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Tax Planning: Avoiding Surprises and Maximizing Deductions · The Millionaire Dentist™

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  Speaker 1: Hello, everyone, welcome to the Millionaire Dentist podcast, brought to
• 0:07
  Speaker 1: you by four Quadnan's Advisory. On this podcast, we break
• 0:11
  Speaker 1: down the world of dentistry, finances, and business practices to
• 0:14
  Speaker 1: help you become the millionaire dentist you deserve to be.
• 0:17
  Speaker 1: Please be advised we do speak with an honest tongue
• 0:19
  Speaker 1: and may not be safe for work.
• 0:23
  Speaker 2: Hello, and welcome to the Millionaire Dentist. I am your host,
• 0:27
  Speaker 2: Jared Bridgeman. Casey is not in today. He is out
• 0:30
  Speaker 2: traveling and spread into good word. So instead I brought
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  Speaker 2: a very very very special guest. His name is Steve Levy.
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  Speaker 2: He is a CPA, he is a g JD. Sorry
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  Speaker 2: about that. He is a singer. He's also known as
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  Speaker 2: the rock star of accounting.
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  Speaker 3: Steve.
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  Speaker 2: How are you today?
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  Speaker 3: Hey, Jared? How are you?
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  Speaker 2: Very very good? I'm really excited that you're in here.
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  Speaker 2: It's been a bit since we've had had the golden
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  Speaker 2: pipes here for us. I brought you in today to
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  Speaker 2: talk about something that is almost a I mentioned the
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  Speaker 2: last podcast sometimes accounting, sometimes with the financial people, all
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  Speaker 2: your guys' stuff is like a foreign language to me. Okay,
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  Speaker 2: you know, because I don't I don't understand how to translate. Yes,
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  Speaker 2: So we brought you in today and we wanted to
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  Speaker 2: talk about tax estimates. Yeah, right, can you kind of
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  Speaker 2: go through for those who are maybe new in the business,
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  Speaker 2: maybe we've got some students listening, what exactly is a
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  Speaker 2: tax estimate?
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  Speaker 4: So a tax estimate is something that you need to
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  Speaker 4: pay in ideally quarterly, that you need to pay because
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  Speaker 4: you haven't yet covered it with your tax withholdings like
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  Speaker 4: from your from your paycheck. It's kind of a gap
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  Speaker 4: payment to make sure you're paying in enough taxes as
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  Speaker 4: a business owner especially.
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  Speaker 2: That makes sense. So that way, this is kind of
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  Speaker 2: what helps you. Now normally these are done. These are done.
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  Speaker 3: Quarterly, that's right.
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  Speaker 2: And so this is meant to adjust as time goes on,
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  Speaker 2: because sometimes you go up, sometimes you go down. Sure's
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  Speaker 2: money coming in and that way, come actual tax filing time,
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  Speaker 2: you're you're not hit it with any major surprises.
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  Speaker 3: That's right.
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  Speaker 4: It's done correctly, Yeah, certainly, And a lot of times
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  Speaker 4: it comes as a shop for business owners that maybe
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  Speaker 4: they've been paid just via like wages before and now
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  Speaker 4: are a business owner and think, okay, I've got my wages,
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  Speaker 4: but what happens to the tax on the profit. And
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  Speaker 4: that's where the tax estimates really come in, because the
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  Speaker 4: only way you can really pay your taxes on the
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  Speaker 4: profit that you have in your business is from paying
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  Speaker 4: these quarterly estimates.
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  Speaker 2: Okay, so let me ask you, you know, your your
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  Speaker 2: title that you kind of gave me was why do
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  Speaker 2: the tax planning year round? So why is this something
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  Speaker 2: that a business owner or a practice owner needs to
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  Speaker 2: worry about?
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  Speaker 4: Well, because a lot of times when your taxes are
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  Speaker 4: being prepared, what you'll get sometimes usually is here are
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  Speaker 4: four vouchers for each of the quarters. We hope it
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  Speaker 4: works out for you paying enough. We're not sure, but
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  Speaker 4: here you go. And that's kind of not the ideal
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  Speaker 4: approach for that. Really, you should be monitoring your your
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  Speaker 4: profit and your tax situation at least quarterly so that
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  Speaker 4: you can trying to get an avoidance of the tax surprise,
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  Speaker 4: whether it be too much or too little either one.
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  Speaker 4: It's not ideal to be too much or too little.
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  Speaker 2: And so when we onboard new clients or even just
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  Speaker 2: talking to potential potential prospects out there, is this something
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  Speaker 2: you see on the regular being neglected?
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  Speaker 3: Oh?
