Dental Financial Planning: Turning Chaos into Financial Freedom - Part 6

In this episode of The Dental Boardroom Podcast, Wes Reed, CPA, CFP, continues his financial planning series for dental practice owners by diving deeper into the concept of break-even levels and the importance of creating a business financial plan that supports your personal financial goals.

Wes revisits the three key break-evens every dentist should know:

1 Practice Break-Even – Covering fixed costs, variable costs, and debt.
2 Living Budget Break-Even – Covering your practice costs, personal living expenses, and taxes.
3 Financial Independence Break - Even – Covering all the above while setting aside money for your future.

From there, he outlines the five critical steps to building a business financial plan, with a special focus on Step 3: Completing a Tax Plan. Wes shares why tax planning is not just a one-time event but an ongoing process tied to your overall cash flow and long-term financial independence.
Whether you’re just starting your practice or have years of experience, this episode offers a practical roadmap for aligning your business and personal finances so that your work today fuels the life you want tomorrow.

Key Points
• Recap of the three break-evens: Practice, Living Budget, and Financial Independence.
• Why defining your version of financial independence is essential before planning.
• Four core steps in the financial planning sequence for dentists.
• Five steps to creating a business financial plan
• Importance of structuring your practice as an S Corporation for tax efficiency (in most cases).
• Tax planning as an ongoing process, not a one-time task.
• Balancing current needs with future goals through strategic planning.

Transcript:

Welcome back. It's Wes Reed, C-P-A-C-F-P. It is a Saturday morning and I am hours away from embarking on a trip to Europe, first time in my life, and so I am knocking out a few podcast episodes a week. Continue the sequence of two episodes per week. That's what we aspire to here at Practice CFO, with our Dental Boardroom podcast.

So let's carry on. So we just got done talking about in the last episode the cost structure and breakeven levels pop quiz. What were the three breakevens as I define them? They were, number one, your practice breakeven. Your practice breakeven, covers your fixed costs and your variable costs and your debt.

Number two, your living budget break even That co, that covers that level of collections, not only covers your fixed. And variable costs, but it also covers what you need to live on and pay your taxes [00:01:00] today. And the third break even my favorite break even is the financial independence break even. That is the break even that not only are you covering your fixed to variable costs, paying yourself today, paying your taxes, but you're also setting aside money on your personal balance sheet to pay yourself in the future.

That is financial independence breakeven. Now, what is the additional amount you need to layer on every month? Into your personal balance sheet in order to become financially independent. Well, that depends on how you define financial independence, which was earlier in this series. Remember, the series was number one.

It's really four simple things, financial planning for dentists. Number one, assemble your team. Your A team. Meet with them. Have a cadence, a, a management, uh, process in the way you run your business as the CEO of the business. Number two, develop a personal financial plan for financial independence. That was step two, really authoring what kind of life you want.[00:02:00]

What kinda life you want at, I mean, particularly as it of course relates to money. And so much of the things we want to do in life are funded by money. And unless you essentially wanna live on the beach with a sleeping bag. And bum food off people. You basically need to have a certain amount of resources to take care of yourself.

Beyond that is really a function of your preferences, your goals. Is it travel? Does that mean a lot to you? Is it having a really nice second home? Does that mean a lot to you? Is it some really nice cars? Is it. Golfing a lot. Is it fashion handbags? What is it? What means a lot to you? Now, I won't get into the philosophy around what drives true sort of happiness or joy.

I'll leave that one to you to think about, but I will put an endorsement on experiences. And relationships. Experiences and relationships. And truth is you actually don't need to have a bazillion dollars [00:03:00] to have a incredibly fulfilling life through experiences and relationships. And you can layer on faith in there if you're a person of faith, but it really doesn't require a huge amount.

It doesn't. However, I admit, there are things that I want to do, like I'm about to leave on a, on a, what's a fairly expensive trip to Europe? And I have never done this before, but I've decided that I want more experiences in my life. Helping my kids through some of their college costs is also a priority for me as well.

And I gotta admit, I love to have a little house somewhere up right next to my brother in the northern parts of Washington. He lives on an island called Anacortes. Up in the San Juan Islands, and I would love to have a small second home right up there. It's beautiful. The scenery is beautiful. Be with my brother.

