The end of 2020 is quickly approaching, so now is a good time to start planning your taxes to ensure that you are minimizing liability. By taking these steps to be proactive with your financial health, you can make sure that you are saving wherever possible. Unified Smiles has some helpful tips to guide you through tax season so that you can make the most out of your Q4. Here are our strategies for managing your year-end taxes:
If you know you will have some significant expenses in the upcoming year, such as for lab equipment or supplies, you can prepay those expenses for an accelerated deduction. Future expenses can be prepaid as long as they are filed before December 31st. By paying for these expenses using a credit card, you can prepay for these large expenses without letting go of your immediate cash surplus, and you can take advantage of the tax write-off a year in advance.
Implement New Equipment Before Year-End
With 100% bonus depreciation and increased Section 179 expenses in 2020, you can make significant purchases of equipment, furniture and fixtures, and write off 100% of the value. The assets will just need to be placed in service by December 31st to get the deduction this year. Purchase and finance through Unified Smiles to maximize your savings. We are currently offering 0% interest for the first 6 months, with flexible repayment options.
Defer Income to 2021
One way to minimize tax liability is to defer income until 2021. You can do this by simply slowing down the billing and collections process. As long as your practice is in a healthy place financially, deferring income to the following year is a great way to reduce your tax burden. Send your invoices right at the end of the year so that they are not completed until January.
Put Your Kids on Payroll
Putting your kids on payroll helps to reduce your taxes. You can list children aged 6 or older as employees of the practice. This can allow you to put money into their college fund or a ROTH IRA for children. By paying your kids to clean the office, appear in marketing materials, or helping out around the practice, you can save money and help secure your child’s financial future. Talk to our representatives to learn more about your area’s limits for children’s’ tax free earnings.
Review Your Retirement Plan
While the best investment is always an investment in your business, it is still important that you understand your options when it comes to retirement. Many independent dentists neglect their retirement savings, which does a disservice to their future financial security. However, understanding your full financial health can really open many doors for future retirement planning. If your practice has a healthy cash flow with a large surplus of cash on hand, you may be able to enjoy a larger retirement plan beyond a typical 401(k). There are several different ways that you can save for retirement, including profit sharing, defined benefits, SEP, and a SIMPLE IRA. Talk to our representatives at Unified Smiles to learn more about what types of investments are available to you so that you can get the most value for your money. You should also ensure that you are maximizing your annual contributions to whichever retirement plan you choose.
Get a Second Opinion
It always helps to have a fresh perspective, especially when it comes to your taxes. Unified Smiles is happy to help when it comes to understanding your practice’s financial health, so we encourage you to give us a call to set up a consultation. Taxes can be updated within three years of being filed, so we can even help adjust previously filed tax returns. We can work with you or your CPA to find any areas of adjustment to help you keep as much of your money as possible. An amendment can be filed to potentially help you get a refund that may have been missed previously.
Our team can help you find savings wherever possible so that you can get the most value for your money. Do not purchase equipment, make a quick investment, or follow a new financial strategy without talking to a professional first. Doing anything for the sole purpose of avoiding taxation could quickly get you into some hot water, so you want to make sure that every step you take is in the best interest of your dental practice. We recommend that you give our team a call no later than 90 days after filing to review your practice’s previous year of tax returns and to make a plan for the current year. Call Unified Smiles to get a clearer picture of your financial health and understand what opportunities are available to you.