September 30, 2020 | Podcast
With all the changing legislation and updates to the various relief programs, it’s important for dentists to stay informed. Although it may seem complex, Art helps make sense of it to help you with strategic tax planning and maximize profitability in your practice.
In this episode of The Art of Dental Finance and Management podcast, Art updates dentists about the new HHS Provider Relief Fund reporting requirements. In addition, there may be other potential changes coming in the PPP program, as well as a proposal for a second round of PPP loans. Eide Bailly will continue to monitor changes in government programs and tax law to best inform dentists to better manage their practice. Art also discusses other financial topics impacting dentists and what they should be considering:
Have a question about year-end tax planning for your dental practice? Reach out to Art email@example.com or 657.279.3243. More information about the Eide Bailly dental team can be found at www.eidebailly.com/dentist.
Art Wiederman, CPA Welcome to another edition of The Art of Dental Finance and Management with Art Wiederman, CPA. I'm your host. My name's Art Wiederman. And for those of you joining us for the first time, I'm a dental-specific CPA. I'm a dental director at the wonderful CPA firm of Eide Bailly, and I'm located in Southern California here in the city of Tustin. And we're recording this on the night of September 25th, which is we're almost three-quarters of the way through 2020.
I was watching TV the other day and they were talking about the fact that they're going to be having a very different type of celebration New Year's Eve in Times Square in Manhattan. Now, for those of you who may not be aware, in Times Square every year, what they do is they get, you go down there, you take the subway and you hang out with about a million of your closest friends. Sometimes it's in the 30s or 40s. I did it once when I was growing up in New York and I did it and it was one degree below zero. But I was young and stupid at that time, so what can I tell you?
But, you know, everything is changing. And I will tell you that I think the celebrations that will happen on December 31st at midnight this year may be greater than others because I don't think there's anybody in this country, or in the dental profession at least, who will not be happy to see 2020 go and 2021 come with a new, hopefully some new hope and new promise. And I am one of those people. It's been a tough year, folks, but hopefully, some, of the information we'll be able to provide for you on the podcast has been helpful.
Today, it's going to be you and I. I have no guests today because it's been a while since we've done an update on the government programs. They're just not going away. We're going to have to deal with them at some point. And the Department of Health and Human Services decided to jump in and they created the reporting requirements for the Health and Human Services Provider Relief Fund.
And, OK, we're gonna do a multiple choice question here. Maybe we should do a Jeopardy question. The answer is, 'they are so ridiculously hard, that I just want to go to the Maldives.' OK. And the answer is, 'What are the new HHS reporting requirements?' Ding. You just won 400 dollars and if there's a Daily Double, you might've won a lot more. We're going to talk about them. I'm gonna get into them at a very high level and kind of give you my advice on that. We're also going to talk about where we are with the PPP loans and what you should be doing right now.
We're getting a lot of doctors who are calling our office and saying, 'the bank says we got to go file for forgiveness. Let's get it done. I want to get it done by next week'. Nope, nope. We don't want to do that in most cases. And I want to go over one more thing with everybody. And I want to go over this. And it has to do with tax planning. I know we had a great, great conversation, myself and my partner from Fort Collins, Colorado, at Eide Bailly, Scott Haberman, about three or four weeks ago.
And we were talking about tax planning, but, we've started to run some numbers for some clients. And I wanted to just give you some updates on to what you should be thinking about. I do want to give you a little bit of information, first of all, about our partners in this podcast who have been absolutely amazing. First, Decisions in Dentistry magazine. Decisions in Dentistry magazine has been absolutely unbelievable. Lorraine Kent and her team. They have great clinical content and their articles on their website and their magazine. Again, I think 80,000 subscribers, something like that.
They also have fantastic continuing education courses. Let me give you an example of some of those - Effects of Estrogen in Temporoandibular Disorders. I was worried about pronouncing that word temporomandibular, because as you guys know, anything over two syllables is an issue for me. Treating Children with Sensory Processing Disorders and Setting Risk-Based Periodontal Recare Intervals. These are very inexpensive courses, gets you CE units and they do have a special deal if you buy a whole year's worth, you have you get a real great break in the price and you get 140 courses at your fingertips. So go check out their website, which is www.DecisionsinDentistry.com.
Also, I am a proud founding member of the Academy of Dental CPAs, 24 CPA firms across the United States that represent close to 10,000 dentists. And when we joined Eide Bailly, we added four or five hundred dentists to that list. And given all the new clients we've all been working with through the COVID-19, we're now up over, I believe, over 10,000 clients. This is the best in breed, best in the bunch. I don't know how else to say it. These incredible men and women headed up by our president, Allen Schiff, have been working tirelessly, as we have at Eide Bailly for the last six months, not only getting tax returns done in a year of uncertainty but also helping clients with regular needs, as well as the PPP and the HHS and the EIDL and any other alphabet soup that they've thrown at us. We've been there. We're the financial first responders. If you're not working with a dental-specific CPA, you should be - go to www.ADCPA.org.
Alright, let's start off by talking about tax planning a little bit. And, you know, everybody, you know. When there's things that you don't want to deal with, you just don't end up dealing with them, right? You know, it's like, oh, taxes, that's Art's problem. Art will figure it out. Art knows what to do. Right? Well, you know, let's think about it. You're at home here and you're thinking, you're listening to this podcast, or you're driving in and you say, well, you know, gosh, I tell you what, my taxes are going to be like nothing this year. They're going to be zero. I'm going to get a lot of money back because, gosh, there was a pandemic this year. Well, I want to think about this for a second. I was thinking about this the other day and I actually gave a webinar today to a wonderful, my dear friend, Jeanette Kern has a wonderful mastermind study club. Shout out to Jeanette and she, you know, I presented to her group and I was thinking about what I wanted to talk about income tax planning during a pandemic.