I deeply love, again, relationships, relationships, relationships. That's what I'm finding as I get older. It's [00:04:00] relationships and the quality of those relationships that just seem to drive happiness home. I love it. So financial independence break even if you have done a good financial plan. And you take that financial plan, which will say how much you need to set aside every month to your financial goals.

You give that to a good business planner and CPA and maybe, maybe they can back in through your taxes, debt, fixed costs, variable costs. Ultimately, what do you need to collect? Every year. What do you need to collect every month in order to satisfy those three breakevens practice, breakeven living, budget breakeven, and financial independence breakeven.

So here at Practice CFO, here's my sales pitch. That's what we do. That's why we exist, is we start with the end in mind as life, what do you want? And then we work our way backwards into it deeply. Deeply committed and organized financial plan inside and outside of the practice. Most of the work, most of the [00:05:00] hard work, I'll say, happens on the inside of the practice where all your overhead is, where your practice acquisition debt is, or build out debt, equipment, debt, all that debt your, your 401k might be in there.

This is where so much of the tax planning needs to take place is on the inside of your practice. So the business financial planning is. Th the most important part of the overall process when it comes to the technical side of financial planning for a dentist. It's on the business side. I would say. We spend 75% of our time with our clients focusing on the business.

The here, the now, this year cash flows, taxes, 401k to find benefit, plan a, budget budgets, all of that growing your top line, all of that. That's where we spend 75% of our time. Knowing that if we have a healthy cash flow in the practice, then we can feed out to your personal life what you need today and what you need in the future.

And that's where we spend probably 25% of our time, is really doing a personal financial plan, talking about your personal [00:06:00] spending and needs in a very real way in the here and now. Alright, let's now carry on to the next part of the process. Did I. Did I remind you of all four sequences of the, of the steps in the financial planning sequence?

I think I did. Your team, your personal financial planning, your business financial plan to support your personal financial plan, and then you revisit, monitor, revise. Those are the four steps. All right, let's go on to the business planning. So we are in step three, create a business financial plan to support your personal financial plan.

And there were very steps in this, reiterating what those steps are. They are organize your practice financial reports, that's your monthly p and l and other reports. Number two, understand your break even. That's what we just talked about. Number three, complete a tax plan. As what we're gonna talk about today.

Number four, determine your appropriate W2 payroll for the year. [00:07:00] That is assuming you are a C corporation, which if you are a single doctor, you absolutely should be, and if you're a partnership, your ownership in that partnership should be through a wholly owned S corporation. I had a whole series. On partnership, financial planning and partnership structuring and financial concepts back in, I think the seventies of my podcast.

If in numerical order, if you're interested, go check that out. But if you are a single doctor owning your practice, unless you're say six, 700,000 collections or less. Where you can be a sole proprietor, you absolutely above that amount should be a corporation, an S corporation. Now, in your state, you may be able to be set up as an L-L-C-A-P-L-L-C.

There's different sort of state designations when it comes to the actual title of formation and the liability protection you get out of that. But since we're on the subject of taxes, they all explain this when it comes to the IRS. The [00:08:00] IRS doesn't even know what an LLC is. That's a little bit tongue in cheek, but they don't have a LLC tax return.

They don't. There is simply your SA corporation tax return and a corporation can be S or C. Small businesses are gonna be S. There is a partnership tax return and there is a sole proprietor as well, the sole proprietor. It goes actually just on the 10 40 tax return, and then there are different tax returns for states and trusts and charities and things like that, which I'm not gonna get into.

But for a dental practice owner, it is. Your three options are sole proprietor, S Corp, C Corp, or partnership. That's it. Those four don't ever be a C Corp. Period. End of story. Never, never. Partnership. Yes, always. If you are more than one owner and scorpion, [00:09:00] yes, always. If you are a single owner or your partnership, your S corporation.

Owns your share of the partnership. Those are the primary tax structures for a dental practice owner. And again, if you're an S corporation, you are required to pay yourself a W2 as an employee of your own corporation. And I'm gonna explain that a little bit later. Many of you listen to this, are seasoned vets and are gonna understand that concept, so I won't spend too long on it.

