dr. Richards Offutt
So, and I know we’re in the fourth quarter and you know, when we’re recording this, but for our folks that are listening, it’s the, you know, the first quarter has as much impact as the fourth quarter. Right. In terms of dollars.
00:03:02
Holden Sours-Thompson
Exactly.
00:03:02
Dr. Richards Offutt
So, so what, what do you, what do you want from folks in that, you know, so you can build, I guess, build the year and be able to predict, that’s a good question, where it’s going.
00:03:13
Holden Sours-Thompson
So I would even back it up further. I’d say this time of year is when we’re really projecting out first, second quarter, kind of anticipate what’s going on. So you can make those tact decisions along the way. Because when you’re in the. It’s kind of almost too late. So really sitting down now, figuring out, okay, what really happened this year? Well, what do we think is going to happen the beginning of next year? That’s an important thing to do because what we’re trying to do is manage your deductions. Are your deductions more valuable this year or are they more valuable next year? And one way you can determine that is by what your income’s going to be. Cause if you’re in a higher tax bracket next year, those deductions are going to be more valuable next year.
00:03:53
Holden Sours-Thompson
It’s going to offset income tax at a higher rate. So by kind of projecting out where we think next year is going to be, we can make a lot of important decisions now.
00:04:01
Dr. Richards Offutt
So you have to look at a couple of buckets. Right. You have to look at the practice bucket. And then you have to also look at any other buckets that the dentist has going on.
00:04:10
Holden Sours-Thompson
Exactly.
00:04:10
Dr. Richards Offutt
Like we talked about, dentists are notoriously good and really quite good.
00:04:14
Holden Sours-Thompson
Doing something else.
00:04:17
Dr. Richards Offutt
Doing something else. So you have to look at all the buckets, I guess, to, and then.
00:04:21
Dr. Murtuza Shah-Khan
Bring it in if your spouse is working, bringing in their Stuff.
00:04:24
Dr. Richards Offutt
Yeah, exact. So that’s another bucket.
00:04:26
Holden Sours-Thompson
Exactly, exactly.
00:04:28
Dr. Murtuza Shah-Khan
Too. Too many buckets and too many hats sometimes.
00:04:30
Holden Sours-Thompson
Yeah, yeah, very much so. So I’d say one of the most important new things we’re seeing in the tax world is what’s called the pass through entity tax. This wasn’t something that was in place two or three years ago. North Carolina just passed it two years ago. And it’s a new way to pay your state taxes. So you can pay it through your practice, get a write off for it as opposed to paying it personally. A lot of states have been doing that, especially here in North Carolina. It’s valuable because of tax legislative changes. You can no longer write it off as an itemized deduction. You’re capped to $10,000. Most dentists are paying more than $10,000 in state taxes.
00:05:10
Dr. Richards Offutt
Would that apply to S Corps as.
00:05:12
Holden Sours-Thompson
Well as C Corps Corporations?
00:05:14
Dr. Richards Offutt
Does that have any application to C Corps?
00:05:17
Holden Sours-Thompson
Not as much C Corporations just because they’re taxed differently. But it would be any flow through entity applicable to that. So it’s extra steps. It’s another reason to kind of stay on top of where your income’s going. But it’s valuable because you’re taking something you’re paying anyway and making it a deduction. That’s our favorite thing to see.
00:05:36
Dr. Murtuza Shah-Khan
That’s awesome.
00:05:37
Dr. Richards Offutt
That’s one of my favorite things too. I don’t do CPA lingo very often, but deductions are good.
00:05:43
Holden Sours-Thompson
Deductions.
00:05:43
Dr. Murtuza Shah-Khan
I can understand deductions. I understand.
00:05:46
Dr. Richards Offutt
So let’s change this and say so. So Dr. Chukan comes in to see you as a new client.
00:05:53
Holden Sours-Thompson
Yep.
00:05:54
Dr. Richards Offutt
He walks in, you know, he’s a dentist, he’s a small business owner. And walk me through. I know it’s elaborate process, but kind of walk our listener through. What do you, what are the big questions you ask him?
00:06:06
Holden Sours-Thompson
Yeah, good question. My first question is always tell me what tax strategies you’re implementing. Just get a base knowledge. Some people say, I have no idea what I’m doing. Other people are a little more sophisticated. They know what they’re doing. They’re kind of playing the game. Kind of want to get a game plan of where you are. My second question is, okay, what do you think the next five years look like? Are you trying to grow? Do you want to go into the DSO space? Are you going to buy a building? Where are we going in the long term? Because that’s really going to help us decide how we’re going to Utilize all these deductions you have available. Because a lot of times it’s a timing thing.
