Top Tax Challenges Every Dentist Should Be Aware Of
Running a dental practice is deeply rewarding — clean smiles, happy patients, and that satisfying whirr of a well-oiled drill. But when it comes to taxes? It’s less smiles, more spreadsheets and panic googling “Is dental floss a deductible?” (Spoiler: no.)
Fear not, brave molar master. We’re diving into the top tax challenges dentists face — and exactly how to tackle them without needing an emergency root canal for your finances.
1. Employee vs. Contractor Classification: The IRS Identity Crisis
Think you can just call your hygienist a “contractor” because it’s easier? The IRS disagrees — and they’ve got penalties to prove it. Misclassifying workers is one of the biggest tax traps out there.
Stay on the Safe Side:
- Understand IRS rules: It’s all about behavioral control, financial control, and the relationship structure.
- Talk to a tax expert: Seriously. One wrong call could cost thousands in back taxes and penalties.
- Keep airtight documentation: Job descriptions, agreements, timelines — have your paper trail ready.
2. Missed Deductions & Credits: Money Left on the Tray
You’re probably overpaying your taxes. Why? Because most dental professionals aren’t claiming all the juicy deductions available to them. We’re talking equipment, CE courses, even scrubs.
Sniff Out Every Savings Opportunity:
- Track everything: Supplies, lab fees, marketing costs — if it keeps the practice running, write it down.
- Use a dental-savvy CPA: Generic tax folks won’t know what you’re eligible for. Get a specialist.
- Keep up with IRS updates: What’s deductible this year might not be next year. Tax laws change faster than dental trends.
3. State & Local Tax Laws: The Map of Mayhem
Sales tax? Maybe. Property tax? Probably. Weird municipal business licenses? Oh, definitely. Every state — and city — has its own rules, and ignoring them can lead to ugly surprises.
Keep It Local (and Legal):
- Research your region: Don’t assume anything. Know what your city, county, and state expect from you.
- Hire local tax advisors: They’ve seen it all, from tax code loopholes to township-specific nonsense.
- Watch for law changes: Especially during election years. New taxes = new problems.
4. Retirement Contributions: The Underrated Power Move
Your retirement plan isn’t just about future-you sipping Mai Tais on a beach. It’s also a tax-saving machine. Yet many dentists underutilize it — or worse, don’t have one.
Secure the Bag (and the Breaks):
- Explore options: SEP IRAs, Solo 401(k)s, SIMPLE IRAs — pick your fighter.
- Talk to a financial advisor: Get a plan tailored to your income, staff size, and goals.
- Contribute early: The sooner you fund it, the more you (legally) dodge Uncle Sam’s grip.
5. Estimated Tax Payments: The Quarterly Gut-Punch
If you own your practice or file as a sole proprietor, you’ve got to pay the IRS *before* April. Quarterly estimated tax payments are required — and missing one? That’s penalty city.
Make It Painless (ish):
- Use IRS Form 1040-ES: It’ll give you a ballpark number to aim for based on your income projections.
- Budget ahead: Set aside a portion of revenue monthly. Don’t get caught short in Q4.
- Get professional oversight: Especially if your income fluctuates. Let someone else crunch the numbers.
6. IRS Compliance: The Audit Monster Lurks
The IRS doesn’t need a reason to knock on your door. But if your records are messy or you’ve skipped a few best practices? You’re putting out an audit welcome mat.
Stay Audit-Proof (or Close Enough):
- Know the rules: Income reporting, documentation retention, expense categorization — master the basics.
- Run internal audits: Check your own books before someone else does. Fix errors early.
- Work with experts: A CPA who specializes in dental tax strategy is worth their weight in stress relief.
How Altrust Services Can Help
Tax strategy doesn’t have to feel like pulling teeth. That’s where Altrust Services comes in. They specialize in tax compliance and planning for dental practices — from classification cleanups to identifying overlooked deductions to making sure your estimated taxes are on point.
With Altrust in your corner, your financials aren’t just compliant — they’re optimized. That means more confidence, fewer penalties, and yes, more money for things like upgraded equipment or finally taking a vacation.
Conclusion: Taxes Don’t Have to Hurt
Let’s face it — taxes are never going to be fun. But they don’t have to be a disaster either. By tackling key areas like worker classification, deduction hunting, retirement contributions, and staying on top of compliance, you can turn tax season from a stress-fest into a strategic win.
Want expert help to do it right? Contact Altrust Services and take your financial strategy from chaotic to confident. Your future self (and your accountant) will thank you.