I have other podcasts dedicated entirely to the concept of. How much to pay yourself as a W2 employee, and I am gonna just address that briefly again here shortly. Alright. Number five in the. Phase three, develop a business financial plan. Phase number five is to complete a cash flow projection and allocate any surplus cash or what I like to call surplus capital is really the more technical use here, so organize your practice reports.

Understand your breakevens. Complete a [00:10:00] tax plan, determine your W2 payer for the year, and then complete a cashflow projection and allocate surplus capital so that those are the steps of the, uh, business financial plan. And we are in number three, complete a tax plan. So let me head on over here. Those you view on YouTube are following along.

And I will explain for the rest of you. Alright, number three, complete a tax plan. I don't actually have a lot of visuals on this one, so this one's pretty much just me talking. And I'm wanna start this off by emphasizing that there is a process to tax planning, just like there's a process to doing a root canal or a restoration with initial x-rays.

Um, clinical treatment. Discussion, doing the work collecting, there's a process. There's a process around good tax planning as well. It's not actually a single. Event or act, or just one strategy of a few check boxes or a few forms, that's not tax planning. [00:11:00] Tax planning is a subset of financial planning, and financial planning is a comprehensive game plan for your full cash flow end-to-end from the moment it hits your bank account in your business, checking to the time that it goes out to pay the various vendors, the bank, the tax agencies, yourself, et cetera.

Planning for all of that. Top to bottom, and then within that. You start to see where your opportunities are for tax planning. It's like you gotta get all the pieces of your 3000 piece puzzle on the table and you start to organize these things by color. You start to get a good idea of generally where they are, and you start piecing this thing together.

And the more you piece it together, the more you get clarity, and the more you get clarity, the more decision making, better decision making you can have. That's what tax planning is. It needs to be done within a comprehensive understanding of the cash flow. And this is why CPAs will give you some basic.[00:12:00]

Tax planning advice. Some of the common tax planning advice is on your level of your W2 relative to your profits. On your K one, they will also talk to you about how much depreciation you can take. They may give you some advice about what you can or can't run through the business. Most CPAs are ultra conservative on keeping a division between personal and business.

I am way more strategic. And intentional around that to, uh, try to maximize deductions. And I will, I will talk about that a little bit. But the tax, the tax planning is, it's looking at that, those are some of the main things that A CPA will do, but they're not really getting into the deep trenches of cash flow.

So here is the process. Number one is some time, so number one is in the, in the beginning of the year, you can look at your p and l for the full prior year. And you can, you can use that as your starting point to [00:13:00] forecast out your current year. Let's just do, you can just assume this new year is gonna be last year plus 3% because I raised my UCR a little bit, or the insurance companies allowed an increase to the fee schedule, whatever.

It's gonna be pretty consistent from year to year. And you have a, you probably don't have your tax return yet done in January or February. You definitely aren't gonna have your 10 40 unless you have an absolute superhuman CPA because the IRS doesn't even open their filing window until late January, sometimes early February.

And so you're probably not gonna get your, you're not gonna know what your ultimate tax liability for the prior year was until. At best, it's gonna be probably around March. So we, some of our, our clients who are in need of getting a tax return done right away because they're trying to buy a house or for whatever reason, or some of our largest clients where we absolutely need the tax return done.

ASAP, we will have. We'll, we'll have some scorp and some 10 forties done [00:14:00] in February, but most of 'em start to roll out scorp really aggressively late February. Finishing up a lot of our S-Corp in March, and then we really pivot after March 15th when the is the first deadline for S Corporations. Then you got one month to try to get the 10 40 personal tax returns done by April 15th.

Now the vast majority of business owners extend. Their tax returns so they don't file on their corporation's returns. On March 15th, they will extend and then they will extend their 10 40 from April 15th. The extension date, the, the final due dates. The extended due dates are September 15th for corporations and October 15th for individuals and partnerships are also on, I, they've, I think they may have changed this, but partnerships historically have been October 15th as [00:15:00] well.

