The Top 5 Tax Savings Tips

Chris Cuadros CPA and Alex Nottingham JD MBA discuss tax savings for dentists and entrepreneurs, covering retirement plans, payroll and more!

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Chris Cuadros CPA MPA

Chris Cuadros is the owner and head CPA of Crossroads. He began Crossroads in 2008 specifically for dentists and has expanded the practice to include other private health care practices. Chris is originally from Louisville, Kentucky and is a graduate of Hanover College. He earned his Masters in Taxation from Indiana University Kelley School of Business.

About Alex Nottingham JD MBA

Alex is the CEO and Founder of All-Star Dental Academy®. He is a former Tony Robbins top coach and consultant, having worked with companies upwards of $100 million. His passion is to help others create personal wealth and make a positive impact on the people around them. Alex received his Juris Doctor (JD) and Master of Business Administration (MBA) from Florida International University.

Episode Transcript

Transcript performed by A.I. Please excuse the typos.

00:00

Welcome to Dental All-Stars. I’m Alex Nottingham, founder and CEO of All-Star Dental Academy. And with me is Chris Quadros, founder and lead CPA at Crossroad Tax Advisors. Our topic is tax savings opportunities. Please welcome Chris. Thanks for having me. We were having fun getting our streaming set up in multiple locations. So we’ll see how that is working.

 

00:29

It’s not just doing a podcast is enough. Let’s let’s stream at the same time Yeah, so Chris you’re always good about taking everything to the next level right next level got to experiment if it ain’t broke break It try some new things. So Chris I’ve been very impressed talking with you you’ve been at multiple events that we do the practice growth summit and others and I was just really impressed with all your knowledge as a CPA and tax advisor

 

00:58

because as our listeners, mostly dentists and other entrepreneurs, is we don’t want to pay more taxes than we have to. So give us a little background about yourself, and then kind of bring us into this discussion of taxes and how can we save? What are some tax savings that we can do? Yes, absolutely. I appreciate it, Alex. And yeah, just a little bit of history about Crossroads, tax advisors, and myself is, you know,

 

01:26

We started, gosh, it was back in 08, 09, and not a result of the crash back then. It was just life happened to evolve us into the dental arena at that point. And it just happened to be that, the more that I learned about the dental industry, learned that dentists are good people, and they work hard, and they just need help running.

 

01:53

their practices from a financial standpoint. And so we kind of worked reverse from the typical CPA firm out there. And that’s because we looked at the processes and tried to work backwards to figure out how can we make the working relationship easier with the dentists, uh, all across the country and still be able to provide the, the, uh, the financials in a timely manner.

 

02:21

be proactive from a tax perspective. And then from a team aspect, to be able to help every members of whoever the dentist team, whether that’s a financial planner, practice management consultant, the attorneys, whoever else is involved in a lot of the decisions and being proactive from their line of services.

 

02:44

stems from where a good clear and timely overhead or the financial profit loss and the balance sheet statements. And so we kind of worked backwards of how can we solve these problems for the dental community instead of, hey, we’ve got a lot of dental clients and we’re gonna say with it, we’re a dental CPA firm right now. Excellent. Does that make sense? Complete sense. Sometimes, right, we want to movies.

 

03:13

like talking about your origin story, it’s not always, you know, how we imagine it, but it, you know, you roll with it and it works out where there’s a need and you solve it. Well, there’s a need to not pay more taxes than you have to. And I remember we were talking about this the other day, and you gave this beautiful framework in terms of tax savings and just running your business. And I love to hear about it, three, four, five points, whatever it is, let’s hear those those tax savings.

 

03:42

Absolutely. And keep in mind, these are some ideas that may or may not fit whatever is going on in your practice. You may lease or you may own the real estate. That’s some opportunities. You may have kids, you may not. And so a lot of these are just some general ideas that we see a lot of our clients take advantage of. And so just wanted to communicate with you, Alex, and your friends here on the podcast.

 

04:11

But, you know, it really does get back to where is the financials and where is a good clear picture of where your overhead is. And so in order to implement any of these, you obviously need the cash in order to deploy some of these strategies. And so definitely just trying to, um, to bring some, uh, bring some ideas to the table, but it’s also what can you afford? And so that’s where it comes into the accounting.

