Tax Talk for Dentists: Avoiding Missteps and Leading with Confidence – Episode #560

Morgan Hamon, CPA and President of HDA Accounting Group joins Ryan to discuss different leadership styles and valuable advice to help lead your team with confidence. Morgan and Ryan also dive into the financial side of running a dental practice, exploring the importance of maintaining clear boundaries between personal and business finances and fostering open communication with your CPA. They dispel common myths about taxes, discussing why taxes don’t actually break dentists and the importance of tax planning to alleviate the emotional burden around tax season.

Related Readings

5 Tax Write-offs Every Dentist Should Know About

Learn more about HDA Accounting Group

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Podcast Transcript

Intro: Hey everybody, welcome back to another episode of the Dentist Money Show, where we help dentists make smart financial decisions. Today on the show, we have CPA Morgan Hamon from HDA Dental Group. We’re talking about leadership, communication, taxes, of course, strategies, year end stuff, common mistakes. This guy’s seen it all. They work with so many practices, good friends of ours. Thanks Morgan for spending time with us. If you have any questions for us, go to DentistAdvisors. com. Let’s have a conversation. Thanks for being here, everybody. Enjoy the show.

Ryan Isaac: So thanks for doing this again this morning, man. It’s been, it’s been a while. Have we done it this year? I can’t remember

Morgan Hamon: Not sure we have this year. It’s been a little while.

Ryan Isaac: It feels like it’s been a while. let’s give a little refresher for the audience here. this is, Morgan Hamon and, out of, Denver HDA. And, man, we’ve done things with you and your company for a very long time, but tell our audience a little bit about who you are. For those who don’t know, tell us about HDA.

Ryan Isaac: I also, I think it’s interesting the story of how you got started in dentistry with dentists.

Morgan Hamon: Yeah,

Ryan Isaac: That’s a fascinating thing.

Morgan Hamon: Yeah, definitely. I’m Morgan Hamon. I’m a CPA and president of HDA Accounting Group. We’ve been at it for about 15 years now. and we specialize in working strictly with dentists that own and operate their dental practice. So it’s, it’s private dental only. So very much a niche firm, how we, you know, we get asked sometimes how we got into dental, a bit of luck and opportunity, kind of a long story on the introduction, but kind of early on got connected with a doctor out of, Texas, named Scott Luna.

Ryan Isaac: Oh yeah.

Morgan Hamon: Who is launching his, at the time, his practice management seminar was, was fairly new. ended up working with him, supporting him in his practices. He liked us, uh, he and I connected and, we were invited as a vendor to his seminar and that’s how we got into dental. so did that for a lot of years, still have a relationship with him, still send the sales team to his, his seminars.

Morgan Hamon: that got us into dental and, and, and we’ve just been very exclusive in this space. We currently serve, you know, it’s close to a thousand dental practices,

Ryan Isaac: Geez, man.

Morgan Hamon: So we have clients all 50 states and our, our average client is about a 1. 4 million, you know, solo doc office.

Morgan Hamon: That’s our world. And that, that’s important because it gives us a lot of data to share with our clients in terms

Ryan Isaac: Mm hmm.

Morgan Hamon: Lots of perspective if we’re looking at just fine tuning profit margin or sometimes, you know, they just don’t know what they don’t know. They’re in their office, they’re grinding away week after week, they’re checking the bank balance.

Morgan Hamon: I don’t really understand like, how am I doing? Am I doing okay? So sometimes it’s just a, some perspective, that 30, 000 foot view, you know, those are the phone calls to have when you’re checking in with a doctor. And you get on the phone, you can tell they’re, they’re real nervous. Right. And they don’t, cause it’s their first business.

Morgan Hamon: They don’t know how, and it turns out like in prepping for the call, we can see that they’re just, they’re killing it

Ryan Isaac: Yeah. 

Morgan Hamon: They, but they don’t know it.

Ryan Isaac: They don’t know it. Uh,

Morgan Hamon: When you can, when you can break it to them. You know, and just give them some comparison, that’s very rewarding. Now, if it’s the other way around, that’s also rewarding because then, you know, we can diagnose low profit like very quickly,

Ryan Isaac: Mm-Hmm.

Morgan Hamon: Quickly.

Morgan Hamon: And so instead of them just feeling helpless, we can provide like one or two action items. to get things moving. and that’s how we do it. I mean, I don’t, I don’t give people a big list of homework. It’s, let’s identify the one or two, maybe three at the most, like kind of key, key things that can put some more money in their pocket.

Morgan Hamon: So, so that’s what we do. We do, the bookkeeping for every client. Start to finish every month. and then we do what we call profit advising, give them feedback, and there’s two parts to that. We do not give our clients a generic P& L. They get a full color dashboard style report called our practice profitability analysis.

Morgan Hamon: It’s easy to read. It’s helpful. They can look at it, understand it. It also has the client average column on there. So you can see how everyone else is doing. Um, and then we’re available to talk about it, like we said. And then of course we do the tax planning and do the tax returns. So that’s us, that’s our world and what we do. And of course, that’s how, how we came into contact way back in the day, you and Reese, uh, uh, discover we’re, we’re supporting the same folks.

Ryan Isaac: Yeah. I was gonna say that, yeah, we, we started about the same time. I don’t remember when our companies met, but I do remember feeling like, The approach of a lot of data and the approach of being niche, it does just help you give better advice to people as you’re telling your story.

Ryan Isaac: I was curious about, do you remember being surprised by anything as you met and learned about the field of dentistry in those early years with Scott Luna’s team and going there, was there anything that sticks out to you, like that you remember about the life and the work of dentists that made you go like, Oh, this is a different, this is a unique, different.

Ryan Isaac: Set of people and it’s a unique profession.

Morgan Hamon: Yeah, you know, it, I don’t know how to articulate it in exact words, but it was just a good fit. You know, like I got, like I met, some of our very first dentists we met are still clients and I’m still, still close with them. And it just felt right. I started the firm with my dad and our vision was to have a business, oriented firm that was sophisticated, high touch, high service.

Morgan Hamon: But you know, we’re not out trying to be H& R Block, like we want to support business owners. And so right from the get go, it felt right. And you know, prior to being a CPA, I was a Navy officer, Navy pilot, you know, for 11 years. And you learn a lot about leadership. Like the Navy grooms you to be leaders.