Sorry, September 15th as well. And the reason for having the business tax return due date before the personal tax return due date seems pretty obvious 'cause it is. You need to have that K one as a business owner from your S corporation or partnership in order to do your 10 40, meaning you can't do your 10 40 tax return until your business tax return is done.

Therefore. The IRS expects business tax returns done to be sooner to dish out those K ones, uh, for s corporations and partnerships to the CPA to then be able to do the 10 40. So that's why the sequence is what it is. Now, a lot of people think, oh, well then why do I even need to worry about figuring out my tax liability making any final payments by April 15th?

If we can extend and have all the way until October 15th. The reason why is even though the, even though the [00:16:00] IRS allows you to extend, to file the return, the physical, well, it's not physical, the digital return these days, they, it doesn't mean that the IRS is letting you extend the due date of your payments or amounts owed.

This is why CPAs have to do an estimate. They have to look at your, the prior year data and they have to try to get some information about your personal situation. If they, if the CPA is doing the accounting in, in, in-house within their company, like practice CFO, if they're doing the accounting in, in-house, then they have the financial statements through, uh, December 31st, and we'll be able to therefore get a.

Almost, almost a perfectly accurate extension of the S Corporation tax return. Now, that said, the one big variable with S Corporation tax returns is the fact that [00:17:00] if you have a 401k, or a few of you may have a defined benefit plan, cash balance plan. But if you have a 401k, a lot of times you don't know exactly what the final.

Uh, top off amount. The final contribution is to your 401k until you get. What's called a contribution letter back from the third party administrator or TPA, so I'm gonna double click on this just for a sec. Your 401k has to be tested every year. Now all, pretty much all of our clients have a 401k and we do the year end work to gather the census data and information to then hand off to the TPA.

We are not a TPA practice CFO, but we do work very closely with. Uh, two TPAs and we then we do the interaction with the TPAs so the doctor doesn't have to, we give them the census. We go over the design. Here's what we're trying to do, TPA, we want to maximize the safe harbor. And the profit share on this 401k.

We've [00:18:00] got the spouse on payroll in order to contribute into this. And then we will work with the tpa. They'll give us some scenario, scenario one, two, and sometimes even a third scenario. And then we come back to the doctor and we look at the cash balance and we look at how much they're gonna own in taxes.

'cause this all relates to each other and we will recommend a certain amount. Now what I usually say is if you have sufficient cash above your working capital needs. Then I like to drop a lot into that 401k because for most doctors, every dollar they put into the 401k at that time is getting somewhere around a 35 to 47% income tax deduction.

It's a significant reduction on taxes. The more that you can put into your 401k. Now I get it. You don't see that money now and so it may not feel as valuable, but the reality is it's hugely valuable because not only is it gonna save you a dramatic amount in taxes, it's also going to grow tax deferred.

And [00:19:00] if you look at the, the science of compounded growth tax deferred significantly propels the rate of compounding, and that's why tax deferral is so valuable. And a lot of times I have a doctor say, yeah, but Wes, I'm gonna have to pay taxes on it at ordinary rates when I pull it out down the road. Well, that's true, but if you can let this sit for 15 years, 20 years, 25 years, the compounding effect just dwarfs the fact that you are gonna have to pay taxes when you pull it out.

But remember, it saved you taxes today when you're likely in a higher tax bracket than you are at that point. I'm, I'm sort of riffing here, but I wanna keep going on this a little bit, and this is sort of the, the conversation I will often have with people is people will say, well, yeah, but West in the future, tax rates are likely going to be higher, and that could be very, very true.

There are two reasons why your tax [00:20:00] rates for you personally will be different in the future. Number one is your income level will be different in the future after retirement. Theoretically, your income level will be a lot lower, and if your income level is lower, you're gonna be taxed at a lower rate.

However, there's a second reason for a change in your tax circumstance. The tax brackets themselves change and you have no control over that other than your. Tiny little one vote that you make for the president. He usually dictates what this, uh, these tax code changes are. And they may lower the brackets or they may raise the brackets.

They may change the rates, or they may change the new tier at which you enter a rate. Think of the tax bracket or the tax scale. This progressive tax scale is like stairs. You've, uh, probably heard me say this many times. If you listen to me a lot, the stairs and on the first stair. It's [00:21:00] 0% up to about $15,000 of income.

