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Dentist’s federal income tax for 1962: a check list
reports of councils and bureaus
Dentist’ s federal income tax for 1 9 6 2 1 a check list
C O U N C IL O N L E G IS L A T IO N
A dentist in private practice reports his professional income and expenses on a separate Schedule C “ Schedule of Profit (and Loss) From Business or Profession.” The net profit shown on Schedule C is then carried over to Form 1040 where the dentist may then take his personal deductions or elect to take the standard deduction. All business deductions are set forth on Schedule C, and all personal de ductions on Form 1040 unless the dentist takes the standard deduction in lieu of his actual personal deductions. T A X A B L E IN C O M E
Income from the following sources is tax able as income from the practice of a pro fession, and as such, must be reported on Schedule C. —Professional fees. —Profits from a professional partner ship. —Honorariums for speeches and writ ings.
—Referral fees. —Other. Depending on whether they arise from the dentist’s profession, the following are reported on either Schedule G or Form 1040. —Contest prizes. —Rents and royalties. —Interest and dividends. B U S IN E S S E X P E N S E S
Business expenses are shown on Sched ule C. A dentist, like anyone engaged in a business, is entitled to deduct all ordinary and necessary expenses incurred in the practice of his profession such as: —Accountant’s fees. —Auto expenses to extent used for professional purposes; not included is commuting to office. —Books if useful life is short; long-life requires depreciation. —Collection fees.
134/418 • T H E JO U R N A L O F T H E A M E R IC A N DENTAL A S S O C IA T IO N
—Fees to professional societies; does not include contributions to political ac tion committees. —Dental meeting costs; includes regis tration fees, room, meals, transportation, tips. —Costs of defending a professional lia bility lawsuit. —Dues in dental societies and other organizations for a business purpose. —Educational costs (see under Edu cational Expense). —Entertainment (see special entry). —Fire, casualty and theft losses to ex tent not compensated by insurance. —Gifts to employees and others for business reasons. —Instruments with life of less than one year. — Premiums for such policies as pro fessional liability, premises liability, and fire and theft insurance on professional property. — Interest on indebtedness arising out of professional practice. —Laundry costs of linens, uniforms, and so on, Connected with practice. —Legal fees in connection with profes sional practice. . —License fees necessary to maintain practice. —Magazines and newspapers for wait ing room. —Maintenance of office, including util ities. —Office supplies, bookkeeping sup plies. —Professional journals and periodicals. —Rental space for office. —Repairs to equipment. —Utilities and other expenses of up keep of dental office. — Salaries to. assistants, hygienists, and so on, including contributions to employee pension plans. —Taxes on personal and real property used in professional practice. —Telephone and telephone answering service.
—Traveling expenses; for example, vis its to patients, attending dental meetings, trips to hospitals. — Surgical gowns or other “uniforms.” —Depreciation on long-life equipment, furniture, books, etc. Wife’s Travel Expenses • A husband may deduct his wife’s travel expenses if he can prove that his wife performed services on the trip which were directly at tributable to, and necessary to, the con duct of his business on the trip. The Internal Revenue Service applies a “ne cessity of presence test” and it can be expected that deductions for a wife’s attendance at a dental meeting will be denied. The tax courts have indicated that the performance of some incidental services on the trip does not establish that the wife’s presence served a boiia fide business purpose. Contributions to Pension and Retirement Plans • Contributions to an employees
pension or retirement plan constitute an expense of doing business and are de ductible. However, tax returns for 1962 must include 1962 earnings which are subsequently contributed to the dentist’s own pension or retirement fund. No de duction is allowed for these contributions in 1962. The Self-Employed Individuals Tax Retirement Act of 1962, sometimes known as the “Keogh Law,” would per mit some deductions when reporting in 1964 (1963 tax return) if a qualified plan is prior-approved by the Internal Rev enue Service. Educational Expense • Educational ex
penses are deductible as ordinary and necessary business expenses of a dentist when the education is undertaken pri marily to maintain or improve existing skills. Allowable deduction is for tuition, fees and travel expenses. Entertainment • A dentist may deduct
the costs of entertainment, provided that
REPORTS O F C O U N C IL S A N D BU R E A U S . . .V O L U M E 66, M A R C H 1963 • 135/419
he can establish that such expenses are ordinary and necessary business expenses and clearly related to the production of business income. The dentist must show something more than that he expected to get referrals or patients as a result of the entertainment. Professional Office and Residence in One Building • All expenses which can be al
located to the business use can be de ducted as business expenses. The alloca tion must “clearly reflect income,” and if it does, the method of allocation is ac ceptable. Depreciation • The dentist can use any
of several methods of computing depreci ation and elect the one most beneficial to him. Regardless of the method used, the dentist may deduct in the year of acqui sition 20 per cent of the cost of the prop erty which has a life of six years or more. Rental Costs • Equipment rental costs
are deductible business expenses. If the equipment is subsequently purchased from the lessor and rentals applied as part of the sales price, the rental costs are not deductible. In such instances the total cost of the equipment is either depreci ated or it is deducted as an expense, de pending on the expected life of the equipment. Dues to Social, Athletic and Sporting Clubs • It is necessary that the club be
used primarily for business purposes be fore any dues or fees will be deductible. And then, only that portion allotted to business use will be allowed.
