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Why Every Dentist Needs to Understand Quarterly Tax Estimates · The Millionaire Dentist™

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  Hello, everyone, Welcome to the Millionaire Dentist Podcast, brought to you by
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  four Quadnans Advisory. On this podcast, we break down the world of dentistry,
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  finances and business practices to help you become the millionaire dentists you deserve to
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  be. Please be advised we do speak with an honest tongue and may not
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  be safe for work. Hello and welcome. This is Casey Hires back at
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  the Millionaire Dentnist Podcast in studio with co host Jared Bridgeman. A Hoy hoy,
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  how's it going, Kevin? Let's start again? A holy hoy.
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  This is Casey. Alright, Kevin's also here. Jared is on point.
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  Yes, our our guest today, Kevin wrote an NBA c p A.
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  When we bring Kevin in, it's typically for what topic taxes? Usually taxes.
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  So here's the cliff notes. You got to pay him, Kevin or
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  the taxes he takes. He takes, you know, he'll take something.
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  I gotta pay taxes. Podcast over, Ye, what do you want to
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  talk about today? Man? Yeah, so I wanted to go I want
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  to go a little bit more into the estimates. So what do you what
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  do you just estimates? Like we're working quarterly, so quarterly tax estimates perfect.
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  I'm learning from you. So a lot of times, you know,
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  when you're a W two employee, you have withholdings, and a lot of
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  times those withholdings take care of any tax obligations that you might have, like
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  escrow and your mortgage. Yeah, I just came to me. Sure it's
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  brilliant. But when doctors get into practice ownership, there comes that practice income,
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  that escorp income aspect to it, where you know, there's no withholding,
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  there's no uh you know reporting W two. The mind shift have to
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  change now you're the owner. Yes, yeah, there's a huge difference between
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  being an employee and being the owner. So a lot of times practice owners,
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  for many different reasons, don't quite understand the tax the quarterly tax projections,
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  the quarterly tax estimates that have to be done to really fine tune and
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  make sure that you're paying the correct amount of taxes, not overpaying, not
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  underpaying. So many times with practice owners coming in, uh you know,
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  going through the consult consultation process. Uh, you know they're there if they're
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  new practice owners, not having experienced the ownership level, the ownership aspect of
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  practice. So some entity structures make it so you don't play quarterlies. Is
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  that correct? Or is that incorrect? AD's incorrect. Very good, I'm
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  making you look smarty. Some people aren't paying quarterlies the first because they don't
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  need to, because not just is of lazy accounting. It is possible that
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  every person it is an individual tax aspect, so you could have to pay
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  You could have to pay quarterlies if say, your non earned income that you're
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  not paying W two with holding on is high enough. Okay, And so
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  we've talked about this before. Unfortunately, too many practice owners out there there
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  settle for last year's performance, divide it before there's your quarterlies. We're sort
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  of that's the one on one level, we're past that a little bit,
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  right, But feeling that feeling of paying quarterlies can make you I was gonna
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  say pucker, but we'll say nervous because of cash flow. Right, So
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  you, oh, you four times a year, you're paying a pretty decent
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  chunk of money, and so the cash flow stress is real. You've seen
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  that, Yeah, maybe just a bad up a little bit where you were
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  hitting on is the irs. They say, as long as you pay in
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  ninety percent of your tax for the current year or one hundred percent of prior
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  year's taxes, you won't owe a tax penalty. So a lot of times,
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  you know, practice owners are coming to us where their prior tax prepare
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  just what I call canned tax estimates, where okay, this is what your
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  tax liability was last year. Just make sure you get this paid in and
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  you're fine. Okay, they do that, but I'll fine on the at
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  least the penalty partine the internal revenue service. They're so nice they don't make
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  you pay penalties, right, gotcha, But you still owe taxes. What
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  if your income went up twenty percent or you know, two hundred three hundred
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  thousand dollars, which we've seen when they've come to us that, hey,
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  my practice, I have one hundred and fifty thousand dollars tax surprise. You
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  know that their prior accountant didn't do the quarterly adjustments that we look at,
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  and then probably extended it and then was late and then yeah, so what
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  are quarterlies do? So quarterlyies are due. It's interesting because the irs and
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  all their wisdom don't have quarterlies on a quarterly basis. The first quarterly is
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  Doe April fifteenth, tax day, yep, so you would think, okay,
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  then the next one would be July fifteenth, the first three months later,
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  three months later. No, the next one's June fifteenth, just you
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  know, yeah, two months later. Then you go to September fifteenth,
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  and then you go all the way to January fifteenth for the fourth quarter.
