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Compendium
September 2023
Volume 44, Issue 8

Maximize Tax Credits to Benefit the Practice, Grow Wealth

Corbin Rayburn

The Research and Development Tax Credit (commonly known as the R&D) and the Employee Retention Tax Credit (ERTC) provide dental practices an influx of cash that business owners can use in a variety of ways, including hiring new employees, investing in new technologies, or otherwise investing in the business to create growth and generational wealth. The cash infusions from these programs can help business owners jump-start profitable tax and financial plans.

The R&D rewards business owners for investing in their employees and businesses, yet it is still uncommon for businesses to claim and take advantage of the tax credit. This dollar-for-dollar credit allows businesses to recoup money they have spent to grow their business through investing in new technology, processes, employees, workflows, etc. Many business owners hear the phrase "research and development" and preemptively disqualify themselves from the credit. However, it is beneficial for companies to claim these funds, not only because businesses are entitled to them, but also because this is a once-in-a-lifetime event and should be capitalized on.

Meanwhile, the ERTC is available to dental practice owners to recover employee costs in response to the COVID-19 pandemic. This credit allows business owners to claim wages paid if they either saw a 50% decline in gross revenue, were otherwise impacted by a full or partial shutdown, or experienced nominal disruptions of operations of 10% or more. The credit has been intentionally created broadly enough to encompass many businesses, especially in the healthcare field. This credit is the government's response to the many expenses businesses incurred related to the pandemic, such as the installation of plexiglass barriers and distribution of masks. Most business owners believe they have received all they qualified for, but they likely were only filing under "gross receipts test" and only received no more than $5,000 per employee, which may have been further reduced by the Paycheck Protection Program. In sum, even if a business already qualified for and accepted ERTC, new regulations allow for even more money to be received.

Once a business receives money from the R&D and/or ERTC, it may be unsure how to best deploy it. Moreover, the business may need additional assistance in reducing its tax liability. Various long-term and short-term tax strategies are available to dental practice owners that can save them thousands of dollars each year. Most business owners do not have a tax plan or strategy, as this simply is not their area of specialty. However, this is a very important aspect of the business, and many owners may be leaving money on the table if they are not comprehensively reviewing their tax situation and creating and adhering to a strategy. By reducing its tax liability through a customized tax plan, a company can save a significant amount of money, thus in effect increasing its bottom-line revenue.

A financial services partner can help a business create a plan and then work with that business to ensure the plan gets implemented properly. Many financial plans fail because of a lack of follow through. This is where a financial services partner assists. Most business owners face a plethora of their own day-to-day challenges to fully and successfully implement a tax plan; thus, the right financial partner can help businesses with the implementation of their financial plan.

Utilizing the R&D and ERTC recovery money can help businesses save on taxes and recover overpaid taxes, but it is also important to roll that money into longer-term investments for the purpose of creating generational wealth. The financial services partner should be able to help business owners create individualized investment plans based on their personal financial goals, which can be kick-started by the money that is saved on taxes. These exciting new tax and financial planning opportunities can allow business owners to develop and meet seemingly unreachable financial goals and attain financial freedom.

Along these lines, a fractional chief financial officer (CFO) can serve an indispensable role in keeping a business on financial track. Fractional CFO services are a cost-effective alternative to hiring a full-time CFO, providing top-tier financial expertise while managing practice expenses efficiently. A fractional CFO can offer guidance through the intricacies of financial management specific to dental practices. Such an asset provides comprehensive support to enhance the practice's financial management, saving practice owners time and granting them the reassurance and peace of mind of having a qualified professional diligently overseeing their finances and allowing them to optimally focus on dentistry and productivity.

In summary, business owners should first ensure that they are saving the maximum amount on their taxes and recovering overpaid tax dollars. Then, they should roll that newly found wealth into financial tools and plans that build self-sustaining wealth. Partnering with a financial advisor who can walk them through this entire process can be most beneficial.

ABOUT THE AUTHOR

Corbin Rayburn
Chief Executive Officer/Founder, Medical Incentive Advisors (medicalincentiveadvisors.com), which
specializes in helping medical professionals recover profits utilizing the Research and Development Tax Credit, Employee Retention Tax Credit, and advanced tax strategies

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