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  Speaker 4: Yeah, like I said, usually they'll be given four voutures
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  Speaker 4: representing kind of like one hundred percent of what they
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  Speaker 4: paid in before without really.
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  Speaker 2: And is this kind of based upon like the last
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  Speaker 2: year's numbers.
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  Speaker 3: Yeah, that's what it is. That's all they have.
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  Speaker 4: And as any business owner knows, the year might fluctuate
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  Speaker 4: and be different than I mean, there's no way it
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  Speaker 4: can be exactly the same.
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  Speaker 2: I mean, I mean, this is an extreme example, but
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  Speaker 2: it did happen in twenty twenty with COVID.
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  Speaker 4: Oh yeah, that was where the swings were wildly different.
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  Speaker 4: So if people were paying their twenty twenty taxes based
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  Speaker 4: on twenty nineteen, it had to be wildly way too
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  Speaker 4: much because of the of the changes.
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  Speaker 2: So speaking of like of paying wildly too much, or
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  Speaker 2: it is paying too much in general? Why why is
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  Speaker 2: it a bad thing to pay too much? In my mind?
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  Speaker 2: You know, this is like a generic layman thing. But
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  Speaker 2: I'd rather be covered than not covered.
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  Speaker 4: Yeah, you're paying too much. The government gets to keep
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  Speaker 4: your money generally interest free, so you're losing out on
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  Speaker 4: the ability to use that money and better ways than
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  Speaker 4: giving them.
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  Speaker 2: Maybe the extra couple grand that you overpaid this quarter
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  Speaker 2: could have been used for equipment could have been used
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  Speaker 2: for investing or to your own into a distribution.
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  Speaker 4: Right instead of earning nothing, no kind of return on
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  Speaker 4: that money the investment or otherwise.
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  Speaker 2: So on the flip side of that, I mean, I
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  Speaker 2: kind of know the obvious answer is for this, But
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  Speaker 2: let's say I'm paying too little. What are some negatives
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  Speaker 2: they come out of that?
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  Speaker 4: Well, so the government wants you to pay in what
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  Speaker 4: you think you owe each quarter, and so if you're
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  Speaker 4: not paying in.
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  Speaker 2: Enough, can't they just tell me?
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  Speaker 4: Right, they will tell you, but they won't tell you
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  Speaker 4: that quickly. But they want you to try to get
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  Speaker 4: as close as possible in each quarter to what you're
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  Speaker 4: gonna And if you're behind in that, then it's basically
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  Speaker 4: it's it's called an underpayment penalty. What it is really,
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  Speaker 4: it's interest and with the interest rates still on the
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  Speaker 4: high side, that can be a decent amount.
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  Speaker 3: And then come tax time, if.
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  Speaker 4: You're underpaying, then you also have that balance to pay
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  Speaker 4: it on tax.
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  Speaker 3: Yeah, fifty paid, surprise there.
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  Speaker 2: So this is a required quarterly taxesmens are required?
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  Speaker 4: Oh, they certainly are. And that's, like I said, that's
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  Speaker 4: the only way a business owner can pay its taxes.
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  Speaker 4: On hopefully its profit is via these payments estimates of
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  Speaker 4: each quarter.
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  Speaker 3: So awesome.
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  Speaker 2: Okay, there is a tax I've heard you mentioned before
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  Speaker 2: called the pass through entity tax, right, and to me
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  Speaker 2: that sounds like some kind of ghost or something, a
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  Speaker 2: spooker respect.
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  Speaker 3: Right fast through, like it's invisible.
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  Speaker 2: Can you can you give me a brief description on
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  Speaker 2: what that is and then how does that factor into
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  Speaker 2: all of this?
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  Speaker 4: Yeah, So, kind of stepping back a bit, with the
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  Speaker 4: Tax Cuts and Jobs Act, what happened was on your
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  Speaker 4: itemized deductions on your personal tax is there's a deduction
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  Speaker 4: for state taxes, and usually before that act, you got
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  Speaker 4: to take as an itemized deduction as many in state
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  Speaker 4: taxes as you wanted that you were paying in. But
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  Speaker 4: with that Act it was capped at ten thousand, which
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  Speaker 4: is a super low amount. And so what eventually, especially
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  Speaker 4: when we're working.
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  Speaker 2: With businesses, there are in the millions collections.