You don't have to pay a single dollar in taxes. Federally speaking state, you may, but federally you don't. Then the next stair after 50,000. And that stair will go from 15,000, I don't know, let's say up to about 35, 40,000, that that, that portion of your income for the year is not that next step. That next interval of income is taxed at.

10% and then the next 30 or 40,000 is taxed at 12% and those stairs keep going up and there are, if you count zero as a stair or the base, the first stair is at 10%. There are 1, 2, 3, 4, 5, 6, 7 stairs. 10, the 10% bracket, the 12% bracket, the 22% bracket, the 24% bracket, the 32% bracket, the 35% bracket, and the 37% bracket.

1, 2, 3, 4, 5, 6, 7. [00:22:00] Now, most of you doctors are above the 24% bracket federally, and you hit that when you have $206,700 of taxable income. Now, that's not necessarily your W2 or even some of your W2 and K one, that is your taxable income. So that's after a certain deductions for itemized deductions, for example.

Or what's called a qualified business income deduction. There's some deductions you have on your 10 40 that you are lowering. What is your sort of gross take home income in order to get to your taxable income and your taxable income is then entered into this sort of stairs, this, this, this tax bracket, and your first 15,000 is taxed at nothing.

Your next 20 or 30,000 is taxed at 12% on and on and up when you get to $206,700. Of taxable income. You are now in the, these sort of, you're getting into the larger brackets. You're now at 24% federally. Now remember, you gotta add on whatever your state [00:23:00] is. If you're in a state like California, where at around 70, $80,000, you hit the, the near top bracket pretty quick, that's at 9.3%.

You gotta add that 9.3%, whatever your state tax is. Whatever that is. In Arizona, I think it's like three point a half percent or so. Pennsylvania, I think it's 3.01% and sometimes they're just flat taxes. Sometimes they're also stared or tiered or progressive brackets like the federal bracket is, but you gotta layer those two, two things on top of each other to get your true.

Marginal income tax rate. Now, some of you are in a state like, like Tennessee or a state like Washington where you don't have a an income tax. However, as a business owner, you're the one who pays the, in the taxes needed for that state to offer all the public benefits that it does. So business tax owners are, business owners are disproportionately, uh, carrying the state tax load in those states.[00:24:00]

And so that's why a lot of times you, you hear people just all excited for living in tax free states like Texas or Florida, Tennessee, Washington, Alaska, these states where there's no income tax. If you're an employee, that's fantastic. You have, you completely escape the cost of providing the benefits of.

Uh, sort of public benefits of roads and parks and school systems, not school systems 'cause that's actually paid by your property taxes, but you get to bypass paying for a lot of these benefits that fund the public area that, that you live in. And not all, there are some state and local taxes that are very unique to given states like Pennsylvania.

Pennsylvania has some unique local taxes and whatnot, but. If you're in a lot of these states that don't have an income tax and you're a business owner, you have to pay this thing called a franchise tax. It's named differently in different states, but it's usually, uh, a a percent of the either gross income or the net [00:25:00] income in your business for that month.

And every month you kind of gotta log in and you gotta make a payment, or it could be done on, on the tax return itself. But it's important to understand that most of you are paying taxes at the state level, most of you through an income tax, some of you through a franchise tax. And there's a few states where you just sort of escape it all altogether.

Alright, so at at 206,700, you, you, you're now on the. 24% tax bracket. Once you get to 300, this is married filing joint. By the way. You, if you're single, take half of this. It's pretty much half is the, um, the tier, uh, uh, of income at which you're entering a higher bracket at 300, 390 4,600. You're in the 32% federal bracket at $501,050.

You're in the 35. Percent tax bracket and at 751,600, you are in this [00:26:00] high, the highest tax bracket at 37%. And if you're in a state like California, you're gonna be paying about another 10%. If you're above that 751,000, you're gonna add roughly another 10% or so in California. And so you're at 47%. Once you get up past a million, uh, California, you're getting up to like 11% plus you're approaching 50%.

