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.
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Thoughts About Employing a Spouse in the Practice

Thoughts About Employing a Spouse in the Practice

6/5/2019 8:00:00 AM   |   Comments: 0   |   Views: 54

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.

There are a number of good reasons to employ your spouse in your practice. However, before you start generating paychecks, work with your accountant to make sure you meet IRS rules for spousal employment. For example, and this is pretty basic, your spouse should have a position description and actually perform the functions of the job. In addition, you should avoid paying a salary that is in excess of market rates.

A great reason to hire your spouse is the valuable services they can render to your business. Through my work as a practice integration advisor, I’ve come to know some dentists that frankly could not operate without their spouse’s management of the practice. In some cases, the spouse is an office manager or a dental assistant or hygienist. Many dentists I know also find that having their spouse work in the practice provides valuable insight into the daily operation of the business and staff morale. They often are another set of eyes and ears in the practice when the dentist is busy with patients. Finally, dentists may find great comfort in working through the day-to-day problems of the practice with their wife or husband.

Paying a spouse provides some spending cash for family or individual personal expenses. I generally suggest not to “overpay” a spouse because it helps minimize the associated Social Security and Medicare payroll taxes. However, I also recognize the potential importance of the spouse having his or her own Social Security benefits in retirement.

The primary reason I would recommend dentists hire their spouse in the practice is to take advantage of the benefits afforded to owners and their spouses in qualified pension plans. In a 401(k) plan, both the doctor and spouse can maximize their salary deferrals, effectively doubling their tax-deferred savings while reducing their income tax bill. In cases where a dental practice has both a 401(k) and cash balance defined benefit plan, adding a spouse may enhance the dentist’s ability to maximize the dentist’s share of the employer’s contribution to both plans. A word of caution, however; pension rules are complex and I recommend you speak with a competent pension plan actuary before implementing any qualified plans.

Have questions? Reach out to Buckingham’s practice integration advisors to get them answered. We look forward to speaking with you!

In our next article, Katie Collins will share her thoughts about employing your children in your practice.

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