Morgan Hamon: And at the time it’s all fun and exciting. You don’t quite realize. Like how valuable all this training was that I got in the Navy. And that’s a real key to success as a business owner is effective leadership skills. And I think, you know, if we were to talk, you know, practice profitability, for example, the question I get often from the young doctors going into ownership, a very common question is, okay, Morgan, you’ve got clients, you know, all 50 states, what’s, what’s the hot areas?

Ryan Isaac: Yeah.

Morgan Hamon: Should I go? Where should I go to like make the most money? So I get that question.

Ryan Isaac: Mm-Hmm.

Morgan Hamon: Well, I should specialize because if I specialize I’ll make more money. there might be some, some truths in there, right? There, there, but I, I don’t think that is key.

Morgan Hamon: The doctors that I think enjoy the most success and we have to quantify success.

Morgan Hamon: I think there’s, there’s two things, there’s dollars and there’s time. The doctors that hit the home run, I think, you know, they have the full package. They’re an, Amazing clinician, but equally valuable. They are an effective business leader. And I think, you know, that’s it for years. I’ve said, you know, in the, in the profit equation, there’s just two factors, right?

Morgan Hamon: There’s two variables. You got the expense side and you got the revenue side and you got to be, managing both. but I think over time I’ve come to the opinion. There’s actually a third variable and that’s the effectiveness as the doc of the doctor as a business leader.

Ryan Isaac: Hmm hmm.

Morgan Hamon: What I mean by that is, you know, do you inspire your staff? are you, as a clinician, do you get that, you know, like, like case acceptance? It’s not sales, but, but, you know, you have to be very productive. You have to have high, high case acceptance. you have to have, on the admin side, you have to know how to schedule.

Ryan Isaac: Yeah.

Morgan Hamon: If you’re as I was seeing my doctor the other day, close personal friend of mine, I mean, it runs three columns.

Morgan Hamon: Like you got to know how to do that, right? Um, you have to know how to collect money. You can’t be hostage and just saying, Hey, someone’s in the back room, hopefully doing insurance claims, but I’m just, you know, I don’t really care about that. I, I like being with the patients. You gotta collect money. I mean, that is, The most important administrative function of any business dental practice or small business So I think you know the doctors that you know, when I when I hear the question Well, what’s what’s the the big the geographic area and they don’t specialize? I would say look live where you want to live

Ryan Isaac: Yeah.

Morgan Hamon: Specialize and what you’re back, you know, what interests you but you’ll be successful when you are the master of your craft as a clinician and And you are a, an exceptional business leader and you have to invest in those skills that, you know, you don’t just, you don’t just get those with time.

Morgan Hamon: Although you do get better with time. If you view that as a skill and you learn from your mistakes, which you will make and progress. So I think, you know, the effectiveness as a business leader is, doesn’t get. Talked about a lot when we talk about finances, especially I’m talking to my CPA and he’s talking to me about

Morgan Hamon: Well, that’s how you make money

Ryan Isaac: Yeah. I’m actually I didn’t even plan on this, but I’m so glad you just said this well, I recently have been interested in what people wish they had learned in dental school and Been having discussions around this and I posted in our Facebook group. We have a private Facebook group I think it’s called the Dentist Advisors Discussion Group, if you want to join it.

Ryan Isaac: But I posted a question. What did you, what did you not learn in dental school that you wish you had? And there was like 40 comments on there. It was really cool. And one of, probably the most prevalent theme is what you just said, which is, I wish I learned leadership and communication. Can you talk a little bit about, I mean, you have such a background that trained you very specifically in that.

Ryan Isaac: Can you talk about, how do you even define Leadership and communication. And do you have any like advice for people wanting to learn that? Cause it, that was literally the most commonly said thing that I wish I had learned leadership and communication, which, I mean, it was just, you know, it was so prevalent.

Ryan Isaac: So any thoughts on that?

Morgan Hamon: Yeah, they’re, I mean, to start with. so leadership involves people.

Morgan Hamon: You have to have some people skills. and, You know, it actually, you could almost fill, fill the whole hour talking about, leadership and how that works. If I, if I’m just thinking just kind of top of my, my mind here, to have any successful business, you have to have a team, a team that believes in you.

Morgan Hamon: And so you have to think about, okay, how to start with, how am I going to approach my team? Because without the team, you’re not in business, you just, you’re going to be working for someone else. So, in the Navy I had. maybe I’ll just tell, tell some sea stories here to

Ryan Isaac: Yeah.

Morgan Hamon: The question so I had a broad spectrum of different type of leaders in the Navy. when I checked into my first operational squadron, you know, and that was a huge moment, right? Because I’d been in flight school for over three years and you finally get your wings. I’m qualified on the F 18. I’m checking into my fleet squadron. I’m going to be on the front lines and you know, like this is it.

Morgan Hamon: And I checked into my squadron and. it was a bit, a bit of a shock because the, the skipper at the time, although he gave me a very warm welcome to the squadron, but after I, you know, integrated with the squadron for a short period of time, I realized this place is, is hell.

Ryan Isaac: Hmm.

Morgan Hamon: His leadership style was do what I say or I’ll destroy you.

Morgan Hamon: And he meant it and he had the power to, you have the power to do that in the military. Like, and you can’t just say this job sucks. I’m going to go, you know, get on LinkedIn and flip my resume. Like you’re stuck, right? So you have to do what they say. And so it was just miserable. at all, every level, morale was so low. Next skipper. I mean, there was nowhere to go but up, right? But the next skipper was okay. And then I was very fortunate. After that, my follow on command, because there’s a change of command about every two years, right? You get a new, new boss, but it can be a long two years

Ryan Isaac: Yeah. Yeah, I’m

Morgan Hamon: But then I, I had some amazing commanding officers, you know, really inspirational, right?

Morgan Hamon: And, and the difference was, and I think, you know, kind of getting to the takeaway here is, you know, how do your employees see you, as a leader? Of any kind, but especially as a business owner, you have to realize you are under the microscope every day when you show up to your office and you have your huddle in the morning and then you’re, you know, as you’re seeing patients and directing, like your employees are watching you at all times.