tion with existing or proposed legislation which is of direct interest to the dentist. Combined Business-Personal Trip • The
Internal Revenue Code was amended to permit the Commissioner of Internal Revenue to allocate the amount of travel expense which is not deductible because it is a personal expense. When the trip is for less than one week and the time spent for pleasure is less than 25 per cent of the total time away from home, the full cost of the trip is deductible. Reimbursed Expenses • A dentist serving
as a committee member or in some other official capacity wherein he is reimbursed by the dental society while away from his practice must report this sum as in come in certain cases. If the reimburse ment is equivalent to actual expenses, then it need not be included in the tax return. If reimbursement is in excess of, or less than actual expenses the total amount of the reimbursement must be added to gross income and then all actual expenses may be deducted. D E C L A R A T IO N OF E S T IM A T E D T A X
In general, an individual is required to file a declaration of estimated tax, Form 1040ES, and to make quarterly payments in advance of filing the annual income tax return if his total expected tax ex ceeds his withholding by $40 or more. Dentists who are self-employed must file a declaration if their expected income, not subject to withholding, is more than $200 for the forthcoming year. P E R S O N A L D E D U C T IO N S
• Contributions to candidates, political parties and political action committees are nondeductible. Dentists may take deductions for certain types of legislative activities: for exam ple, costs of appearances before or com munications with legislative bodies, and communication of information to a dental society. All expenses must be in connec Lobbying Expenses
These are deductions personal to the den tist as an individual as opposed to deduc tions incurred in the course of his pro fessional practice. The following check list is applicable to all taxpayers who elect to itemize their deductions rather than take the standard deduction. A den tist is entitled to take the standard de
136/420 • T H E JO U R N A L O F T H E A M E R IC A N DENTAL A S S O C IA T IO N
duction even after he has deducted on Schedule C the ordinary and necessary business expenses. —Charitable contributions.* —Interest expense. —State and local taxes, including real and personal property taxes, sales tax, state income tax, gasoline tax and cigar ette taxes in some states. —Medical and dental expenses, in cluding medicines and drugs and costs of
travel to a doctor or hospital.* —Medical appliances, including hear ing aids, prosthetic appliances, orthopedic shoes, and so on.* —Hospitalization and insurance pre miums for medical insurance.* —Casualties and theft losses. —Costs of preparing income tax re turn. *Sub|ect to percentage limitations.
“ A udio analgesia” : supplem entary report
C O U N C IL O N D E N T A L T H E R A P E U T IC S
In October, 1961 the Council on Dental Therapeutics published in t h e j o u r n a l O F T H E A M E R IC A N D E N T A L A S S O C IA T IO N a
set of minimum requirements for ap paratus for “ audio analgesia” as part of a general report on the subject.1 Although the Council has voted to ex clude “ audio analgesia” devices from its classification program until more defini tive data are available, it wishes to en courage further investigation which may provide a better basis for assessing the efficacy of these devices. A procedure was established by the Department of Sales and Advertising whereby the products would become eligible for advertising in publications and exhibit at meetings of the American Dental Association. Such eligibility was dependent upon the ap paratus meeting the following provisions: (1) a device is certified by an acceptable testing laboratory to meet the physical standards established in the Council’s re port, (2) the devices are accompanied by directions for use which conform to the safety standards established in the Coun
cil’s report, and (3) the promotional claims for the product are limited to those related to diversion or other psychological factors. Several manufacturers have requested such eligibility for their devices and the products have been examined by referee laboratories for compliance with the min imum requirements. The referees’ reports have revealed several shortcomings in the original version of the minimum require ments, particularly with respect to the exact procedures to be followed if the combination of earphone and cushion that is submitted by a manufacturer does not fit the standard acoustic coupler in which it was assumed the necessary meas urements of acoustic output would be made. The present revision of the mini mum requirements, which has been adopted by the Council on Dental Thera peutics, makes explicit the loudnessbalance comparisons which must be made in such situations, and also gives specifica tions for an extended coupler that can be used with any circumaural cushion.