So let's think about this, folks. Okay. For 8 to 12 weeks you had no revenues. That's a, we won't argue about that. You had a little bit of revenues. Yes. You know, maybe it was more like eight weeks because you had receivables from the prior. But then, you know, you didn't have receivables at the end. So call it 8 to 12 weeks. But let's think about this - for 8 to twelve weeks, one of two things happened to most of you. Either you put all of your employees on unemployment, you furloughed them, you laid them off. Well, if there's lawyers listening, please don't get mad at me. That's what you did. They weren't working for you and they weren't on your payroll, they were collecting unemployment. You didn't have a payroll cost for them. Well, that's 30 percent, maybe some cases 35 percent of your gross revenues go to payroll, between your front office and your back office and your hygienist and if you have associates, it's even more than that. Alright, well, you also didn't have lab and supply costs because it doesn't take a rocket scientist to figure out if you're not doing dentistry, you're not going to be paying for supplies and you're not going to be paying for the lab. Well, depends on the type of practice you have. If you're a periodontist or you're placing a lot of implants as a general dentist, your supply and lab costs could be as high as 20 percent of your revenues. As a general rule, dental supplies are somewhere between, you know, 5 1/2 and 6 1/2 percent of revenues. And lab can generally run, I don't know, 8 to 9 percent of revenues.
So with that said, we don't have 30 to 35 percent of revenues and expenses in salary, and we don't have maybe 15 to 20 percent. So that's fifty or fifty-five percent. Well, what other expenses are we going to lose? Well, we're still going to pay our insurances and probably not gonna have a lot of repairs. Probably not gonna have a lot of office expense. The telephone didn't ring that much, so maybe the telephone bill was down. So it's conceivable, folks, that out of 100 percent revenue that you didn't have, maybe 60 or 65 percent of that revenue went away.
What I mean, that you had 60 to 65 percent of expenses, so you might have lost 30 or 35 percent in profit. So, let's say you're doing a 100,000 a month, you got a really strong practice, and 60 percent of your expenses you didn't have. So your loss is 40 percent. So maybe that's 40,000 dollars a month. Times two and a half months. So you lost 100,000 dollars.
Maybe it's 125, I don't know. But what happened when you came back? OK, a lot of my offices came back at 100, 110, 120; one was at 150 percent of pre-COVID production because of all the pent-up demand.
You had all these hygiene appointments that you had to get in. We had doctors that were working four days a week, 32 hours a week, and they went to five days, somewhat to six days. Some had evening hours because they had to get all the patients in and the phones were ringing off the hook. Oh, my gosh. Dr. Smith, you're open. Thank God you're open. When can I get in? My dentist couldn't get me in for two months from the time he opened. That's how busy they were. I mean, it's great for him. But think about it this way. So maybe you were doing a 100,000, maybe the first two or three months. You were up by 20,000 a month. You're up 60,000. There's really not a whole lot of expenses with that other than lab and supplies. So maybe your net profit is 50,000. So what did I say before? OK, maybe we lost 100,000 in profit and we gained back net profit from when we opened up with maybe 50. You might only be off 50,000 dollars for the year. Now, let's take this a step further. What happens if you made a big retirement plan contribution last year and this year you didn't? Right?
How does that work? Well, we might lose 50 or 75,000 dollar deduction there. What happens if you made a big equipment purchase or you remodeled your office or you put in another operatory? How does that work? Well, may not have that this year. Not going to be a lot of doctors putting in a lot of equipment this year. I think some will, but a lot won't. We're going to talk in a minute about the deductibility of the PPP expenses. Now, we already determined that we didn't think if you either were paying someone or you paid them and the expenses are not deductible, that's going to affect your bottom line. And many of you got HHS Provider Relief Fund grants, which were basically two percent of your revenues. So if you have a million-dollar practice, you got 20 grand. If you had a two million dollar practice, you got 40 grand. You have a five million dollar practice, you might have gotten 100,000 dollars. That's taxable income, folks. And that goes right into your bank account.
So my whole point and you know, what does this tell us? What it tells us, is that we've really got to look at this, nail this tax planning down, because we may be in a situation where if you did a million dollars and you netted 350 and you're thinking your net is gonna be 150, it might be 250, it might be 275. It might be a lot more than you thought. So what does that mean? That means that we really have to sit down. You need to sit down with your CPA. You know, give me a call, we at Eide Bailly do a great job. I'm in Southern California. The ADCPA is all over the country. Give them a call. I mean, we will sit down with our clients right after the October 15th tax deadline. That's another thing. Don't forget, you've got about three weeks to file your 2019 individual income tax return.
And if you owe tax, not like it was in April where you got a three month holiday, there's no holiday. If you owe money, you got to pay. If you need to fund a retirement plan contribution. You know, some of them were due September 15. The corporate ones, the non-corporate ones, for the most part, unless they are defined benefit are due October 15th. So you're going to have to come up with that money. And I don't know how many banks are loaning if you're short. So you got to watch this.