 

04:40

process is, you know, that’s, that’s really very important. That’s going to drive a lot of our decisions, but, um, you know, to, to get into some of the ideas is one is the cleanest and easiest is retirement plan. And so the, what that means for everybody is a little different, right? Whether you have a, uh, an organized or a structured plan in place in the practice.

 

05:04

If not, then you can still contribute to the Roth IRA, traditional IRA, and so forth. Once you get into the group plans within the practice, that’s where you get into either a simple IRA, and that’s with up to a 3% match. And the other alternative would be a 401k, where now your deferral limits increase significantly, and you’ve got a lot more room for creative retirement plan strategies to be implemented.

 

05:34

Um, uh, one is the profit sharing plan. So we always explain the 401k as kind of there’s three buckets. One is the deferrals. One is either the match or the safe Harbor. And then the third is the profit sharing plan. Now, keep in mind, there’s a lot of other bells and whistles that you can attach to those. And that’s why the 401k can be very creative and very, um, beneficial for the practice owners.

 

06:00

There’s one thing that’s called even a cash balance plan that is essentially a pension plan piggybacked off of the 401k plan. Um, but again, you’ve got to have high profits and high cash flow, uh, in order to, uh, to make those happen or, or on the, even on the flip side, uh, just control your living and be able to, uh, to be able to afford some of these strategies, um, uh, uh, outside of your just normal living expenses.

 

06:27

And so, you know, one would be the retirement plan. Like I said, cleanest and easiest. It’s a no-brainer. Right. And, and keep in mind, it’s going to be a few thousand dollars, but that’s where it can, it makes sense, I guess, at the end of the day. If you’re talking about in managing the 401k. So you’re talking about? Yeah, you have to have a TPA or a third party administrator, and they’re basically going to report.

 

06:54

All of the deferrals, everything, all of the details to the IRS for each year. So it’s kind of like a tax return, but specifically to a 401k and it’s to the IRS. And then you have to have somebody that’s what’s called a fiduciary, uh, in there as well, and somebody to manage that money. So there’s, like I said, there’s a little bit more complexity, uh, but it can be definitely beneficial. Yeah. I think there’s kind of the stages, like you start with your Roth, then you start with, and you.

 

07:24

you can’t do Roth, then you can do a backdoor Roth, which you still could do. And then moving up to if you is a 401k, where you can defer and then your company can provide contributions, and you need some sort of administration as you’re talking about to do that, which is a great way of maximizing your retirement. Like you said, you can go further and you have pension situations, but there’s a certain limit though that you can go to. That’s step one is maximize any.

 

07:52

retirement benefits the government allows you with respect to that. And I think what’s nice about you as well as looking at that and trying to keep the cost down with respect to administrators because some of them are more expensive than others and we don’t want to spend more than we have to. Right? Right. For sure. You know, and sometimes you do get what you pay for though. So there is a cheaper, I don’t know, let’s just say.

 

08:22

Um, you know, button buttoned up approach and it’s really a, just a template. Uh, well that may or may not work in some regards, but you know, if I, I prefer to spend a little bit more money and have that plan customized for you. And so that I think that, you know, spending a couple of thousand dollars up front will definitely yield better results down the road and it’s going to pay off, but that makes every situation is a little different. And it’s interesting. A lot of those plans.

 

08:51

the ones that are less expensive, there’s less you can do with them and you may not apply like if you have employees, these simple 401k’s and so on, if you have multiple employees in your business with most entities do, those won’t work. So you’re gonna have to get one that has administration and so on. It’s gonna cost more money. But again, you pay it for yourself or you pay to the government. That’s your choice. Okay, so that’s pretty straight

 

09:19

Staff tax or the income tax. Right. You’re going to get to some somewhere. So, okay. Uh, so 401k that’s one bucket in retirement. Yeah. And then, you know, even then this kind of start sparks different conversations of what is the ideal W2. And so this is where, you know, the difference between crossroads, tax advisors, and I mean, you can find a bookkeeper and a tax preparer anywhere. Right. But what we try to do is take a more holistic.

 

09:49

approach and consider things that you should. So, you know, for example, we see a lot of W-2s be very low because if you’re an S corporation, you have to check the box with a reasonable compensation. The lower your W-2 is, the more that you save on payroll taxes. No doubt about it, right? Right. But it’s kind of inverse relationship with the retirement plan. The higher the W-2 will typically yield better retirement plan results.

