Tuesday, September 29, 2009

Which Dental Associate Collections vs. Lab Fees Scenario is Best?

With all else being equal, what is the better deal for an associate?

A. 30% of collections, no lab fees
B. 33% of collections, 33% of lab fees

In other words, how much (in terms of a %) does no lab fees make a difference? I understand that alot depends on how much you send to the lab, but looking for a ballpark range.


You do need to assume what the typical lab cost is as a % of revenue. If it typically runs 5-8% in a GD practice lets assume 7% as a nice round #. Now we also know the typical GD practice generates 75% of its revenue from dentistry (not hygiene), so lets take a million dollar practice, where $750k is from dentistry. Lab expense would be $70k (7% of $1mill), so 70/750=9.33%.


Now, lets assume you make 30% of collections which are $100,000, you'd make $30,000.


33% of collections is $33,000, however, 33% of your lab (9,330 x 33%)= $3080 and 33,000-3080 = $29,920.


So 30% of collections is better.... in this case - assuming 9.33% lab expense.

How much lab related work will you be doing?

The less lab the more the 33% less 33% lab looks better.


BTW, some also do 100,000-9330=90670x33% = 29,921. Same result, different path, that's all.

This first appeared on Dentaltown.

Send your questions to Tim Lott, CPA, CVA at tlott@dentalcpas.com

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Monday, September 21, 2009

Paying a Dental Associate as a W-2 and as a 1099?

The issue of employee vs. IC has always been a highly debated topic, especially in the dental world.


While the debates almost always revolve around associate dentists, owners should also know that the issue can also arise with other IC's they pay.

For example, I got a call yesterday from a client where one of his assistants wants to make more money and offered to clean the office after hours instead of having him pay the cleaning company.

So the question is, when doing the cleaning would this person be an employee or an IC? It'll depend on the circumstances surrounding this specific situation and the person/company (hint, hint) doing the cleaning.

Anyway, below is a link to some recent material from the IRS concerning the issue, which is what prompted this blog.

Enjoy!

IRS Regulations About W-2 vs 1099


This first appeared on NewDocs.

Send your questions to Tim Lott, CPA, CVA at tlott@dentalcpas.com

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Tuesday, September 8, 2009

How Do You Convey the Quality of Care That Your Dental Practice Provides?

Our friends at Dental Office Interiors have sent us another article entitled "How Do You Convey the Quality of Care that Your Practice Provides?"

Send your questions to Tim Lott, CPA, CVA at tlott@dentalcpas.com

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Tuesday, September 1, 2009

Is an S-Corp the Correct Structure for this Dentist? Probably Not.

I formed an S-corp as I was encouraged by my tax accountant to do so. My question is, is it really saving me money?

Based on the info below I bet it's costing you money!

Here's my info:

I'm one year removed from school. I'm making about 95K annually at the moment, working as an associate at one office 4 days a week. My boss is treating me as an Independent Contractor. I'm giving myself a salary of 72K as suggested by my accountant.

Ok, so lets stop right there. BEST case the $23k difference is being spent on your professional expenses and your payroll taxes and MAYBE a retirement plan. On a $72k salary the MOST you might be contributing is $18k AND you'd be able to get close to that with a sole proprietorship (or single member LLC if CA allows them) so don't think for a moment that the s-corp is allowing you have a retirement plan. You could also be deducting the same professional expenses as a sole prop (self employed), so again, it's not like the s-corp is allowing you to deduct items you couldn't deduct as a self employed person.

Best case, you have very little professional expenses and maybe $17k is flowing thru as s-corp div saving you approx. $1,300. Sounds like the annual fee & tax prep fee is eating that up. However, you're paying the employer's tax on the $72k, which is $5,500 and IF the owner would have paid you the same $95k as an employee, THEY would have paid the employers tax saving you $7,300 AND you could have asked them to reimburse you for any professional expenses in lieu of W-2 comp, getting the exact same tax benefit as though you paid them yourself.

As I see it I'm paying an addition $800 to have a corp in California every year in addition to the $600 he's charging me for a corporate tax return plus 150 a month for payroll.

$150/mnth payroll? OUCH! Using an outside payroll service would likely be 20% of that figure if you do your paycheck once per month.
That comes out to an extra $3200 dollars a year. Am I saving that much tax wise from having an S-corp? Should I lower my salary even more?

You could lower your salary, then you run the risk of getting an audit for unreasonably low W-2 comp.

If I decide to stick with it, I'm thinking of outsourcing my payroll as I've heard this can save me some money. What's the cost involved with abolishing a corporation? Thanks for your help, I'm not that great when it comes to crunching numbers so any honest advice would be greatly appreciated.

As a VERY general rule, I believe one needs to NET (that's after expenses) $150k per year to warrant an s-corp here in MD. Sounds like CA is a little more expensive with their annual fee & that would raise the bar.

This first appeared on Dentaltown.

Send your questions to Tim Lott, CPA, CVA at tlott@dentalcpas.com

For more information or to sign up for our newsletter, please contact arose@dentalcpas.com
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