Now, the other thing I'd recommend that you do and we talked about tax rates and everything like that is Tuesday, November 3rd, watch TV. Every four years is the presidential election. And again, I actually did get an e-mail from one of our listeners who said, Art, you keep saying you're not talking politics, but you are. No, I'm not. I'm really not. I'm talking politics, Republican, Democrat, only to the extent that it affects income taxes. So here's the reality of the situation. The reality is right now, the White House is in the hands of the Republican Party. The House of Representatives is in the hands of the Democratic Party and the Senate is in the House, in the hands of the Republican Party. That's a fact. OK, so the House of Representatives has about a 30 to 35 member advantage Democrat over a Republican. The likelihood that the Republicans are going to retake control of the House, not very likely from everything I've read.
Just this is what they say on TV. The White House, as we've all been watching on TV, that is a toss-up. It's a close race. It could go either way. And that's all I'll say about that. The Senate is interesting because you would need to flip four senators because remember if it gets tied at 50 50, who breaks the tie? The vice president. If it's a Democratic vice president and it's 50 50, then the Democrats control the Senate. If it's a Republican if Vice President Pence is the vice president for four more years, then it's Vice President Pence who breaks it and the Republicans control the Senate.
My point in telling you all of this is that there is a real chance that the White House and the House of Representatives and the Senate will all be in favor, numbers-wise, of the Democrats. If that happens, former Vice President Biden has indicated on TV that he will not raise taxes for anybody who makes less than 400,000 dollars a year. I don't, based on my history, see that they're gonna be able to keep that promise. They may. I don't know. But I do think that they are going to have to raise revenues. They're going to have to do a big raising of revenues. Because remember, folks. Number one.
Think about all of the revenues that the government has lost this year. Think about all the businesses that have been shut down, that closed. I mean, 10 to 15 percent of restaurants in this country are no more. Souplantation is no more. There are other changes that are no more. So these are all businesses that we're paying taxes, sales taxes to states, paying federal and state income taxes, no more.
So they've lost this revenue. They've gone 3.2 Trillion dollars into debt. Two days ago, the Democrats and we'll talk about this when we get to the PPP, introduced or, the speaker of the House, Nancy Pelosi, mentioned that the Democratic Party was going to initiate a bill in the House that will probably be voted on this coming week. That is a 2.4 trillion dollar deal. The Republicans don't want to go over a trillion. I have a feeling they're going to meet somewhere in the middle.
And the bottom line is this government is going to put this country five trillion dollars into debt. Now, did they have a choice? They didn't have much of a choice because had they done nothing, we will be back to 1929. But the fact of the matter is, is that they have to raise revenue. So my whole point in talking about this is this. If the Republican Party controls any of the three houses of the government, that being the White House, the Senate, or the House of Representatives, you're more than likely going to have no change in the tax laws.
We have low tax rates. We have bonus depreciation. We have Section 199 A, we have research and development tax credits. I'm going to mention those here in a second. So we have all these things.
So now. You know, we have all these things, if we have, if the Democrats are in control of the government, there will be a major tax law change. They have been talking about raising the capital gains rates. I think the Section 199 A deduction, which is 20 percent of your net income as a sole business owner, is on the table. I think bonus depreciation is on the table. At the end of the day, they're going to have to raise revenues because they can't afford not to. So what does that mean for you? A lot of talk. And now I'm going to give you some real specific advice. If you get to November 3rd. And again, you know, we may not know who the next president is, November 3rd. It may be the end of the month. Who knows what's going to happen. We don't know. But basically, if the Republicans keep any one of the three houses of government, if you will, probably business as usual as far as taxes go, you do whatever you're going to do.
If it goes democratic and we see tax increases for the wealthy. And who is that? That's you guys. That's the dentists. Dentists make more money. Again, I know President, Vice President Biden said 400,000. I think it will be lower, to be honest with you. But we'll see. So if that's the case and your income is down this year, you may consider accelerating income into this year and deferring deductions.
So maybe you buy that C.T. scan machine. Maybe you buy the digital scanner or maybe you do it next year when your tax rates are going to be higher. Maybe you build out that second office next year. I don't know. But think about deferring deductions and accelerating income. You know, if your income is way down this year, maybe you just started a practice and you were an employee in 2019 and you were making a good income and then you started or bought a practice and it got hit by COVID, I mean I've talked to some poor doctors who ended up buying practices three days before COVID hit, four days, five days in.
That's just, somebody had their number and it might be a good year to maybe do a Roth IRA conversion or maybe accelerate some income. Maybe you do your billing if you don't bill for your patients tiI I don't know, December 20th, maybe you bill ten or fifteen days later and get some of that money in the door at a lower tax rate. So those are the things you need to think about. And again, folks, your income is going to be lower for 2020 than it was for 2019. I don't think there's any doubt about it. How much lower? We don't know. And you need to sit down with your accountant to figure that out. I do want to point out a couple of things before we go to our next topic, which is going to be which is gonna be talking about the deductibility of PPP and what's happening with PPP.
First of all, we have a seminar that is going to be and I'll mention it again when we talk about HHS. This is alphabet soup, as you can tell. But we have a seminar that Eide Bailly is putting on on the new Health and Human Services reporting requirements. We're calling it the Healthcare HHS Provider Relief Town Hall. This is going to be a live webinar that's going to be put on by two of our amazing partners at Eide Bailly, Ashley Brandt-Duda, CPA, and she's a partner at Eide Bailly, as is Tyler Bernier, who I spent about a half-hour on the phone with, having me explain to me all this stuff as far as it goes to dentistry. And he is also a partner. This is going to be Tuesday, September 29. Now, you're not going to hear this podcast until Wednesday, September the 30th.
