The Tax Questions to Take to Your CPA

The meeting happens in the spring. The owner arrives with a folder, a bank login and one question he has been saving all year, usually some version of "can I write off the truck?" The CPA spends the hour reconstructing a business she has not seen since the same meeting last year, and the conversation that could have changed the outcome, the one about timing and structure and plan design, never happens. By then the year is closed and nothing in it can be moved.

Let us be direct about what this is. It is not tax advice. It contains no figures, thresholds or deadlines, deliberately, because those change and because a number read on a website is how owners talk themselves into expensive decisions. It is the list of questions a practice owner should bring to a qualified professional, with enough context to follow the answers, push back intelligently, and tell the difference between a CPA who is thinking about your practice and one who is filling in forms.

The Quick Answer

Almost everything that determines a practice's tax outcome is decided during the year, not on the return. The return records what already happened. The questions that move money are about how the business is structured, how the owner is paid out of it, when large purchases land, how the retirement plan is designed, who is on payroll, whether estimates track reality, and whether the books arriving at the CPA are usable.

So the most valuable thing you can change is timing. Schedule a working meeting with your CPA in the fall, while the year still has room in it, with clean books and this list of questions. The spring appointment is for filing. The fall appointment is for deciding.

Entity Structure, and Why It Keeps Coming Back Up

Two things get blurred together constantly. The legal entity is formed under state law and governs liability, ownership and what happens when somebody joins or leaves. The tax treatment of that entity is often a separate election that can sometimes change without the legal entity changing at all. Dentistry adds a wrinkle: many states restrict who may own a practice and require a professional form of entity. That is a legal question before it is a tax question, and it varies enough that our state resources page is the right first stop, followed by an attorney licensed where you practice.

It comes back up because the answer is tied to circumstances that move. What made sense for a young associate with a small practice is not automatically right once profit has grown, a partner arrives, you buy the building, you add a location, or you are a few years from selling. The sale in particular is affected by how the business is held and how a price gets allocated across the pieces of a deal, covered from the transaction side in how dental practices are valued.

Questions to bring: Is my structure still right at this level of profit, and what would change if it were different? What would adding an owner do to it? Should real estate be held separately? How does my structure affect a future sale and the way the price gets allocated? What does changing cost, how long does it take, and is it reversible? Our chapter on financial management for practice owners covers the entity landscape in more depth, with questions worth taking to the attorney alongside these.

Owner Compensation: How You Pay Yourself Is a Tax Decision

Depending on how the practice is taxed, the money you take out may split between compensation for the work you do and a return on owning the business, and the two are not treated the same way. Where that split exists it is a closely examined issue, and one of the few places where being aggressive and being conservative both create problems.

The governing concept is reasonableness: compensation should reflect what the work is worth. For a dentist that means both roles, clinical production and running a business, valued at what you would pay somebody else to do each. Your CPA will want your clinical days, your production, what the practice earns, local comparables, and how much administrative work you genuinely do rather than delegate.

What owners rarely anticipate is that this is not only a tax number. Retirement contributions frequently key off compensation, so setting it low to reduce one cost can quietly shrink how much you can put away, which is usually the more valuable of the two. Those decisions belong in the same conversation, not in separate ones six months apart.

Questions to bring: What should my compensation be, and how did you get there? What documentation supports it? How does it interact with my retirement plan design? How often should we revisit it? What changes if I cut back clinically? For the mechanics of running it through payroll, see dental practice payroll and benefits basics.

Equipment, and How Timing Interacts With the Rest of the Year

Here is the sentence that saves more money than any deduction: a deduction is only worth something against income you actually have. A large purchase dropped into a weak year can be worth meaningfully less than the same purchase in a strong one, and buying equipment you do not need to reduce a tax bill is still spending a dollar to save a fraction of one. Vendors get louder at year end for a reason, and the reason is not your balance sheet.

The concepts worth understanding before the conversation:

• Expensing versus depreciating. Some rules let you deduct an asset quickly, others spread it over its useful life. Which applies, and which is better, depends on your income picture that year and the ones around it.
• Placed in service. The point at which an asset counts is a defined concept, and it is not the date you signed the order. Delivery, installation and readiness for use all matter, which is why a late purchase and a late install are two different conversations.
• Financing and leasing. A financed purchase can produce a deduction without the cash leaving in the same year, while a lease is treated differently depending on how it is written. Our comparison of leasing versus financing versus cash covers the business side.
• State treatment. States frequently do not follow federal rules on accelerated write-offs, so the federal answer and the state answer can point in different directions.
• Recapture. What you deducted quickly can come back when the asset is sold or traded, which matters if you expect to sell the practice.

Our post on Section 179 and bonus depreciation for dental equipment covers the mechanics. Just do not let any published figure substitute for your CPA running it against your actual year.

The Home Office and the Vehicle, Since Everybody Asks

These come up at every study club and generate more bad advice per minute than any other topic in practice ownership. Both are real. Both are smaller than people hope. And both live or die on documentation rather than cleverness.

The home office analysis turns on how the space is used and on the fact that you already have a principal place of business, which complicates things for a practice owner in a way it does not for a consultant in a spare bedroom. How the benefit reaches you also depends on how the practice is taxed: an owner who is an employee of their own corporation sits differently than a sole proprietor. There are also consequences when you eventually sell the house.

