I was asked recently about the top mistakes dentists make on their taxes. This is a great question and there are a few tips that can help one avoid making common mistakes.
One of the top mistakes I see is regarding the estimated tax payments. If a dentist is required to make estimated tax payments, then they really need to make sure the payments are made on time and the amounts made and the date paid need to be accurately reported to their CPA. If income changes, either up or down, make sure your CPA is involved; it would be ideal to have your CPA reviewing your accounting on a quarterly basis so they can review the income and check the tax planning for you. No tax surprises should be the goal.
Another mistake that I see often is regarding IRA contributions. We all know that Traditional IRA contributions are tax deductible, but if you make too much money, you may lose the ability to deduct IRA contributions or you may be eligible to make a Roth IRA contribution. It is the Roth IRA contribution and the Non-Deductible IRA contributions that I often see not reported to the tax preparer. It is important to report all of these contributions so that your tax preparer can track your “basis”. When you hear the term basis, think of your “non-taxable” portion in something. Basically, the more basis you have, the less tax you will pay later; so tracking basis is important.
Another mistake dentists make on their tax return is regarding charitable donations. If you made charitable donations, either cash or non-cash, make sure you take advantage of the tax benefits. You need to make sure you get a receipt for your donation and if it is non-cash, make sure to give it proper value. So many times people under-value their donations. Talk to your CPA about required documentation and maximizing your donation value.
The best way you can avoid mistakes on your taxes, is to make sure you have an open communication with your CPA. You should be able to speak with your CPA, don’t be afraid to ask them questions, demand that they ask you questions and look for opportunities.
Please contact us if you have any questions about these items or any other tax issues. We are here to help you maximize your tax avoidance (which is legal) as opposed to tax evasion (which is a felony).