Morgan Hamon: They are picking up on your mood, your expressions, everything

Morgan Hamon: Right? So, and that, that is going to influence that, that culture in the office. So, these skippers, subsequent commanding officers that, were very inspirational, you know, they all had some, some common traits. They were genuinely interested in the people serving below them,

Ryan Isaac: Okay.

Morgan Hamon: Right?

Morgan Hamon: Genuinely interested in their well being and just, just personally. They were, you know, it’s all business, right? But you can still be fun to be around. They were fun to be around. You wanted to see them. And you knew that, and they also wanted to see you. they were very good at what they do.

Ryan Isaac: Hmm.

Morgan Hamon: It was, you know, Hey, everybody, follow me and keep up and lead by example.

Morgan Hamon: So you have to think about those things when, when you’re in business, you can’t do things like lose your temper.

Ryan Isaac: Mm

Morgan Hamon: You can’t get frustrated. People communicate differently. And as a business leader, it’s your responsibility to adapt your communication style. To your staff, not the other way around.

Ryan Isaac: Okay.

Morgan Hamon: Have to realize that.

Morgan Hamon: So if somebody needs a little, you know, and I view it as you always play in the long game. Is this a good person? Are they a good employee? Like I can train skills. I can’t

Ryan Isaac: Mm

Morgan Hamon: Train values.

Ryan Isaac: Uh huh.

Morgan Hamon: Attitude. So I play the long game. Play to people’s strengths. Invest in them. They’ll know that you’re investing with them.

Morgan Hamon: And you know what? Stick up for them. Protect your team. You know, my, my team, we have employees been with us a long time and, and, and they know I, I protect them. Like there’s some things we just don’t tolerate. Now, we have a real nice niche, right? All our dentists are real nice people. But occasionally, You know, we’ll get somebody that decides that it’s okay to mistreat our staff.

Morgan Hamon: And I fire those clients that day.

Morgan Hamon: I mean, I had one this years ago. I’ll tell a more recent example. you know, it doesn’t happen very often, but, my, Very valuable employee of mine, like very valuable. I’ve invested a lot of time mentoring and training, was on a call and was treated very poorly, very poorly.

Morgan Hamon: And she called me after the call and said, I would normally would never complain, but this just, I’m, she says, I’m shaking.

Ryan Isaac: Yeah.

Morgan Hamon: I said, tell me what happened. And she told me what happened. And I said, thank you very much, put down the phone, picked it up. And I fired that client that day.

Ryan Isaac: Yeah. Good.

Morgan Hamon: Immediately

Ryan Isaac: Yeah.

Morgan Hamon: I tell ya.

Morgan Hamon: The whole company knows that.

Morgan Hamon: I said, we’re under the microscope. They know Morgan values us and stands up for us. Interesting thing about that story, Ryan. Um, a month later, I got this mea culpa email from that client saying, we’re so sorry. That’ll never happen again. We really value. Will you please take us back?

Morgan Hamon: And I, so I called my, my employee. I said, look, it’s your call. What do you think? She says, I think so. We can take them back and guess what? They’re really good client now,

Ryan Isaac: I’m sure. Yeah.

Morgan Hamon: But you have to, you have to, you have to stand up for your team. So, I don’t know if that answers your question, but I, you know, I think that’s how you have to look at it as a business owner and the doctors that get that, that they inspire their team and they’re leading from the front.

Morgan Hamon: You know, follow my example, keep up with me, and they’re, you know, you don’t, you have to enforce your standards, but you can still be enjoyable to be around.

Ryan Isaac: Mm hmm. You can still care.

Morgan Hamon: You can, you still care, you know, and, and, and have high standards. You have to have high standards. You know, if I, if our, so like a big part of our culture is just very rapid email response because it makes people happy and I can measure it and we have tools and you know, and if I see that’s getting behind the people, they’re going to hear from me, right?

Morgan Hamon: And they don’t, they don’t necessarily enjoy that. But we enforce the standard, but I’m still, you know, very professional and very caring. But like, you know, keep up with me. All right. Look at my look and look how I correspond with the doctors. Emulate what I do.

Ryan Isaac: Yeah. I like that.

Morgan Hamon: So you have to, you know, and that is just such a key part of profitability. That is again. It’s it’s different hearing that from your CPA, but I I do think that that is a Significant factor in how much money a doctor will make is

Ryan Isaac: Well, yeah. I mean, what does it cost you if you have kind of a toxic, unhealthy work environment and you’re constantly turning people

Morgan Hamon: Oh, it’s

Ryan Isaac: I mean, Teah,

Morgan Hamon: And I’ve had it’s a challenge for me because I mean I’ve had some you know clients over the years where like we’re I get to know our clients, you know, we like each other, but one doctor said to me one time, he’s like, you know, Morgan, I’ve been through, I’ve been through 36 employees in the last like, 18 months.

Morgan Hamon: Like some ridiculous thing. And in, in my head I’m just like, know, it’s, it may not be everyone else, you know, you might wanna think about what’s it like working in your office? Um, boy, I gotta be super delicate how I like approach because I wanna insult them, but at the same time, I don’t wanna, I don’t.

Morgan Hamon: I mean,

Ryan Isaac: Yeah.

Morgan Hamon: if you’re churning through that many people, you got a systemic problem in your office and at some point you just got to look in the mirror and say, where am I coming up short? And how can I, you know, and I think that’s another key, characteristic of successful people is you learn from your mistakes, you know, you can’t be, you can’t make excuses, you know, and it’s, you know, when something goes wrong, particularly if, if, you know, Like you didn’t do it, like your employees messed something up, right?

Morgan Hamon: I mean, you really, you gotta own it sometimes. You know, you, you really have to diagnose and, and I think the offices, you know, if something goes sideways with the patient, you really gotta take a look.

Ryan Isaac: Hmm,

Morgan Hamon: The patient’s just being completely unreasonable. No one’s ever going to meet, you know, in that point, then you got to switch gears and protect your team.

Morgan Hamon: But if something isn’t happening, maybe you got a bad procedure. Maybe you have no procedure.

Morgan Hamon: Maybe, you know, you’re just learning something new the hard way. you really got to take that on board, look in the mirror and adapt.

