Dental Practice Spring Checkup
Apr 03, 2014
In addition to providing for you and your family, your dental practice is a part of this country’s small business job creation engine. Small businesses make up 99.7% of U.S. employer firms and account for 64% of net new private sector jobs.* Conducting an annual review of your practice finances can help keep your business healthy and growing.
Management
No doubt you are pivotal to the success of your practice, however, at some point it’s important to focus on bringing up the next level of management, especially if you would like to sell your practice or pass it on in the future. While mentoring the key individuals who can effectively run the business, don’t forget about key person insurance for them. It’s designed to protect your business if you, a partner or another key employee were to die prematurely.
Plan ahead
What would happen to your practice if you or one of your key employees could no longer work? Unless you’ve planned ahead, the practices’s continued success, continuity of management and the future of all the families your practice supports could be jeopardized. Would the absent employee’ family — which could be yours — be fairly compensated for their interest in the practice if that interest needed to be sold?
A buy-sell agreement combined with key person insurance can help relieve concerns you may have. Work with your financial professional and attorney to make sure the agreement is drafted properly to address your and your practice needs.
Risks
Do you have appropriate processes and procedures in place to handle human resources and compliance issues, such as the new health care coverage rules under the federal health reform law? When was the last time you reviewed your practice’s insurance coverage with your financial professional? You may discover that your practice does not have all the coverage it needs in this litigious climate. Ask about umbrella and general liability insurance.
- Frequently Asked Questions about Small Businesses, SBA Office of Advocacy, September 2012
Categories: Healthcare & Dentistry
Important Birthdays Related to Your Taxes
Apr 01, 2014
From a tax standpoint, some birthdays are more important than others. Here are some notable tax milestones.
BIRTH: You generally can start claiming a dependency exemption for your child in the year he or she is born. In 2014, the exemption is $3,950, subject to phaseout for higher income taxpayers. For married taxpayers filing jointly, the phaseout begins with an adjusted gross income (AGI) of $305,050, and the credit is completely phased out with an AGI of $427,550.*
13: The child care credit is available to eligible working parents until the year their child turns 13. The credit is 20% to 35% of employment-related child care expenses, depending on income. The maximum amount of expenses eligible for the credit is $3,000 for one qualifying child and $6,000 for two or more. As a general rule, qualifying expenses are limited to the earned income of the spouse who earns the lesser amount (no earned income, no child care credit).
17: A child tax credit is available until the year a child turns age 17. The maximum credit is $1,000 per qualified child, and it is phased out above certain income amounts.
19: Your child may continue to qualify as your dependent until the year he or she reaches age 19. If your child is enrolled as a full-time student for some part of five calendar months during the year, then he or she can qualify as your dependent until age 24.
59½:You won’t have to worry about the 10% penalty tax on early withdrawals from tax-deferred retirement accounts and traditional individual retirement accounts (IRAs) once you reach age 59½.
65: If you claim the standard deduction instead of itemizing your deductions, you can celebrate your 65th birthday with an additional standard deduction. For 2014, the additional standard deduction is $1,200 for a married individual (filing jointly or separately) or a surviving spouse and $1,550 for a single or head-of-household taxpayer.
70½: After you reach age 70½, annual required minimum distributions (RMDs) from traditional IRAs and employer retirement plans generally must start — and they represent taxable income. (Your plan may allow you to delay RMDs if you are still working for the company sponsoring the plan and you are not a 5% owner.)
- The 2014 AGI phaseout range for single taxpayers is $254,200 to $376,700. It’s $279,650 to $402,150 for heads of household.
Categories: Uncategorized
1st Quarter is Coming to a Close, Now What?
Mar 31, 2014
If you live in or around the Ohio area, like I do, you are probably thankful that 1st quarter is ending and maybe that means the snow and cold weather will finally be gone! It is supposed to be 62 and sunny today, but in a few days back to the 40s and 50s! Oh well, you can’t have everything and at least with April on the way we can get out of these winter blues! And truthfully I’ll take the 40s and 50s over what we had! Perhaps more importantly, with the close of first quarter I am also hopeful that everyone is comparing their budget to actual.
First of all, I hope a budget was established in late fall of 2013 for the 2014 year. If you did not, consider creating a budget for the remainder of the year now. As I am sure many of you have heard me say, if you do not know what something should be, it’s easy to believe it is correct. It’s like taking an exam that you didn’t study for: all the answers may seem to be the right answers.
If you did a budget, I hope you have been taking the time to compare your estimates to what actually did happen? A budget is only useful tool if it’s used! Not spending the time to reconcile it to actual completely negates the time spent creating it.
The best use of a budget is comparing the actual results to the anticipated results and then answering the question why. Why were things better/worse/different than expected. Is the cost of material higher, but scrap lower. Or, is cost of material lower and scrap higher, for example. Just looking if the numbers are more or less than what you expected and not asking why, again is not a good use of time.
