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Your 2023 Year-End Tax Playbook (Dentist Edition) · The Millionaire Dentist™

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  Hello, everyone, welcome to The Millionaire Dentist podcast, brought to you by
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  four Quadness 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 to another episode of The Millionaire Dentist.
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  I am your host Jared Bridgeman. Casey Hires is out at the moment.
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  He is working with some clients at the moment. So I brought in
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  Steve Levy Pipes, the man with the Golden voice. Steve, how are
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  you, hey, Jared? How are you doing doing great? Steve?
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  I bring you in at the end of every year for something we call it
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  the tax that your end tax wrap up. And these are things that practice
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  owners and business owners in general should probably keep in mind as the year winds
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  down. Yeah. Absolutely, So let me ask you a lot of a
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  lot of practice owners and stuff we'll give out holiday bonus is to their employees.
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  Can you kind of walk me through what needs to be done with that?
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  Yeah, this is about the time when you see practice owners paying out
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  bonuses, and you can't just sort of give them give it to them and
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  that's the end of the story. Because the relationship between you as the owner
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  and your employee is an employer employee relationship, So any payment that you give
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  them really is compensation. So this may this also could this will include non
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  cash payments or whatever as well a gift of some sort or yeah, gift
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  cards typically, So what we recommend one of two things, but they both
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  should be considered for it. You can obviously just give them a bonus through
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  their regular payroll system, not something we commonly see as far as bonuses,
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  because gift cards or cash is typically what we see. So in that second
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  instance, what we recommend is that you give them the money no problem,
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  and then report the people that received that money or gifts report that to your
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  payroll provider so that they can do what's called grossing up for taxes, which
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  means that the net amount they receive is still the same. They still receive
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  that amount, but there are Social Security and Medicare taxes on that amount,
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  so essentially it brings that amount higher as far as reported in their compensation.
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  To reflect that you're kind of covering their Social Security and Medicare withholding. Is
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  there a minimum where that would take effect or is at any in all?
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  It's really any and all, there's no because, like I said, it
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  is compensation considered compensation no matter what amount. There's really not a thing called
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  gifts to your employee because of that relationship that it's for typically services given at
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  the time or even prior. You said, it's not as often that you
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  see them. Just do like a monetary bonus through the payroll system. Between
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  those kind of two options you show, is there an easier or less complicated
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  path, Yeah, certainly. The first option just saying hey, here's whatever
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  amount, like a thousand dollars bonus, it's compensation, so it's going to
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  have withholding, that's already kind of autonatically taken care of. Yeah, it's
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  already taken care of the other one. And so with the second option of
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  just kind of giving the money or gifts, the best suggestion there is to
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  let your payroll provider know as ahead of time as possible so that they can
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  not cram to get that in, especially since it's usually given at the end
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  of the year and that has to be reported on the w two and everything
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  with it being if it's done through payroll like that, would it be taxed
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  as a bonus then to with the slightly higher rates? Yeah, most likely?
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  Okay, ye, Steve, okay. Keeping them with the holiday theme,
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  a lot of companies are gearing up to within the next couple of weeks
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  do a holiday party. Now ours is in week and a half. That's
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  right. I'm pretty stoked about that. I absolutely can't wait to make our
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  owner buy meal kinds of nice food and drinks. But Steve, how does
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  how does the holiday party work with with taxes? And I'm assuming we walk
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  me through that, you know, yeah, you know the words. So
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  it's kind of the exception to a lot of rules in what you can actually
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  write off for meals and entertainment when you have a holiday party. The normal
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  rule is you can't write off entertainment and you only get fifty percent of what
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  you write off for meals. Well, this is this is a different situation.
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  It's a holiday part already, it gets one hundred percent right off for
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  both and so it's it's and you don't just have to have it during this
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  time. It's really right, So we can have like the rockets show up
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  whatever, you know, that would be fast. I heard that's actually happening,
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  but that would be really great. But anyway, so and and it
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  doesn't just it's not just restricted to holiday parties. It can be company parties
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  of like summer parties or that kind of thing. Now, I can't just
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  a standard a standard dinner with your department. Yeah, would wouldn't. Uh
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  so, No, not that. It's got to be kind of a company
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  wide occasion, which can be a brilliant any time. But holiday is usually
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  what we see around that time. But it's the exception to a lot of
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  rules, which actually we'll get into. Okay, that's the next topic.
