Benefits by the book

Benefits by the book

Jun 01, 2006

Gary Glassman
I heard that a veterinarian was audited and fined more than $30,000 in back taxes for not claiming discounted pet care as taxable income on his employees' paychecks. I've been offering $300 in pet care per year per full-time employee (and half that for part-timers). If an employee goes over the $300 limit, he or she gets a 50 percent discount on additional care. Have I been doing it wrong all these years?

"Yes, you've been doing it wrong. First, the rules on discounts for products are regulated differently from services," says Veterinary Economics Editorial Advisory Board member Gary Glassman, CPA, a veterinary financial consultant and partner with Burzenski and Co. PC in East Haven, Conn. The Internal Revenue Service (IRS) says the discount on products and lab tests can't be greater than the normal selling price multiplied by the employer's gross profit, which is determined by subtracting the cost of the product and the costs of shipping and carrying the product from the sales price. "A good rule of thumb is to have employees pay cost plus 10 percent for products," Glassman says.

You can, however, offer tax-free services when you're not booked full, Glassman says. He bases this on IRS code section 132(b). "Where excess capacity exists, no income is imputed to the employee," he says. "It's only when a practice is at full capacity that IRS code section 132(c) applies, which states that discounted services can't exceed 20 percent." For example, if you have open appointment slots or available cage spaces, your employees can take advantage of them tax-free. Otherwise, it's a 20 percent discount. If you offer employees a set dollar amount of free services, Glassman says the credit can only be used for services, not product purchases.

Hot topics on dvm360

Dog of Dallas Ebola patient will not be euthanized, authorities say

Health officials have quarantined and will monitor dog and amid concerns surrounding deadly virus.

Video: How to perform a belt-loop gastropexy

Prevent GDV in your at-risk patients with this simple technique.

Stretch your skills to earn more in veterinary practice

Finding new tasks could be the key to generating more income for your practice—and boosting your pay.

Veterinary community stunned by Sophia Yin's unexpected death

Prominent veterinary behaviorist died of suicide Sept. 28.

Study shows sustained salary slump for veterinary support staff

Since 2009, technicians paid by the hour have experienced a bump in pay, but pay for other team members has stayed stagnant, according to data from the 2014 Firstline Career Path Study. Here’s a look at changes in team pay from 2009 to 2013.