This week, on the Dr. Marketing Tips podcast, Corey sits down with tax expert Dalia Cantor, CPA, CVA, president and founder of CPA Solutions, to run through common questions from medical practice owners and administrators regarding taxes and finances. 

Check out the full interview with Corey and Dalia in this extended episode. If you have a question not addressed here, DM us on Twitter @drmarketingtips, and we’ll do our best to get it answered for you.

Tune in to discover: 

• Tax changes in 2020 practices need to be aware of 
• Common tax deductions often missed by practice leadership 
• Financial and tax planning tips for physicians approaching retirement 
• Benefit packages currently being offered to new physicians
• Frequent pitfalls and challenges for practices in the startup, growth, or acquisition phase

Transcript Notes

Speaker: Dr. Marketing Tips, paging Dr. Marketing Tips, Dr. Marketing Tips you’re needed in the marketing department.

Speaker: Welcome to the Dr Marketing Tips podcast. Your prescription to the answers you seek to grow your medical practice easier, better, and faster. This show is all about connecting practice administrators and medical marketing professionals with peers, working in practices, learning from experiences, making mistakes, and sharing successes. Let’s get started.

Corey: Hello and welcome to the Dr. Marketing Tips Podcast. I’m Corey, one of your hosts and with me today is a very special guest to talk about taxes and your medical practice. So with me today is Dalia Cantor. She’s a CPA and founder of CPA solutions. Welcome Dalia.

Dalia Cantor: Thank you Corey. I’m glad to be here.

Corey: And we’re happy to have you. So for those of you that don’t know, Dalia has been practicing as an accountant and a tax advisor since 1997 and she’s a certified public accountant in the States of Florida and New York, and a member of both the American Institute and Florida Institute of Certified Public Accountants. CPA Solutions has been around since 2008. Like I said, for today’s episode, we’re going to run through some common questions that Dalia and her team of experts hear from medical practice owners and administrators when it comes to taxes and finances. So that said, Dalia, are you ready to go?

Dalia Cantor: I’m ready when you Are Corey.

Corey: All right, so first question, what tax changes in 2020 should practices be aware of?

Dalia Cantor: So there’s really no tax changes in 2020. However, with the big business tax changes that occurred at the end of 2017, and was first in effect 2018, there’s a lot of tax planning opportunities and adoption of the new tax laws that are being carried over in this year. One particularly, the qualified business income deduction for pass-through entities such as S-corps and partnerships, you can take a 20% deduction. However, for medical practices, this is going to be limited because it’s considered to be a service type business such as health providers. The deduction is actually limited based on the individual income, which phases out at 321,000 for married filing, joint taxpayers. But there is still some smaller practices that fall under this bracket where they can utilize this 20% deduction.

Dalia Cantor: Also, a lot of businesses, particularly physicians that own their own buildings and therefore have a different type of activity. They have a real estate activity. That real estate business can actually really benefit from this QBI 20% deduction. So, in essence you pay taxes on 80% of the profits versus a hundred. The other thing to utilize in 2020 is definitely a bonus depreciation, which is a hundred percent deductibility of medical equipment or any office furniture. Also bonus depreciation, excuse me, qualified to leasehold improvements. A lot of practices kind of get confused because they think that if they finance the equipment, they can’t take a deduction. That is not true. Even if you finance the equipment 100%, you can still take 100% tax deduction. And then of course increased retirement plan contribution, so, 401K limit for people under 30 years old is 19,500. So, I always encourage to maximize those deductions as well.

Corey: Awesome. And, as you’re working with these practices, is there common deductions that leadership may miss or may not be aware of?

Dalia Cantor: It still amazes me that not every medical practice will utilize retirement savings and deferral. Because 401K plan, it doesn’t cost a lot of money for the practice, even with the 4% safe harbor. It really gives two benefits. One is the tax deferral and maximization for the owners, but also gives a great incentive for the employees, for the retention of talent.

Dalia Cantor: Another thing that some medical practices are not utilizing fully is travel and automobile deductions. Even though the vehicles are in their personal name, if it’s being used for business, the deduction can be taken. Some of the home office expenses that can be deducted. And from home office, I don’t really mean that you have a particular space in your home to use for business that you could take as a home office per se. This is also available, but it’s a very small portion of it. But there is an IRS rule that if you rent your home for less than 14 days a year, you actually can take a deduction on a business and not declare rental income. So, for instance, if you hold your shareholder’s meeting or your partners’ meeting at your home, you can actually charge rent from your corporation.

Corey: Interesting.