Ryan Isaac: Mm hmm,

Morgan Hamon: And I think that that’s been a real. you know, and I learned that in the Navy, right?

Morgan Hamon: Cause I mean, you, you learn from your mistakes. That’s how you stay alive. Um, right.

Ryan Isaac: Those planes I’m sure you, you

Morgan Hamon: Yeah, there’s, yeah, we, I mean the manual, like in the Navy, it was called NATOPS, Naval Aviation Training and Operating Procedures. And that was, that was the Bible. I mean, and the, the, what we all said was like everything written in that book is written in blood and that’s, it wasn’t a joke it’s, true.

Ryan Isaac: Hmm.

Morgan Hamon: So like that type of standardization and systemization, I mean, it saves lives in the Navy, but in business, it makes you pay more. Efficient and profitable and I think you have to do. Yeah, so learn from your lessons write it down Don’t make the same mistake twice. You will learn as a business owner you and your team you will learn things the hard way Identify that own it apply a correction and don’t learn that in the stat.

Morgan Hamon: They hear me say it all the time Like I like I don’t have much patience for learning hard lessons twice. It’s okay to learn at once. We’re all just a human, human based business, you know? but once we learn it, let’s tweak a procedure, apply some training. and let’s like not do that again. and I think the doctors that get that.

Morgan Hamon: And evolve their practice and are in tune with that also enjoy a lot of success

Ryan Isaac: Yeah. Yeah. Thanks for sharing all that. I think, tell me how you feel about this. I think this speaks to a doctor. There’s probably some innate skills that some people possess that make them maybe more easily, they can develop these kind of skills with people easier than others maybe, but I think this speaks to a doctor’s personal development in their own personal life to be able to, Hold patience for people, adapt their communication styles, learn what it’s like to listen to a venting, frustrating person who might be blaming you for something and not lose your cool and lose your temper.

Ryan Isaac: There’s probably just a lot of like maturity, growth, and maybe just time that has to go by and personal development in order to show up like that as a leader.

Morgan Hamon: Yeah, and I think what you just described is you you have to identify leadership Is a separate skill

Ryan Isaac: hmm. Yeah.

Morgan Hamon: That has to be, you have to learn it and some people might just be, you know, you hear the term natural leader,

Ryan Isaac: Sure.

Morgan Hamon: Some people might. but you can be a natural leader, but still, it’s still required. You have to understand that the framework.

Morgan Hamon: And then you have to develop that. So I would say, you know, for a doctor that owns our practice, if they, if they have that, that frustration, they didn’t learn any of this in dental school, you gotta invest in some, some seminars, or some training and realize, you know, just cause you have, um, DDS or CPA or whatever behind your name, it doesn’t make you a leader, you gotta, you have to cultivate that skill and it’s a very valuable skill.

Ryan Isaac: hmm. Yeah, I agree. Like I said, that was the most commonly mentioned thing people wish they had learned somehow I don’t know how you teach it to a d2 d3 dental student. I don’t know how you

Morgan Hamon: I don’t know, their brain is probably so full of everything else, you know, I do think it is a follow on, I, you know, I guess my advice would be to somebody in, like, dental school, you know, when you graduate, go work for someone else for a couple years, right? And when you do that, watch. Be a sponge.

Morgan Hamon: How do they do things? And be like every other employee. Watch that leader. You learn a lot from serving. I mean, I learned a tremendous amount from the Navy by just serving under some people seeing different ways to do it. That’s a great goal. Go, go be an associate for a little while and watch. Watch how they do things.

Morgan Hamon: You’ll pick up on, Gee, I’m not ever gonna do that. Or, you know what? That’s really effective. Everybody loves this person. You know, maybe I, and just get some free lessons. But at the same time, you know, at that point you’re done with school, making money, hopefully enjoying some life, but then start on your own time taking some courses.

Morgan Hamon: You’ll have time then and take courses on, on leadership, and start developing those skills so that when you’re ready to go into ownership, you will have had some time to really hone both of those skill sets, both, both clinically and, and leadership.

Ryan Isaac: Yeah. let’s switch gears a little bit here. Thanks for all that. that was a direction I wasn’t planning on, but I appreciate that. I think that’s really valuable and

Morgan Hamon: good stuff.

Ryan Isaac: and it does lead to money. I mean, all of these things, yeah, they lead directly, but yeah, it does. we’re coming up on the second half of the year tax deadline.

Ryan Isaac: maybe I thought we could talk about, what are some things on your side of the table that you would love for dentists to know how to improve their relationship with their CPA or their accounting team? You know, what are, what are some ways that dentists can get more out of having a competent CPA?

Ryan Isaac: What are things they can ask for, do, what would you, what do you wish people did more when they interacted?

Morgan Hamon: So I think at its core, accounting and tax, it’s a team sport. It is a, you can’t completely just outsource like the whole thing to your accountant. Like, you know, there’s certain information we need. You have to engage, a common, like what can really trip up your account this time of year, you’re getting ready for taxes.

Morgan Hamon: What can, what will trip up your account every time is if you go buy stuff out of your personal bank account, right? If they’re doing, if they’re doing accounting for you, like, and like our engagement, we, we require you Online access to their business accounts. And we also require that the doctor has a, you know, some discipline.

Morgan Hamon: We call it a segregation between your business license and personal life. Don’t, don’t buy things out of your personal account, but, but if they do it anyway, you know, your accountant isn’t going to know, and it really, it causes huge problems. So I would say, you know, it is a team sport. Your accountant. They don’t have this omnipotent knowledge of everything in your life just because they’re doing the bookkeeping. if you buy some stuff out

Ryan Isaac: And that’s really common, by the way. The, uh, we run into that when we’re trying to track people’s spending, is they mix it. It gets really muddy, business and personal

Morgan Hamon: That’s such a horrible, horrible habit. And, and we really, I’m, I’m, I’m pretty direct and nipping that in the bud. There’s so many reasons to not do that. and again, I think that’s just part of being a disciplined operator,

Morgan Hamon: But that will definitely create problems with the bookkeeping and the tax return.

