Coffee Talk: Year-End Tax Planning Questions to Consider

Fall is the season for football, bonfires and apparently Pumpkin Spice lattes. It’s also a great time to meet with your accountant. “Why,” you might ask, “do I need to meet with my accountant now? It’s only October. Don’t I have six months or more until I need to file my taxes?”

Well, we’ve found that about now is when dentists often overlook important opportunities for any small business owner. In fact, the fourth quarter is a critical time of year when it comes to taxes. Why? This is the time that you can actually plan for your taxes. Once the calendar turns into a new year, your options for lowering your tax bill are limited. Your time for saving to pay a tax bill is also limited. Starting early allows you to be intentional with your planning and your tax strategy. As you begin to think about year-end tax planning, here are five questions to consider asking yourself to get the ball rolling:

How do my collections compare to last year? Are they higher? Are they lower? If you find that your collections are higher than last year, this could mean your taxes will be higher as well, and you may not be paying enough in taxes throughout the year to avoid a big tax bill in April. If your collections are lower, this could mean you’re overpaying, essentially providing the government an interest-free loan. Who wants to do that! Collections, however, are just the first part of the equation.

How do my expenses compare to last year? This is the second part of the calculus. Even with similar collections, a drop in expenses will increase your taxable income and could cause a bump up in the amount you owe come April. Did you see an increase in any expenses this year? Did you find yourself generating bigger treatment plans and, therefore, more lab expenses? Did you put together a marketing campaign, which would have increased your marketing expenditure? Taking a thorough look at your expenses not only lets you know where your money goes, but can also shed light on a change in practice income for the year.

Did I purchase or do I plan to purchase a large piece of equipment this year? Inform your accountant of any large equipment purchases you have made or plan to make. Did your office go digital this year? Did you purchase a new CEREC machine or a Cone Beam? These will all provide tax-planning opportunities for you and your accountant when determining how you wish to expense those items.

Are my pension deductions higher this year? Does your accountant know you added a cash balance pension plan to your 401(k) profit sharing plan and increased your pre-tax savings by $100,000? (Yes, this can be done.) What about your choice to upgrade your pension strategy from a SIMPLE IRA to a 401(k) profit sharing plan? Does your accountant know about that? These can both increase your deductions this year, which will impact your tax liability.

How much have I paid in taxes so far this year? Reviewing your estimated payments/tax withholdings with your estimated tax liability should give you an idea of your tax picture. Knowing this information in October or November permits you to plan before year-end. If you haven’t done that equipment upgrade you want to do, and you are facing a tax bill in April, December could be a good month to talk with your accountant about purchasing that equipment and getting it installed and ready for use by Dec. 31.

Taxes shouldn’t feel like a mystery, and there are steps you can take to feel confident about your tax picture. It starts with having open lines of communication with your accountant and your financial advisor. Talking about, and thinking through, these topics is the beginning of the tax planning conversation. If you have any questions, please do not hesitate to reach out to us.

This commentary originally appeared October 4 on

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The opinions expressed by featured authors are their own and may not accurately reflect those of the BAM ALLIANCE. This article is for general information only and is not intended to serve as specific financial, accounting or tax advice.

© 2017, The BAM ALLIANCE

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Katie Collins, CFP®

As a practice integration advisor, Katie works directly with clients to develop a financial plan personalized for their specific situation and goals. She quarterbacks the entire financial picture, often for clients who have never put all the pieces together with one advisor. Katie joined Buckingham Strategic Wealth through the 2014 merger with Indiana-based Hufford Advisors, where she spent more than 10 years working in various financial planning roles, most recently as a senior planning consultant.

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