And it's going to be for our clients. And, you know, the people that we work with, our group has been on top of this since day one. We deal with, you know, again, we're pushing 800 dentists that we work with in our practice. But in addition, they also work with hospitals and rural healthcare and all these. So, you know that, the rules for that are even more crazy. It will probably be up sometime towards the end of this coming week, which will be the end of September, beginning of October.
In addition, folks, we've also talked about our, a couple of weeks ago we had our Research and Development Tax Credit podcast with Joe Stoddard and Heidi Lanin. They did a great job. I talked to them the other day. And we have a tool, if you haven't taken advantage of it, you should, that will allow us to evaluate whether your dental practice might qualify for the Research and Development tax credit. Now in California where I am, the California credit is actually bigger than the federal credit. In other states, it may or may not be, but it's a wonderful credit. We have another one of our clients we found out that does about five million a year is gonna get about 40,000 dollars in credit. That's a dollar-for-dollar tax savings. That's pretty cool.
So if you are interested in learning as to whether you're doing new procedures or new methods or you maybe you took a big, maybe you just became a Coys mentor, you went to Frank Spears', you know, the Scottsdale Center. Maybe you've been in a Pankey course, maybe you've been to LDI. I am mentioning all the food groups here. And you've got a whole bunch of new ways of doing things. This may be a tax credit that might be able to save you potentially five figures in income taxes. And that's not just one year. It's every year, potentially.
So what I want you to do is I want you to go onto our website, which is www.eidebailly.com/dentalRD. So that's www.eidebailly.com/dentalRD. You'll find when you get to that web page, you'll find some great articles about, you know, the Research and Development tax credit, what it does, how it works. Who's eligible. And what would make a dental practice eligible. And you'll be able to go on and fill out about a five to ten minute questionnaire, about 15 questions that will let us know about your practice. And then we will call you. Heidi and Joe and their team will call you and let you know whether or not we think you're going to qualify for this tax credit.
So no guarantees, but, you know, they'll tell you how you can do this. So those are a couple of things I wanted to touch on. OK, let's start talking now about the PPP. I did that for about seven weeks in a row and I was just absolutely you know, I was PPP'd out, as all of you are. Well, where are we now? Most of you got your money in May or June of this year. And, you know, basically, we know that the rules changed so that you have 24 weeks to spend the money instead of eight.
So most of you will have a covered period that will end sometime in October or November. And you then have 10 months to file for forgiveness. Well, when this program came out, it was advertised as a program that would allow you not only to not have to pay taxes when the forgiveness came, because debt forgiveness is income, but it also was advertised that you'd be able to write off the expenses. Well in May, our friends at the Treasury, Mr. Manoogian and Friends, came up with a Notice 2020-32 and basically said au contraire. It's really not fair to the government that if you're going to get 100,000 dollar loan and never have to pay it back, it's really not fair that you should be able to write off the expenses. Well, the fact of the matter is, is when they did that, both houses of Congress were furious. I mean, furious. I was talking to my friend Megan Mortimer, who is been on our program, has been on my webinars, and who is the congressional lobbyist for the American Dental Association. Megan said, I don't think I've ever seen some of these people as angry as I've seen them about this. So they went to Treasury and said, you need to change this. And Mr. Mnuchin told them to pound sand. That was no by the way.
So we thought when there was an eight week covered period that would end sometime in June or July, that people would file for forgiveness and, you know, it would all happen in this year and be real easy. Well, that's not what happened. So now. What do we have? We have a 24 week covered period, and that means that many of you will finish your covered period in October and then you've got 10 months. You've got till next August of 2021 to file if you choose to wait that long. And so what does that mean? So think about it this way. So let's say you file, and wait a minute. One more thing. So you wait 10 months and then the bank has 60 days to decide your fate. And then they turn around and send it to the SBA, who then has 90 days to basically verify what the bank has decided.
So there are some people who might not actually get forgiveness if they wait till the end until the beginning of 2022. So what does that mean? So I got 100,000 dollar PPP loan. I spent it on all the things the government told me to spend it on - payroll, rent, utilities, and interest. OK, that's great. It's a loan. It will be a loan until it is forgiven. So at the end of December, December 31st. Do I have forgiveness? Nope. Not going to have it till 2021. Even if I filed for forgiveness today, and most of the banks are not accepting applications because they're waiting for the government to change the rules. We'll talk about that a minute. Right. So now I get to 2021. So what do I do? So do I deduct the expenses in 2020? I don't have any forgiveness in 2020.
You could. Do you in 2021, these are your choices, one, deduct the expenses in 2020. Then in 2021 you have the forgiveness and follow the notice. Notice 2020-32. And what do you do? Do you report that 100,000 dollars that you deducted in 2020 as income in 2021? So now in 2021, you have phantom income. You don't have any money in your pocket. OK. You have no money in your pocket. And you've got phantom income. Or, do I go back and amend my tax returns for 2020. File them. File the amended returns. And then I'm looking at potentially late payment. Late filing. I'm sorry. Late payment penalties. That's right. Late payment penalties and interest. It's not good, folks.
