Non-Cash Contribution Tax Deduction - Homework made Easy

Each year, during "tax season", I will have clients provide me with lists of items that they have donated to their favorite charity.  It makes sense right? Out with the old and in with the new.  Items in your household or wardrobe that you no longer need or maybe doesn't fit quite right any more can find a new home or body size.  It's perfect, your junk is someone else's treasure.  And, instead of holding the dreaded "Garage Sale", you receive an Itemized Deduction on your income taxes from Uncle Sam. Uncle Sam is such a good guy, isn't he?  But wait a minute!  Your favorite Uncle has rules you must follow if you are going to turn these "treasures" into a deduction on your income tax return.

The following summary is meant to assist you in preparing the "treasure listing" that you provide me or your tax professional to ensure your deduction is used.  Keep in mind that all cash and non-cash charitable contributions must be substantiated in order to be deductible.  

• Name and Address of the Charity - make sure that you provide this information when organizing your tax information.  Often the organization will provide you with a receipt that contains this information.  If your total non-cash contributions exceed $500, a form 8283 must be attached to your return.  This form requires this information for the donee organization.
  
• A Description of the property being donated - typically, the recipient of these goods will provide you with a form or receipt that provides space for describing the property.  Be sure to keep a good list of what you donated.  A description like, "Three garbage bags of clothing" will likely not fly with the IRS in an audit.  Be sure to list the items separately.   The form 8283 doesn't require that each item is listed separately, but your records need to clearly substantiate the deduction.  Also, keep in mind, that household items that you donate must be "in good used condition or better".  Most tax professionals now believe that used clothing is not "in good used condition or better" and no longer qualifies for a non-cash charitable donation deduction. So, if you are going to donate clothing and you wish to take a deduction, you should be able to verify that it meets this criteria.
  
• Dates, Costs, and Fair Market Value - your records should list the date you donated the property to the organization and the date you originally acquired the property.  Each item donated should contain the original cost of the item (or adjusted basis) as well as the fair market value of the item.  The method used for determining "fair market value" may also be required, if you need to file a form 8283.  To obtain a value of your items, I would suggest that you use a donation calculator, like the one found here at Goodwill Industries of West Michigan to substantiate your deduction even if you donate the items to another charity.
  
• Qualified 501 (c) (3) Charitable Organization - whether you donate cash or non-cash, your contribution must be given to a qualified charity to receive  a deduction.  To make sure that you are donating to a charity that will qualify, look the charity up on the IRS website that allows you to search for the organization.  It really works quite well - click here to go to the IRS webpage and search for the exempt organizations that are eligible to receive tax-deductible contributions.

Substantiating your non-cash charitable contributions at the time you make the donation will assist you in taking an appropriate donation and receiving a deduction. Using the steps above and the two websites referenced will help make your homework easy!

Disclaimer/Disclosure - the above summary does not constitute specific tax advice.  The reader should be certain to review their personal tax situation with their own tax professional.  Any US tax advice included in this written or electronic communication was not intended or written to be used, nor can it be used by a taxpayer, for the purpose of avoiding any penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.

Close the Back Door! Or, It Will Be Cold Inside Your Practice

Having experienced many cold winters here in Michigan, there is one saying I heard as a kid and often repeated to my own children - "Close the back door. We don't need to heat the garage!"

Dental practices that are experiencing the effects of a slow economy might want to take this saying to heart as it relates to the number of new patients they add to their practice. The average dental practice saw approximately 20 new patients per month in 2011, according to data collected from practices across the country. If you are thinking, wow, what do I have to do to reach that goal? Or, twenty a month? I'm knocking that down by the end of the second week of the month, be careful.  Comparing yourself to benchmarks can be helpful, but you need to look at the bigger picture.

Begin this year by establishing the number of active patients you currently have in the practice. A good definition of an active patient, is a patient that you have seen in the practice within the last eighteen months. Then, at the end of each quarter, add to this figure, the number of new patients that have joined your practice. Next, subtract the total number of active patients at the end of the quarter. If the result of this computation is positive, great, your practice is moving in the right direction. If, however, the result of this exercise is the same or lower, you may need to "check the back door".