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  So they're a little bit off, but regardless, it's that new math.
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  Yeah, I like, I like asking questions. I already do the answered.
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  But that was good to hear. Yeah, I didn't know any of
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  that. Yeah, so the schedule is a little bit off. But again,
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  what we try to educate our clients on our practice owners is our estimate
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  process, our projection processes we go through. We don't just do the Okay,
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  as long as you've paid in what you owed last year, then you're
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  fine. We go through a very long process we bring in We of course
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  look at your practice year to date income, which by us doing the monthly
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  financial statements. A lot of practice owners they don't get monthly financial statements,
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  they don't have an accountant keeping up with their profit and loss year to date.
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  We're able to take that, We're able to take any outside income from
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  spouse, maybe a spouse has an outside W two. We look at their
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  investments, year to date activity, you know, if they've and we have
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  actually quite a few that have rentals. You know, there's all kinds of
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  different aspects to your income. It's not just practice owners love real estate.
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  Yeah, yeah, they do, and we take that into account when we
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  look at their quarterly estimates. You know, it's not just well, what
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  was my W two income this year? Okay, good to go. So
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  with that comprehensive view and with adjusting it throughout the year, which is the
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  right way to do it. That's surgical, that's varsity, that's pro,
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  whatever else you want to describe it, that's the way to do it.
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  What are some unattended consequences or challenges that come with this? Sometimes if you
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  put in a new structure for practice owners that maybe they're not used to or
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  that's hard for them, the estimates will go will be adjusted. We'll go
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  up and down. They might be used to Okay, I pay twenty five
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  thousand dollars every quarter for estmates and that's all I do. Well, then
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  they get smoked on the back end with a tax surprise. Yes, So
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  now if it goes from twenty five thousand to thirty six thousand, they feel
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  that cash flow stress in the year. It kind of reminds me that this
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  is probably a really poor connection here. But when I was in college,
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  I remember signing up for our electric company had like a budget program where you
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  just paid like seventy dollars a month, no matter what, and at the
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  end of the year you made up the difference and so and then all of
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  a sudden, the head and turned out we use the air conditioning a lot
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  more than the last. That's the worst college story you've ever told. Your
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  college stories are usually pretty good, all fair. That was just I'm sorry,
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  that was cute. Yeah, and then I had a beer. But
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  yeah, it's kind of similar like that, where it's like it's at the
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  end of the year, no matter if you've underpaid that it might have been
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  more. I had to kind of cover up to the front. So it's
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  easy. It's easy to do that. Yeah, and when your your estimates
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  go up because your income has gone up. Now, a lot of times
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  the practice owner might not feel that because that's not exactly what they're pulling out
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  of the practice. Their W two is probably said at some amount, well,
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  your practice income went up, and while you don't realize that with money
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  in your pocket right away, it's probably sitting in the practice of bank accounts.
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  You can take a distribution for that, but our ideal is you only
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  pay as much in taxes as you need to, no more, no less.
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  So for that quarter. You know, if your taxable income for those
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  few months that we looked at is up quite a bit, then we adjust
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  your quarterly that much. You know, you might might have a piece of
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  equipment, your X ray machine or something go down, or sarak goes out
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  or is going out. You need to per just know, well, we
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  can take section one seventy nine on that that lowers your tax liability, then
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  that will lower your your quarterly that month that that time. So a lot
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  of times practice owners will look through a singular lens. I mean this is
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  humans look through one lens, a singular lens. Just look look at the
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  one thing. This could be frustrating if it shoots up and down, but
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  in reality, if you're looking at the comprehensive picture, it is the most
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  effective, the most efficient and most beneficial way for the practice owner right is
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  to have custom livetime quarterlies so that there's planning and consistency versus playing catch up,
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  rearview mirror, historical history and all that. Okay, Yeah, And
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  on the back end of that is we help our clients with preparing for those
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  taxes, you know, whether it's through savings. You know, we'll pull
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  some money over into brokerage. It's you know, it's not like here,
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  just go spend all this. Let's pull all the us you've had a great
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  quarter, let's prepare for Yeah, you know there will be a little bit
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  of tax a tax hit on that growing pain sometimes to get used to that.