00:06:41
Holden Sours-Thompson
So the next thing we do is kind of look through the returns and see if what we see on the paper really is matching what you’re saying. Because, you know, there can be disconnects between a taxpayer and a cpa. We want to make sure that everything that happened in the past is what we expected it to be or what we thought.
00:06:58
Dr. Richards Offutt
Yeah, what we thought was going down.
00:07:00
Dr. Murtuza Shah-Khan
Right, exactly.
00:07:01
Holden Sours-Thompson
Exactly. The next thing we do is just make sure a lot of the common tax strategies you’re employing, those can be things like home office expenses, making sure your children, your spouse are on the payroll, if that’s applicable, making sure you’re in the right retirement plan, making sure you’re in the right entity structure. And the only way we can really know the answers to those questions, if we know where you think you’re going to be in the next five years.
00:07:28
Dr. Richards Offutt
So planning.
00:07:29
Holden Sours-Thompson
Planning. Yep. Yeah, yep.
00:07:30
Dr. Murtuza Shah-Khan
And more on a five year scale than. Than.
00:07:33
Holden Sours-Thompson
Yeah, just one year. Exactly.
00:07:35
Dr. Murtuza Shah-Khan
Nice.
00:07:36
Holden Sours-Thompson
Yep.
00:07:37
Dr. Murtuza Shah-Khan
You kind of touched on retirement planning. Yes, I know this is something you and I have talked about, you know, personally a bunch.
00:07:43
Holden Sours-Thompson
Yeah.
00:07:44
Dr. Murtuza Shah-Khan
So with that, you know what strategies do you look at helping your clients with as far as, you know, do you have them looking at simple plans? You look at 401ks, other options for them.
00:07:54
Holden Sours-Thompson
Exactly. So we usually start by asking, okay, how much money do you personally want to set aside for retirement? If you say it’s close to 20,000, you think you can defer into a plan. It’s a really good way to start out with a 401k right out of the box, right out of the.
00:08:12
Dr. Richards Offutt
As soon as you can. As soon as you can spare the.
00:08:14
Holden Sours-Thompson
Money, you can put that money aside. That’s the best thing you can do. Your staff are going to be start.
00:08:20
Dr. Richards Offutt
Early with a plan, right?
00:08:21
Holden Sours-Thompson
Yeah, exactly. If you don’t think you’re going to be able to kind of meet that contribution level for a while, we can look at things like a simple plan. That used to be a lot more exciting, I guess, because the fees to have a simple plan were significantly less than administering a 401k plan. That’s not necessarily the case anymore. There’s a lot of low cost provider 401k plans out there that kind of eliminate that need. So we say if that’s the case, you might as well just start out with a 401k plan. The price is the same. That way you have the option to contribute more. If you have a great year and you have extra funds available. 401k plan you can also grow with. You can add on a cash balance plan, a defined benefit plan.
00:09:05
Holden Sours-Thompson
Those are ways to funnel a whole lot of money into retirement. Some of it makes sense early in your career, but a lot of times those bigger plans make a lot more sense when you’re closer to retirement on that back end. Yeah.
00:09:17
Dr. Richards Offutt
Can you tell our listeners the difference between a defined benefit plan and a cash balance plan?
00:09:21
Holden Sours-Thompson
Yeah, it all depends on how the funds are calculated, whether it’s a defined contribution that you’re going to get, a defined benefit that you’re giving your staff, or if it’s extra funds you’re putting into a plan. We don’t see as many of those as much anymore as we see cash balance plans. They just allow for additional funding.
00:09:41
Dr. Richards Offutt
And so do you take your folks that direction when you’re coaching them?
00:09:44
Holden Sours-Thompson
Yep. A lot of times we’ll defer to the TPA who actually runs the calculations, because what they’ll do is they’ll look at the ages, wages, and makeup of your staff. And usually if there’s a really wide discrepancy between the doctor who’s receiving a large wage might be a little bit older versus a new staff not making a lot very young. Well, the amount of money you’re putting into the plan gets a lot more heavily allocated to the retiring doctor just because they’re so close to retiring. So I’d say an important thing to look at is finding a TPA so the person who administers the plan who’s dental specific, because the makeup of a dental practice is a lot different than a makeup of other businesses.
00:10:25
Dr. Murtuza Shah-Khan
So, I mean, along those lines, we’ve talked about retirement already. Kind of back towards other stuff with the individual practices as far as inflation and, you know, fee increases to kind of switch gears. What do you see this year versus last year? You see, what are you know, advising your clients on?