Keep in mind that every practice will experience patients leaving. The key here is to track and know why they are leaving.  Is it because they have moved away?  This happens all the time, but do you know it?  If your patients aren't leaving because they moved out of the area, then it's likely it may be for a reason or perception that you and your team can change before your schedule feels a major impact.

In his book, Everything is Marketing, Fred Joyal explores several reasons that patients leave a practice. They include the following:

• Your Practice doesn't offer what they want - Let's face it, people talk!  If they hear about the latest whitening program or dental procedure from a friend and never hear about it from you, then they just might be leaving because they perceive that you don't offer what they desire.  You do offer a whitening program don't you?
• They don't know what you do - Begin with the assumption that if they aren't told at each visit, they don't know.  In my opinion, having a brochure by the checkout counter on a snore guard, or a television ad running in the lobby that demonstrates the benefits of the new laser equipment you are using, doesn't count as telling them.  It only supplements what you and your dental team communicate as part of your continual standard of care. 
• They think you are too expensive - Having done many fee analysis over the years, I know that the typical dentist isn't too expensive.  Often, I end up showing a client that their fees are below the average for their locale before they will actually adjust their master fee schedule to a recommended charge.  Here is a little secret for you -  patients don't leave because you increase your fees.  They leave because they don't value what you do for them.  Building up the value of dentistry in the minds of your patients is a process of communication that you and your team need to work on continually.  This communication begins with you, believing in the value of your services.
• Their insurance changed, and you don't accept it - I'm not an advocate for participating with every dental preferred provider organization that comes your way, but I do think you should research the plans and understand how they work.   Prepare a brochure for your patients entitled, Dental Plans: What you Need to Know.  Most likely your patients don't have a thorough understanding of their plan.   Once educated, many will choose to stay with you, their preferred dentist - even if that means going out of network and paying more. 
• They are embarrassed about how long they've put off their recall - I recently went to see my family physician and I know,  from first-hand experience,  that I felt a little sheepish saying to the receptionist who couldn't find me on her computer screen - "Might you have changed practice management systems within the last eight years?"  I have a dentist client who says, "I hate bugging patients about keeping their appointments".  To which I reply, "You aren't bugging them, you are simply showing them you care!"  This is the last reason Fred points to as a reason a patient might be leaving your office.
• They don't believe you care -  I once had a general dentist call me after being referred to a specialist to have a wisdom tooth extracted.  "Mike, I'm just calling to find out how you are feeling.  Did everything turn out alright?"  You show a patient you understand their discomfort or go out of your way to simply acknowledge them in some way and you show them that you care. 

Adding new patients to a practice can be tough in any economy.  Be sure to enhance your marketing efforts this year by Minding Your Own Business and "Closing the Back Door!"

Not just for kids!

Yesterday, our Pastor asked the kids of the congregation what they were going to do to make the Year, 2012, a good year.  He challenged them to think of some ways in which they could make the world a better place.  As we move forward into a year of changes and opportunities in the business of healthcare, this is a question that we should all contemplate.

Walt Disney once wrote that there were three types of people in this world: "Well Poisoners," who criticize and try to tear people down rather than build them up; "Lawn Mowers, " good people who do their jobs, pay their taxes, and take care of their families and homes but never venture beyond their own yards to help others; and "Life Enhancers," who by their kind words and deeds enhance the lives of others and leave their world a better place for having lived.

As we set our goals for 2012, let's look for ways in which we can be "Life Enhancers".  Be an encourager to your staff, show compassion to your patients, be a mentor, a leader, a friend.  Begin this year by Minding Your Own Business and giving yourself to enhancing life of those around you. How will you make the Year, 2012, a good year? - It's not just a question for kids.

To help you set your goals for 2012 and establish quarterly action plans use this worksheet - http://dld.bz/MDManagement_GoalWorksheet (Link expires 1.8.11).  Go ahead, Practice with a Purpose!

Number One Customer - Your Employee

Physicians and Dentists who manage their own office face a variety of compliance issues these days that place time demands on them and their office managers.  And, with all the work and oversight that comes with billing matters, e-prescribing, electronic medical records, applying for and attesting to "Meaningful Use", and managing the daily activities of the office, doctors and managers may fall prey to putting-off various aspects of Human Resource Management.