Looking at the budget at the end of the quarter is a necessity, but even more frequently could be very useful. Reconciling every month is a good practice and sometimes every week, every day, every hour is necessary. You need to know what you are looking for and the correct time frame to look at it. Comparing the monthly utility charges every hour would not make sense, but reconciling material usage every hour may.
Categories: Cost Accounting
Direct Labor – Is It Fixed or Variable?
Mar 28, 2014
For many of my clients, this question is almost laughable. They have considered direct labor a variable cost for so long to think of it in any other terms would be outside the realm of reality. But in today’s ever increasing mechanized manufacturing environment, the question of whether or not labor should be accounted for as fixed or variable is being asked more often.
I was having lunch with the CFO of one of my clients recently and he was struggling with this very issue in his organization. His question, however, was the reverse of what you might think. His manufacturing environment was highly machine controlled and for years his entire manufacturing team had considered direct labor as fixed overhead and part of the machine cost. The problem that he was facing was the entrenched thought process in considering labor a fixed cost, and therefore, not available for modification as volumes changed. Above this, his primary concern was that short-term fluctuations in volume should be met with short-term fluctuations in cost where possible. The CFOs goal of course was to have good management. Rather than considering labor fixed, he recognized that some portion of his crew was talented and experienced in their operations and was not readily replaced by other inexperienced, untrained individuals. However, a portion of the fixed labor crew truly was relatively untrained and could more easily be replaced if necessary after a downturn in volume.
The real challenge was to convince his management team that such fluctuation in crew size makes sense in an environment where virtually all of the costs are related to machinery and all production was in a machine controlled environment.
His thought process did call to mind other components of his operation, which could be available for modification in times of decreased volumes. As volumes fall off, a good cost manager will attempt to match the lower volumes with decreased costs where possible.
In many cases, truly fixed costs are unavailable to be modified by temporary changes in volume. However, it’s worthwhile thinking through the process of those costs that might be available and assuring that changes in volume are met with changes in expenses.
Years ago one of my largest manufacturing clients experienced substantial reductions in volume as their industry protracted in the early stages of the recession. However in this case, the cost manager was able to significantly reduce manufacturing costs and in fact used the volume variance calculation to help guide cost cutting initiatives by providing a guide post about how many dollars in cost need to be removed. At the end of that year, there was a very large negative volume variance which was almost completely offset by a very large positive spending variance.
The ability to manage a cost in spite of their nature in times of fluctuating volumes is one of the hallmarks of a good cost manager.
Categories: Cost Accounting
Tax Return Identity Theft – What Should You Do?
Mar 26, 2014
Recent reports of identity theft related to tax filings have been reported by local dentists. We would like to take a moment to remind you that the IRS uses your Social Security Number (SSN) to make sure your filing is accurate and complete, and that you get any refund you are due. An unexpected notice or letter from the IRS could alert you that someone else is using your SSN. However, the IRS does NOT contact taxpayers by sending an email, text or social media message that asks for personal or financial information. If you get an email that claims to be from the IRS, do not reply or click on any links. Instead, forward it to phishing@irs.gov.
If someone uses your SSN to file for a tax refund before you do, the IRS might think you already filed and got your refund. When you file your return later, IRS records will show the first filing and refund, and you’ll get a notice or letter from the IRS saying more than one return was filed for you.
If you think someone has used your SSN for a tax refund or the IRS sends you a notice or letter indicating a problem —contact the IRS Identity protection unit immediately, 1-800-908-4490. Specialists will work with you to get your tax return filed, get you any refund you are due, and protect your IRS account from identity thieves in the future. Make sure you take the following steps to minimize the effectss
- Complete IRS Form 14039, Identity Theft Affidavit, and attach it to a paper-filed tax return to the IRS with a letter of explanation. You will also need to include with the Form 14039 the following:
- A clear and legible photocopy of your identification – a passport, driver’s license, social security card, or other US Federal/State government issued identification.
- Telephone # to best reach you (home, work, cell) and a best time to call
- Contact the Federal Trade Commission to report the identity theft atwww.consumer.gov/idtheft, or call the hotline at 877-438-4338.
- Contact the Social Security Administration at 1-800-772-1213.
- Contact each of the three major credit bureaus:
- Equifax www.equifax.com 1-800-525-6285
- Experian www.experian.com 1-888-397-3742
- TransUnion www.transunion.com 1-800-680-7289
- Notify your personal financial institutions/banks.
- Consider filing a police report, but without a lot of information, the local police often won’t file a report.
Once the IRS receives the Identity Theft Affidavit they will begin their investigation. Please be aware there are significant processing delays with this unit. You must allow 204 days (6-8 months) for their investigation. There are over 1 million cases, so it is a long process! If no information has been provided after 204 days, then we suggest calling the specialized unit at 1-800-908-4490.
Categories: Uncategorized