00:10:46
Holden Sours-Thompson
So a lot of times this is annual discussion, but we’re encouraging people to do it twice a year, if not three times a year. Because with the rate of inflation, if we’re waiting a whole year, there’s a lot of time. We could have raised it earlier and kind of been on the front edge of that. One of the things we say to look at is how are your supplies increasing and kind of drive it in that regard. But we are seeing a lot of fee increases.
00:11:13
Dr. Richards Offutt
Kind of look at the variable expenses that are that you’re paying every month or every year and see, you want.
00:11:20
Holden Sours-Thompson
To pass that on.
00:11:22
Dr. Richards Offutt
That will scare a lot of doctors right now.
00:11:23
Dr. Murtuza Shah-Khan
It will, you know, because I mean, between supplies and then you start talking about what you call, yeah, staff wages. The increases we’ve seen in that over the last couple of years.
00:11:36
Dr. Richards Offutt
Holden, kind of give us some metrics on that. Where should those numbers be post or in this inflationary period kind of what percentages are. I know this kind of dumbs the subject down.
00:11:52
Holden Sours-Thompson
No, not at all.
00:11:53
Dr. Richards Offutt
But maybe it gives us a takeaway that we go, okay, hey, if we’re at 38%, we’re too high. If we’re at 28%, we’re probably not going to retain employees. And there is a balancing act.
00:12:05
Holden Sours-Thompson
Very much a balancing act. That’s a good point. You bring that up. One of the things that we find helpful, we recommend to a lot of our clients is building a dental specific chart of accounts in your QuickBooks file. So that means when we’re talking about benchmarking percentages, you can easily see what the benchmark is and you can see what you’re doing. So it’s just changing the order of that chart of accounts so you can have knowledge of what you’re doing. You don’t have to wait for the consultant to come in and look at this and tell you can see it for any time period you want. But to your point, usually we see staff wages, 30% of collections. That is increasing and increasing. A lot of it depends on what industry you’re in as well, what specialty that can change it.
00:12:49
Holden Sours-Thompson
Supplies are just increasing. A lot of times we base this on historical averages and I don’t necessarily think that’s where we are now. They’re just increasing so substantially. But it’s usually around 15% of collections is where we see lab builds and supplies in total.
00:13:07
Dr. Richards Offutt
In total, yeah.
00:13:08
Holden Sours-Thompson
If you’re doing Invisalign, you’re going to be on the higher side of that than if you’re not.
00:13:12
Dr. Murtuza Shah-Khan
And then are you seeing differences with general dentists that are milling crowns in office versus the guy or not exactly.
00:13:19
Holden Sours-Thompson
Anytime it’s a lab provider, you are seeing that closer to the upside of.
00:13:24
Dr. Murtuza Shah-Khan
That benchmark and then little tips and tricks, I guess. Are you seeing clinicians still using kind of the in house lab write off some of those?
00:13:34
Holden Sours-Thompson
Yep, yep. Not as much as we used to, but some of that.
00:13:40
Dr. Richards Offutt
Explain that a little bit.
00:13:42
Dr. Murtuza Shah-Khan
So it’s something, Holden, I briefly talked about. There’s a time when if you’re a CEREC doctor or, you know, I guess CEREC’s not just the only in house milling products you could, you know, deduct, basically. And Holden would speak better on this than I could.
00:13:56
Holden Sours-Thompson
You could previously deduct a portion of what you were doing as an additional.
00:14:02
Dr. Richards Offutt
Credit as a laboratory expense.
00:14:03
Holden Sours-Thompson
Yeah, exactly.
00:14:05
Dr. Richards Offutt
Even even though it’s an in house.
00:14:07
Holden Sours-Thompson
Yeah.
00:14:08
Dr. Richards Offutt
So that would include what, space and equipment.
00:14:11
Holden Sours-Thompson
Yep.
00:14:12
Dr. Richards Offutt
And employee cost in there.
00:14:14
Holden Sours-Thompson
Yeah, exactly. That kind of brings up another topic that I’ve heard a lot of my clients ask about lately is research and development credits. R and D credits. I think there’s a lot of third parties out there that have kind of honed in on the dental industry and have said, hey, we can get you a credit for research and development. When we’ve actually run the numbers there, very few practices actually qualify. And it’s basically saying more in the orthodontic space, if you’re manufacturing things like that, you could take a deduction for it. Another tax. Well, not a deduction, another tax credit. There are third parties out there. They usually do cost segregation studies and research and development credits. And I’ve seen a lot of clients say, hey, I really want to see if I qualify.