Morgan Hamon: If you’re just buying all kinds of stuff out of the personal account. And then just say, well, nobody asked me. It’s like, well, we actually do ask and, but you have to then say, oh, shoot. Yes, I did that. Here’s all this stuff. You know, so there’s a lot of teamwork there. It’s a two way deal with accounting and tax, um, for tax planning.

Morgan Hamon: As an example, you know, there are a lot of tax strategies that can be done. to trim that tax bill. but that requires, again, a high level of communication. So we use an adaptive online checklist. We give it to the clients, complete it, submit it, it comes back to us just to try and facilitate that communication and at the same time give people some comfort.

Morgan Hamon: They’re not missing anything because that’s the other kind of insecurities. Like, well, you know, what have, what haven’t I done? What am I

Ryan Isaac: What else is there?

Morgan Hamon: So I like giving everybody, Hey, here’s the game plan. I do the whole thing, start to finish. And if you, if you just, just go through everyone and maybe somebody can’t do like everyone, like, you know, don’t, don’t have kids or I don’t know.

Morgan Hamon: Don’t want to do the meetings at my home with my staff. pick and choose. But, but here, here’s all the information. Just go through it, but then give it back to us. Right? So I’d say, two way communication is imperative. and so keep that communication going, going both ways. I think You know, tax in and of itself, I mean that is where there’s a lot of emotion, right?

Morgan Hamon: What we’ve been talking about up till now has just been is the practice making money, you know, and how am I doing? You know that there’s definitely that that can be a journey for some folks that have a certain degree of stress and emotion and anxiety. It can also be tremendously rewarding as well.

Morgan Hamon: Which we’d love to help with. but the tax side of things, tax, tax is a whole separate deal. Also, can’t have a, it can be emotional because when you own a business for the first time, right, and you’re no longer an employee, we got the withholding coming out, you know, and that gets you close, but tax is sort of, well, it is what it is.

Morgan Hamon: I got my net paycheck and that, you know, when you own the business and we’re now, okay, there is no withholding and you actually have to write the check.

Ryan Isaac: Uh huh,

Morgan Hamon: It’s It’s different.

Ryan Isaac: yeah.

Morgan Hamon: And the key thing is sometimes people think that the income’s taxed differently, you know, and it isn’t. It’s all our clients, it’s past their entities, it’s all earned ordinary income, just like employee.

Morgan Hamon: It’s the same tax rate, you can google the tax rates, plug it in, you know, in some degree it’s just math.

Ryan Isaac: Yeah,

Morgan Hamon: But it’s harder when you have to write the check.

Ryan Isaac: Mhmm.

Morgan Hamon: And so, what I’ve, you know, what, what we watch for it’s the newer business owners that they’re just becoming acclimated to two things.

Morgan Hamon: They have all the stress that we’ve been talking about for the first half of the call, but now it’s like, okay, making money, more money than they likely have ever made in their life.

Ryan Isaac: Totally. Yep.

Morgan Hamon: And with that comes a corresponding tax

Ryan Isaac: A tax bill. Yeah. It’s

Morgan Hamon: A little shocking sometimes, right? Especially then when you’re having to write the check and send it and say, Oh my gosh, you know, this, this can’t be right.

Morgan Hamon: So, you just have to realize that, and this is how I, I try and, Speak their language a little bit. Like, okay, the saying goes death and taxes, right? Paying tax is a terminal condition. There is no cure. So we have to manage it. You can live a long healthy life with this condition, but the condition must be managed,

Ryan Isaac: I like that. Yeah. Yeah. It’s a chronic terminal.

Ryan Isaac: Yeah.

Morgan Hamon: Terminal condition. There is no cure, but we can live a long happy rewarding life if we manage the condition properly. So tax planning is a treatment plan. I would ask the doctor, if you want a positive outcome and you present the patient with a treatment plan, what’s required of the patient to have a positive outcome? They have to comply with the treatment plan,

Ryan Isaac: Yep. Follow through.

Morgan Hamon: That’s tax planning. If your accountant says you need to make an estimated payment, then make it . And a lot of times people, they just like, it can turn into a catch 22. Like, well, how do you guys know the year’s not over yet. Well, we’ve done some forecasts, right?

Morgan Hamon: You know.

Ryan Isaac: We do this with a thousand people every year, but I don’t know.

Morgan Hamon: How can this be? You guys, you guys don’t know. This is too much, you know, but then if they, if we don’t do that and we get to the end of the year and say, okay, yo, this tax, well, someone should have told me earlier. Okay, well, you know, so you got to believe you got to believe your account like when it’s like this time of year and we’re saying you need to To send some money in, you know, send it in.

Morgan Hamon: And yes, we don’t know tax planning is very difficult in the, in the private dental industry, because it’s very dynamic trying to understand what that profit is going to be. And just, just, just quick, explanation here. It’s passed through income. It’s going to pass through the personal tax returns, going to add it in with spouse income.

Morgan Hamon: You’ve got rental property, all, whatever, all that is that gets added up, you pay your tax. So your tax rate is determined by the total annual income. Okay. Well, if we’re in August right now, total income is unknown,

Morgan Hamon: Which means your tax rate is unknown. So to provide any meaningful estimated payment, we, we have to forecast, we have to, we have to fill in the blanks on those months that haven’t happened yet.

Morgan Hamon: And as every doctor knows, your collections change every month, your expenses change every month, and you go buy that CEREC machine you’ve been thinking about. I got changes things like overnight. So the very dynamic, so the best you can do is put a good faith effort to come up with a reasonable forecast and say, you know, you need to send this money in.

Morgan Hamon: And the further we get into the year, the more accurate that becomes. Cause we’re using more actual data on this forecast data, but it’s all, it’s all estimates. I’ll tell just a quick, another, well, C story here. So I got. We had a client, it kind of elevated up to me cause he was just in complete disbelief.

Morgan Hamon: Young doctor bought a practice and did well. I mean, he tripled it, bought the practice and triple. I mean, he’s obviously, he obviously has the whole packet, everything we’ve been talking about. Right. so seven figure profit Ryan forecasted for seven figure profit within like after a year of owning this.

Morgan Hamon: I mean, Phenomenal

Ryan Isaac: I’ve seen those. It is wonder. Yeah. It’s amazing. Yep.

Morgan Hamon: So we worked up an estimated payment

Ryan Isaac: Mm-Hmm?

