Do I need a dental accountant?

With tax deadlines approaching, the New Dentist News talked to Allen Schiff, president of the Academy of Dental CPAs, about the special tax needs of dentists.

Why should a dentist consider using a dental accountant? A dental accountant is a tax professional who has dedicated their entire accounting practice to dentistry. They are committed to learning all aspects about a dental practice whether it be financial, operations, personnel or marketing. Dental accountants can point to Tooth No. 7 and also help answer questions such as why one location maybe be better than another for a practice start-up or how to value a practice for a possible acquisition. These tax professionals also have good relationships with dental lenders, both local and national, and can also assist dentists with employment contracts, help them determine market value for their compensation, when to hire an associate or other personnel, when and how to raise practice fees, and whether it’s better to lease or buy certain equipment. Dental accountants also have knowledge of employee salaries in the market area and can help design employment contracts for owners who hire associates.

What do new dentists generally need to know before tax filing? For dentists who are employees, or independent contractors, they should make sure they have all their 2021 tax documents handy. These include: W-2’s, IRS Form #1099, IRS Form #1099 Interest and IRS Form #1099 Dividends. It could also include itemizations such as stockbroker annual statements, crypto currency transactions, charitable contributions, IRS Form #1098 Mortgage Statements and IRS Quarterly Tax Payments for federal or state, if applicable. For dentists who own their own practices, it’s important to make sure all financial transactions within the practice have been accounted for prior to filing their 2021 income taxes. This includes making sure all receipts are accounted for as well as all disbursements to include the practice’s employee payroll. Owners also must include the depreciation of any equipment as well as the amortization (expensing) of the goodwill they purchased when acquiring the practice, along with any 2021 retirement plan payments they will be paying during 2022.

What if a new dentist bought a practice in 2021? For new practice owners, I recommend they work with a dental accountant before filing. Take the time to interview candidates and be sure to ask about their expertise and experience working with dentists. Once the dentist has an accountant, be sure to give them the following documentation:

• Asset purchase agreement.
• Settlement sheet.
• QuickBooks or Peachtree file.
• Bank and credit card statements.
• Annual payroll reports.
• Invoices for equipment purchases or  build out costs.
• Startup costs paid by the practice.
• Startup costs paid personally, outside the practice.

What deductions should new dentists look for? Besides the typical tax deductions such as dental supplies, lab fees and employee payroll, new dentists should look for deductions that are “out of the box.” For example, if the dentist purchased loupes or text books while a dental student, these may be tax deductible costs along with startup costs they incurred personally prior to starting their practice as well as continued educational costs. Please keep in mind, it depends on how the dentist is set up as a taxing entity (employee, sole proprietor, corporation, LLC) as to whether or not the above expenses are deductible.

To learn more about managing debt and creating a financial plan for the future, visit  ADA.org/money.

Note: The information in this piece is not intended to be, nor should it be construed as, tax, accounting or legal advice. Readers are urged to consult a qualified professional when seeking such advice. The ADA makes no endorsement of the above advice, nor of any website or organization mentioned in the above piece.