Now a lot of you're gonna say, why would I even go into work if I'm literally giving up 50% of my hard earned income to the IRS? That just seems ridiculous. Well, a couple things to keep in mind. It's not, it's not like this is the main thing. It's not that a hundred percent of your taxable income, let's say you're making $800,000 taxable income, you got a thriving thing going on.

Let's say that's the case. It's not that all $800,000 is taxed at 37%. No, the first $15,000 is [00:27:00] zero. The next roughly 20, 30,000 is taxed at 10% and so on. So. In all the, in all the income below $751,600, your taxed at a rate lower than 37%. It's only dollars above that that are taxed at 37%. So you have to sort of blend them to understand what is your total, what, what's called effective tax rate.

Marginal tax rate, is the tax rate in that, on that step that your income is on. And so if you're at 800,000, you're on the 37% step in my stair analogy. And so the effective tax rate is simply the total taxes you paid, divided by your taxable income. So if you paid a hundred thousand dollars in taxes and your taxable income was 400,000, then your effective tax rate is 25%, a hundred thousand divided by 400,000.[00:28:00]

Which is one divided by four, that is 25%. That's your true effective tax rate. Federally layer on state, which may be like seven or 8% in California, and now you're at 32%. And now you got a good idea of my, of my total income taxable income. I am paying, in that case, around 32% to federal and state. Now, that doesn't factor in FICA taxes on your W2.

That's Social security and Medicare. That doesn't factor in, uh, property taxes, which is on your 10 40 Schedule A. That doesn't factor in sales tax, which really for most of you is not a tax deductible paying your sales tax. And so when you layer on all these taxes. It starts to creep up there, and this is why taxes are a, a significant impediment to financial independence.

And that's why having a good strategy around the way you weave your money throughout all of your vendors and your debt, your taxes yourself, your retirement plan, [00:29:00] your investments, yada, yada, the way you weave that and align all those levers really has a significant effect on how much friction you gotta give up to the tax agencies.

Okay, let's carry on now. Uh, so the cadence that I recommend here on getting a tax plan is in the beginning of the year. Uh, I think it's a great idea to, if you can meet with your CPA, it's gonna be very difficult. You may not be able to do this, but it's important that your payroll, your W2 outta your corporation is structured in a way so that it is withholding.

Property, uh, a proper amount of taxes and it, if you have a four one K, you are projected to fully fund your 401k. If you have a spouse on payroll, then the spouse's payroll try to get sort of the boat pointing in the right direction in the first month or two of the year. To the extent that you can, uh, a lot of times what happens is whatever your payroll structure was [00:30:00] at the end of December just carries on in January.

For a lot of you though, if your payroll was above 176,000, what happens is, uh, if your payroll was above your own, W2 was above that, then your FICA taxes got capped out. And 5K taxes are 12.4%. And so if you don't change anything and you were tapped out, you you, let's say you paid yourself $200,000 W2 in the prior year when you had hit, it was right around se, it was right around 170,000 or so last year when you hit that point, suddenly you got a bump in your net deposit in your personal checking account because you already satisfied.

The fica, the social security tax withholding, and that is no longer withholding, which means the amount you took home went up. But in January, guess what kicks back in? Everything that was sort of phased out in the prior year, like your social security, uh, tax payments that. Kicks back in. In certain states [00:31:00] like California, where you have a state disability income deduction as well, an SDI deduction, which caps out pretty early, that kicks back in in January.

So a lot of times in January you'll see suddenly your payroll drops outta nowhere. So what What we do here, practice CFO, is every January. Uh, we, we have from the prior year meetings, let's say the last quarter of the year or so, when we met with clients, we, we projected out their taxes. We projected out everything.

We said, okay, in January, here's what the payroll update needs to be for the doctor and doctor, spouse and kids. If kids around payroll, and we spend a good couple days just going through every client and updating them so that that boat starting with the new year is pointing in the right direction, then fast forward, you get 4, 5, 6 months.

Of p and Ls and cash flow into the new year. Now you now you have an ability to project out what the income and a net taxable income will be in the new year. Now at practice CFO, we [00:32:00] work really, really hard to get as many tax returns done on time by the original due dates, by the original due dates of April 15th, because if we do that, then.