My recommendation and what I'm gonna be telling my clients is, well, the first thing I'm gonna tell them is, I hope they change the law and then we won't have to worry about it. But that's not a really good way to go. What I am going to tell my clients is we are going to plan for the worst and hope for the best. We're going to assume that these expenses are not deductible in 2020, period. They've got to come out, if they don't change the law, they've got to come out with some rules. Let's not deduct them in 2020 and be done with this in 2020 and just assume that's the way it's going to be. Now, let's think about timing here.
The government, the House, and the Senate will be in session through the end of this coming week. So, again, I told you, we're gonna be, this podcast will go up on the Internet on Wednesday, September 30th.
By that Friday, many of the senators and congressmen, representatives are going to go home and start campaigning because remember, it's one-third of the Senate and the entire House is up for reelection in an even-numbered year. So nothing will happen in October.
Maybe we'll have some. I've read possibly that they'll that, you know, some of Mr. McConnell and Mrs. Pelosi and the Treasury secretary, Mnuchin and Mr. Meadows, who's the chief of staff at the White House, they're all going to be talking, because you know, what I think is going to happen is they're going to say, listen, if we, do we all think it's a good idea to pass stimulus, which is going to make us all look good for November 3rd? Don't know. Again, it comes back to politics, right? We'll see what happens. But they'll probably be nothing happening in October. Then you have a, you know, potentially a lame-duck session of Congress. Maybe it's not a lame-duck session, but you've got Congress and the holidays. They don't do a heck of a lot. And then you have a brand new Congress, which you will have because some of the seats will change. Absolutely. That always happens. And then you have January and then what do we do? We've got to do year-end tax planning. Plan for the worst, hope for the best.
Plan that these expenses are not deductible unless they pass a law that says they are and there is bipartisan support. And I guarantee you that Megan Mortimer and Michael Graham. And Dr. Ghani and Dr. O'Shaughnessy, who is the executive director of the American Dental Association, are all fighting in Washington to try and get this reversed. We'll keep our fingers crossed. We'll see what happens. OK, so that's PPP. Let's talk about what do we do. Lots of you are getting calls from your bank. Oh, you got to go file for this. Get it done. Go file. File for forgiveness. No, don't file for forgiveness. Use the entire 24 weeks. OK? And why would you file for forgiveness now if we're talking about the possibility, and there is a law that's floating around, a bill that's floating around, that basically would allow you if you have a PPP loan of less than 150,000 dollars, and that is eighty-five percent of you who got PPP loans. If this bill passes, if you have less than 150,000, here's what the one-page attestation will say. Hi, my name is Art Wiederman, DDS. I made a good faith effort to follow all of your dumb rules. I did. Now go away. Leave me alone and don't ask me for this money back. It's mine.
I don't think it will quite say that on the documents that you're going to sign. But basically, it'll be a one-page attestation that says I made a good faith effort to follow the rules. You won't have to provide any documentation. They're talking about for loans between 150 and two million, 250,000 - two million. They're talking about having a limited amount of documentation. They should just make the whole thing forgiven and just make everybody's life easier because they should. But the fact is, that I read an article on the Internet that one out of every five or every six PPP loans are, have been used for fraudulent purposes. So that's why they're probably not going to do that.
So the only reasons that you should file for forgiveness now is either, A if you're selling your practice because it could be a problem, or B if you believe that your practice's revenues are going to take a big hit and you're going to have a significant drop in income between now and the end of the year. If you have all your team members in place and you've spent the money and you've made all the rules, you've met all the rules, maybe you should file. And you can get it done. The banks are not, a lot of the banks are not taking the applications. My friend Dan Bywater, who is on a lot of our webinars with Ready Capital, emailed me the other day. He's got over 400 applications that have been sent to the SBA.
They haven't answered any of them yet. So I don't think anybody really knows what this process is going to look like yet. The banking industry is lobbying very hard for the 150,000 hour rule because they don't particularly have the people power to handle 5.1 million forgiveness applications. So there is no reason to file for forgiveness unless you're selling your practice or you really think that your employees are all going to go away and your practice is going to collapse and the world is going to come to an end. That's kind of what we think. So with that said, let's move on to and again, just in the middle of the program, I usually like to get guests give out their information. I'll give out mine. If you want to go get a hold of me in my office in Tustin. I'm at 949, not 949. I'm at 657.279.3243. Rule number one, know your own phone number. My email address is firstname.lastname@example.org.
And please give me a call if you need some help or have any questions or you've got a good joke, anything. I'll take anything these days. Alright. Let's get to our last topic here, which is the H.H.S. Provider Relief Fund reporting and the fund. Let me just take a brief moment. And again, we're going to, we'll spend some time on all this right now. And so let's start by talking about what is it? So it's part of the CARES Act, which is a 3.2 trillion dollar relief package signed by President Trump on March 27.
Part of that was the PPP. That was 351 billion dollars. The other part of this, one of the other parts of this was, not really spoken about in the world of dentistry because the dental profession was not included in it right away. This is the HHS, which is the Department of Health and Human Services Provider Relief Fund. This was a fund created by the CARES Act that gave 175 billion dollars to the Department of Health and Human Services to dole out to health care providers. And it was intended to provide help to allow health care providers to fight COVID-19. So here's what they did for dentists. In June, early June, they said, you know, dentists are important, too. We're going to include them in this thing. But for now, we're only going to include dentists who are taking receipt of Medicare and Medicaid. California's Medi Cal. So basically, Medicare, dentists; welfare, dental, welfare patients. And they did that. And that's that was nice. And some people got relief.