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  But yeah, go crazy, you'll get a hundred percent right, all right,
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  So next up would be you'd mentioned that outside of the company holiday parties
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  and then one hundred percent tax right off with those there is you said,
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  usually like a fifty percent thing with just meals in general. So you said
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  the notes you wrote me, so I know what to ask. That there
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  was a deduction change in for twenty twenty three weeks. That's right. So
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  it had been for several years now since the Tax Cuts and Jobs Act that
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  specifically for purchases from restaurants that you got to write off one hundred percent of
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  the meals that you purchased from restaurants, take out in person, whatever,
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  not groceries that wasn't part of it. But starting in twenty twenty three,
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  that's reverted back to just the fifty percent right off rule, which obviously not
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  great, but it's still something. Yeah, absolutely, I mean it's still
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  available. Like I said, the holiday party is an exception for that.
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  But you know, we are a proactive firm here, and so when that
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  that changed, I know we probably reached out to our clients and let them
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  know. But is there is there anybody you think out there that's going to
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  get caught not knowing about that? I would say, I mean, because
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  it's been the rule for you know, a few years now, since that
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  act around twenty eighteen. So it's it's those things where you probably shouldn't have
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  bet your eggs on plus your best on them, being like, well,
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  my go one hundred percent of this back, right, So you did a
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  dinner every every week? Yeah, yeah, yeah, definitely, so,
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  but it could if you're having a large meals expense, typically you'll get that
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  fifty percent haircut. A lot of states were kind of doing it too.
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  They were like, you know, sure, federal law, but we kind
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  of liked the old way, so we're only going to give you fIF percent.
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  You had to make an annoying adjustment for a state to do that.
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  But now everybody's kind of in sync, federal and the state and back to
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  the old ways. Does that make it easier on your end when you're when
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  you're doing it's it's fine either way. You know, we know what to
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  put where and what's am because I don't, So I appreciate your expertise when
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  you come in here and whenever I guilt you and to do my taxes next
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  time. It'd be nice. With twenty twenty four coming up, you know,
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  we you and I had sat down and talked about the irs and retirement
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  changes, things like that. Do you mind going through just a quick kind
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  of cover of a cover of the inflationary changes for twenty twenty four? Yeah,
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  no problem. So, like we talked about, it wasn't a boost
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  as much as from twenty two to twenty three, as far as limits that
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  you can defer for four one K, but it's still some things did increase.
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  So in twenty twenty three, you could defer for four one K purposes
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  twenty two five hundred four or for your form one K twenty twenty four.
