Message Boards
Today's Active Topics Today's Active Cases Browse Forum Categories My Recent Activity My Messages Private Groups My Marked Threads My Subscriptions
Today's Active Images Today's Active Polls Most Active Topics Global Townie Map Advanced Message Board Search Message Board Terms of Use

Finance32: Dental School’s Missing Curriculum
Finance32: Dental School’s Missing Curriculum
Great clinical skills simply are not enough for dentists to achieve financial success. Let Buckingham Strategic Wealth's Practice Integration Advisors share what else you need to know to realize your lifetime goals and obtain financial peace of mind.
Blog By:
Buckingham Strategic Wealth
Buckingham Strategic Wealth

Coffee Talk: Frequently Asked Questions About Taxes

Coffee Talk: Frequently Asked Questions About Taxes

9/20/2017 8:00:00 AM   |   Comments: 0   |   Views: 118

Mike McAninch is a Practice Integration Advisor with Buckingham Strategic Wealth, where he specializes in helping dentists connect their money and their values to realize their most important financial goals.

You know how each season comes with its own unique character? Autumn has its falling leaves, winter has its snow (at least in some places) and spring its rain showers, while summer recalls sunshine and the beach. But there’s at least one thing each season has in common, and that’s the need to pay income taxes.

As we enter fall, and move closer to the next time taxes come due, we thought it would be worthwhile to tackle some common tax-related questions. So, today and in our next article, we’ll address a shortlist of tax concerns either we hear frequently from dentists or that dentists should be aware of. We hope you find our answers and the information therein helpful as you consider your own tax bill this year.

I haven’t been paying my state and federal estimated taxes. What kind of trouble am I in?

All of us from time to time experience a cash shortfall. Estimated tax payments are easy to skip because there are no immediate negative consequences for doing so. However, you eventually must pay your income taxes! And both state and federal agencies assess penalties and interest on income taxes paid late. If you need to skip one or more estimated tax payments, I recommend notifying your accountant as soon as possible. That way, you and your accountant can set up a payment schedule that minimizes late payment penalties and interest on any unpaid taxes.

Also, it’s worth looking into whether the cash shortfall that prevented you from paying your taxes on time is a one-time deal or indicative of more systemic financial problems. In either case, though, consider investigating what a framework for making holistic financial decisions and a comprehensive financial plan built on strategies (including tax strategies) to accumulate and protect wealth over time could bring to your practice.

Should I extend my tax return?

A number of my dental clients routinely extend their federal and state tax returns and delay filing them for five or six months. Tax return extensions are legal options open to all taxpayers. As a practical matter, federal and state tax agencies require the full payment of income taxes upon filing an extension. I generally recommend extensions only in situations when you cannot provide your accountant with the needed data on a timely basis. For example, there are occasions when the pension actuary delays delivery of the necessary pension expense data.

Which deduction is more valuable to me: pension contributions or equipment depreciation?

Both deductions are of equal value when it comes to reducing your taxable income and income taxes. However, when your deductions exceed your income, you have a problem. In these cases, my personal inclination is to favor the pension deduction over depreciation because the pension contribution results in an investment that will grow tax-deferred until retirement. Further, tax rules typically offer a variety of depreciation methods that allow you to spread the depreciation deduction over a number of years.

My accountant says the IRS helps me fund my 401(k). What is he talking about?

Assume for a moment that every extra dollar of your income is subject to a 40 percent federal income tax. Also assume you want to save $18,000 this year for your retirement. If you elect to invest your savings in a regular after-tax savings account, you will have to earn a total of $30,000 this year to meet that goal ($30,000 minus the $12,000 you’ll pay in income taxes at the 40 percent rate leaves you with $18,000 available for savings).

In comparison, let’s say you instead elect to defer $18,000 from your paycheck into your 401(k) account. Not only does your amount of tax-deferred savings grow by $18,000, but your taxes drop by $7,200 (40 percent of $18,000). In effect, the IRS helped you fund $7,200 of your $18,000 401(k) savings by lowering your tax bill.
You must be logged in to view comments.
Total Blog Activity
997
Total Bloggers
13,451
Total Blog Posts
4,671
Total Podcasts
1,788
Total Videos
Dentaltown Magazine
April 2024
Dentaltown Magazine April 2024 Read Current Issue Read Archived Issues
Sponsors
Townie Perks
Townie® Poll
Have you ever switched practice management platforms for your practice?
  
Site Menu
Message Boards Magazine Continuing Education Podcasts Blogs Classifieds News Events Townie® Poll Ebooks Townie Choice Awards
Company Info
Contact Us Advertise With Us Howard Farran DDS, MBA Policies and Agreements
Site Help
Sally Gross, Member Services Specialist
Phone: +1-480-445-9710
Email: sally@farranmedia.com
©2024 Dentaltown, a division of Farran Media • All Rights Reserved
9633 S. 48th Street Suite 200 • Phoenix, AZ 85044 • Phone:+1-480-598-0001 • Fax:+1-480-598-3450