00:14:59
Holden Sours-Thompson
Spend a lot of money for study, and then it turns out they don’t qualify. So anybody out there who’s been marketed to heard something like that. I’d run it by your CPA before you kind of dive in, see what the numbers look like.
00:15:11
Dr. Murtuza Shah-Khan
So is that more orthodontists that are fabricating aligners in office and things like that?
00:15:16
Dr. Richards Offutt
Yep. So would that be the 3D printing as well? So.
00:15:20
Holden Sours-Thompson
Exactly.
00:15:20
Dr. Richards Offutt
If you’re printing surgical guides, for example, and you have a designated space for that.
00:15:26
Holden Sours-Thompson
Yep. And it doesn’t really fall within the letter of what the tax credit is for. The tax credit is really for research and development to do something new and improved in a different way.
00:15:37
Dr. Richards Offutt
So what I’m talking about would probably go back, become under your lab. The lab deductions are common in the.
00:15:43
Holden Sours-Thompson
Eyes of the IRS to really qualify.
00:15:44
Dr. Murtuza Shah-Khan
So are they having to publish results or do anything to back up that they’re actually doing research and development?
00:15:51
Holden Sours-Thompson
It’s a calculation. So these third parties come in, kind of fudge the rules to see what qualifies.
00:15:58
Dr. Richards Offutt
That’s a very highly technical CPA term. I used to use the thing of wing it. And my CPA hated that expression. He’d look at me and go, rick, we don’t wing it. You know, we don’t wing it very much so.
00:16:13
Dr. Murtuza Shah-Khan
But black, white, and then there’s that gray. Yeah, like my pants right now.
00:16:18
Holden Sours-Thompson
Y. Yep. Well, the irs, they have some hard and steady rules. A lot of times there’s some gray areas you Talk about, like W2. Compensation for an S corporation has to be reasonable in terms of the irs. Well, what is reasonable? You know, you kind of have to walk that line.
00:16:34
Dr. Murtuza Shah-Khan
Reasonable can be a good vague.
00:16:37
Holden Sours-Thompson
Yeah, but most of the time they’re pretty hard and fast.
00:16:40
Dr. Richards Offutt
You know, I always would use the thing, Holden, that if you’re sitting down there with a couple of your friends and you’re telling them a tax strategy and they look at you and go, you know, I don’t think that’ll fly. It’s definitely not going to fly with the irs because you’re supposed to be a guy, you’re talking with some of your friends and if they go, man, you could go to jail for that, you know, you probably shouldn’t try it.
00:16:59
Dr. Murtuza Shah-Khan
Right, right.
00:17:00
Holden Sours-Thompson
Exactly. That’s what I always say. Think about sitting across from an IRS agent and are they going to agree with you? You know, that’s kind of a good litmus test. You never know what agent you’re going to get. You can get someone who’s kind of, you know, like.
00:17:14
Dr. Richards Offutt
But I doubt many of them.
00:17:15
Holden Sours-Thompson
I doubt many of them are pretty.
00:17:18
Dr. Richards Offutt
I doubt many of them use the term. Doc, it looks like you are winging.
00:17:23
Dr. Murtuza Shah-Khan
I see what you’re trying to figure out.
00:17:24
Dr. Richards Offutt
I see what you were trying to do here, Doc, but that’s not. That’s winging it.
00:17:27
Holden Sours-Thompson
Yep, yep. Very much so.
00:17:29
Dr. Murtuza Shah-Khan
Along those lines, how often as a solo practitioner or group practitioner can you expect to have the state or the federal government kind of want to peek at your books?
00:17:40
Holden Sours-Thompson
Yeah.
00:17:40
Dr. Murtuza Shah-Khan
Is there, is there a hard and fast rule on that or is it.
00:17:42
Holden Sours-Thompson
That’s a very good question. I get asked that a lot. So I would just say there’s a difference between a federal and a state audit. As opposed to the county wanting to see your business personal property tax return or sales and use tax return. Those are just kind of automatic things you’re probably going to see every seven, eight years a full blown IRS or state audit you likely won’t see in your career. I was in a course just last week and they said only 5,000s corporations were audited last year. Well, if you think nationwide. Nationwide, okay. So your chances are pretty slim. Especially when you think of an S corporation in the dental sense. Usually have one or two shareholders. Well, an S corporation can have up to 40 some odd shareholders.
00:18:30
Holden Sours-Thompson
The amount of income in that business is a lot more than one shareholder in a dental practice. So when the IRS is kind of looking at everything they could audit, they’re going to go after the ones making more money. There’s just more lucrative to them than it is to you. So there has to be a whole lot of red flags. A whole lot of things have to go wrong before you get into this audit bucket.