 

10:16

So we have to kind of weigh what is because you have to have a certain W two to allow you to max out right before a one K. You can’t be too limited. Right. Yeah. So there’s there’s kind of a sweet spot and you can go anywhere from, you know, the whatever the bottom of the barrel is, you know, the basement of that W two up to a limit that is set by the IRS. It’s every year. So for 2024 that number.

 

10:42

is 200. We have a caller. Let’s see. Any questions? Hey, we’re doing, we’re doing Facebook live and LinkedIn live and, and, and so on. So we had to get a caller come in. But we’re, we’re busy right now. We’ll answer that later. Go ahead. I thought I had all the phones on, on, they’re streaming. They have a question. So, and so, you know, that strategy, if, if there’s a, if there’s a CPA that is taking, you know, just a myopic look, if

 

11:10

my value is to save payroll taxes to you. Well, then I’m gonna bring that W-2 very low. Like I said, we take more of a holistic approach and big picture that’s yes, and we’re gonna help quantify that, right? So if you bump your salary up to $345,000, you’re going to pay X amount of payroll taxes versus this is the benefit that you get. And so, like I said, we’re just trying to make it easy to understand, educate our clients, what’s best for you.

 

11:39

And if retirement plan savings is high up there, like I said, it’s one of the cleanest and easiest ways, um, to, uh, to save on taxes. I should say defer on taxes because you’re, you’re eventually going to pay those taxes. It’s just a matter of doing the, if you’re doing the pre-tax, uh, method and some can do, I think with 401k, you can also do the Roth method where you pay it now and then, which that always hurts, but that can be done too. Got it. Yes. Great point. And so.

 

12:07

But like I said, we work very closely with the TPAs, with the retirement, or the financial advisors to try to figure out what’s going to be the best scenario given what the cashflow is from the practice and given what the goals are for the client. So, like I said, these are just some of the ideas that we come up with. Another one is kids on payroll. That’s a super easy one. If you have kids to shift.

 

12:36

money from your high tax bracket down to theirs, which is zero up to $14,000, whatever the standard deduction is for that year. Okay. This year it’s $14,000. And, um, you know, a lot of times we’ll have some, some folks come in and, Hey, well, I had a kid last year. He’s, you know, he’s one or two years old now. Can we put him on payroll? Like, well, that’s, that’s, that’s kind of pushing it. The balance. Yeah. Right. So this is a question of where, where, how aggressive do you want to be?

 

13:06

And so, you know, we had one client put a six year old on payroll. And so we got a call from the department of labor asking for their job description, right? And so, um, you know, like I said, it’s, it’s kind of how aggressive and there’s also child labor laws you have to look at in terms of your state and what the, what the expectation is. So, and what I like, what I hear you saying, which is nice is you’re going to customize it’s like also as you, um, invest in.

 

13:34

the stock market or so on, you’re going to have a certain level of aggression or conservative perspective and your advisor is going to have to work with you within the realm of it. So there’s no one way of doing it, but you’re right. I mean, that’s cool. So you can go up to the standard deduction. So they’re not really paying taxes per se, much of it, but you can jump that into, who would you put that for the child that money will go into their Roth IRA or something like that?

 

14:01

Okay. Yeah, that was a, that’s a great point, Alex. And kind of step one is to put them on payroll. But then now that opens up the door for opportunities for them to start contributing to the Roth because you have to have earned income in order to contribute to a Roth. And so then now putting them on payroll, it does kind of do some double duty and it’s, it shifts and come down to zero, but then it also opens that door for opportunity.

 

14:27

And this is just building wealth at the end of the day. But, but it’s also assuming that the cashflow, uh, from the practice and at home permits that. So, and I like what you said earlier, we kind of glossed over it. It can be a whole nother topic is living below your means and being mindful of what you spend, because what is the, is it, is it Parkinson’s law or is it another law, maybe it’s Parkinson’s law that as you make more money, your expenses grow to that amount that you make. And so we have to be mindful of it.

 

14:56

in terms of when we unleash more spending with respect to that. So wealth is not just making money, it’s also saving money or not spending money. Alright, so the second is consider your child as well as a for their own income. And just be mindful of child labor laws with respect to that because you don’t want to get a call like what is a six year old doing? Very, very well done. Alright, so what’s our what’s our third?

 

15:24

Chris and it’s we’ve we’ve got a lot of calls for this this year for some reason is just called the Augusta rule and Nothing new. It’s been around I believe since the 70s. And so basically what that does is allow you to quote unquote rent your house for up to 14 days rent free. And so, you know, obviously, you know, you’re starting to go to change to change right? Rent your house 14 days rent free.