What's interesting is that many of our doctors who might have seen one or two Medicare patients got checks the week of I think it was April 10th or April 17th for like, you know, I don't know, 54 dollars, 87 dollars. And what that did is that forbid them for a while for applying for this provider relief fund. When in the first week of July, I think it was July 10th, if I remember correctly, when the government opened this up to all dentists. Now the window is closed. It closed on, I believe, September 13th. I don't remember. I don't think that they expanded it further than that. I'd have to check on that.
But I think it's closed. I could be wrong. If I am wrong, I will report back to you next week. But basically what it did is it gave the dentists an opportunity to apply for these loans up to two percent of their gross revenues. So if your practice was doing a million dollars, you get 20 thousand dollars. If your practice was doing 40,000, you could get four. Two million. You get 40,000 dollars. If you did five million, you could get 100,000 dollars. Now, this is taxable income. It's not a grant. It's not a forgivable loan. I mean, it is a grant, but it's not a forgivable loan. It's taxable income. The way I've described it and I've done it before on this show is it's basically a large case that you've done or two large cases, no lab, no supplies. And instead of having to, you know, make crowns and bridges and place implants or do implant crowns, what does it mean? It just means you get a fill out a lot of paperwork on the computer. That's what it means. So, you know, basically, that's what happened and a lot of my clients said, well, should I apply for that? And I said, yeah, you should because you know, the ADA thought it was a good idea. I thought it was a good idea. The ADCPA thought it was a good one. Most of us thought was a good idea. With one caveat. The caveat is you had to read the terms and conditions. And one of the terms and conditions was there were going to be reporting requirements. Well, they were supposed to come out with the reporting requirements on August 17th. And obviously they didn't do that. They came out with them a month later, August, September 19th. So basically, here's what they said. Number one, you are going to have to report your expenses. You're going to have to justify the expenses that you spent this money on. Right?
So you have until, there are going to be two reporting periods, you'll have to report all expenses that were paid between, you know, the beginning of the year for the most part, or when COVID started. And December 31st you'll have to report those on are before February 15th. Now, the problem is, is that HHS on their website about a week ago said, yeah, we're going to open up the portal for you to do this on January 15th. So you get a month to figure this all out. And folks let me be very clear. We don't have all the answers here. We just don't. If you don't spend all the money by December 31st they're going to give you another six months to do it. But, you know, if you don't spend all the money by June 30th, you're out of luck and you probably have to return it, what you don't spend. Now for dentistry, I don't think it's a big deal. Here's why.
Let's say now it could be for the bigger practices. But the bigger practices may have multiple large number of operatories, multiple locations. But here's the deal. We get to use the expenses that we used, that we spent before we got the money. Most of you got this money in August and September. Well, you spent a lot of your money that was to prevent COIVD in March, April, May, June, getting your office ready.
Buying massive amounts of PPE, buying, you know, air ventilation systems, UV systems, sanitation systems, all kinds of systems. So you can use those expenses. Now, here's how this works. Basically, there are two types of expenses. Two types of ways you could show that you use this money. The first one is called healthcare-related expenses. OK. And by the way, this is for any loan received over to any grant received over 10,000 dollars, which is pretty much everybody. OK, now you've got two categories of expenses.
Number one, these are quote, expenses attributable to Coronavirus may be incurred both in treating confirmed or suspected cases of coronavirus, preparing for possible or actual coronavirus cases. That's you guys, you're preparing and protecting against it and maintaining healthcare delivery capacity, etc. So the bottom line is, I don't think there's any question, at least in my mind, that you are spending this extra money to prevent COVID-19 from happening, not only for your patients, but for you and your dental team. So the first category that we'll get to use this money. Let's again, just say 20,000 dollars on a million-dollar practice. General administration expenses attributable to coronavirus. And I'm reading right from the rules here that came out on September 19, the actual GNA expenses incurred over and above what has been reimbursed by other sources. So you really can't take much payroll when you were getting a PPP loan. You can't take rent, utilities, or interest.
So these are the things, the categories that you can use this money for. You can use it for mortgage or rent, monthly payment related to mortgage or rent for a facility. But again, if a PPP loan covered that, that doesn't count. Insurance premiums paid for property, malpractice, business, insurance, or other insurance relevant to operations. Personnel we talked about. Workforce-related actual expenses paid to prevent, prepare for or respond to coronavirus during the reporting period, such as workforce training, staffing, temporary employee or contractor payroll, overhead employees or security personnel. Does your head hurt yet? These are supposedly additional expenses that you spent. How are we going to determine what additional expenses are? We need more guidance. Fringe benefits, lease payments, utilities and other general administration expenses.
The second category, and this is where you're going to basically get the get out of jail free card from the HHS. And these are healthcare-related expenses attributable to coronavirus, the actual healthcare-related expenses incurred. Now, this is what it says over and above what has been reimbursed by other sources. OK. So, again, PPP loans.
Does it include EIDL? I went on the website. It doesn't say EIDL because that's really reimbursement. That's a loan. PPP is not a loan. I mean, it is. But it's a forgivable loan. So that's considered reimbursed by other sources. If you are a big, big dental practice and you get the Main Street Lending program through SBA, that would be included also. So these are the expenses that you can and you might want to jot this down. Expenses paid for purchase of supplies used to prevent, prepare for, or respond to the coronavirus during the reporting period.