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  Speaker 4: Yeah, absolutely, and so that's a crazy low amount. So
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  Speaker 4: what eventually most states that have an income tax came
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  Speaker 4: around to is that, Okay, we know about this tax,
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  Speaker 4: we're going to instead allow the business usually a pass
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  Speaker 4: through a s corporation, And for most of our businesses
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  Speaker 4: to that business pays the taxes, gets the deduction on
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  Speaker 4: the business, and so you're actually getting value for the
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  Speaker 4: taxes that you paid. It's sort of substituting for the
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  Speaker 4: state tax estimate, got it it kind of it substitutes
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  Speaker 4: it so you don't have to pay it individually and
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  Speaker 4: not get the deduction on it. So it's it's for
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  Speaker 4: the business to get the deduction where it otherwise wouldn't, and.
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  Speaker 3: So it's a good thing. It's definitely a good thing.
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  Speaker 4: You passed by the ten thousand dollars crazy cap for
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  Speaker 4: your imized deduction if you even itemize it all, and
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  Speaker 4: then the business gets the deduction, and eventually all states
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  Speaker 4: came around to it. It's basically substitutes for having to
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  Speaker 4: pay in individually this tax. You get a you get
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  Speaker 4: a credit for the taxes that you pay on your
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  Speaker 4: personal return, and you get the deduction that otherwise would
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  Speaker 4: have been missing.
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  Speaker 2: This is why I don't want to do my own
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  Speaker 2: tax as ever.
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  Speaker 3: Okay, all this, none of them.
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  Speaker 2: I'm like, this is why I got somebody named Steve
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  Speaker 2: Leeby to help me out.
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  Speaker 4: Now, each state is a little different, sometimes the time
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  Speaker 4: is a little different, the systems are are different, and.
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  Speaker 2: So how would if someone's out there on their own
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  Speaker 2: trying to do this, or maybe they have a non
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  Speaker 2: proactive CPA, how would they find out more about their
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  Speaker 2: state rules on something like this.
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  Speaker 4: Yeah, there are some some websites that have it all
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  Speaker 4: kind of consolidated, like the AICPA has like a consolidated
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  Speaker 4: list of all states.
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  Speaker 2: But most most you know, it's usually pretty, isn't it,
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  Speaker 2: Like by law, like they have to present this information somewhere.
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  Speaker 3: Oh, usually accessible.
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  Speaker 4: So yeah, and so generally what you can do is
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  Speaker 4: just Google pass your entity tax and the state that
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  Speaker 4: you're in, and it'll have a good amount. Some have
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  Speaker 4: been doing it for years, really since like twenty eighteen.
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  Speaker 3: Some have some states.
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  Speaker 2: Finally came here to say it's been happening for years
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  Speaker 2: since twenty eight It feels like yesterday.
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  Speaker 4: Well anything pre COVID feels like ages ago, because that
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  Speaker 4: was a different world.
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  Speaker 3: But yeah, all right, let's say.
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  Speaker 2: I'm owning, I own a business and it's time, it's
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  Speaker 2: quarterly at tax time. Yeah, what are some ways that
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  Speaker 2: I can pay in these estimates?
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  Speaker 4: Yeah, so there's kind of the old school way where
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  Speaker 4: you can write a check in so The dates are
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  Speaker 4: generally April fifteenth, June fifteenth, September fifteenth, and January fifteenth
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  Speaker 4: for the last one, and so those are the markers
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  Speaker 4: to pay it.
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  Speaker 2: In terms of a check, does that need to be
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  Speaker 2: like in their hand by that date.
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  Speaker 3: Or dated by that date?
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  Speaker 4: And so generally, if you're going to write a check
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  Speaker 4: I would recommend doing it in some way that where
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  Speaker 4: you could have the date that you actually sent the check,
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  Speaker 4: like the mailing do registered mail or certified something like
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  Speaker 4: that where you can actually say, if there's any question.
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  Speaker 3: You still write checks.
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  Speaker 4: People still do, but every state and the federal government
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  Speaker 4: has a mechanism to paid electronically, and that's.
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  Speaker 3: A pretty reliable way. You get a record of what
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  Speaker 3: you pay. Yeah, you emailed right to you, right, and
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  Speaker 3: so's it's a great hard coop in case.
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  Speaker 4: You know, mail is not the most reliable thing nowadays,
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  Speaker 4: and so I could get lost.
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  Speaker 2: You know what's funny as you're speaking of mail sometimes
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  Speaker 2: being unreliable, Yesterday I got some stuff in in the
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  Speaker 2: office from from the from the UESPS, and they were
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  Speaker 2: postcards that I had created to invite some practice owners
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  Speaker 2: to an event we were hosting over two years ago.
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  Speaker 2: They were mailed out in April of twenty twenty two, okay,
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  Speaker 2: and they just came back to my desk yesterday. They've
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  Speaker 2: been floating around.
