NCPA Executive Update

NCPA Executive Update delivers insights on legislative, regulatory, policy, and industry developments from NCPA CEO B. Douglas Hoey, Pharmacist, MBA, to NCPA members and pharmacy leaders every Friday.

Taxes: Yes, they're inevitable, but why not pay less and take home more? | NCPA Executive Update | May 4, 2018

by NCPA | May 04, 2018

Dear Colleague,

Doug Hoey

"In this world nothing can be said to be certain, except death and taxes," were words of wisdom over 200 years ago from Benjamin Franklin. Well, as life expectancy continues to go up, it's possible the new tax law may make your tax rate go down giving you some extra dollars to provide some additional cushion in those extra years.

In December, Congress passed the biggest tax reform in 30 years. There is plenty of controversy around who benefits the most from the bill, but the Tax Cut and Jobs Act signed into law at the end of last year has some significant potential benefits for pharmacy small business owners.

Next Wednesday, May 9, at 2 p.m. ET, NCPA will host its second webinar for NCPA members on the new tax laws. The call will be recorded in case that's not a good time for you. Registration is required, but it's free.

You have probably already done some research on how the changes to the tax code will affect you. That's good, but given the sweeping changes and the uniqueness of your business compared to other small businesses, is there more to know that could benefit you?

For added perspective, consider the time you spend trying to understand and account for DIR fees. On average, PBMs claw back approximately 3 percent to 5 percent of all Part D revenue from pharmacies. A tremendous amount of your time and resources are spent trying to lower that percentage by improving quality ratings. More time, energy, and angst are rightfully spent around the ability of PBMs to use their take-it-or-leave-it contracts to claw back your money.

Contrast that with being as informed as possible about the new tax law, where a lower tax bracket can save you tens of thousands of dollars. For some, tax brackets might fall from more than 35 percent to 21 percent or less. How are you incorporated? Are you a S-corporation like 65 percent of independent pharmacy owners? Much of the new tax bill is targeted to help C-corporations, yet there are provisions that could still be of benefit to S-corps, LLCs, sole proprietorships, and partnerships. What benefits you the most will depend on your business situation. Hopefully you have an astute accountant on your team who is up to speed on all the changes to the tax code, because one oversight on their part could cost you thousands of dollars.

Ollin Sykes and his son Scotty are CPAs who specialize in accounting for pharmacies. The Sykeses are frequent presenters at NCPA's Annual Convention and contributors to NCPA publications. They will be the webinar speakers next week.

Opportunities to potentially pay less in taxes and put more in your pocket don't come along every day. Taxes may be inevitable, but why pay more than you have to?

Best,
Doug Hoey