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What would be the best set up for private practice to minimize tax burden?

Home Tax Reduction What would be the best set up for private practice to minimize tax burden?

  • Avatar livefree00 
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    Status: Physician
    Posts: 19
    Joined: 06/08/2018

    Johanna, I mean to ask if you take clients from out of your state? For example, I were to ask you to be my accountant.  Or accountants should be next door to me for face to face interactions?

    First 3 months I will need to spend on my savings for my personal living expenses which I could without having to take out a loan or cashing out my retirement funds.  This can be replenished back to my savings likely in 5-6 months from now.  Thus, strictly speaking I do not need to take out a loan of about $60-80k with 3.5-4% interest rate.  My cousin’s point in not using my savings is that business money should be separate from my personal money just as PLLC is a separate entity from myself, and in case of the business flopping (which is extremely unlikely), my personal money is protected.

     

    Guess #2:  I do look at a lot of images and work closely with radiologists and not infrequently have to call them to addendum their reports.  They are very grateful for these.

    #219917 Reply
    jfoxcpacfp jfoxcpacfp 
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    Status: Financial Advisor, Accountant, Small Business Owner
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    Johanna, I mean to ask if you take clients from out of your state? For example, I were to ask you to be my accountant.  Or accountants should be next door to me for face to face interactions?

    Click to expand…

    Oh! 95% of our clients are out of state, all virtual, almost all physicians. But we all meet f2f via the amazing videoconferencing software, Zoom.

    First 3 months I will need to spend on my savings for my personal living expenses which I could without having to take out a loan or cashing out my retirement funds.  This can be replenished back to my savings likely in 5-6 months from now.  Thus, strictly speaking I do not need to take out a loan of about $60-80k with 3.5-4% interest rate.  My cousin’s point in not using my savings is that business money should be separate from my personal money just as PLLC is a separate entity from myself, and in case of the business flopping (which is extremely unlikely), my personal money is protected.

    Click to expand…

    I’d do it the other way around, then. If you can easily borrow in the event of need, why don’t you simply use savings now and wait until you see if you need to borrow?

    How would you pay the bank back if your business “flopped”? You’ll have to personally sign the loan and would lose your money either way. But, I agree, it is highly unlikely that it will flop – at least to the point you would lose this money. Worst that will probably happen is that your projections will be off and you won’t make as much as you predict in the first year.

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #219920 Reply
    jfoxcpacfp jfoxcpacfp 
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    Guess #2:  I do look at a lot of images and work closely with radiologists and not infrequently have to call them to addendum their reports.  They are very grateful for these.

    Click to expand…

    I’m mystified, but I bet the docs have guessed the right answer!

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #219922 Reply
    Avatar Panscan 
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    Joined: 03/18/2017

    Cardiology

    #219926 Reply
    Avatar livefree00 
    Participant
    Status: Physician
    Posts: 19
    Joined: 06/08/2018

    I am beginning to agree with the idea to avoid taking business loans and pay the interest on it unless I really have to.

     

    Guess #3:  I occasionally recommend cardiology consult and get consult requests from cardiology and CT services.

    #220013 Reply
    Avatar livefree00 
    Participant
    Status: Physician
    Posts: 19
    Joined: 06/08/2018

    Here are the fees my accountant/CPA is proposing. Are these reasonable?

    $3800 ONE time fee: For accounting software & payroll system set up and training and continued support and oversight for family member as a book-keeper.

    $7000 for company design and tax set up and strategy review each year to reduce tax as company grows (hires more people) and investment strategy. Includes entity selection, income shifting strategies, and hiring, investments. Review and ongoing advises on business finances for maximum profitability and stability and growth.

    $1800/quarter or $1300/month accounting fee.

    #221828 Reply
    Avatar jacoavlu 
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    Status: Physician, Small Business Owner
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    Joined: 03/01/2018

    Seems really expensive to me for a lean business

    The Finance Buff's solo 401k contribution spreadsheet: https://goo.gl/6cZKVA

    #221836 Reply
    jfoxcpacfp jfoxcpacfp 
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    Here are the fees my accountant/CPA is proposing. Are these reasonable?

    $3800 ONE time fee: For accounting software & payroll system set up and training and continued support and oversight for family member as a book-keeper.

    $7000 for company design and tax set up and strategy review each year to reduce tax as company grows (hires more people) and investment strategy. Includes entity selection, income shifting strategies, and hiring, investments. Review and ongoing advises on business finances for maximum profitability and stability and growth.

    $1800/quarter or $1300/month accounting fee.

    Click to expand…

    Good grief. No wonder he calls himself a specialist. If I could get away with that…

    And some doctors accuse US of being expensive!

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #221876 Reply
    Avatar livefree00 
    Participant
    Status: Physician
    Posts: 19
    Joined: 06/08/2018

    What would be a more reasonable fee range in this situation? Or what would you charge?

    #221880 Reply
    Avatar jacoavlu 
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    Status: Physician, Small Business Owner
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    $7000 for company design and tax set up and strategy review each year to reduce tax as company grows (hires more people) and investment strategy. Includes entity selection, income shifting strategies, and hiring, investments. Review and ongoing advises on business finances for maximum profitability and stability and growth.

