Selling Your Dental Practice: Part I The Transition Period

18 Jan

By Bob Rojas, CPA

Selling a dental practice requires negociation and agreement on many issues.  This article will cover the transition period.  This is the period between settlement and when the seller exitits the practice.  One major variable is how long the seller would like to continue practicing, and when the seller would like to retire.  There is an entire spectrum of possibilities to include retiring as soon as the practice is sold to working full time for a period and phasing out gradually.  Keep in mind if the seller wants to keep practicing there needs to be enough patients to keep two doctors busy.   Practices with two or more offices make scheduling easier two doctors easier.

If the seller stays it is important to list hours, days, benefits and compensation in the agreement.  Generally the seller is paid a percentage of collections as would an associate.  If the seller stays a period shorter than six weeks, generally there is no compensation and it is just considered a quick transition.

A common myth is a seller must stay a minimum of six months to help introduce the new doctor to the patients. My experience is that the staff is equally effective at introducing the new doctor or seller.  Most patients stay with the practice even when the doctor is deceased and a new doctor takes over with no transition period.  A letter to the patients is normally adequate transition.  Patients want to know that their records are safely maintained and the staff will remain with the practice.

A specialty practice is one which relies on referrals from other doctors.  This requires the seller to spend time introducing the buyer to referral sources.  This can actually require more involvement than transition in a practice with recurring patients.

I have found a flexible seller in the transition negotiation makes it much easier to find a buyer and put a together a great deal for both doctors.

AMT Changes for 2015 … and its good news!

17 Jan

Your AMT (Alternative Minimum Tax) exemption goes up.

For tax year 2015 your AMT exemption has increased to $53,600 for individuals and $83,400 for married couples. This lets us all make 1.5% more income than last year without thinking about going into Alternativve Minimum Taxes.

Every tiny bit helps.  Happy 2015!

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Taxes in 2013 – The Marriage Tax Penalty

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Call me old fashioned, but I love being married.  When I met my future wife, we fell in love and we knew we wanted to get married.  I had a Masters Degree in Tax and helped many clients minimize their taxes.  I knew exactly what our marriage would cost.  We were married anyway despite the Marriage Tax Penalty.  We are still in love and I love being married.  We also still pay higher taxes for being married.
What are the facts?  In 1990 55% of US households were married, in 2000 51% and in 2010 it is 49%.  Clearly more couples chose not to marry.  How did the Marriage Tax Penalty come about?
It was supposed to help married couples with one income which at the time was the majority of US households.  Today most couples living together have two incomes whether they are married or not.  This older law penalizes the married couples.  Its not a huge penalty, but when we were married my wife and I did feel it.  I personally think marriage is worth the tax  penalty.

 

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Saving Money In My Home Laundry

3 Mar

This month I’d like to talk about a simple way to save money.  Saving money is like tax free income and puts money in my bank account I would not otherwise have.

Consumer’s Report did a great article on effectiveness versus price of laundry detergent.  I personally find the price per use misleading as it is based on an unrealistic quantity of the product.  The conclusion I drew from Consumer’s Report is

  • Wisk Deep Clean this is liquid costs 14 cents per load.  It scored an 80 out of 100.
  • Costco’s Kirkland Signature Ultra Clean this is powder and runs   9 cents per load. It scored  73.
  • Target Up and Up is liquid and is 13 cents per load and scored 69 out of 100.

Both of those “best buys” are much cheaper than Tide Ultra plus Bleach Vivid White + Bright HE (powder), the highest-ranked laundry detergent of all. At 23 cents a load, the Tide offering got an 82 yet failed to clinch the magazine’s seal of approval.

Deductions for 2013 IRS Tax Return. Where am I safe?

13 Feb

Los Angeles Office

Los Angeles Office

My wife is a commercial airline pilot. She obsesses over  tickets. I mean the bad kind of tickets sometimes called citations.  This includes everything from speeding to parking tickets. She also loves to drive fast. She checks web sites for red light cameras. She generally drives just a little over the speed limit but not enough to get pulled over. She never mixes alcohol with driving.  I even caught her checking our city’s parking regulation web site.  She almost never gets a ticket.

I do the same thing for my clients and their tax returns. I pay careful focus to IRS areas of attention and expertise.  An area the IRS loves to enforce is travel and entertainment deductions.  I look at these areas as intersections with red light cameras.  If you push the tax code you will get unwanted attention.

We Americans love our travel and entertainment deductions. Right next to that is our business use of our cars. These are areas which IRS Auditors are experts.  Each year the rules change, but I’ll give you some classic examples.  If I host an employee Christmas Party at a restaurant, only half of the cost is deductible.  If I have the same party catered in the office, I can deduct the entire tab.

I accept a new client who was a dentist.  As I studied his previous returns I noticed he deducted 75% of his automobile as a business expense.  This is a hard one to defend as Dentists do not travel often.  He may actually use his car exclusively for business, but he is also begging for an audit.  This would be difficult to defend.  Even if it were well documented.

My goal as a CPA and a tax professional is to create wealth.  I do this in part by reducing tax liability.  I also look at ways to increase income.  Sometimes earning more income generates greater tax liability.  The net result is more wealth.  Not a bad problem.

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Tired of decorating?

13 Dec

Enjoying the decorations.

Don’t forget end of year tax planning for 2013. Contact your CPA before the end of the year.

Taxes and Marriage The Marriage Penalty Tax

13 Dec

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Call me old fashioned, but I love being married.  When I met my future wife, we fell in love and we were married.  I had a Masters Degree in Tax and helped many clients minimize their taxes.  I knew exactly what our marriage would cost me in income.  We were married  despite the Marriage Tax Penalty.  We are still  in love and I love being married.  We continue to endure the Marriage Tax Penalty.

Why does our Tax Code penalize married people?

In 1990 55% of US households were married, in 2000 51% and in 2010 it is 49%.

The marriage penalty came from the Tax Reform Act of 1969.  At the time most families had one income earner and it was designed to help those families. It was even referred to as the marriage bonus tax as a single earner with a family paid less tax than an earner without a family.  In 1960 72% of all people were married.  Today most households have two income earners but only 52% of US people are married.  This is why we  use the phrase marriage penalty tax.  Does this tax keep people from getting married?  I hope not; but it does increase two income married couples’ tax liability and reduces their usable deductions.

Today the 2012 American Taxpayer Relief Act (ATRA) actually increases the marriage penalty for  higher  married dual income couples.  If you are in a 25% tax bracket you are defined as higher income.

So far I have offered you statistics.  How will the marriage penalty and the ATRA affect you in your 2013 taxes?  If you are two married income earners with combined incomes under $200,000 your taxes will increase, but your marriage penalty will be the same as 2013..

The income group most affected by the marriage penalty have a combined gross income over $400,000.  On average high earners will pay an extra $9,000/year more in taxes than their unmarried peers.

If you are in the Marriage Penalty Tax income group, think of it as the cost of a luxury car payment and enjoy the ride.

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