By Larry Goldberg, DDS, CPA, CVA

1. Thinking tax liabilities/refunds can wait until spring
Come the end of the calendar year, you should already be thinking about the following April 15. It is important to schedule end of year meetings with your accountants and financial planners to plan year end tax strategies and to determine how much you may owe. This will allow you to prepare for any liability well in advance. The amount you end up saving on your taxes by planning ahead will more than make up for the cost of your consultants.

2. Ignoring the calendar when making major purchases
If you are planning on making capital improvements to your practice, either by buying new equipment or any other major purchase, make sure you always have tax savings in mind. Purchases made before the end of the year may save you on your spring tax filing. However, if you make a purchase in January or February, you will have to wait more than an entire year to see the tax benefits.

3. Making decisions based solely on tax consequences, not economic consequences
Even though making purchases before the end of the year will save you on your taxes sooner, it is only worthwhile if you actually have the cash flow to afford it! Dentists often apply for loans to purchase the latest, greatest piece of equipment, assuming they are justified by the tax write-off. But, if you don't have the money to pay off the loan in a timely fashion, it will just cost you more in the end. Tax benefits should always be considered secondary to your practice's current cash flow capabilities.

4. Ending the year with outstanding bills
If cash flow permits, always strive to pay off any outstanding bills before the end of the year. This will help maximize your possible tax deductions. If cash flow is tight, as it has a tendency to become for dental practices towards the end of the year, it is always smart to have a line of credit established for short-term cash needs. You never know when that safety net may come in handy. And unlike other expenditures, credit card purchases count towards the tax year in which they were made, not when the bill was paid. So, if you place an order for supplies with a credit card in December 2008, you can wait to pay until the bill arrives in January 2009 and still deduct the expense off your 2008 taxes.

5. Delaying retirement planning
The most important thing to remember about retirement funds is that they need time to grow. The earlier you begin planning for your retirement, the more money you will have to enjoy your retirement when the time comes. Consult with an accountant to ensure you are contributing the most you can afford to a retirement plan that is right for your practice. A healthy retirement fund also equals great tax savings!

Larry Goldberg, DDS, CPA, CVA is a CPA with Glass Jacobson, a Maryland-based accounting, tax, management consulting and financial services firm. Before becoming a CPA, Goldberg practiced dentistry for 17 years, first as an associate then as an owner of a successful private practice. Now, Larry advises other dentists on the best financial strategies to build and run their practices efficiently while increasing profitability and preserving their own wealth. For more information, click here.