Dentist’ s federal income tax for 1 9 6 2 1 a check list
C O U N C IL O N L E G IS L A T IO N
A dentist in private practice reports his professional income and expenses on a separate Schedule C “ Schedule of Profit (and Loss) From Business or Profession.” The net profit shown on Schedule C is then carried over to Form 1040 where the dentist may then take his personal deductions or elect to take the standard deduction. All business deductions are set forth on Schedule C, and all personal de ductions on Form 1040 unless the dentist takes the standard deduction in lieu of his actual personal deductions. T A X A B L E IN C O M E
Income from the following sources is tax able as income from the practice of a pro fession, and as such, must be reported on Schedule C. —Professional fees. —Profits from a professional partner ship. —Honorariums for speeches and writ ings.
—Referral fees. —Other. Depending on whether they arise from the dentist’s profession, the following are reported on either Schedule G or Form 1040. —Contest prizes. —Rents and royalties. —Interest and dividends. B U S IN E S S E X P E N S E S
Business expenses are shown on Sched ule C. A dentist, like anyone engaged in a business, is entitled to deduct all ordinary and necessary expenses incurred in the practice of his profession such as: —Accountant’s fees. —Auto expenses to extent used for professional purposes; not included is commuting to office. —Books if useful life is short; long-life requires depreciation. —Collection fees.
134/418 • T H E JO U R N A L O F T H E A M E R IC A N DENTAL A S S O C IA T IO N
—Fees to professional societies; does not include contributions to political ac tion committees. —Dental meeting costs; includes regis tration fees, room, meals, transportation, tips. —Costs of defending a professional lia bility lawsuit. —Dues in dental societies and other organizations for a business purpose. —Educational costs (see under Edu cational Expense). —Entertainment (see special entry). —Fire, casualty and theft losses to ex tent not compensated by insurance. —Gifts to employees and others for business reasons. —Instruments with life of less than one year. — Premiums for such policies as pro fessional liability, premises liability, and fire and theft insurance on professional property. — Interest on indebtedness arising out of professional practice. —Laundry costs of linens, uniforms, and so on, Connected with practice. —Legal fees in connection with profes sional practice. . —License fees necessary to maintain practice. —Magazines and newspapers for wait ing room. —Maintenance of office, including util ities. —Office supplies, bookkeeping sup plies. —Professional journals and periodicals. —Rental space for office. —Repairs to equipment. —Utilities and other expenses of up keep of dental office. — Salaries to. assistants, hygienists, and so on, including contributions to employee pension plans. —Taxes on personal and real property used in professional practice. —Telephone and telephone answering service.
—Traveling expenses; for example, vis its to patients, attending dental meetings, trips to hospitals. — Surgical gowns or other “uniforms.” —Depreciation on long-life equipment, furniture, books, etc. Wife’s Travel Expenses • A husband may deduct his wife’s travel expenses if he can prove that his wife performed services on the trip which were directly at tributable to, and necessary to, the con duct of his business on the trip. The Internal Revenue Service applies a “ne cessity of presence test” and it can be expected that deductions for a wife’s attendance at a dental meeting will be denied. The tax courts have indicated that the performance of some incidental services on the trip does not establish that the wife’s presence served a boiia fide business purpose. Contributions to Pension and Retirement Plans • Contributions to an employees
pension or retirement plan constitute an expense of doing business and are de ductible. However, tax returns for 1962 must include 1962 earnings which are subsequently contributed to the dentist’s own pension or retirement fund. No de duction is allowed for these contributions in 1962. The Self-Employed Individuals Tax Retirement Act of 1962, sometimes known as the “Keogh Law,” would per mit some deductions when reporting in 1964 (1963 tax return) if a qualified plan is prior-approved by the Internal Rev enue Service. Educational Expense • Educational ex
penses are deductible as ordinary and necessary business expenses of a dentist when the education is undertaken pri marily to maintain or improve existing skills. Allowable deduction is for tuition, fees and travel expenses. Entertainment • A dentist may deduct
the costs of entertainment, provided that
REPORTS O F C O U N C IL S A N D BU R E A U S . . .V O L U M E 66, M A R C H 1963 • 135/419
he can establish that such expenses are ordinary and necessary business expenses and clearly related to the production of business income. The dentist must show something more than that he expected to get referrals or patients as a result of the entertainment. Professional Office and Residence in One Building • All expenses which can be al
located to the business use can be de ducted as business expenses. The alloca tion must “clearly reflect income,” and if it does, the method of allocation is ac ceptable. Depreciation • The dentist can use any
of several methods of computing depreci ation and elect the one most beneficial to him. Regardless of the method used, the dentist may deduct in the year of acqui sition 20 per cent of the cost of the prop erty which has a life of six years or more. Rental Costs • Equipment rental costs
are deductible business expenses. If the equipment is subsequently purchased from the lessor and rentals applied as part of the sales price, the rental costs are not deductible. In such instances the total cost of the equipment is either depreci ated or it is deducted as an expense, de pending on the expected life of the equipment. Dues to Social, Athletic and Sporting Clubs • It is necessary that the club be
used primarily for business purposes be fore any dues or fees will be deductible. And then, only that portion allotted to business use will be allowed.