 

15:52

Yes, you can rent, uh, and, and this stems from, uh, you know, Augusta, Georgia, where they would have the masters there and people would rent their house out and the, the tournament was only, you know, a week long ish. And, uh, so that’s where kind of the 14 days comes in the IRS says you can rent out your primary or vacation home. Um, and this includes, I guess, boats and motor, uh, motor, uh, motor homes too, if that can qualify as a, as a vacation home.

 

16:19

Um, it has to have a sink and has to have restroom facility in order to qualify for that, but, um, I got off on a tangent here, Alex. So the, uh, but it’s mainly your primary home. And so why, what, what, what are some of the things that you could do, uh, to quote unquote, rent out your house? And if, if you are having staff meetings at your house, that’s one, you could have a board of directors meeting at your house. Um, and so let, you know, if your spouse and your kids now are on payroll,

 

16:48

Well, that increases the quote unquote team members that are attending. Right. And so the, how you go about it now is that you have to justify whatever the cost is. We can’t just say, well, my house is, I rent it out for $25,000 a day. I mean, everybody would like to do that, but we, you know, in case of an audit, you know, this is where we want to have some support now, a little bit of

 

17:17

Is go on a holiday weekend. So we’ve got 4th of July coming up here soon. Okay. Go to Airbnb. And when the, the, the prices for homes in your area are peaked and try to get, you know, get a snapshot of what a home comparable to yours would be in a holiday weekend, now you’ve got a little bit of a higher baseline. And so let’s say, say that that’s $1,500 a night. Let’s say, let’s just say, um, and so then now you can do 1500 times up to 14.

 

17:45

So there’s 12 months in a year, let’s say that you do it monthly. Uh, and so there’s 12, uh, you know, one, one staff meeting per month at your house for $1,500, uh, per night. Is this different? Is this different than just writing off a percentage of your house for home office? Yes. Yeah, this is different because, um, now your home office, uh, which is, it’s difficult for dentists to do that. I’m saying entrepreneurs that have.

 

18:13

Now, if you are a dentist and you have a second business as an entrepreneurial business, speaking, consulting and so on, then you could rent a part of your house for that business. So you’re saying in addition, we can or if you don’t have that capability, you’re saying 14 total days in a year that you can get market rate for the day and saying that your business, this is off your personal taxes, right? Is what you’re saying? So you’re correct.

 

18:41

What does this mean? You’re getting income. So it’s expense from your dental business or your entrepreneurial business and to the person. And then so you it’s income to you. Right? Right. And expense off the business. Correct. And it’s tax free for tax free. Yes, I like to hear that. Wow. You just paid you just paid for yourself right there. It’s a you see you get what you pay for.

 

19:09

It’s no different than if you were to host this staff meeting at a, I don’t know, a local, a local, uh, or I guess, uh, what’s the word I’m looking at? So just someplace to a restaurant or whatever, like you’re going to rent a room, uh, you’re going to rent a venue. Well, this is no different than you’re just renting a house as the venue. You’re saying you’re having a meeting for your team or some officers of the team yourself and maybe a spouse, you know, something that’s being done. Very, very.

 

19:38

clever Chris Wow, that’s cool. Yeah. And so I don’t like I said this is it we’ve had a lot of folks, you know, asking about this and, and like I said, it’s nothing new. It’s just that I guess people are new. I’ve never heard of it. I mean, it’s, I mean, it’s not new, but you are able to think it’s outside the box. It’s it’s very, wow, very, very interesting. Augusta, remember the master’s rule.

 

20:07

Okay. To renting out your house. Very, very interesting. For sure. So we’ve got a plan. We’ve got kids, we’ve got the Augusta rule and then, uh, the, uh, probably the fourth one is it’s, so it’s called PTE or they pass through entity tax. And that is potentially going to be off the table next year of 2025. So if we go, if we roll back the calendar a few years and that’s where the, uh, the salt or.

 

20:37

sales and local taxes were limited on your personal tax return. So, uh, to $10,000. So any real estate taxes, state income taxes, personal property taxes, all of that was limited to $10,000. And so for most of our clients, they put well in excess of that, uh, just on their income taxes alone, uh, much less you add in real estate taxes and so forth. So the States have come up with a way to combat that now.