    Click to expand…

    you’re a solo operation now, this is a bunch of garbage. You said it yourself, you have little expenses, no physical office, no employees yet. What is “investment strategy” or “income shifting strategies” or “maximum profitibility” or what is this person going to do for “stability and growth”. And it seems to me you’ve already done “entity selection”.

    You shouldn’t be investing company money in the traditional sense. T bills or money market should be about as sophisticated as you might get

    Income shifting strategies might be benign as establishing a 401k, cash balance plan, but you’ll engage other professionals if that happens. Determining salary and distributions is pretty standard and nothing too fancy.

    Maximum profitibility – well, work and make money, control expenses.

    Stability and growth – is this person purporting to function as a practice manager, out hunting for new clients and contracts?

    The Finance Buff's solo 401k contribution spreadsheet: https://goo.gl/6cZKVA

    #221883 Reply
    jfoxcpacfp jfoxcpacfp 
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    What would be a more reasonable fee range in this situation? Or what would you charge?

    Click to expand…

    I don’t know what all you’ve talked about, I just know we offer a QuickBooks training package for (I think) $999. Might be $699. Laura handles that. Direct, live training, handled virtually. They log right in and clean up the books and train as they go along. What is the $1,800/qu or $1,300/mo supposed to pay for? Is the $7k another one-time fee?

    The above just sounds too much like a system “designed” for physicians and carrying a high price tag. There’s another one out there advertising right now and a prospective client brought me a similar “plan” to look at this week. I about had a stroke. First of all, they do a blueprint for $995 to make a lot of suggestions, then guarantee a 5-fold return in tax savings or “your money back!” The recommendations for this doctor earning $100k – $150k/yr of side IC income? An S-corp plus a C-corp plus an LLC. Only other income the couple have is both are W2, one not even a doctor. I can only imagine what that setup would have cost and what hoops they would have had to jump through. Talk about dodging a bullet. No names mentioned, ok?

    Not saying that is what you’re looking at, but this just sounds a little bit “produced” to me.

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #221884 Reply
    Avatar livefree00 
    Participant
    Status: Physician
    Posts: 19
    Joined: 06/08/2018

    My initial thinking was exactly the same as what Jacoavlu said above regarding $7000 for business design and tax strategies.  I am wondering if this would be ok to pay just for the first year to set up the company on a right course.  What is the average fee for these types of accounting services?

    To answer Johanna’s question:

    $1800/quarter or $1300/month is for:

    1. Quarterly services= review of accounting system; monitoring of tax plan implementation; profit plan implementation; quarterly estimated tax projections; quarterly review meeting to make sure I am on track and meeting your business goals.
    2. Monthly services = more comprehensive and include the same services as quarterly plus more frequent support/contact; monthly review of your bookkeeper’s work; assistance with bank/credit card reconciliations and sales postings; monthly check-in accountability meetings.

    I asked her if these include IRS filing for the PLLC and my and my wife’s individual income tax filing.

    More opinions will be appreciated.

    Johanna, what would your fees be for the equivalent services this CPA is proposing?

     

    #221903 Reply
    Dreamgiver Dreamgiver 
    Participant
    Status: Physician
    Posts: 831
    Joined: 03/09/2017

    My CPA charges $1800/yr for payroll with 2 employees plus myself and accounting plus standard tax filing. I try to be good at making notations on CC and bank account transactions so that no questions arise as to what is what and they can just download everything to quickbooks. If I have more complex questions and want to set up extra meetings and such there is a fixed hourly rate, I believe $90/hr. He does not do financial advising as part of his services but will advice as far as best set up for tax efficiency and such.

    #221911 Reply
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
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    Joined: 01/09/2016

    My CPA charges $1800/yr for payroll with 2 employees plus myself and accounting plus standard tax filing. I try to be good at making notations on CC and bank account transactions so that no questions arise as to what is what and they can just download everything to quickbooks. If I have more complex questions and want to set up extra meetings and such there is a fixed hourly rate, I believe $90/hr. He does not do financial advising as part of his services but will advice as far as best set up for tax efficiency and such.

    Click to expand…

    And THAT is cheap. Not sure what “standard tax filing” means, though.

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #221916 Reply
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
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    Joined: 01/09/2016
    Johanna, what would your fees be for the equivalent services this CPA is proposing?

    Click to expand…

    We’d have to meet first, as I don’t know your business plan beyond the simplified version in the first paragraph. I’m not going to give a public quote then find out I don’t know what I’m talking about. Bkk services start at $300/quarter and typically go up to ~$1k/quarter for practices, depending on how involved we are versus how much you do yourself. That’s a pretty wide range.

    We do have some clients who we charge more, but that’s for full payroll services, check-writing, paying invoices, etc. I believe we have a client in NM we charge $1,500/mo, for example, but we also invoice their customers (this is not a doctor). We work with a dentist in CO who we charge $1k/mo but we do a lot for him, include a big payroll.

    I’m a bit in the dark at this point and you’ve had more discussions with them. The $7k design/strategy setup sounds like something we do as part of ongoing business and tax planning, though, which is included in annual flat fees.

    I believe we should talk before you sign on with this service, at least for a 2nd opinion. Or talk to SOMEONE else (besides the other guy I am referring to above). There are others on the tax strategist list at WCI.

    Our Minimum Fee Schedule

     

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #221919 Reply

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