Remember, your employees are a key component to running an efficient and compliant professional business.  They really are your first and most important customer.  When HR troubles arise, doctors find themselves facing staff turnover, misuse of overtime, employee absences, "rotten apple" attitudes, un-met productivity goals, and host of other people problems that can have a major impact on the profitability of the Practice.

Might it be time for a review or analysis of one or more of the following?

• Do all your employees have a job description? Have you reviewed it with them lately?
• When was the last time you looked over your Personnel Policy Manual?  It may be time to have this reviewed with an HR professional.
• Are your employee's wages and benefits up to par with what is being offered locally?
• Have you done your performance evaluations with your employees within the last twelve months?
• Should your employee benefit plans be analyzed for cost savings?
• Do you maintain a Procedure Manual that will help answer questions for the new employee, or even the seasoned veteran, on how you  would like to see a task or situation handled?

If you find yourself admitting to a lack of follow-up in these areas, or wondering if you are up-to-date on the latest policies, then be sure to give us a call to set-up a HR Check-up.

Both the Internal Revenue Service (IRS) and the US Department of Labor (DOL) also require that you maintain specific records regarding your staff.  Having an employee file with the following items would be crucial should either agency require you provide this information:

1. Employee's demographic information including full name, social security number, address, date of birth, sex and occupation.
2. Copies of employee's W-4, I-9, and State New Hire Forms
3. Amounts and dates of all wage payments.  This would also include the fair market value of "in-kind" wages paid.
4. Start and end dates of employment.
5. The time and day of the week that an employee's workweek begins.
6. Hours worked each day and the total hours worked each workweek and pay period.
7. The basis on which your employee's wages are paid and their regular hourly pay rate.
8. Your records should indicate employee's regular straight-time earnings, total overtime earnings for a workweek, total earnings for a pay period, and any additions or deductions from from their earnings. 
9. The date of payment and the pay period covered by the payment.
10. Periods for which employees received pay for days absent due to sickness or injury and the amount and weekly rate of payments you or third-party payers made to them.

Additionally, your business should have available the following corporate information:

• Your employer identification number
• Copies of payroll tax returns filed
• Dates and amounts of tax deposits and benefit payments made (such as 401(k) deferral payments)
• Records of fringe benefits provided to your employees, including substantiation.

Hopefully, this information has just been a good reminder of things you are already doing.  If not, don't neglect your number one customer any longer.

Scheduled October 1, 2011 Tax Decrease in Michigan - Delayed

Under a 2007 law, Michigan's income and withholding tax rates were scheduled to decrease from 4.35% to 4.25% on October 1, 2011.  However, under legislation enacted into law on May 25, 2011, this decrease has been postponed until January 1, 2013.  In addition, the 2011 law revokes the additional tax rate decreases that were scheduled from October 1, 2012 through October 1, 2015.

Start your day with a Practice Huddle

Whether a football player is on offense or defense, they go to the huddle at the start of each play to encourage each other and call a play that will move the team towards their goal.  Doctors can use a similar approach to reaching practice goals by utilizing a "team huddle", a morning meeting, to start the day.  Here are some key practice management aspects to consider with your staff.

• Review Goals - summarize your actual production, adjusted production, collections, number of patients seen, number of new patients, number of procedures performed, and expenses for the prior day, week or current month and compare these figures against your goals to alert your team of any variances.  Don't focus on only the negatives if you find yourself behind on your goals.  Remember, this is a time for positive team encouragement and to work the office "playbook", which should move your team towards the practice goals.  Save the longer strategy discussions and modifying the playbook for a regular staff meeting.

• Review Yesterday - analyze the prior day's activities so that you follow-up on items that may have been missed or for a chance to market your services in the future.  How was the new patient referred to your practice and why did they make an appointment with you?  Was a treatment plan established and was it entered into your practice management system?  Did you receive an updated e-mail address and cell phone number?   Use this summary to follow-up with your new patients the next day with a quick note or phone call thanking them for visiting your office.  Providing them with a patient opinion survey will also help your practice listen to and meet their needs; moving your practice towards becoming more than just a friend on Face book.
  
  
• Review Today - look at today's appointments scheduled.  Is the day full? If not, use your staff time efficiently by looking to today's listing of patients that are inactive or overdue for care.  Work towards filling the day or a future schedule.  If someone should call today with an emergency, where should the staff put the patient? Look at today's treatment plans and coordinate care with all providers of care to do what is best for the patient and efficiently utilize insurance benefits. Do any of today's patients have an outstanding balance with you?  If so, be sure everyone on the team knows their role and assignments for following up.