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  It's just a five hundred dollars boost up to twenty three thousand versus twenty two
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  was like around twenty thousand, so it was you know, it went up
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  but not as much. And one of these changes, let me ask you
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  real quick. With my four oh one K, I went into the computer
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  and I started diverting all your funds into mine. Okay, fine, I
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  mean that really be very created to catch up. It sounds like a kind
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  of an office space. Touch a deal. It's just a diversion. Fine,
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  it's just incremental. So now the catch up contributions, which you know
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  I'm catching up, you're catching up to take mine. This is after fifty
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  five that's right, Yes, you need fifty fifty fifty Yes, so that
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  remained the same. That's still seventy five hundred. And those are the two
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  main ones. There's also, like we mentioned last time, a boost in
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  how much much compensation can be considered for the company match it's It was three
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  hundred and thirty thousand in twenty twenty three and in twenty twenty four, it
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  boosted up to three hundred and forty five thousand. If you need more information
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  about this, listeners, there is an episode where Steve and I dive really
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  into the nitty gritty of that just a couple of weeks ago. Let me
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  ask you, you have written down your federal reckets. Yeah, those who
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  have kind of shifted a bit, they have. It was a big boost
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  in from twenty twenty two to twenty twenty three, and the change really was
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  that more income was taxed at lower rates, and so really that means an
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  overall tax hit was less. That's why there was a bigger boost from twenty
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  two to twenty three. There still is a boost in from twenty three to
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  twenty four, which just came out in November. So, for example,
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  the jump of on the limit of the taxable income for the twenty four percent
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  bracket, that jumped twenty thousand dollars, So twenty thousand more is it the
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  twenty four percent bracket versus the thirty two percent bracket, So that's it was
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  twenty four thousand between twenty two and twenty three. So it did go down,
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  but that difference between the thirty two and twenty four percent I mean,
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  that's a big rate difference, one of the bigger ones in the whole bracket
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  system. There was also a jump in what's in the thirty two percent bracket
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  versus thirty five percent. That increased twenty five percent versus thirty thousand, and
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  all this means is really more income tax at a lower rate. And so
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  if you had the same income in one year versus the next, the next
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  one would be less. Next next tax, the tax would be less,
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  and that'll be starting in next year like January first, that's right, you
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  know, it's December. This is the time of year where a lot of
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  owners out there will be like, oh, shoot, I should probably make
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  some in of your purchases here real quick, let's get some stuff in here,
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  and sometimes try to use that tax code. The tax what's that tax
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  called. It's section one seventy nine. Section one sevent nine, which I
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  mean, if if you need the equipment is very beneficial if somebody actually need
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  to use sure, but a lot of people will try to use this as
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  a way to lower their taxes. Can you walk me through into your purchases?
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  So what we generally believe is that you shouldn't make expenses and purchases just
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  to save taxes, because that's kind of chasing things and you lose the money
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  from the the amount that you're you're spending for it. Now, if you
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  need it, by all means, go for it before the end of the
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  year. It's not it's like, if you actually need it, sit down
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  and think about it. Yeah, I mean a business decision versus just oh,
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  I just want to minimize my tax just not pay the government. And
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  I saw a video the other day on TikTok this intern. They gave the
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  intern a company card and he spent eighteen thousand dollars on a bag, a
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  birkin bag. I think, okay, but yeah, so I wouldn't do
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  that. Yeah, that's kind of rough. Now, one rule you have
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  to make sure you follow is that you're not going to get the benefit in
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  twenty twenty three unless you place it in service by the end of the year.
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  So that's really the So even if you paid for in twenty twenty three,
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  if you haven't used it yet, it doesn't count exactly. So if
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  you January fourth, you finally put it into into into motion, it would
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  go in twenty twenty four, that's right, which you wouldn't get that,
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  you know, savings, the time value of money saving. It'd be another
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  year, it would. So if you're going to get it, if you're
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  going to buy that equipment, make sure you're getting it delivered in some way.
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  Are you using it? So? Steve, as always, you come
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  in here and you just kill it. Is there anything else you'd like to
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  add before we wrap up the tax wrap up? Well, just think about
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  the various topics we talked about, and especially the bonuses one. We often
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  see that one where people believe, here's the money, we're good right now,
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  there's some reporting there by all means, throw the big holiday party,
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  do all the meals expenses you want, but just note the last deduction and
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  don't fall for all the end of your purchase sales pitches for that because make
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  sure you need that. Okay, thank you listeners, We really appreciate you
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  tuning in. Please feel free to follow us on Spotify or subscribe to us
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  on Apple Podcast. If you like our podcast, please leave us a review.
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  It always always helps. Steve. Thank you so much and have a
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  happy holiday and good new year. Thank you as well. That's all the
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  time we have today. Thank you to our guests for their insight and for
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  sharing some really great information. And thank you to you the listener for tuning
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  in. The Millionaire Dennis podcast is brought to you by four Quadrance Advisory to
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  see if they might be a good fit for you and your practice. Going
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  over to four Quadrantsadvisory dot com and see why year after year they retain over
• 15:22
  ninety five percent of their clients. Thank you again for joining us and we'll
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  see you next time.