Dr. Ian Shuman's "The Ugly Duckling" (Dental Economics, October) is a landmark article. It is rare that articles in any journal include step-by-step technique alongside fresh, even revolutionary, practice-management thinking. Dr Shuman is changing the way we think about dentures, and the patient is the ultimate beneficiary.
Kudos, Dental Economics!
Patrick Wahl, DMD, MBA
Wilmington, Del.
One man can make a difference
Dr. Hsiang, you are my newest hero. Thank you for your positive stand. (See the "Viewpoint" in the September 2002 issue of Dental Economics.) You've assumed a leadership role avoided by "leaders" in organized dentistry and our universities.
We both know the full extent of compromises in patient care by mainstream dentistry, designed to accommodate the insurance industry. We've seen the results of oral rehabs, with $49-per-unit, off-shore dental labs. We've seen full crowns totally replace what should be tooth-conserving onlays. We've seen small-to-moderate carious lesions placed on a "watch" status, since the PPO fee schedule doesn't pay enough, until a cheap endo and cheap crown results. Heck, we've seen dentists skip this supervised neglect, and aggressively proceed directly to full-crown coverage.
Some may call you elitist or unrealistic. I view you as an honorable man within a profession in the midst of moral and ethical crisis. One man can make a difference.
Michael W. Davis, DDS
Albuquerque, N.M.
A summary of IRS Section 179
Dec. 31, 2002, is coming up on us more quickly than you think!
Under IRS Section 179, equipment purchases, up to $24,000, can be expensed (deducted from taxable income) if installed by Dec. 31. Finance leases qualify for this deduction in their year of inception.
The Job Creation and Workers Assistance Act of 2002 was signed into law in March of this year to serve as a stimulus bill to our economy. This is essentially a temporary 30 percent depreciation bonus. We are now entitled to an additional first-year depreciation deduction equal to 30 percent of the adjusted basis of qualified property (equipment). This 30 percent bonus depreciation is allowable for regular and alternative minimum tax (AMT) purposes for the tax year in which the property is installed. Property eligible for this treatment includes the following:
• Property with a recovery period of 20 years or less; i.e., dental equipment
• Non-IRC Section 197 computer software
• Qualified leasehold improvements
Property must be acquired after Sept. 10, 2001, and before Sept. 11, 2004. Since this applies to property placed in service after Sept. 10, 2001, you may qualify for the bonus depreciation on your 2001 tax return. You may want to consider amending your 2001 return.
Let's look at a simple example: You purchase $100,000 worth of equipment for an investment of $100,000 —
• Section 179 benefit: $24,000
• 30 percent bonus of what is left ($76,000): $22,800
• The regular MACRS (five-year) depreciation on what is left ($53,200): $10,640
• Your total first year depreciation: $57,440
This tax savings is quite significant. If you are considering making any capital improvements to your office — such as digital radiography, imaging software, dental equipment, or more — this may be an excellent time to move on this plan. Consult with your accountant before making any final decisions.
The Economic Growth and Tax Relief Reconciliation Act of 2001 has increased pension limits, allows for new contribution opportunities, and may now give you more flexibility with your plans. Here are some of its highlights:
1 Increase in 401(k) salary-deferral limits: This increases to $11,000 in 2002 and then $1,000 a year until $15,000 in 2006, and then indexed in $500 increments.
2 Increase in Simple plan salary-deferral limits: This will increase to $7,000 in 2002, then $1,000 a year until $10,000 in 2005, and then indexed in $500 increments.
3 Increase in defined contribution limit: This will increase the limit to the lesser of $40,000 or 100 percent of compensation in 2002. This $40,000 limit will then be indexed in $1,000 increments.
4 Increase in maximum contribution limit: This will increase the maximum amount of compensation that can be used when allocating contributions to $200,000 in 2002 and then indexed in $5,000 increments.
5 Catch-up contributions: Participants age 50 and older can make additional salary-deferral contributions up to $1,000 beginning in 2002, then increased each year by $1,000 until $5,000 in 2006, and then indexed in $500 increments. These contributions are exempt from nondiscrimination testing. These amounts do not count against the overall contribution limit or deduction limit. Catch-up amounts will be half of the above amounts for simple plans.
6 Expansion of plan loan availability: Plan loans are allowed for sole proprietors, partners, and subchapter S shareholders beginning in 2002.
7 Increase in profit sharing deduction limit: Increases the limit to 25 percent of total aggregate plan compensation beginning in 2002.
8 Salary deferrals and deduction limit: Salary-deferral amounts will be excluded from the deduction limit beginning in 2002. The definition of compensation used for deduction purposes will include salary-deferral amounts.
9 Safe harbor match and top heavy contribution: The safe harbor matching contribution will be considered to satisfy the top heavy contribution requirement if no other employer contributions are made to the plan. Also, matching contributions may be applied to meet the top heavy minimum contribution requirement.
10 Tax credit for start-up costs of new small-business retirement plan: Allows a small business (less than 100 employees) an annual credit of up to 50 percent on up to $1,000 of administrative costs for the first three years of a new plan. This does not apply if the employer had a plan during any of the last three years. It only applies if the employer had at least one non-highly compensated employee benefiting under the plan.
11 Increased portability: Permits rollovers from various types of employer-based retirement plans and IRAs without restriction beginning in 2002. After-tax contributions can be included in an eligible rollover distribution to a qualified plan or an IRA.
12 Multiple-use test repealed: Employers with 401(k) plans with matching contributions will no longer have to worry about passing this test beginning in 2002.
13 IRS user fee waived: The normal determination letter request fee of $125 for nonstandardized plans with less than 100 employees will be waived beginning with requests received after Dec. 31, 2001. This only applies to the first five years a plan is in existence.
14 Creation of Roth 401(k) accounts: Beginning in 2006, participants can have their salary-deferral amounts taxed upfront and withdraw these amounts tax-free if withdrawal is considered a qualified withdrawal (generally need to be over age 591/2 and these amounts are in the plan for more than five years).
15 Involuntary cash outs between $1,000 and $,5000: These amounts will have to be automatically rolled over to an IRA unless the participant affirmatively elects to receive the amount in cash or directs the amount to be rolled over to another plan or IRA. The Department of Labor is directed to issue regulations on safe harbor investments for these amounts.
16 Increase in IRA contribution limit: Will increase to $3,000 in 2002 through 2004, $4,000 in 2005 through 2007, and $5,000 in 2008, and then indexed thereafter in $500 increments.
Again, consult with your accountant before making any changes.
Jeffrey B. Dalin, DDS, FACD, FAGD, FICD
St. Louis, Mo.
