Jason Whaley of Watkins, Uiberall, an international company with local offices that provide accounting and consulting services to businesses throughout the Mid-South, says physicians should be aware of changes in tax law to ensure they take full advantage of deductions.

“Practices can take a full 100 percent deduction on major equipment purchases this year as opposed to only a 50 percent deduction next year.”

Financed equipment is also eligible whether the practice pays for it in full in 2011 or not. “That’s another advantage because business owners can apply that capital towards other deductible expenses,” Whaley said. 

Deferring profits into retirement plans is an option. “Owners should maximize contributions to their retirement plans and, if able, maximize them toward their employees’ retirement, too.” 

According to Whaley, contribution limits vary depending upon the retirement plan’s structure and prevailing tax laws and doctors should consult a professional before making any decisions.

“One way we determine which retirement plan is the best one to choose is to take a look at the practice’s size and its physician to non-physician-employee ratio.  Regulations limit how much money businesses can defer to a retirement plan based on these factors,” Whaley pointed out.

He adds that the business’ overall setup and operation should be evaluated.  For example, doctors need advice on whether to set up their practice as a corporation or a limited liability company. “This determines whether you have to pay corporate taxes versus only paying individual income taxes,” said Whaley. “Your business’ structure directly impacts the amount and type of taxes you pay.”

This strategy equally applies to doctors managing existing practices and those setting up new ones. Whatever the option, Whaley says to avoid waiting until the last minute. “It’s a common pitfall. Dropping off your information to a tax professional for the sole purpose of getting a simple tax return prepared can be a recipe for disaster.

“By that time, tax laws have already made the decision for you. You can miss out on vital deduction opportunities,” according to Whaley.

Mergers, expansions, contractions and location moves are other factors to consider. “Doctors should contact a CPA whenever they anticipate major changes and now is a good time to get started and mid-year is an even better time so long-range planning can be done,” said Whaley. 

Ken Massey agrees. He works exclusively with healthcare organizations at Cannon & Company, CPAs, a Memphis firm that provides financial services and advice to businesses ranging from large companies to small family enterprises.  As a pharmacist turned accountant, Massey has amassed 30 years of experience in helping healthcare organizations develop business plans and strategies that are designed to not only maximize profits, but also prepare them to weather financial storms brought on by industry shifts. 

“One thing I’ve learned over the years is that doctor’s don’t like surprises,” he said.

Massey suggests it’s a good idea for physicians to take a holistic approach to business planning. “Doctors should have a professional analyze their practice’s revenue, expenses and patient volume. Operating without a plan is like taking off on a road trip without a map.”

Massey says financial problems can arise sometimes when a business makes a major equipment purchase to reap a tax deduction and that equipment does not yield expected profits the following year. “Such a maneuver could lead to direct cash loss and that’s not my idea of a great tax deduction,” explained Massey.

He adds that most practices are cash basis taxpayers and that sometimes it’s better to have as little cash on hand as possible at tax time. “In some cases, distributing profits through cash bonuses to owners and employees is better.”

Besides analyzing a practice’s cash on hand, Massey especially likes to project its profitability going forward. He says it’s an important tactic that helps a doctor avoid placing their practice in a financial position that prevents them from being able to overcome new healthcare legislation that negatively impacts profits. 

“Right now congress is reviewing legislation that proposes a 28 percent decrease in Medicare reimbursement. This could bankrupt some practices.”

He says it’s best to be proactive, no matter the business’ financial standing. “Congress is notorious for doing things at the eleventh hour. Getting started now gives us enough time to develop strategies that create the flexibility a doctor needs to be able to overcome unexpected dips in revenue,” he said.

While Massey says a 28 percent drop won’t likely happen, doctors should prepare for a decrease of some kind. “There can be a five or ten percent reduction. Either way, it’s important to be nimble and financial planning can help you achieve that.”

Tags:

Related:

Bookmark:

Digg

Facebook

Technorati

Newsvine

Google