tion with existing or proposed legislation which is of direct interest to the dentist. Combined Business-Personal Trip • The
Internal Revenue Code was amended to permit the Commissioner of Internal Revenue to allocate the amount of travel expense which is not deductible because it is a personal expense. When the trip is for less than one week and the time spent for pleasure is less than 25 per cent of the total time away from home, the full cost of the trip is deductible. Reimbursed Expenses • A dentist serving
as a committee member or in some other official capacity wherein he is reimbursed by the dental society while away from his practice must report this sum as in come in certain cases. If the reimburse ment is equivalent to actual expenses, then it need not be included in the tax return. If reimbursement is in excess of, or less than actual expenses the total amount of the reimbursement must be added to gross income and then all actual expenses may be deducted. D E C L A R A T IO N OF E S T IM A T E D T A X
In general, an individual is required to file a declaration of estimated tax, Form 1040ES, and to make quarterly payments in advance of filing the annual income tax return if his total expected tax ex ceeds his withholding by $40 or more. Dentists who are self-employed must file a declaration if their expected income, not subject to withholding, is more than $200 for the forthcoming year. P E R S O N A L D E D U C T IO N S
• Contributions to candidates, political parties and political action committees are nondeductible. Dentists may take deductions for certain types of legislative activities: for exam ple, costs of appearances before or com munications with legislative bodies, and communication of information to a dental society. All expenses must be in connec Lobbying Expenses
These are deductions personal to the den tist as an individual as opposed to deduc tions incurred in the course of his pro fessional practice. The following check list is applicable to all taxpayers who elect to itemize their deductions rather than take the standard deduction. A den tist is entitled to take the standard de
136/420 • T H E JO U R N A L O F T H E A M E R IC A N DENTAL A S S O C IA T IO N
duction even after he has deducted on Schedule C the ordinary and necessary business expenses. —Charitable contributions.* —Interest expense. —State and local taxes, including real and personal property taxes, sales tax, state income tax, gasoline tax and cigar ette taxes in some states. —Medical and dental expenses, in cluding medicines and drugs and costs of
travel to a doctor or hospital.* —Medical appliances, including hear ing aids, prosthetic appliances, orthopedic shoes, and so on.* —Hospitalization and insurance pre miums for medical insurance.* —Casualties and theft losses. —Costs of preparing income tax re turn. *Sub|ect to percentage limitations.
“ A udio analgesia” : supplem entary report
C O U N C IL O N D E N T A L T H E R A P E U T IC S
In October, 1961 the Council on Dental Therapeutics published in t h e j o u r n a l O F T H E A M E R IC A N D E N T A L A S S O C IA T IO N a
set of minimum requirements for ap paratus for “ audio analgesia” as part of a general report on the subject.1 Although the Council has voted to ex clude “ audio analgesia” devices from its classification program until more defini tive data are available, it wishes to en courage further investigation which may provide a better basis for assessing the efficacy of these devices. A procedure was established by the Department of Sales and Advertising whereby the products would become eligible for advertising in publications and exhibit at meetings of the American Dental Association. Such eligibility was dependent upon the ap paratus meeting the following provisions: (1) a device is certified by an acceptable testing laboratory to meet the physical standards established in the Council’s re port, (2) the devices are accompanied by directions for use which conform to the safety standards established in the Coun
cil’s report, and (3) the promotional claims for the product are limited to those related to diversion or other psychological factors. Several manufacturers have requested such eligibility for their devices and the products have been examined by referee laboratories for compliance with the min imum requirements. The referees’ reports have revealed several shortcomings in the original version of the minimum require ments, particularly with respect to the exact procedures to be followed if the combination of earphone and cushion that is submitted by a manufacturer does not fit the standard acoustic coupler in which it was assumed the necessary meas urements of acoustic output would be made. The present revision of the mini mum requirements, which has been adopted by the Council on Dental Thera peutics, makes explicit the loudnessbalance comparisons which must be made in such situations, and also gives specifica tions for an extended coupler that can be used with any circumaural cushion.