Dalia Cantor: Yeah. This is not something that everybody is aware of, and it’s surprising. And it could add up to some nice tax saving.

Corey: Yeah. And it’s noteworthy too about the vehicles because we work with a lot of practices and we know that the physicians and some of their teams and whatnot, they’re traveling all over the place just going from office to office. And that does seem like a common one that would get missed.

Dalia Cantor: Yeah. So not always. Sometimes you have to talk to a tax advisor to see what gives you a better deduction, whether it’s using a standard mileage, which is 58 cents a mile, or to use an actual lease expense, or gas. And when you use a standard deduction for mileage, you can still, deduct tolls and parking as a separate deduction. It’s not part of the standard.

Corey: Yeah, absolutely. And one thing that we started to touch on there, I want to expand on a little bit, is planning for a retiring physician. So as we know, as physicians start to age and retire out, is there anything that a practice should plan for, let’s say, even a couple of years before this happens? So, they know that they’ve hired some younger guys that are going to come up and replace them, but from a financial and a tax planning standpoint, is there something that they can do when they know that they’ve got a retirement around the corner?

Dalia Cantor: Oh, absolutely. And, I’ve been seeing this, and experienced this in the last few years. We have the baby boomer generation either retiring or taking more time off. The biggest challenge for practices is if the managing partner, so to speak, or managing physician is retiring and they have not strategized of who’s going to be in control of administration and financing overall, from a CEO perspective. So that’s very important to line up the rest of the doctors and pick out the leadership going forward.

Dalia Cantor: From a financial and tax point of view, it is important to be aware of the retiring person’s tax situation because, depending on their age, they might be already getting social security and the required minimum distribution, in some cases. And then when you’re adding salary to it, it becomes very expensive from the tax side. So a lot of planning comes into effect. Depending if you get a new physician for replacement, it could definitely hurt the bottom line of the practice, you know, poor period of time.

Corey: And is there a specific time range when someone should start to plan for these retiring physicians or is it a case by case basis kind of thing?

Dalia Cantor: It is case by case, but we usually look at probably two years. So, especially if there’s a new physician coming on board. Obviously, as you know, the recruiting happens way ahead of time. When the residency is finished in June, July, usually by the end of the year you’ll already reach out to the residency programs to recruit physicians. And again, two years is where I’ve seen a lot of practices start to plan because they have to also plan, if there’s a new physician coming on board, will there be enough patients to share for every one? If there’s no new physician, who’s going to be taking the load? If there are also hospital calls, who’s going to, who’s going to man those hours? So a lot of planning, probably more operational than financial. But again, if there’s a succession of the practice, then a lot of financial things come into play as well.

Corey: Yeah, absolutely. And, I guess the flip side of that previous question about physicians that are retiring is when you’re bringing on new physicians and you’re going through that recruitment process like we were just talking about, what kind of benefit packages are you seeing offered to new physicians?

Dalia Cantor: So definitely high is salaries than in the past. And I think that this is where the biggest challenge for the practice would be, with the older folks, to bring a new doctor who now starting with a base salary higher than theirs. So it’s always that emotional aspect of it. But, when it comes to the whole compensation package, a lot of practices will offer production based bonus, which can vary. Basically the concept is you eat what you kill, but, in the base house still kind of incentivizing the new physicians. Kind of go out there and get the referral sources and get the production up and running as soon as possible. Of course then the CME allowance, malpractice insurance.

Dalia Cantor: And I’ve been seeing a lot of relocation benefits being offered because a lot of, especially in the more rural areas. Where we are, right, let’s say Polk County or Lake County, there’s some nice relocation benefits for folks that are coming out of state because it’s hard to recruit them.

Dalia Cantor: And then you have your general health insurance benefits and long-term disability as well as retirement account savings.

Corey: Yeah, that makes total sense. I mean it’s a little bit of an uphill battle if you’re more in one of those rural type areas when you’re competing against sort of a bigger city. So that does make sense for the practices to do something like that. Is there any sort of change or challenge that you see when they’re, let’s say they’ve got some new physicians, but they’re getting a new partner on board. Does anything change there?

Corey: Hey guys, Corey here, co-host of the Dr. Marketing Tips Podcast, and I wanted to interrupt this episode just for a minute to tell you about Insight Training Solutions. So Insight Training Solutions is an ongoing employee engagement and training platform for your medical practice, meaning employees can log on and take these medical practice specific trainings whenever and wherever they are. And each training is meant to increase employee engagement, improve practice reputation, and develop some patient service mindsets. If we’re being honest, something that we all know, some of the employees may lack, not calling anybody out by name.