Such items could include personal protective equipment, PPE, hand sanitizers or supplies for patient screening. Now, the one thing we don't know is this. Let's assume that before COVID-19 and this is a question we're waiting for an answer for. Before COVID-19, your dental team wore one N95 mask and they wore one per day. OK, maybe they changed them out every time. Maybe they changed them every couple of patients. I don't know. OK. That's up to the different offices do different things. There are protocols. But let's just assume that you had a mask that someone was wearing. OK, now you've got an N95 mask. Then you've got a traditional face-covering what we all walk out in the street with. Then you've got a shield. Then you've got gowns. Then you've got, you know, other protective equipment that your team is wearing. Is it the. Is it everything except the N95 because we had it before? I doubt anybody's going to take that position, but that seems to be what they're talking about. But again, everybody's bought a ton of PPE. That's going to qualify.
And remember, folks, like I said before, it's not just the PPE that was bought when you got the money. You can go back, the HHS says, quote, as early as January 1 to claim these expenses. What my hope is, is that between the supplies and the equipment that you bought, which I'm going to get to here in a second. What I what my hope is, is that you will have spent enough money between March 16th and again, we go back to January, is what they said. But let's just say March 16th.
Buying PPE and equipment that you needed to buy, that you will spend this 20 or 40,000 dollars either by December 31st or by June 30th of next year. And we don't even have to go to the net income calculation, which I'll get to in a second, which is where you just kind of take your cell phone and throw it away because you just have had enough of all this. I'm not too far behind. The other category that qualifies here is equipment.
So I'll read this right out of the HHS code here, the guidance. Expenses paid for the purchase of equipment used to prevent, prepare for or respond to the coronavirus during the reporting period, such as ventilators, updates to HVAC systems, etc. OK, three more categories that qualify. Information technology, expenses paid for I.T., or interoperability, interoperability systems. That's two big words in one podcast. You guys should be impressed. To expand or preserve care delivery, to expand or preserve care delivery during the reporting period such as electronic health record licensing fees, telehealth infrastructure. Maybe you got involved in a telehealth program that would qualify increased bandwidth on your Wi-Fi so that you could have people you might have had some people working at home while you were shut down. You probably did. And teleworking to support remote workforce.
Now, we in the CPA profession I have been working at home for the last six months. I've been in the office about four or five days in the last six months. It's kind of hard to do dentistry from home. So that may not apply as much. Facilities, expenses paid for, facility-related costs used to prevent, prepare for or respond to the coronavirus during the reporting period, such as lease or purchase of permanent or temporary structures, or to modify facilities to accommodate patient treatment practices revised due to coronavirus. So what is that? That is textbook. You put up plexiglass all over your front reception area and that's what you all did. And you put plexiglass or special dividers between your operatories to again, provide for social distancing, that qualifies.
And then other healthcare or any other actual expenses not previously captured above that were paid to prevent, prepare for or respond to coronavirus. I believe, folks, that you're probably going to cover the grant there. But if you don't, then we go to loss of revenue. So if you don't spend enough money, first you look at the amount of expenses you spent in the two categories of general administration, of which we're still not sure. Are those specifically coronavirus related general administration or all your general administration? I think it's coronavirus related. General administration, they did not give us a lot of guidance on that and supplies and equipment and I.T. So if you don't spend your two percent loan on that now, we get to go to loss of revenue. Now, when they came out with this program several months ago, HHS was selling it by saying, here's what you got to do. You're going to take a look at, you know, how much revenue did you have for the period of time March to December.
In 2020 verses 2019 and the difference is, you're going to get that as an amount that you're allowed to write off. But no, that's too easy, way too easy for the healthcare practitioners who have had an easy go of it for the last six months. I mean, hospitals. Yeah. It's boring in a hospital. They've had no problems, no issues.
What are we up to - seven million people in this country have got the coronavirus now? Not every one of them ended up in a hospital. But so, sadly, as we all know, we just passed a horrible milestone of 200,000 Americans who have lost their lives to coronavirus. I think the number for the world is close to a million people now. It might be over a million people who have lost their lives due to the COVID-19.
So, you know, they had to make it harder. Right? So now what they've done is they've made you do a calculation of income and expense, comparing quarters in 2019. Each quarter for 2019 versus each quarter in 2020. So let me give you an example. Now, again, a lot of this applies to the bigger clinics, hospitals, rural healthcare, etc.
So if in 2019 you had a million dollars of net income. OK. And they don't give us a lot of guidance on how to calculate this. But, you know, net income. But in 2020, you had a loss of 500,000 dollars. You're allowed to, basically, you've lost a million five from 2019 to 2020. You've lost a million five hundred thousand. You had a million-dollar profit this year. You had a big loss. Probably not going to be in dentistry, but just giving you an example. So you could basically claim up to the million and a half to all of expenses. Now again, I don't think most dental practices are going to get anywhere near this. Alright. Here's another example. If in 2019, maybe you just started your practice and you had a loss, maybe you took a lot of depreciation expense. Again, we're still fuzzy on what the calculation is. And then this year, you did better. You had a good first two and a half months. You came back strong after the pandemic was after you reopened your office. And you have a profit of 500,000 dollars or a profit of 200,000 dollars. You basically get your 200,000 dollars and you can use that as an expense again. These calculations, we are waiting for guidance.