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  Speaker 3: Wow, on a journey. Sure, it's got a story to tell.
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  Speaker 2: End up in Taiwan, all kind of right.
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  Speaker 3: But no, that makes sense, you know.
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  Speaker 2: And I feel like a lot of the monnial dentists
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  Speaker 2: than possibly younger, are more more on the instant pay
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  Speaker 2: online kind of form.
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  Speaker 4: Yeah, and they're all generally if you wouldn't want to
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  Speaker 4: pay via credit card or they'll be associated, right, But
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  Speaker 4: most of the time there's a free option for both
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  Speaker 4: federal and state to go ahead and pay that in.
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  Speaker 4: So I would say, take advantage of that.
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  Speaker 2: And what were these d dates again, because they're a
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  Speaker 2: little different than what you'd expect.
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  Speaker 4: Yeah, they are a little because the second one comes
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  Speaker 4: up quicker than you would think. So it's April fifteenth,
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  Speaker 4: and then June fifteenth all of a sudden comes up
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  Speaker 4: after that, and then kind of gets on a little
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  Speaker 4: farther out with September fifteenth, and then all the way
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  Speaker 4: back to January fifteenth, the last one.
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  Speaker 3: So yeah, that makes sense. Yeah, it makes sense to me.
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  Speaker 4: It's a little bizarre one caveat on that is the
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  Speaker 4: pass through entity tax. Some states want your fourth one
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  Speaker 4: by December fifteenth, So those first three are generally what
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  Speaker 4: we expect, but then sometimes that last one they wanted earlier.
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  Speaker 2: So again google or look up your state's rules from
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  Speaker 2: that for their recommendations.
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  Speaker 3: Yeah, but definitely monitor things.
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  Speaker 4: Over the over the year versus just take what you
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  Speaker 4: get for your four voucher system and because your year
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  Speaker 4: is going to be different, like you said, you want
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  Speaker 4: to avoid those tax surprises.
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  Speaker 2: If you're if you're if you you know, have a
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  Speaker 2: CPA right now that you use for your firm, and
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  Speaker 2: you're not really hearing much each each quarter about these things.
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  Speaker 2: Is this is something you should be reaching out.
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  Speaker 4: For, right Yeah, you know, speak with them saying, hey,
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  Speaker 4: here's my my financials. Can you kind of give me
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  Speaker 4: a projection of what my tax situation might look like?
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  Speaker 4: Because that would that would be a nice proactive way
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  Speaker 4: to have that communication each quarter on that.
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  Speaker 2: So all right, and that way again, you're not giving
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  Speaker 2: the government some free money to hold on to for
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  Speaker 2: a while, or you're not setting yourself up for a
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  Speaker 2: big tax bomb later.
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  Speaker 3: Exactly.
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  Speaker 2: Yeah, Steve, anything else you'd like to say before you
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  Speaker 2: wrap up. No you want to sing us a little diddy,
• 13:58
  Speaker 2: not at the moment, no comment, Steve, thank you so
• 14:04
  Speaker 2: much for being here today. I really appreciate you folks.
• 14:07
  Speaker 2: If you're looking to get more information on how a
• 14:11
  Speaker 2: company like us can help with texts, estimates, investing, all
• 14:16
  Speaker 2: kinds of different things, and you want to learn a
• 14:17
  Speaker 2: little bit more, go to four Quadrants Advisory dot com
• 14:20
  Speaker 2: slash events. We've got events coming up in Detroit, We're
• 14:25
  Speaker 2: going to be in Grand Rapids, San Francisco, Lafayette, California.
• 14:29
  Speaker 2: We're also going to be in the Philadelphia area soon,
• 14:31
  Speaker 2: Dallas and Austin, all kinds of places, so please please
• 14:34
  Speaker 2: please join us. It's Casey and his team do a
• 14:38
  Speaker 2: really great job of presenting, and usually we've got bourbon
• 14:41
  Speaker 2: and food and other fun things too, and it's we're
• 14:43
  Speaker 2: ce like exactly like you know, drinking and ask perfect.
• 14:48
  Speaker 3: Thanks Steve, all right, thanks.
• 14:51
  Speaker 1: Hello everyone, Welcome to the Millionaire Dentist Podcast, brought to
• 14:55
  Speaker 1: you by four Quadnance Advisory. On this podcast, we break
• 14:59
  Speaker 1: down the world of dnnist finances and business practices to
• 15:02
  Speaker 1: help you become the millionaire dentist you deserve to be.
• 15:05
  Speaker 1: Please be advised we do speak with an honest tongue
• 15:07
  Speaker 1: and may not be safe for work.