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  Sure, we do get that I hate paying taxes. Everybody hates paying
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  taxes and they don't don't really want to. But you know, the IRS
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  has spent many, many years on closing you know, loopholes on how to
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  get out of paying taxes. So what are some challenges sometimes when a practice
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  owner goes for maybe their old way where it was terribly inefficient and they're paying
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  probably more in taxes and versus getting it right. What are some of the
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  growing pains or things that are potentially out there going from your canned projections to
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  more of a lifetime update to truly custom I think it's the I don't necessarily
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  want to say behavior, but it's what they're used to, you know.
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  More on the education side of education, Why this is the way it is?
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  It has to be twenty five thousand. Why to go up at the
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  y six? Well, it can also be viewed as well. It can
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  be a good thing. I mean, something positive happen. If you go
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  from paying twenty five to fifteen. On the surface level, you're paying less
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  in taxes. Well why producing less, collecting less, making less? So
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  yeah, you know, ultimately the really the only way you can get out
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  of paying some taxes is to not be successful. If you're going to be
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  successful, well, even then that's true, you can still they'll still take
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  some taxes from me. But and and not looking at it just on a
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  quarterly basis. This quarter I have I have to pay so much looking at
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  it at an annual basis of I paid taxes when things were when I had
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  a good couple months, my tax payment was a little less when I bought
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  that new piece of equipment. And then at the end of the year,
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  you don't have a one hundred and fifty thousand dollars TAXI prize. So many,
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  so many come in wanting better tax services because of that year in tax
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  surprize of one hundred and fifty, we've seen two hundred I mean huge amouna
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  because they really didn't expect hardly anything because they were they were paid quarter.
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  But yeah, there's a pivot for you. How bad ass were our forefathers
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  three hundred years ago when for a two or three percent tax on tea and
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  they had enough? And now we're paying like thirty five forty forty five fifty
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  percent taxes. But we've got our uber eats in our NFL, so we're
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  all good man, we're soft, we're soft. Back then they're like,
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  well, you're gonna tax my t two percent? It's on. Yeah.
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  Yeah, they had that tea party and everything I read too much that just
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  came out of nowhere. It was not really helpful for Kevin today. Kevin,
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  So, if you if we have some people out there listening and maybe
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  they're they're currently paying their quarterly taxes but aren't quite sure if they're doing this
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  correctly, what what are some baseline advice you'd have for them to kind of
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  get back on the right path. Send a strongly worded email to your currency.
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  Yeah, I mean I wonder what would happened if a lot of sorry
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  to interrupt you, a lot of our listeners, their clients, they're like,
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  I get it. There, that's what they do. And but I
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  wondered those if they said, hey, I'd like you to have a forecast,
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  look at last year and do lifetime adjustments with my quarterlies. I wonder
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  would they I wonder, I'm just not an answer, But would they do
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  it? Would they not do it? Would they triple the charge that they
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  charge you for it? Yeah, they'd charge you a lot more. Yeah.
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  That hopefully practice owners would want and get what you pay for. Yeah,
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  yeah, you get what you pay for. So practice owners should want
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  monthly financials followed up with quarterly estimates to get these right from their accountant,
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  you know, waiting till just year end, here's all my stuff, do
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  my taxes. That's where that problem comes in. You should want that on
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  an ongoing basis throughout the year, talking to your CPA to go through all
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  this to avoid those tax prizes. So actually the red flag is if your
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  quarter these are exactly the same four in a row, that might be your
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  red flag that you're getting some canned service. Exactly if you have no idea
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  what your monthly net income is, your to date income is where that's going
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  because that that swings up and down throughout the year. Well, there's so
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  many areas with tax especially in dental and me dental industry, that are there,
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  you their nuanced there, you need forensic experts in the field. It's
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  crazy how many people we've talked to who yeah, we work with somebody who's
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  you know, dentalist specific and those are some of the worst offenders. I
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  used to think that was a badge of honor, and then we see some
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  of the tax returns and it's it's frightening what what they see, the kind
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  of work he gets done. Yeah, we've seen a lot of autopilot,
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  fancy financial statements. Uh. Actually, we've had quite a few clients come
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  to us recently who do get those monthly financial is a nice, pretty portfolio
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  of here's bars and grafts, and here's a lot of colors, a lot
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  of colors. You know, this is what everything did? You know?