 

21:06

but it has to be what’s called a pass-through entity. So S corporation or a partnership. So if you are a single member LLC operating as a sole proprietor, there’s no pass-through. If it’s a C corp, there’s nothing to pass through. So it’s S corporation and a partnership are considered pass-through. And what this does is basically your estimated quarterly taxes.

 

21:32

now would be, which would normally be paid on a quarterly basis to the state. Now that’s paid by the practice to the states. So it’s a deduction on your, on your practice financials and your practice tax return, but it’s essentially state, um, a state, uh, taxes paid on your behalf. Now, Alex, you in Florida, you don’t have to, uh, you don’t have to worry about this, right? Uh, but there’s a lot of other States out there that do have to worry about it. And so

 

22:02

the pass-through entity tax is a percent of the income at the end of the day. And then it will allow you to essentially pay taxes for your shareholders, which in most cases is 100% toward, you know, for our client, the dentist. Does that make sense? It does. All right. Like I said, it could be something that is going to go away next year, which is if it’s the salt limitations are set.

 

22:29

currently going to sunset the end of 2025. So as everybody knows, there’s an election going on this year. Who knows what’s going to happen with whoever wins it, right? And so this is all subject to change. But this is the 2024 tax tips from Chris over a crossroads. And then 2025, we’ll find out what else we got in store. Yes, sir. No federal income tax. That was one that was proposed. Yeah, I’d love to see that.

 

22:59

So, and then lastly, for anybody that owns the real estate out there, which, you know, we’ve kind of 50-50 on who owns real estate, who doesn’t. But if you do, then now you have the opportunity for what’s called a cost segregation study. And basically, that is going to break out all of the building into smaller components, which are typically going to be depreciated over shorter lives.

 

23:27

So right now your building is depreciating at 39 years, most likely. And so that is going to break it down into five, seven, 10, 15 year property, which is then now subject to section 179 and or bonus benefits. So it can be very lucrative or beneficial for anybody, especially if you are going through any type of renovation. And, you know, kind of my,

 

23:56

breakeven is about $300,000 for renovation. And so, because it does cost more money to hire a engineer and CPA firm in order to do this, we don’t do this in-house either, just because it’s such a specialty and it takes site studies. And it’s, I mean, it’s a 20, 30 page document that if audited, the IRS will want that in order to prove, hey,

 

24:23

you spent half a million dollars here and now you’re going to recognize all of this depreciation, we want to make sure that everything is legit. And so that’s why it’s important to hire a cost segregation firm in order to do that in order to pass an audit. But I could talk some numbers, but it’s kind of tough to talk numbers, I guess, over a podcast or a video like this and without some kind of illustrations.

 

24:52

It can be very lucrative, beneficial for property owners. I have to say, of all the accountants and tax people that I’ve met, I’ve never met a more creative mind than you, Chris. I mean, very creative and ethical. I’ve met some people that are a little off the chain, ethical, but you have a great reputation in dentistry, very ethical and some great ideas. For those, the listeners that want to learn more about you and your services, please do

 

25:22

How do they reach out to you? Yes. Um, so you can just text our mainline. Uh, it’s info at crossroads tax.com or our mainline is Eric code 3 1 7 8 8 4 3 1 3 6 and just for ask, uh, ask for Jason, he’s, is our director of business development, um, his specific, or I guess direct email to is Jason J S O N at crossroads tax.com.

 

25:51

And for all of our friends at All-Star Dental, we do offer a complimentary dental checkup, so to speak, dental CPA checkup. And so we will just take a look at what your current processes are and taxes and see if there’s any recommendations. And so, you know, we are we just like to help the dental community. And if this helps you sleep at night knowing that you’re checking all the boxes. Awesome. We want you to walk away from that experience saying.

 

26:20

You know either yes or no that crossroads is a good fit We want you to walk away with that being very valuable for a tool for you and walk away with some good ideas And you specialize in dentistry, but anybody you can help Yes, any entrepreneur in the healthcare within the health care in health care is your specialty because we have a lot of entrepreneurs and Medical doctors as well that follow us all over so excellent. Thank you. Chris quadros crossroads tax advisors

 

26:50

And thank everybody for joining us live. We did some live and as well as listening to the podcast afterwards. Remember to follow us on Apple podcasts, Spotify, and YouTube, get the episodes as they are released, share with your friends. And until next time, go out there and be an All-Star.

 

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