It's so much easier and effective to do a tax plan for the new year. When you know what your tax situation ended up being in the prior year, and this is, this is why we definitely get out a lot more tax returns than your traditional CPA we're. We strive for about 50%, uh, but for those of you that we extend, you just gotta be a little patient and empathetic with us because the IRS opens up their tax filing window in the beginning of February.

We have like five weeks. Five weeks to get the corporations done, and we have about 400 corporations and business tax returns that we have to do, and we've got a tax team of roughly six people. It's just a tremendous amount of [00:33:00] work, and they're working pretty much 16 hour days consistently during really from about February one.

To April 12th about, it's insane for my tax team. So we pump those out as much as we can because for us, it's not just about filing your tax return and you paying us for a tax fee. It's not about that. It's actually about the tax return being done so that we can do our financial planning for the new year.

Because the CFO model is all about financial planning and when we don't have a 10 40 tax return done until October, it's kind of hard to tax plan and financial plan for the new year. That's why it's hugely important for us that we push out returns and we're currently looking for a couple more tax people.

I'll tell you what. Since COVID, there's been a mass exodus from the accounting and tax world because the government incentives around ERC and PPP and EIDL and the HHS, uh, [00:34:00] grants that were made, all this government helicopter money that was just dropped in the economy to try to spurred on and get it through COVID was an absolute nightmare.

For us CPAs, and we're having to amend a lot of returns because of the ERC. Doctors are getting er Cs still to this day, four years, five years after COVID hit. Some of them are still landing ERCs, which is forcing us to go back and amend, uh, tax returns from prior quarters. IRS guidance is notoriously, uh, and shamefully late for us.

Uh, tax law changes a lot going on. It's been for tax people. It's been rough. It's been rough and many of you know, our tax director, David Nittle, who we all love and have a, a good friendship with, he left practice CFO to go start a handles ice cream shop in Arizona. That's right. Quite a career change there Amid career.

It was just kind of a bruiser these past five, seven years. And uh, our senior manager in tax named Maya, who was. [00:35:00] Awesome. She is such a great tax person. She's highly technical, very responsive. She, she's growing her team over there on our tax side. She's doing a great job at this. But it has been tough and the accounting industry, it has been in a little bit of a crisis, uh, top to bottom from the big ones like Ernst and Young and Deloit.

Uh, where I used to work at Ernst and Young, from those big ones all the way down to the small CPA firms, there is just a significant struggle to get, uh, talent. That's why a lot of CPA firms are offshoring to the Philippines. Is a sort of a big go-to right now because there's some very confident, competent, uh, accountants and CPAs in the Philippines.

And with the proper technology and security, it's been a, an almost a necessity for a lot of firms to be able to offer their, uh, accounting tax pay, audit services at at least a modest cost in order to cover their own costs and have a reasonable profit. As a CPA firm, that's what's going on. And so [00:36:00] it's been very difficult to be able to get more tax returns out the door across the industry by the due dates of April 15th.

Now, we are trying to hire, and I prefer to be overhired in tax if possible, because I wanna get more and more and more tax returns done on time. Now there have been some people have said, well, Wes, isn't it better? To D to extend your taxes and file them later because it makes you less subject to audit risk because the IS will audit the ones that are done first rather than the ones that are done last.

There may be a little bit of truth to that, but the reality is. It makes Harley no difference because the IRS is so dramatically behind and Doge filed and fi fired another 5,000 people at the IRS that they are, they're just not going, they're just the, the number of audits is so dramatically low. That risk of an audit, the staffing is so that the risk is, is pretty low of being audited.

Not to say you won't, not to say you won't. We've had a few people audited, but the chances are pretty [00:37:00] low and so it really doesn't matter. I would say. Always don't let the tail wag the dog. The dog is, let's get your tax return done sooner so we can do good business and financial planning, business financial planning for the new year. Okay. I'm debating whether or not to do an episode or just sort of wrap this one. I'm gonna, I'm gonna wrap this one up here. Actually, you know I'm gonna park this. We are coming up on 40 minutes. I'm gonna park this, come back, do another episode.