Morgan Hamon: And that estimated payment was a hundred thousand dollars quarterly

Ryan Isaac: Yeah. Uhhuh.

Morgan Hamon: And obviously

Morgan Hamon: Sort of all

Ryan Isaac: They’re like the, uh,

Morgan Hamon: Like all hell broke loose, right? like,

Morgan Hamon: This can’t, this can’t be.

Ryan Isaac: Be, that can’t be right.

Morgan Hamon: And so, and I, and you know, I ended up chatting with them and I was like, you know, first off, like, like, congratulations.

Morgan Hamon: I mean, look, look at your income forecast. Like this is, this is phenomenal. Look what you’ve done. but I could tell it was interesting cause both he and his wife were on the call and his wife kind of got it right. But he was just like, this can’t be like I was talking and then he said, he said, my friend

Ryan Isaac: Yeah.

Morgan Hamon: Me this is, yeah, my friend told

Ryan Isaac: My friend said he made $2 million and didn’t pay any taxes.

Morgan Hamon: Friend said, this is what I should be paying in a whole year, not a quarter. I said, well, if that’s what your friend says, then he makes about. A quarter of

Ryan Isaac: A quarter of what? You make

Morgan Hamon: Know, it’s it’s math. It is math. And he’s like, can I expect this every quarter? I said, yeah, you keep. Putting down 1. 2 mil in profit.

Morgan Hamon: Yeah, this is every quarter. You got to pay this in and if you don’t pay it You’re also you’re gonna pick up some penalties and interest So, you know, we’re protecting you here, but we’re gonna give you all these other strategies and that’s the other thing too The tax strategies, you know that that trims the tax bill.

Morgan Hamon: It doesn’t

Ryan Isaac: No.

Morgan Hamon: Cut it in half

Ryan Isaac: Yeah.

Morgan Hamon: It lowers and everyone should do all the strategies because like why I like avoiding tax is perfectly legal All right, let’s avoid as much tax as possible.

Morgan Hamon: But if you’re going to be a high earner, seven figure earner, you’re going to have a six figure tax bill. I mean, you just are, it’s just, it’s just math.

Morgan Hamon: Um, and so we’re, we’re being proactive and saying, look, trust me, you’re not going to want this tax bill in April. let’s break this into a bunch of smaller pieces and talk about it now. So, um, I ended up having that conversation and I think they got it at the end of it. And I always try and turn it around.

Morgan Hamon: It’s like, look, if you want. If you drove your practice into the ground, you’re going to have no taxes

Ryan Isaac: Yeah. Just don’t make any

Morgan Hamon: You’re not gonna be making any money either. So, you know, let’s celebrate your success. But, you know, for, for a successful dentist making a nice living, a 30 percent effective tax rate is pretty darn normal.

Ryan Isaac: Yeah. And I just want to say on that. I’m so glad you just said this in my head as you’re talking, what comes to me is in my experience in 16 years of being a financial advisor, dentists have never gone broke because of taxes,

Morgan Hamon: No.

Ryan Isaac: Right? Like taxes are not the reason dentists don’t have money there.

Ryan Isaac: There’s a dozen other ones, but taxes are not the reason dentists go broke. That’s just not it. That’s not it.

Morgan Hamon: And the other misconception too, and I had this question, I don’t know, a few months ago, but it’s like, well, I’m just gonna, you know, Stop seeing patients cause it’s going to actually cost, if I go into a higher tax bracket, it’s going to cost me more money. And I said, no, no, no, it’s a progressive

Ryan Isaac: Yeah,

Morgan Hamon: Tax bracket.

Morgan Hamon: So only those top dollars are taxed at that, that tax

Ryan Isaac: Not the whole thing.

Morgan Hamon: You will always like see more patients make more

Ryan Isaac: Make more money.

Morgan Hamon: Have, you will have more money.

Ryan Isaac: Make more

Morgan Hamon: Let’s not, let’s not put a stop on things. Um, let’s keep growing. but yeah, it’s interesting. I mean, it’s sometimes, you know, as, The CPA, we talk business, but honestly, a lot of times I feel like I’m like the coach, um, you know, life coach.

Morgan Hamon: I’ve had people in tears I’ve had, you name it.

Ryan Isaac: Yeah.

Morgan Hamon: Um, but It’s fun, and it’s rewarding, and, uh, but sometimes you do have to, you know, it’s like, I just have to level with them, but also emphasize the reason you’re in this position is because you’re extraordinarily successful.

Ryan Isaac: So successful in your after tax amount of money is so high And if you save a little bit of that, you will be fine later. Yeah, I think it’s a hard truth you probably get this all the time. We get this where people say, well, you know, there’s other tax codes. If I am a real estate professional, or if I run a hedge fund or buy and sell businesses or private equity, you know, those people have different tax, structures and it’s like, yeah, change your entire career then like leave dentistry and start a new career because it has a different tax structure if you like, or just keep making a ton of money and a great lifestyle, pay your taxes, do what you can.

Ryan Isaac: But to pay your taxes and move on taxes aren’t the reason that someone goes broke. That’s just that’s it.

Morgan Hamon: And it’s, you know, all of our clients, you know, they’re all pass through entities, and they should be.

Ryan Isaac: Exactly. Yeah.

Morgan Hamon: It’s earned ordinary income. You’re not paying any more tax than anyone else. It’s the same tax brackets. there can be a lot of confusion. Well, if I take a W 2 and I take a, profit distribution, you know, like it’s taxed differently and not income tax.

Morgan Hamon: If you’re, if you own an S corporation, you’re, you’re paying payroll taxes on the W 2, which is required. but it’s the same income tax. the other thing, while we’re on the topic, I get this question a lot. from new business owners all the time, particularly we get into the fall here. It’ll be, they’ll say, Morgan, I’m not going to take any more money out of my business this year because I don’t want to have to pay

Ryan Isaac: gonna leave it. I’m

Morgan Hamon: I don’t want to, I don’t want to have to pay tax on it. and I also, I’ll get it the other way around too. I’m going to pull all the money out of the business. I don’t have to pay tax on it, you know, okay. But both answers are, are incorrect. It is your business tax return. It’s math.

Morgan Hamon: It’s just math.