Corey: But one of the cool things about Insight Training Solutions is they’re always developing new content, and they just released 10 steps To A Phenomenal Patient Experience, where you’ll learn how to create a phenomenal patient experience, strengthen job security and discover customer service secrets for your entire team. So this course is in addition to the other ones they already have, which include Communication Across Generations and How To Understand Today’s Multi-generational Workforce and How To Develop Overall Patient Experience. This is another course, The New Approach To Customer Service. We’ve also got Eight Ways To Wow Patients and you can sign up for a free trial to see what everything is about at insighttrainingsolutions.io. That’s insighttrainingsolutions.io or just Google Insight Training Solutions. You’ll be glad you did.

Dalia Cantor: I think the mentality changed. We all know that we’re dealing with a different type of generation. So, you can’t achieve that instant gratification with the new doctor coming on board. And not everybody that you would recruit will want to be a partner. And I think that’s the biggest challenge that the practices have is that you hire an employee who does not want to participate in the firm’s administration. So I think that’s the biggest trend that I’m seeing.

Corey: Yeah, that definitely makes sense as well. So this is called the Dr. Marketing Tips Podcast. So I have to ask a marketing question. As we’re going through this. From a marketing perspective, what kind of tax breaks, if any, are there for money spent to grow a practice? We talked a little bit earlier about some of the operations side like furniture and things like that, but what about from like a marketing side?

Dalia Cantor: I think that, in my experience, and I have practices, with the older physicians as well as the younger ones, but more of them are in, I guess the baby boomer generation and I think they undervalue and underestimate the power of social media. And I look at the websites, let’s say I get a new client and I’ll look at their website and some of them are just outdated. [crosstalk]

Corey: Tell me.

Dalia Cantor: They look static and outdated. So I think they would definitely benefit from the social media presence, a stellar website presentation as well. Videos are huge. As much as we, as professionals, hate them because this just makes us very uncomfortable, they work. And then some of these doctors could definitely use these marketing tools because competition just gets worse and worse. And you know, big hospitals, big groups are taking over and they have a very wide budget. But I think if you do smart marketing and targeted demographics and targeted audience, I think they could achieve a lot of new patients and you know, and obviously all the advertising costs are tax deductible.

Dalia Cantor: And the other thing that we’ve been talking about with the physicians now, there was a new tax law, entertainment is not tax deductible anymore. However, there are many ways of entertainment to be tax deductible if you use it for branding purposes. So let’s say if I have seats for a major game, but we find a way to advertise our business and use the same practices name as one of the sponsors or things like that. In that case, it becomes a tax deductible tool. So, I think that physicians in the practice needs to be a little bit more creative of how they blend their business and what they spend on in order to, not only grow the patient base, but also grow their brand and be visible and also get a tax deduction.

Corey: Sure. Yeah. And you’ve got to be able to categorize and track those ROIs as well, which is something that we see from all of our clients. And it’s funny you mentioned the videos a few minutes ago. This morning, I was with a foot and ankle specialist. I was actually seeing him for my foot. And we just got to talking and he was saying how his video has done so much for his practice. He was saying that most of his referrals come from Betty Sue patient and she just sends people to him. But his second most popular referral source, he said, was people watching his videos online and saying, “you know what, he seems like a really nice guy.” And they come and they see him and then they talk about the fact that they watched his video and that’s what made them decide to choose him.

Dalia Cantor: Absolutely. It’s always a trust factor. When you’re dealing with a professional: doctors, accountants, lawyers, there has to be a trust level. So once you kind of feel you know the person, even though it’s through the video, it makes people feel more comfortable. And especially doctors…

Corey: It’s so much easier.

Dalia Cantor: Right. We want to have a caring person. We want to know the person has the skill set and experience that we want. But it’s also, it’s the human factor, right? I mean it’s like any of us will always look. I always search online for any new doctor I’m going to. And I think most people do.

Corey: Oh yeah, for sure. I mean people are looking, they’re going to look for proximity. So how close are they to me? And then are they rated well? So if you’ve got a doctor that’s four and a half stars, that’s right around the corner and he’s got some sort of social media presence or a video or something that makes him seem like he’s a nice guy or girl, then you’re going to say, yep, that’s the one for me. And that’s who you’re booking.

Dalia Cantor: And I think that’s a definitely underutilized area, especially for the older physicians, or even when they’re past, let’s say in their late 40s or 50s, they still have quite a few years left in their career, and if they’re not up to date with their presence in social media, I think it becomes a little bit more difficult to get new patients and to scale their business and grow it, if that’s the goal.