00:18:51
Dr. Richards Offutt
Well, that’s good.
00:18:53
Dr. Murtuza Shah-Khan
That’s good to know.
00:18:53
Holden Sours-Thompson
Yeah, exactly.
00:18:54
Dr. Richards Offutt
That’s good to know.
00:18:55
Dr. Murtuza Shah-Khan
Especially if you’re winging it.
00:18:57
Dr. Richards Offutt
That’s right. That’s right. So. So I guess the addition of 80,000 new IRS agents are not gonna disproportionately affect the dental practice in the world.
00:19:09
Holden Sours-Thompson
I guess a large percentage of IRS agents are retirement age, so we think a large portion.
00:19:16
Dr. Murtuza Shah-Khan
Do you think that’ll be kind of a net zero thing?
00:19:18
Holden Sours-Thompson
Yeah, maybe a little bit better. But it’s not as scary as it sounds.
00:19:23
Dr. Richards Offutt
So let me ask something, and this is by no means a political question, but what do you see? What do you. What do you see with the change in the guard at the national level, with the effort to reduce taxation, encourage small business growth and so forth. With that coming in, do you see any changes that dentists should be watching for or should they just. Is it a wait and see? You know, wait and see, you know, mid year, end of the first quarter, second quarter, try to figure out what’s happening?
00:20:00
Holden Sours-Thompson
Yeah, unfortunately our stance is it kind of is wait and see because so much can happen from what we see now to what actually happens to how the IRS interprets it. That can kind of run the spectrum of what we’ll actually see when the time comes. So unfortunately, it’s nothing we can do right now, but I would say after second quarter, third quarter, next year, there’s definitely some changes we could probably tweak.
00:20:24
Dr. Murtuza Shah-Khan
Is there anything from like the previous four years or.
00:20:28
Dr. Richards Offutt
Well, we know that the tax. The lower tax rates are going to be extended. We do know that. Which would have been quite different had things gone the other way here in November.
00:20:37
Holden Sours-Thompson
Yeah. So I think we are all very excited to see what happens just in terms of what possibly could happen.
00:20:46
Dr. Murtuza Shah-Khan
Yeah, anybody that tells you they know what’s going to happen is.
00:20:49
Dr. Richards Offutt
Yeah, they’re weighing it.
00:20:53
Holden Sours-Thompson
We do a lot of urine planning conversations this time of year, and 99 of the time, it turns into a political conversation.
00:21:00
Dr. Richards Offutt
No, I don’t think mine was political. I was Just, I was just stating kind of what I, what I heard, you know. Yeah, but anyway, that, that’s, that’s good advice, Holden. Thank you.
00:21:12
Dr. Murtuza Shah-Khan
Yeah. Our ideological differences are, you know, not on this podcast. Right. One thing I was thinking about that I wanted to run by you too, with the amount of practices you deal with. On a personal level, have you seen, you know, more practices and more providers going in or out of network with insurance companies because of, you know, lowered benefits? Like, I had a patient come in the other day and they’re like, doc, I’m out of network with insurances. But he’s like, doc, you know, my insurance plan’s changing. They’re only going to, they’ve lowered the max that they’ll pay. They lowered how much they’re going to pay for each visit, and they’ve increased how much I have to pay for each visit. He’s like, what can you do for me?
00:21:54
Holden Sours-Thompson
I was like, what did you say?
00:21:56
Dr. Murtuza Shah-Khan
It’s like, well, let me look at this. And you know, we’ve been out of network for 70 years. We have no plans to go in network, un, you know, fortunately, unfortunately for the patient sometimes. But I think the quality of care that we provide, you know, sets us apart for that. You know, I had a, a mentor in dental school who ran a great successful practice in Raleigh, and she asked her the same question one time and she was like, look, you know, if you’re searching for the lowest price dentistry, I’m never gonna be your dentist. You know, there’s always gonna be somebody that can beat me on price. But if you’re searching for quality, I challenge you to find anyone whose quality of dentistry is better. And so that stuck with me. It stuck with me for, you know, 20 years now.
00:22:43
Holden Sours-Thompson
Yeah, yeah, we’ve seen everyone kind of reevaluate what’s going on. And that’s something I usually suggest, you know, when we see just the bottom line getting squeezed. Because, you know, if you’re dealing with insurance, even if you increase your fees, you aren’t really realizing that. So the only option is to try to go back, renegotiate, see whatever you can do to improve that. And sometimes it does mean kind of dropping.