Morgan Hamon: Your business does not pay income tax, not a tax paying entity. not that there aren’t a few states that levy a franchise tax on gross receipts like Texas and Tennessee and California. but entity itself doesn’t pay tax. So the business tax return, it is revenue. Less deductions equals profit.

Morgan Hamon: That profit passes through and you pay tax on that, whether you take it home or not. So I tell the doctors, look, distributions are where it’s at. That’s why you

Morgan Hamon: Own a business, right? You should take, take up, take pride in and pleasure in writing those checks. Cause that’s why you undertook this journey of.

Morgan Hamon: Business ownership and all the risk and hard work and everything that’s to have all that leftover cash that you distribute and take home That’s part of the that’s part of why why we are all business owners. So definitely do it but to your point You got to pay the tax and nobody ever nobody ever went broke over taxes if you have

Ryan Isaac: Not, yeah, they didn’t, man. we could do this for hours. being that we are in almost September, almost getting to the end of the year. Maybe last question, a wrap here would be, do you have any advice for end of year people? Do a lot of scrambling, people do a lot of purchases they might or might not actually need

Morgan Hamon: So, yeah, and this is, yeah, this would be a good thing to end on. When you’re considering investments in your practice, the overriding criteria should be the operational and clinical needs of the practice, full stop.

Ryan Isaac: Mm-Hmm.

Morgan Hamon: Tax is down the list.

Ryan Isaac: Yep. Mm-Hmm.

Morgan Hamon: Know, you never miss out on on anything when it comes to tax deductions.

Morgan Hamon: If it is a business expense, you get to deduct it, period. Right? nothing’s missed. It’s just timing. Now, sometimes they don’t quite understand like what, what’s depreciation. You know, If you have a business expense, I’m going to geek out a little bit, and you know, in the accounting world, it’s like an ordinary and necessary business expense, you’ll hear that, okay?

Morgan Hamon: That means it’s going to be consumed within 12 months. Supplies, you know, marketing, paying the staff, like all, all those bills, you know, those get deducted immediately, right, because they’re consumed in a 12 month period. if you’re going to invest in a fixed asset, something that’s going to last more than 12 months, You know, like an x ray machine, that’s required to be depreciated over time to match the deduction with the economic benefits, right?

Morgan Hamon: And it’s not optional. It used to be in the, taxpayer business owners would fight with the IRS over what the useful life is and all that, and they finally stand, the IRS got tired of fighting with everybody and that, that’s why you have the makers, the standard depreciation. So if it’s medical equipment, it’s depreciated over five years, accelerated depreciation, full stop.

Morgan Hamon: Or, and this is where people get confused. You can elect section 179 and say, you know what? this machine should be depreciated over five years, but you know what, let’s forget all that and let’s deduct it all this year. That’s section 179. you only get your party once, right? So if you buy it and you depreciate all this year,

Ryan Isaac: That’s it. Back

Morgan Hamon: it’s done.

Morgan Hamon: You’re back to your back to zero. Right? So to your point, it’s end of year. All right. if you need something to equip your practice, to provide the patient care and the patient experience and practice how you want to practice, then do it. and we’ll take advantage of all available tax benefits. If you don’t need it, don’t buy it. So when it comes to year end, this is how I, I think about it and what I communicate to our clients is like, if something’s on the wishlist here and you are for sure going to pull the trigger on this in the next six months, Because you need it for operational and clinical needs of the practice and it’s November if you’re gonna do it Anyway, next six months and you’re just killing it this year.

Morgan Hamon: Then. Yeah, go ahead and go ahead and get it now Why not right? Keep in mind to get so say someone’s gonna go by go go buy that serif machine this year Okay, it has to be delivered and installed this tax year not ordered this tax year. So that that’s important So you got a little bit of lead time It has to be delivered and again to geek out Geek out a little bit on the rules.

Morgan Hamon: It has to be delivered, installed and in a ready condition. Doesn’t mean you have to have used it, but it has to be ready to use. so you got to plan ahead a little bit, but that’s how I think about taxes.

Morgan Hamon: Um, you never miss out on anything and it becomes an interesting conversation. We work with a lot of startup, hundreds of startup clients over the years, right?

Morgan Hamon: And so if someone’s starting their practice in December, then All the costs, like all the equipment, all the startup, like that’s all fair game for 2024 if they open in December. the reason for that is you must have business revenue from which to deduct business expenses. So if you have business revenue in December, everything becomes deductible this tax year.

Morgan Hamon: Now let’s say there’s a permitting issue

Morgan Hamon: Or HVAC issue, like they just can’t open in December and that slides to January. All the startup expenses, all the equipment, everything’s deductible. 2025,

Ryan Isaac: Okay. Moves to the next year

Morgan Hamon: It moves to the next year. And, and that can be a little shocking. They’re like, but look, we’ve spent all this money.

Morgan Hamon: We’re like, certainly there has to be something for 2024. And like, well, you have to have business revenue.

Morgan Hamon: To take those deductions. We can’t just do a business return with zero revenue.

Ryan Isaac: And 400 grand

Morgan Hamon: Or four hundred grand, you know, equipment and all this. I mean, so you have to have some revenue. So, the year end, it becomes a little bit of a factor for, for our startup clients.

Morgan Hamon: But, but again, it goes back to what I said in the very beginning, it’s all timing. You never, you don’t miss anything. It’s just a matter. If you spend a dollar on a business, you get to deduct a dollar. It’s just a matter of when.

Ryan Isaac: When you do it.

Morgan Hamon: When and how fast? You know, equipment has to be spread out over time, supplies, staff costs, rent.

Morgan Hamon: I’ll just take that all right now. Speaking of rent, I hear this, you know, Well, I’m gonna pay January rent in December. Okay, you can do that and have 13 months of rent this year, but then guess how much rent you’re gonna have next year.

Morgan Hamon: You’re gonna have you’re gonna have 11,

Morgan Hamon: Right? It is a one trick pony.

Morgan Hamon: It works one year and then you’re stuck every year thereafter. Paying two rents in December and it screws up your cash flow and it makes your practice analysis look funky like you’ve got this right. So I don’t play those timing games, you know, pay your bills when they’re due, make the investments when you want

Ryan Isaac: You need them.