Corey: Yeah, absolutely. I couldn’t agree with you there more. All right, so last question. Speaking of actually growing the business, what are some of the biggest pitfalls that you see for practices in various stages? So that’s either startup or growth or acquisition. What do you see in these different levels?

Dalia Cantor: Startup, the most difficult thing, I believe, for physicians is the business aspect because they just don’t have enough knowledge of what is involved to actually run a business. It’s not just, you open a practice and you go see patients and that’s it. So I think it’s very important for startups to line themselves with the professionals that they need. So, we’re all playing in the same sandbox with bankers, lawyers, insurance people and accountants, right? And these are the four professionals that I suggest for any new starting physician to align with to make sure that they get good advice and how to stay out of trouble, and how to grow.

Dalia Cantor: The growing practices, the biggest problem I’m seeing is they start to grow and it starts to grow so fast that the process starts to break. So they don’t step back and say, “okay, let’s fix what we have and then keep going.” Once you on that growth phase, I know it’s difficult to pause. But I think it’s important to pause in order to be successful where you’re going. Because if you don’t have good internal controls, good processes, billing department is probably the number one pitfall of a lot of these, especially when you have changing systems. So you’re growing your practice and, let’s say you need a little bit more sophisticated EMR, and that’s a process on its own that is very complex and expensive and it’s time consuming. I see practices over and over failing to Excel in this, and then what happens is they grow and they have to retract because they didn’t get the process intact.

Dalia Cantor: Acquisition and growth are kind of similar, standard practices for your staff, for your team, for accounting. Acquisition can be challenging because you get a team with very different morale, with very different personalities, very different habits and that becomes challenging, especially when you have multiple offices. So standardizing all the administrative backend, so to speak, the front office, the billing department, the phone system, IT, EMR, that’s very important. Again, it doesn’t happen overnight. So, my suggestion for the physicians that are in the growth stage and acquisition stage, just pause for a minute and be a little bit more patient and get your process down before you move forward.

Corey: Yeah, absolutely. And to add to that, I agree with everything you just said. And I would say that something that we see a lot is when a practice goes from 10 people to 30 people or 30 people to a hundred people. One, it can really change the culture in a way that things are done there because obviously there’s just more volume, so things have to change. And two, when you’re going from that small sort of intimate group. Like what you were saying, a lot of the processes and the way that things are done, that sort of institutional knowledge, and it’s what the employees know, and it’s not written down and standardized anywhere. So I would agree that it makes total sense at that point to take a step back and then just create all of those documents and processes and everything that you need. Because when that growth does happen, you need to be prepared for that. Wouldn’t you agree?

Dalia Cantor: Absolutely. And I could tell from my own experience in my own business, the first couple of employees, it’s one thing. Then you get over 10, and immediately it changes because now you need levels, now you need management. You have to be able to delegate and put people in charge that can do the job, because you can’t do everything. That’s another challenging situation for doctors, especially if they had been running a small practice and now they’re growing or they merged, they have to let go of some of the responsibilities because they can’t do everything.

Corey: Yeah, that’s definitely a challenge. We deal with that all the time with some of our clients. And some doctors, not all, but some have a little bit of an ego and so they want to have everything their way. And it’s their way or the highway. So as they grow, you’re absolutely right it just doesn’t work like that.

Dalia Cantor: You have to rely on some people, for sure.

Corey: Exactly. Exactly. So we’re just about at a time for today’s episode, but before we go Dalia, if our listeners want to connect with you, how should they go about doing that? Where can they find you?

Dalia Cantor: So they can find me on my website, which is www.mycpasolutions.com. We also have presence on LinkedIn and Twitter and Facebook. And then what is the other one? It was Instagram, that’s the one. You can also call our office number which is 407-650-9088. We have two offices in Orlando, one in Celebration, Florida and one in Avalon Park, which is the East side of Orlando.

Corey: Awesome, yeah.

Dalia Cantor: And we’d love to hear from some of the listeners.

Corey: Awesome. And if you can’t find mycpasolutions.com, and you’re not on any of the Snapchats and the Instagram and the Facebook and the Twitter, just Google and you’ll be able to reach Dalia and her team there. So again, Dalia, thank you so much. I think we really learned a lot.

Dalia Cantor: Well I appreciate you having me in it. It was great.

Corey: Awesome. So thanks everyone for listening to this episode of the Dr. Marketing Tips Podcast and we’ll catch you in the next one.

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