We don't know exactly how they're going to be. My advice to you folks is this. I'm not going to get into lots of detail as to how this works, how the net profit calculation works. There will be more guidance. There has to because nobody knows how to compute this. The bottom line is this - what I want you to do now, if you've taken this loan, is I want you to start ledgers to keep track of every single cost that you have spent in your office in 2020 that qualify as coronavirus costs or even you think qualifies coronavirus costs.
Again, I'm really hopeful that what's going to happen is that when you get down to brass tacks, that you will have spent enough money on all of this just in the expenses for PPE and sanitation equipment and UV and ventilation systems to clean the air.
I'm very much hoping that that will cover you. If it doesn't, you're going to have to go into this net income calculation. I wouldn't worry a whole lot about it right now. You do need to continue to listen to my podcast, listen to what the A.D.A is going to be telling you. What's your state dental societies are going to have guidance on that. Talk to your dental CPAs. We at Eide Bailly are on top of this. Listen to the webinar that's going to be on-demand after September 29th. That'll give you a lot of really good information. I'm going to be continuing to talk about this when his guidance comes. We'll give it to you. If again, you're not working with a dental CPA, the Academy of Dental CPAs. we're also living the dream of the HHS guidance. One last thing I'm going to share. So that's enough on HHS. Again, it's not a big deal.
And by the way, I had somebody on my webinar today asked me, so, Art, should I keep this money? Here's my opinion. OK. You have 90 days from the date you get this money. Most of you are still in your 90 day period. If you got a 100 or 200,000 dollars. You know what? Hire somebody, spend 5,000 dollars of it to do all these calculations and you net 195,000 of free money. But you know what? If you have a really successful practice, you're doing a million, a million, five. You have 20, 25, 30,000 dollars.
And you start looking at these reporting requirements, which we told you about these reporting requirements, that they could be onerous. And they are. And you just say you know what? This is not worth my loss of sleep. The amount of information that my team is going to have to put together, the lost production of my front office and just the fact that this pisses me off. That's what I would say. If you feel that way about it or you don't think you spent any money on all these expenses, which you had to, then you should give the money back.
Really. If 20,000 dollars, which net after taxes is probably about 13,000 dollars. Now, 13,000 dollars is nothing to sneeze at. But if you've done very well in your career, you're older and you have, you know, millions of dollars saved and you're working because you want to, you might just say the heck with this. I'm giving the money back. I don't want to deal with this. That would be the reason to give them money back. That was the answer I gave today. One more thing to watch for, and then we'll call it a podcast.
There is legislation in Congress. And by the way, it is in this second 2.3 or 2.4 trillion dollar bill that the Democrats are going to pass this week for a second round of PPP. And what this is going to do is this is going to affect people who, we believe, and we don't know what the final law is going to say. But what they're talking about is if your revenues from Q1 or Q2 of 2020 are down 35 percent or more from 2019, you could apply for another round of PPP loans. If that happens, I am going to call Mr. Elon Musk, I'm going to ask him how much it costs to get onto one of his Space X rockets and fly to the moon, because I am over PPP folks. But if it happens, we at Eide Bailly, the Academy of Dental CPAs, we'll all be there for you to help you through all of this.
So, again, if you want to get a hold of me in my office in Tustin, I'm at 657.279.3243 or email me at email@example.com. Don't forget the Research and Development tax credit. If you think you might be, even if you don't think you're eligible, just send in the questionnaire. www.eidebailly.com/dentalrd. And if you're looking for a dental-specific CPA anywhere in the country www.ADCPA.org. And don't forget to watch, go on the website of Decisions in Dentistry magazine.
Well, you know what, I think I've had enough of the PPP and the HHS and whatever else we talked about tonight, it is frustrating as a CPA. I think the last message I'm going to leave you with tonight is, I was in the supermarket the other day, folks, and I saw a Laguna Beach City police officer and I just walked up and thanked them for all the hard work they do. And again, you know, the vast majority of police officers in this country do a wonderful job. They care. They want to help people and they save lives. You know, they're the first responders.
And I'm very much hopeful that they'll get this thing right, that they'll make these PPP loans, you know, they'll make these PPP loans, not tax-deductible, and they'll maybe give you the 25,000 dollar credit. But, you know, I'm very hopeful for 2021. And I hope you are, too.
I'm gonna be in the process of putting together a series for several of our large local dental societies here in Southern California, which we're probably going to tell you about when we get them going in 2021 because we want to motivate you to do better. We want to motivate you to grow your practice. We want to get you out of the dumps. It's been a horrible year. I'm not going to lie. You know it. I know it. Nobody asked for this. Everything was going really wonderfully until March the 16th.
So I will leave you again with my five-word motto, which I've had all through this series of podcasts - failure is not an option. And I am here to try and help you, to provide you resources and information to help your practice to be better. We are coming up on our 100th episode and I am not going to, I'm not going to spoil the surprise until the interview is in the can, which will be in about three weeks. But I do have a very, very special guest for our 100th program.
I am honored and humbled to all the people who listen to this podcast. It's just amazing to me how much it's grown. How many people who, you know, they'll text me. They'll email me, Art. I listen to your podcasts every week and thanks for the information. We're here to help. Absolutely. Again, give me a call. 657.279.3243 or Art Wiederman firstname.lastname@example.org. That is it for this edition of the Art of Dental Finance and Management. Please stay safe. Take care of your family and the ones you love and your dental team and your patients. And we'll see you next time. Have a great week and we'll talk to you soon. Bye bye.
|Art Wiederman, CPA
Eide Bailly LLP
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