00:23:10
Dr. Richards Offutt
I mean, you’re increasing your fees many times just increases your write off.
00:23:14
Holden Sours-Thompson
Right. You kind of have to go to the root of what’s going on.
00:23:18
Dr. Richards Offutt
It may help you on the percentage of your patients that are fee for service, but if you’re 100% all in networks, all you do is write off a bigger number. So you can charge $10,000 a crown, but you’re still only going to get reimbursement.
00:23:34
Holden Sours-Thompson
You’re going to get what you’re going to get.
00:23:36
Dr. Richards Offutt
So your write off just changes.
00:23:37
Holden Sours-Thompson
So you kind of have to go back to the source and try to renegotiate it.
00:23:41
Dr. Murtuza Shah-Khan
Yeah. I had a younger colleague the other day text me. He was like, so I got paid $632 for this crown. I was like, what should I do? I was like, you should get a different practice to work it.
00:23:51
Holden Sours-Thompson
Yeah.
00:23:52
Dr. Murtuza Shah-Khan
I mean, two and a half hours of his day.
00:23:56
Holden Sours-Thompson
Right. And you have to look at those numbers, otherwise you aren’t going to know.
00:24:02
Dr. Richards Offutt
I used to do an exercise on this where were talking about controlling prices and I was speaking at a national meeting and. And were talking about the need to control expenses. And in particular we’re talking about laboratories, dental supplies, whatever other expenses you want to put in there. And I ran through the exercise of the fact of what does it cost dentist a who’s a fee for service dentist? What does it cost him to deliver a crown on a lower first molar? And what does it cost a DSO to deliver it just by virtue of the negotiated pricing that the DSO has done with all of their vendors and suppliers. And it was shocking how few folks. Now this was a couple of years ago, how few folks could really realize.
00:25:03
Holden Sours-Thompson
What that difference is when you put numbers to it.
00:25:06
Dr. Richards Offutt
Exactly, exactly. Exactly. The cost for a fee for service dentist to their cost in the crown is almost equal to what the DSO is charging to deliver the crown.
00:25:19
Dr. Murtuza Shah-Khan
Exactly. Right, Right. Yeah. Frank Speer. I’ve been to a bunch of his lectures and the seminars and workshops that they have at Speer. And he. One of the first ones I went to with him, he talked about that. I mean, obviously if you’re Frank Speer, you can charge whatever you want, anything. But he broke it down with the numbers. And I think as dentists, sometimes we wing it on fees and you kind of have an idea of what the cost is and you kind of understand what it’s costing you to do this procedure. But it’s still in that gray area of you’re not exactly sure. I think this is kind of a right number to give me enough money for what I did to cover everything. But he broke it down. Fee for service versus in network.
00:26:01
Dr. Murtuza Shah-Khan
And he did round numbers and it was, you know, call it a thousand dollars a crown back then. And he broke it down. He’s like, you this dentist did five crowns in office fee for service. He got, you know, $5,000. The other guy did it in network, he got $3,200. He’s like, you keep on running that number. It’s a losing proposition for the in network guy.
00:26:26
Dr. Richards Offutt
Yeah.
00:26:26
Dr. Murtuza Shah-Khan
Unless you can increase something and lower overall costs. If you’re in a big group, like if you’re in a large DSO that has the resources to do it, then you know, your overall cost can go down. But it’s interesting time to do that.
00:26:44
Dr. Richards Offutt
So what would we say, Holden, one of the things that I always ask all of our guests when I’m fortunate enough to be one of the co hosts with one of the brothers Chaqan, what do you what would be the things that you would tell our listeners to really focus on right now?
00:27:11
Holden Sours-Thompson
Oh, good question. Right now as we go into year end, I would say making sure that you’re kind of employing all those ordinary tax strategies. They aren’t exciting, they aren’t like the most fun, but you’re going to consistently lower your tax bill that way. So things like putting your kids on the payroll, have you paid them the maximum amount this year that you can have you funded your 401k to the maximum amount? A lot of times people will be, they’ll get close, they’ll leave a few hundred dollars on the table. Well, if you do that consistently over and over, you’re losing a lot more. So just making sure you’re staying on top of all the year end thresholds. If you are using your home for business functions, just reimbursing yourself for this. This is called the Augusta Rule.
00:28:02
Dr. Murtuza Shah-Khan
I think it’s such a great name.