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  You didn't lead to any It didn't lead to not getting a tax surprise.
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  Yeah, there was no action items. No, Well that was for the
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  dentist to look at and then figure out what they wanted to do, because
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  any additional proactive advice from the CPA is going to Nickel and Diamond get and
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  cost them. So it was all just reactive information, no proactive advice.
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  So pay taxes, right, some more more you pay. Yeah, they're
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  probably doing something right. But unfortunately, when we look at things, there's
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  a lot a lot of areas and has nothing to do with your car or
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  your kids and kind of those little, you know, stereotypical like ways to
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  get around it. That's small ball, really. But some of the other
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  things we see just with structures and a lot of the things we master.
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  I mean, there's tens and tens of thousands of dollars of taxes paid that
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  probably shouldn't have been. But then they're you know, complaining about paying an
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  extra six thousand on a quarterly but well, this is lifetime custom this is
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  actually taking your medicine. This is good for you. Yeah, And and
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  we do we look at the ways that we can save our clients on taxes.
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  It's not like, oh, we're not looking for those credits, we're
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  not looking for those deductions. Place for all of it. There is and
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  we implement many of those, but there's so many out there that that sound
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  or look so good. But on the back end, when again, when
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  you take that one hundred thousand foot look at everything, they weren't all that
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  great. They might have save you on this end, but they bitch you
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  on that. Well, we were talking a couple of different examples. When
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  it's all said and done with the kids, you know, okay, maybe
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  up a couple grand, but if you pay them what's oevever fifteen and then
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  taxes and then there's extra complications where then they have to pay it. And
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  so you've done this exercise where you sound and feel really cool because yeah,
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  I've got my kids on there on the website. They're models. You know.
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  Yeah, there's a place for it. Not knocking it, but a
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  lot of times there's so much time and effort and energy focused on that that
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  the net gain is kind of minimal when these other glaring areas are ignored.
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  Yep, there there's a place for it. There's not one size fits all.
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  Everybody should take this this route, this path. It's got to be
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  custom. It is custom for sure. Well, thanks for coming in and
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  talking us through the quarterlies, because I think the biggest thing is having the
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  same number four times in a year. Actually, isn't that good. And
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  if you know it does go up, well, that stings, but it
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  might sting a lot less than the alternative, which is congratulations you one hundred
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  thousand dollars that you weren't prepared for. The worst thing is owing so much
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  money at the end of the year, But the second worst thing is getting
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  a whole money back at the end of the year. Yeah, good point,
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  money that can have been used better at other places. Yeah. So
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  while that's not while your different quarterly amounts might not be that that steady cash
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  flow that you think, but it is best for your cash flow in the
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  practice and at home long term, long term. Exactly. Good Kevin,
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  thank you so much for coming in today and helping us with this Casey.
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  We're going to be coming to Saint Louis and Kansas City. It's pretty exciting
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  you down to the middle of the country there. We're also going to be
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  in our hometown area of Indianapolis, and a couple events here as well.
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  If you want to check us out, go to four Quadrantsadvisory dot Com.
• 20:10
  At the top of the screen, there is a button that says events.
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  If you want to check out what events we're going to go to. I'm
• 20:15
  also working on relaunching our Millionaire Dentist Podcast web page and our blog that's launching
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  soon as well, so feel free to check it out there. Casey,
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  thanks so much, Kevin, thanks so much, and we'll see you guys
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  som Thank you. That's all the time we have today. Thank you to
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  our guests for their insight and for sharing some really great information, and thank
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  you to you the listener for tuning in. The Millionaire Dentists Podcast is brought
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  to you by Four Quadrants Advisory to see if they might be a good fit
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  for you and your practice. Going over to four Quadrantsadvisory dot com and see
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  why year after year they retain over ninety five percent of their clients. Thank
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