IRS’ rule called constructive receipt, if you could have deposited the money and chose not to, it is still income. If your practice is audited, one of the first things the IRS auditors are trained to do is to look for a gap in income in the month of December and then a large deposit or deposits in early January. You can put off billing your patients or insurance companies which will put off receipt of income, but you cannot just hold deposits. As to expenses, since most all dentists are on a cash basis, you can pay a ton of bills before the end of the year and they will be deductible, such as lab, supplies, rent for next month, etc. You can also charge expenses for the practice on your business credit card and even though you do not pay off the card or make a payment on the card before the end of the year, because you have created
a legal obligation by charging an expense on a credit card, you get the deduction. Be sure that, if you use QuickBooks and send your CPA your books only once a year to prepare your tax returns, you input charges through
“Charitable donations are a great place to cut your tax bill.” December 31st. If you only input credit card charges when you pay the card, if for example you have a card that cuts off on the 15th of the month, you will put the January 15th charges in January when in fact the charges from December 15-31 are on that bill and would be deductible for the current year.
Charitable donations are a great place to cut your tax bill. Charitable donations may be made by cash, check or credit card. As with business expenses for your practice, if you charge a donation on your credit card in December but do not pay it off until next year, you still get the deduction this year. Also if you have old clothes or furniture, donating them to Goodwill, Salvation Army, or any other qualified charity will net you a deduction for the fair market value of those items. For clothes, appliances, furniture, etc., the general rule is 20-25% of the original cost of the item. Say for example you bought a suit for $500, you could take a deduction of $100-125 for the donation of the suit. Hopefully these tips have given you some good ideas how to keep more of your dental practice profits.
See our article in this issue: “Tax Law Updates”
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“Preparing and planning for a flawless practice sale” “California Dental Practice Act” “Associateships, Partnerships, Acquisitions, Oh My…” www.sdds.org • February 2016