00:28:04
Holden Sours-Thompson
It’s. Yeah. You know, for anyone who hasn’t heard of it, you’re allowed to use your home for business functions up to 14 days a year, come up with a rental value for it. Well, you’re deducting it as an expense to your business, lowering your tax bill, but you aren’t reporting it as income. On the personal side, if you’re hosting parties, there anything along those lines, that’s a good thing to do. Like I said, something you’re doing anyway, you might as well take the deduction for it.
00:28:29
Dr. Murtuza Shah-Khan
Sure.
00:28:30
Holden Sours-Thompson
So just making sure you’re doing that as many times as possible on the.
00:28:34
Dr. Murtuza Shah-Khan
Child, child labor laws. So what age are you encouraging clients to start employing their children?
00:28:44
Holden Sours-Thompson
Great question. It’s state by state. Cause it does go back to those child labor laws, but usually around six or seven. You can go ahead and Put them on the payroll this year, you could pay them up to $14,600 a year without them having to file a return or pay any taxes. That’s good because it’s taking money out of your higher tax bracket, putting it into theirs, which is zero. So a good way to kind of funnel deductions down. With that being said, it needs to be, in the eyes of the irs, reasonable compensation. You know, is that amount reasonable for a six year old? Well, I don’t know. You might have the best 6 year old out there, but I don’t know. That’s not a comment I will make.
00:29:22
Dr. Richards Offutt
That reminds me of, you know, my kids are old and. Well, I’m older and my kids are old. But the thing is that I put them to work when they were so little. And back then, you had to stuff the statements in the envelope, and my kids did all the labels and the stamps and all that stuff. And they were so young. Stamps were on the wrong corners. They were upside down. Patients would walk in with a statement and go, doc, did you do this? Stamps in the wrong corner for the whole thing. And so. So that is. My kids remember doing. Doing statements on the floor of the playroom. That’s how. That’s how child labor laws that we did in our house.
00:30:07
Dr. Murtuza Shah-Khan
My kids have it too easy. I need to, you know, get back into that game a little more.
00:30:12
Holden Sours-Thompson
Make them work for it.
00:30:13
Dr. Murtuza Shah-Khan
Yeah, Get. Get a paper cut here and there.
00:30:15
Dr. Richards Offutt
That’s right.
00:30:15
Dr. Murtuza Shah-Khan
Teach them how to be tough.
00:30:16
Holden Sours-Thompson
Mm.
00:30:18
Dr. Murtuza Shah-Khan
So as far as the 14,600, where are you seeing clients push that? Are you having them put into retirement vehicles for their kids? Are you seeing them putting into educational funds?
00:30:29
Holden Sours-Thompson
Usually a mix of things. Our first recommendation is to put it in a Roth IRA, because you need earned income, like from a W2 to be able to do that. Any additional funds you can put towards retirement, 529 or a Coverdell savings account, anything like that is helpful. We kind of like the Roth IRA because they can use it for education, but if they get a scholarship, they don’t need it. Well, it’s not like the money is stuck in an educational vehicle. They can use it for retirement when the time comes. That kind of thing.
00:31:00
Dr. Richards Offutt
That makes a lot of sense, Holder. That’s a great strategy that. I know you’re making kind of light of it, but I think that’s a huge thing, is that you can use the Roth for education, whereas if you put it into an educational vehicle, that’s.
00:31:16
Holden Sours-Thompson
What it’s gonna be used for. Right. So you’re kind of moving it between kids, seeing what happens. And you just can’t make that decision when the kids are 6, 7, 8.
00:31:24
Dr. Murtuza Shah-Khan
9, when they’re becoming elite athletes and you can tell it’s six.
00:31:27
Holden Sours-Thompson
Right.
00:31:28
Dr. Murtuza Shah-Khan
They’re gonna have.
00:31:29
Holden Sours-Thompson
Don’t worry about them.
00:31:30
Dr. Murtuza Shah-Khan
Yeah, don’t need the 529.
00:31:32
Dr. Richards Offutt
Yeah, that’s right. So what do I do with that?
00:31:35
Dr. Murtuza Shah-Khan
Right, yeah, exactly.
00:31:36
Dr. Richards Offutt
How about this? Hold on. Where do you feel that the Health Savings Accounts fit into Dental Dentist Strategies? You know, I was a big advocate of that and just never used it. And I was shocked when I finally looked at it. The amount of money that just grew there. I mean, how do you talk to me a little bit about your feelings on HSAs?
00:32:04
Holden Sours-Thompson
Yeah, we love HSAs. If you have a high deductible plan, you can get one that has an HSA available with it, funding it, letting it kind of grow like a retirement account. It’s going to grow and grow. You don’t have to reimburse yourself from it every year. I think that’s kind of one of the misnomers about it. It’s better to leave the money in there and then reimburse yourself down the road when you are in retirement age for that. Because just think of how much it potentially could have grown.
