Tune in to our podcast series: The Dental Board Room
Listen Now

Why You'll Regret Last-Minute Tax Planning

by Justin Read, CPA | March 29, 2023

With a month or two left in the year, it hits us. That dreadful tax season is nearly here. We immediately contact our CPA to find out what last-minute tax strategies and loopholes are available this year.

The truth is, your CPA knows that there aren't many viable options left at this point. While certain timing-related tax strategies can be implemented late in the year, the most beneficial tax planning is achieved thoughtfully over the course of the entire year.

For dental practice owners in particular, timely tax planning is crucial.

As a practice owner, your practice net income drives your tax projection. This number can swing wildly throughout the year, hence the need for accurate and timely financial statements. Waiting to tax plan at the last minute creates cashflow disruptions and undue stress. Here are a few additional thoughts if you are considering last-minute tax planning:

  • Timing differences are only beneficial if your tax bracket will significantly change the following year. We can reduce or increase expenses and collections in December, however unless our tax bracket changes next year, we are only shifting a tax burden from one year to the next. We’ll find ourselves in a never-ending cycle of robbing Peter to pay Paul.
  • Never purchase equipment for the sake of a tax deduction. Only purchase equipment out of a clinical necessity and after a return-on-investment analysis. If purchased for the tax benefit only, you’re upside down on the deal and creating an unhealthy habit that can delay financial independence.
  • Profit sharing and defined benefit plans can be the best weapon in our tax defense. However, retirement plan funding is best done ratably throughout the year, also referred to as dollar cost averaging. Not only does this lead to better cash management, but it reduces the risk of poorly “timing the market” with a large lump sum contribution.
  • Don’t wait until the last minute to alert your CPA about large taxable events. These can include but are not limited to home sales, material investment sales/returns, solar installations, electric vehicle purchases, and so on. A good CPA builds a tax plan to include these items sooner rather than later.
  • Your CPA is likely buried in Q4. It may be difficult to receive thorough advice, let alone a response to your inquiry in a timely manner.
What our clients say
Are you ready to get started with PracticeCFO?
Pick Your CFO Team
Subscribe to our newsletter to receive news, updates, and valuable tips.
Footer Newsletter Signup

This will close in 0 seconds

linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram