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Zaher Fallahi, CPA Since 1983, Dental CPA, Medical CPA, Doctors' CPA

Dental CPA, Physician’s CPA, Doctor's CPA

Zaher Fallahi, CPA, has concentrated on providing tax and accounting services to dentists, physicians and other doctors and small to mid-sized businesses, in Orange County and Los Angeles County, since 1992.

 

Accounting Services and Financial Statements Preparation

Zaher Fallahi, CPA, has provided tax and accounting services to dentists, physicians, other doctors and small to mid-sized business in Los Angeles and Orange Counties since 1992. We prepare and analyze monthly, quarterly, or annual financial statements used for tax preparation purposes.

 

Financial statements are instrumental in yearly tax planning, and are powerful tools in representation of an entity in IRS tax audit, Franchise Tax Board (FTB) tax audit, California Employment Development Department (EDD) tax audit and California Board of Equalization (BOE) tax audit. Financial statements provide the business owner with the peace of mind necessary to concentrate on planning the growth of her or his business.

  

General Tax Planning for Dentists, Physicians and others; Zaher Fallahi, CPA,  Attorney At law

  

Disclaimer: The tax and legal tips contained herein below are for general informational purposes only. They are not intended for, and may not be construed as, rendering tax or legal advice. For your specific situation, please consult us or your tax or legal advisor.

 

General Tax Tips for Doctors and others

1- If you are a sole proprietor MD, DDS or other small to mid-sized business with gross receipts in excess of $100,000 per year, your chance of being audited by the IRS is higher than an average taxpayer. Consult a lawyer for incorporating your practice.

 2- Once incorporated, prepare all business related contracts in the name of your corporation;

 3- Incorporation of a dental or medical practice does not protect you from professional liability or malpractice. These are       actions brought against you by your patients regarding professional services. Maintain malpractice insurance;

 4- Dental or Medical corporations, protect you against general liabilities. This refers to lawsuits brought against you by employees, suppliers and other business related parties, and provided that your incorporation has been done properly, and all formalities are compiled with;

 5- Think of your corporation as a separate legal entity, and all transactions between you and the corporation must be handled under the corporate law;

 6- Do not commingle, to prevent piercing the corporate veil, which means setting aside the corporate shield by court and holding you personally responsible for your corporate debts;

i) Do not pay your personal expenses from your corporation,

ii) Your loan to and loan from the corporation must be memorialized legally handled to comply with the state law and IRS requirements;

iii) Prepare corporate minutes for all major business decisions; and,

iv) Often, doctors find out about deficiencies in their corporations when they are sued or audited.

 6- In purchasing a dental or medical corporation, consider:

 i) Buying the assets rather than the corporation, to avoid any potential pending lawsuits associated with the target practice, unless there is valuable goodwill in the target practice;

ii) Have a thorough due diligence study done by a competent professional before the purchase;

iii) Seek legal advice from a lawyer on drafting the purchase contract,

iv) Consult a tax lawyer for a tax-advantageous allocation of the purchase price among various assets on the escrow papers. It is important to note that this has far-reaching tax effect on your practice; and,

v) Somewhat different procedures may be followed in the sale of your dental or medical practice.

 7- For income tax purposes, consider establishing your practice as an S corporation. An S corporation does not pay the IRS income taxes, and its California state income tax is limited to the greater of $800 a year or 1.5% of the net income.

 8- If you are working in your S corporation, you must be must on the payroll with reasonable amount of compensation;

 9- For an ultimate tax planning, the net income may be divided into the Doctor’s salary and the corporate distribution via K-1. Paying unreasonable salary to shareholder Doctors has been a major IRS audit trigger in the recent years.

 Although, there is no rule of thumb formula for determining a “reasonable salary” for a Doctor, such determination is made by your tax advisors using case laws, the Doctor’s specialty and experience, the net income and other pertinent facts and circumstances.

 10- For years, the IRS has claimed that a Doctor has not paid herself or himself a reasonable amount of salary in an S corporation. And, they have argued that the owner’s compensation in a C corporation was excessive. Each argument may have its own merits and important tax consequences;

 11- Seek advice of CPAs or tax lawyers who has hands on experience in dental and medical fields;

 12- Have your payroll done by your tax preparer CPA firm so that the monitor the reasonableness of your compensation and perform year-round tax planning for you;

 13- Do not classify dentists or physicians working for you as independent contractors without discussing it with your tax attorney or CPA. This misclassification has subjected many doctors and dentists to the IRS and EDD audits, and cost them dearly in taxes, penalties and legal fees;

 14- Generally, auditors extend their audits to three previous years or more. There are numerous statutory determinant factors by which the courts determine proper classification of someone working for you as an independent contractor or an employee.

 There are twenty requirements by the IRS and twenty two requirements by California to make such determination. There are 4-5 major factors used by auditors in conducting their tax audit;

 15- Use services of experienced CPAs in medical and dental fields in preparing your accounting and tax work. Based on our experience in representing doctors and dentists before the IRS, FTB and EDD, this issue has been a major audit trigger for doctors.

 A professionally trained CPA or tax lawyer ensures proper preparation of the underlying financial statements, eliminate many tax audit triggers;

 16- We have noticed that many audited doctors use services of low quality bookkeepers and accounts because of their low fee or free service. The irony is that, most the time, it is the low quality work of those accountants or bookkeepers that caused the tax audit.  

 Additionally, the individual preparing your tax returns has a major conflict of interest and must not represent you in a tax audit, which is his or her own audited work;

 17- In hiring professional services, always remember the famous British saying; “I am not rich enough to afford cheap service”. Most the time, these cheap services turn out to be very costly to you. It is very common that when these doctors get audited, they retain the same tax preparer whose low quality work has caused the audit in the first place; and,

 18- For competent representation in a tax audit, consider hiring a tax attorney because of the Attorney-Client Privilege, provided only by lawyer and nor provided by non-lawyer advisors, including CPAs.

 Attorney-Client Privilege may prevent the IRS, FTB, EDD and BOE from subpoenaing your confidential information provided to a lawyer. If the case turns into a criminal case, non-lawyer tax advisors may be called as witnesses to testify against you.

 

Zaher Fallahi, CPA, has concentrated on providing tax and accounting services to dentists, physicians and other doctors, in Orange County and Los Angeles County since 1992. Telephones: Los Angeles (310) 719-1040 and Orange County (714) 546-4272 or e-mail: taxattorney@zfcpa.com.

 

 We can help with your Tax Audit

Zaher Fallahi, Attorney At Law, CPA has been rated 10 out of 10 by Avvo  Rated 10 of 10 .

Zaher Fallahi, Tax Attorney, CPA, has been named a top tax attorney TOP Tax Attorney

About 1.8% of the US lawyers are also CPAs, and we are proudly one of them.

 

To help with your Tax Audit, contact us at:

(310) 719-1040 (Los Angeles)

(714) 546-4272 (Orange County)

e-mail taxattorney@zfcpa.com

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