Morgan Hamon: For actual needs, and, enjoy business ownership and those rewards, you know, taxes, it’s down the list.

Ryan Isaac: I love that. Then just don’t go broke by paying taxes and, don’t buy stuff. Don’t make investments you don’t need or not the timing just because of the taxes. Do it

Morgan Hamon: And that goes that, you know, the other thing I hear all the time, maybe you hear it too, Ryan, is the cars, right?

Ryan Isaac: Oh, yeah. Yeah.

Morgan Hamon: This funny conversation, visiting with this doctor and he’s like, you know, Morgan, I heard if you buy a car over 6, 000 pounds, you know,

Morgan Hamon: You can, you can get it, you can just get this huge deduction.

Morgan Hamon: And that’s true. And the rule for that is, if it’s over 6, 000 pounds, you, you can, you can take a very accelerated tax deduction. And that, that legislation is written for, you know, companies that are buying like delivery trucks,

Ryan Isaac: Yeah,

Morgan Hamon: Big, heavy trucks, right? Big fleets, you know, so to encourage that investment, to help those businesses out.

Morgan Hamon: Well, if you go buy a big Cadillac Escalade, that’s over 6, 000 pounds, well, guess what? that, Satisfies that criteria. So you can get a bigger deduction. now keep in mind you buy any car, you get deducted over time, but it’s more accelerated if it’s over 6, 000 pounds. so you don’t want to explain this to him.

Morgan Hamon: And he said, well, I’m going to go buy this big truck. And I said, well, let me ask you something. You’re single, right? Yeah. I’m like, do you need a 6, 000

Ryan Isaac: Do you haul stuff? You tow stuff?

Morgan Hamon: A huge truck? No. Well then don’t, don’t buy one. You’re going to be, you’re going to be cash poor. It’s, it’s not going to cost over a hundred thousand dollars.

Morgan Hamon: So yeah, just all, you know, when it comes to the cars, I, you know, get the car you want at the deal you want when you need it

Ryan Isaac: When you need it.

Morgan Hamon: We’ll figure out the taxes.

Ryan Isaac: We on the on a bigger scale that yes We hear the car stuff that the things that scare me a lot are when people like sell a practice They do have a big windfall big big

Morgan Hamon: Oh boy. Right.

Ryan Isaac: And then they, you know, I’m going to this. Then they want to dump their money into a really illiquid, sketchy, high risk investment simply because it comes with an immediate tax deduction or tax credit.

Ryan Isaac: Just to wipe it out. And that freaks me out because it’s like, you have this one shot at the one business you sold. you can’t afford to maybe not get your money back out of this investment simply because it came with the tax credit.

Morgan Hamon: Yeah, Ryan, we could probably do a whole,

Ryan Isaac: That’d be part

Morgan Hamon: Whole additional part two on practice, on practice sales,

Ryan Isaac: Let’s do that actually soon.

Morgan Hamon: It, it’s a significant taxable event and the, the cruel reality is, because the question we always get is how do I prepare for this? What

Ryan Isaac: How do I avoid it?

Morgan Hamon: You can’t. It’s unavoidable.

Ryan Isaac: A business, you pay

Morgan Hamon: You sold a business and the, the key concept here is you’re taxed on the gain and the gain is a difference between what that buyer’s paying you and what your tax basis is.

Morgan Hamon: And your tax basis is what you paid in the beginning, less depreciation.

Ryan Isaac: Yeah,

Morgan Hamon: That’s not changeable.

Morgan Hamon: And so that’s why, you know, I prepare our clients. It’s a taxable event. There’s a couple little ways to influence that tax bill as a seller and I choose my words carefully here like influence

Ryan Isaac: Small nudges.

Morgan Hamon: But not much and so, as soon as anytime we get wind of a client selling we reach out right away with some education Well, like if I have an loi we’ll put together just a ballpark estimate just to get that seed planted And then when they sell for, when it’s done, um, we, we need the signed a PA we will do a very detailed calculation and provide a timetable.

Morgan Hamon: Cause that money needs to be, you can’t just sit on that money till April.

Morgan Hamon: You gotta send some in and you have some different options. We, we prepare that,

Ryan Isaac: Let’s do a part two on this

Morgan Hamon: We could totally do a part two on selling because it’s a big event. And managing expectations is tremendous, particularly Ryan, if they have debt on the practice, that’s where, that’s, that’s where it can become soul crushing.

Ryan Isaac: All right. We’ll do what it is. I know. Oh man. Let’s do let’s for sure do this. We’ll be the teaser and it was like, when’s this going to help? So let’s do this soon because. It’s such a huge topic and it scares me sometimes,

Morgan Hamon: Well, yeah, the whole, and what we could do is we could tie it in with purchasing and selling, talk about the competing objectives, the tax consequences, either way. that’s a huge topic, that could benefit, anyone considering buying, whether they’re buying an additional practice, maybe they have three and they’re just tired of driving across town and they’re divesting of one.

Morgan Hamon: I mean, it could apply to a lot of folks.

Ryan Isaac: Coming to a theater near you. Stay tuned, folks. We’ll do it. Morgan, thank you so much for all this. Where do people find you? How do they get in touch?

Morgan Hamon: hdagroupdental.com. It’ll you want to see some sample reports, see how we do things. There’s all kinds of places on there to set an appointment. my business partner and I still do every initial consultation personally. So, we just collect a little information up front. when they set an appointment, we provide It’s a kind of a sneak peek video I recorded that shows our reports, talks about how we do things, then we can get together, talk, learn about the practice, see if it’d be a good fit.

Morgan Hamon: Or, if we could do it old school, just email me, you know, morgan at hdagroupdental. com. and I’ll send you all that information and take care of you.

Ryan Isaac: Yeah, you will. I, I’m a big fan of HDA and have been for a long time. You take really good care of our people and we try to do the same likewise. So thanks again, man. Part two. We’ll do this very soon. Have a great week. I appreciate you being here.

Morgan Hamon: Hey, thanks Ryan. Appreciate having me. Always enjoy it.

Ryan Isaac: All right. Thanks everybody. Thanks for tuning in. Catch you next time. Bye bye.

Keywords: leadership, taxes, communication, penalties, accounting

Taxes, Year-End Planning