Did Your CPA Check These 4 Must-Do Boxes This Tax Season?

During this time of year, taxes are on a lot of dentists’ minds. Getting your tax bill as low as legally possible will depend greatly on the quality of the certified public accountant (CPA) you have assisting you. Some CPAs do great work. Others don’t. And those misses can cost dentists tens of thousands of dollars. 

Below I have included four of the major tasks your CPA should have performed this year. These are good ways to ensure you received the best tax advice possible and aren’t overpaying on your taxes. 

1. Give You a Tax Projection by December 
Your tax bill should never be a surprise. At least once in 2020 — preferably twice — your CPA should have provided you with a tax projection. 

Most great dental CPAs provide clients with a tax projection in November or December of the year prior. This allows time to adjust your plan by taking last-minute deductions or strategies before the calendar runs out. 

Subpar CPAs will simply collect your tax information in February or March and surprise you with the tax bill. 

2. Communicate Early and Often on PPP/EIDL Strategies 
2020 saw huge financial shifts in tax-related strategies caused by pandemic-related business shutdowns and Paycheck Protection Program/Economic Injury Disaster Loans — and, in some areas, U.S. Department of Health and Human Services loans — that dentists could take advantage of. 

The best CPAs proactively sorted through and communicated the latest information in real time even though it wasn’t part of their typical duties. Subpar CPAs left their dental clients to the mercy of forum posts and Facebook comments to gather information. 

3. Verify You Set Your S Corporation Salary Correctly 
The vast majority of U.S. dentists are taxed as S corporations with the requirement that they pay themselves a “reasonable” salary through payroll. Naturally, dentists like to keep their tax bills low by keeping their salaries through payroll low. But how low can you go? Your CPA should help you with this. 

Good CPAs will help you get to the right number and provide the information to justify the amount you’ve set for your business. This will typically include corporate minutes naming your salary, which provides the documentation to prove your salary is reasonable. 

4. Proactively Protect You From Audit Red Flags 
Suppose you receive a letter from the IRS informing you that you’re the lucky subject of a full audit. Do you know the one record that can create a nightmare for you? The one record that makes the IRS suspect you’re keeping lousy records elsewhere? 

That record is the mileage log on your vehicle or vehicles. 

My point is less about the business mileage rules and more about how well your CPA is helping to inoculate you against a possible IRS audit and an audit’s most common requests. Did your CPA educate you on how to keep a good mileage log? 

During this tax season, be hypercritical of the quality of the tax advice you’re receiving, and adjust, if necessary. If your CPA didn’t provide you comprehensive help, it’s the right time to look around for a new one. If you’re not hypercritical, the IRS certainly will be. 

Brian Hanks, MBA, CFP, is a dental accountant, author of “How to Buy a Dental Practice” and host of the “Practice Purchased” podcast. He also represents buyers in dental transitions nationwide. 

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