00:32:32
Dr. Richards Offutt
Yeah, I’m glad to hear you say that. I mean, it was one of these things where we funded it forever, put it in S&P 500 and just let it rip. And it ripped along for a long time and it was stunning, the outcome.
00:32:53
Holden Sours-Thompson
And you’re getting a deduction for it every year, which is even better.
00:32:56
Dr. Richards Offutt
That’s exactly right. Maybe the misnomer is. And I believe that in some corporate sponsored, like HSAs, you do, you use it or you lose it. Isn’t that correct? That may be where a lot of times that’s maybe where that misnomer comes from, that dentist.
00:33:13
Holden Sours-Thompson
I would agree with that. Things like an FSA use it or lose it thing. And I think that makes a lot of people nervous. But in hsa, no, I would just consider it another retirement vehicle.
00:33:26
Dr. Richards Offutt
Yeah.
00:33:26
Dr. Murtuza Shah-Khan
And then other changes in the amount you can contribute to that.
00:33:29
Holden Sours-Thompson
Yeah, for this year, it gets.
00:33:31
Dr. Richards Offutt
Goes up like 500 a year. It’s almost $8,000 a year now. Yeah, yeah, yeah.
00:33:37
Dr. Murtuza Shah-Khan
That’s great to know. And yeah, the FSA versus hsa.
00:33:40
Dr. Richards Offutt
Yeah, yeah.
00:33:41
Dr. Murtuza Shah-Khan
I used still, but it’s still. I was right there with you. Yeah, I used me up all the.
00:33:46
Dr. Richards Offutt
Wrong acronym on that.
00:33:47
Dr. Murtuza Shah-Khan
I’m sorry, I. I keep on talking to hold about 501C3 plans. And she was like, you mean a 529 plan?
00:33:51
Dr. Richards Offutt
Yeah, yeah, that’s what I meant. That’s. I meant that. I meant that too.
00:33:56
Holden Sours-Thompson
Well, everyone always says the same thing, you know, everyone’s making the same mistakes in the same way.
00:34:01
Dr. Richards Offutt
As long as we’re all on the same page. Exactly.
00:34:03
Dr. Murtuza Shah-Khan
Yeah. She. She knows how to translate the. The dumb dentist. There we go. Well, Holden, thank you so much for being with us.
00:34:09
Holden Sours-Thompson
I appreciate it.
00:34:10
Dr. Murtuza Shah-Khan
It’s great to have you here. If there’s any other closing tips or any big picture items you’d like to share with our audience, that’d be great.
00:34:17
Holden Sours-Thompson
Good question. So I’ll leave you with this. Vehicle deductions, those are rather large this year, that we might not see them as large next year. So if you need to replace a vehicle, I’d probably think about doing it this year versus next year.
00:34:31
Dr. Richards Offutt
Oh, wow, That’s a great take home. Yeah, we always say at the end of our podcast, what can we tell our listeners? That they can go home tomorrow and better off as a result of it. Exactly. And buy a new car. Right. That’s awesome.
00:34:46
Dr. Murtuza Shah-Khan
Does that include, like, the midlife crisis buying the Porsche?
00:34:50
Holden Sours-Thompson
Maybe not that one. That kind of gets limited. But if you think you’re gonna buy it next year anyway, you might as well get it now.
00:34:57
Dr. Richards Offutt
So what you’re saying, Holden, is that a new boat doesn’t qualify?
00:35:00
Holden Sours-Thompson
Maybe not. I think an agent might kind of look at you a little crazy with that one.
00:35:04
Dr. Murtuza Shah-Khan
Thank you.
00:35:04
Dr. Richards Offutt
Good advice.
00:35:05
Holden Sours-Thompson
Are you gonna put your logo on it? Are you gonna take everyone out on it? Then maybe we’ll do all that stuff too.
00:35:10
Dr. Richards Offutt
That’d be great.
00:35:10
Holden Sours-Thompson
Yeah. Maybe for the podcast, maybe not. Your dental practice.
00:35:13
Dr. Richards Offutt
Holden, so very nice to meet you. I appreciate you coming on and doing Simplify Dentistry with us.
00:35:19
Dr. Murtuza Shah-Khan
Yeah. Thanks again, Holden.
00:35:20
Holden Sours-Thompson
Yeah, thank you, guys.
00:35:21
Dr. Murtuza Shah-Khan
All right.