The vehicle question is a recordkeeping question wearing a tax costume. It starts with business use versus personal use, and the commute between home and the office is generally not the business part. Which calculation method is better depends on the vehicle and on your driving, type and weight can change the treatment, and switching later is not always available. Whether the practice owns it or you do changes the mechanics and brings payroll and insurance consequences.

Questions to bring: Is the home office worth the complexity in my situation, and what does it mean when I sell the house? For the vehicle: which method fits, can I change later, what records do you want and in what format, what appears on my compensation if the practice owns it, and what does my insurance agent need to know?

Retirement Plans: The Largest Lever Most Owners Never Pull

For a consistently profitable practice, retirement plan design usually moves more money than every other item in this article combined. It is also the one owners postpone longest, because it feels like a benefits project and the first conversation involves words like testing and allocation.

The landscape runs from simple to powerful. At the simple end are payroll-deduction arrangements: cheap, easy to administer, modest in what they let an owner set aside. In the middle sit employer-sponsored plans with company contributions, vesting schedules and compliance testing, often combined with profit sharing where the allocation formula can be weighted within the rules. At the far end are defined benefit and cash balance plans, sometimes layered on top of profit sharing, which can allow substantially more for an owner whose profit is high, stable and likely to stay that way.

The tradeoff nobody mentions in the sales conversation is staff cost. The designs that let an owner put away the most also require meaningful contributions for employees, and how expensive that is depends entirely on your census: how many people, their ages, tenure and pay. Two practices with identical profit can get wildly different answers because one has a young, high-turnover team and the other has four people who have been there fifteen years. That is an actuarial question with an actual answer, worth paying someone to model rather than guessing.

On the other side of the ledger: a genuinely good plan is a retention tool in a labor market where retention is expensive, so the staff cost is not purely a cost.

Questions to bring: Given my actual census, what would each design cost me per dollar I get to set aside? Can designs be layered? What are the ongoing administration and testing costs, and who does that work? What happens in a year when profit drops? What are the timing requirements for establishing a plan and for funding it, since those are not the same thing? And who is the fiduciary once a plan exists, because that is a responsibility rather than a title. Be careful with a default plan bundled into a payroll service: it may be right for you, and it may also be a design nobody ran against your census.

Hiring Family, and Other Structures That Need a Real Reason

Putting a spouse or a child on payroll can be entirely legitimate. It needs three things: actual work performed, a defensible wage for that work, and the same payroll treatment and documentation as anybody else in the building. The test: would an unrelated person doing that exact job be paid that exact amount? When the answer is obviously no, being related to the owner does not fix it.

The consequences run further than payroll. Employment taxes can work differently depending on entity type and relationship, adding a family member changes the census that feeds retirement plan testing, and it affects that person's own filings and anything means-tested they are involved with.

A much larger cousin deserves its own mention: whether the people working in your practice are properly classified as employees or contractors. That applies to associates, hygienists and anyone else, and it is not primarily a tax question. It carries employment law, insurance and liability consequences, the standards differ between federal and state authorities, and getting it wrong is expensive in several directions at once. Take that one to both the CPA and an employment attorney.

Quarterly Estimates and Money That Is Not Yours

As an employee you never had to think about this, because withholding happened to you. As an owner, a portion of the money in the operating account belongs to a taxing authority and is waiting to be collected. Practices get into real trouble by treating that balance as available.

The concepts to understand: estimates are based on an expectation of the year, and there are established approaches that calculate from the prior year instead, each with a different tradeoff in cash flow and exposure. States have their own requirements and some localities do too. Payroll tax deposits are a different category altogether, less forgiving than anything else here, which is a strong argument for using a payroll service and confirming the deposits are actually being made.

The habit that fixes most of this: a separate tax account, funded from every deposit at a portion you and your CPA set together, and treated as untouchable. It is the easiest change here.

Questions to bring: How should I fund estimates, from which account, and how often? Should we recalculate mid-year, and what would trigger it? What happens if I have an unusually good year? Which calculation approach fits me and what is the tradeoff? And what state and local filings does my practice have that I do not know about?

What Your Bookkeeper Owes the CPA

The quality of the tax conversation is capped by the quality of the books. A CPA rebuilding the year cannot spend that time planning it, and you pay for the rebuilding either way.

If your books do not look like that, fix the structure before the cleanup, because otherwise the cleanup gets redone. Our post on setting up a dental practice chart of accounts covers building one that supports both benchmarking and a fast close, and reading a dental practice P&L covers what you should be able to see once it is right.

THE CHAIRSIDE TAKE

Print this list, put a fall meeting on the calendar, and go in with reconciled books and the entity, compensation and retirement questions at the top, because those three are where the real money sits. Take the equipment timing question to that meeting rather than to a sales rep in December. And judge the professional by whether they ask about your team's ages and tenure, your lease, and when you intend to sell. A CPA who only asks for last year's numbers is doing history. The one you want is doing planning, and the difference is worth far more than the fee.

Educational content only. It is not legal, financial, tax, or clinical advice. Prices and ranges are approximate and vary by region, condition, and year. Verify current rules with your state dental board and qualified professionals. ChairsideSource is not affiliated with any manufacturer, the ADA, or the DAT.