Dental clients using our Morning Meeting Report can save an average of 12 minutes per day in gathering information for the meeting - that's approximately a week's worth of work over a year's time.  Using a standardized report or a display board will keep your meetings efficient and make a positive impact on your work day. Give me a call to find out how you can begin implementing our standardized reporting process, or start one of your own.  Either way, get into the practice of holding a daily huddle with your staff and move closer to your goals. One, Two, Three - Let's Go!

Practice with a Purpose - 7 New Year's Resolutions for Doctors to Consider

1. If you don't measure it, you can't manage it - A key to making improvements to your practice in the New Year is to measure the objectives of your particular goal.  Don't go overboard on this or you find yourself bogged down in the analysis.  For starters: pick a few Key Performance Indicators that you haven't tracked in the past and begin to study them on a regular basis.
    
2. Is it time for a Master Fee Schedule check-up?  - Having done several fee analyses for practices, I have found that it is not uncommon to see errors in the master fee schedule. Fees below actual costs, below the market, or simply below contracted fee schedules can result in dollars being "left on the table".  For starters: create a listing of all the procedures you did in the past year and the frequency of each code used along with your current fee.  Sort the codes by frequency and by dollar volume to key in on your top 25 codes, which most likely makes up 80 to 90 percent of your gross charges.  If these fees are in line with your costs to produce the charge and market rates, then take the next step and check the rest of your less frequently used codes where under pricing is often overlooked.
    
3. Get to know your patients - While you shouldn't scrap every advertising program you have in place, be purposeful in your marketing strategy this year to grow your "top line".  For starters: profile your current patient base.  Knowing where they work, of which organizations they are members, how they were referred to your practice or how many referrals they sent to your practice will help you identify your biggest growth opportunity.   Whether it is a specific new patient type, service that you could or should be performing for the better health of your patient, or maybe a new geographical market, create a laser-focused marketing plan. 
    
4. Look to gain insight from one of your greatest assets - About a third or more of your general overhead is spent on staff salaries.  Be sure to look to your staff for suggestions on how you might improve your practice this year - most do care about the continued success of your business.  For starters: Whether it is through having regular staff meetings or casual morning huddles in the office, create time on your agenda for non-threatening discussions on their thoughts that will benefit you and your staff this New Year.  And then, don't file them - plan and act accordingly making the best use of your assets.
    
5. Follow the money - Cash flow is the lifeblood of a medical or dental practice.  Keeping an eye on your cash flow will keep your practice healthy and allow for a less stressful year.  For starters: Go through your accounts receivable listing and look for those accounts that are greater than 90 days old. Is there a plan for collecting the money?  If not, look to institute a revised method for collecting this money - check out Payment Clinic as one option for a renewed effort towards patient collections this year.
     
6. Keep things Looking Fresh - Walking into an office and finding old magazines in the waiting room or furniture that looks worn and tired creates a negative "first impression" of you when a patient enters your office for the first time.  First impressions also find their way on your website, or lack thereof, and may be the difference between making that first appointment or sending a potential patient looking for other options to satisfy their health care needs.  For starters: ask a few people outside of your office to provide you with a set of "fresh eyes".  Have them give you their impressions of your website, your patient information brochure, or have them call and make an appointment with your front desk staff to evaluate the experience that your new patient may encounter.
    
7. Renew your perspective - I recently read that most people take a long time to die.  I know, what a way to think about a New Year, right?  But think about it for a minute, if your not one of those who will leave this life suddenly, you will most likely die in a bed waiting.  So imagine yourself there for a moment, lying on your back and reflecting on your life.  Do you have any regrets?  Would your patients and family say that you really made an impact on their life? What saying would you want inscribed on your tombstone?   Now, is there anything you can do this year to make your work life and your personal life even better?  For starters: be sure to take time away from your practice and make an honest assessment of the impact your business has on you and you have on it.  Look for ways this year that will provide you with the proper work balance, renew your passion for being a doctor, and "Practice with a Purpose".

I wish you a happy, healthy, and prosperous New Year.  I look forward to working with you this year once again...helping you mind your own business.