Reviewing Tax Returns Before Buying

Tax returns reveal the true financial story. Learn what to look for when analyzing practice tax returns during due diligence.

What to Request

• 3-5 years business tax returns
• Personal tax returns (if sole proprietor)
• Supporting schedules
• W-2s and 1099s

Key Schedules to Review

Schedule C (Sole Proprietors)

• Total income
• All expense categories
• Depreciation deductions
• Home office (if applicable)

Form 1120S (S-Corps)

• Ordinary business income
• Officer compensation
• Shareholder distributions
• Balance sheet items

Verification Strategies

• Compare to P&L statements
• Verify bank deposits match
• Check for consistency
• Look for amendments

Red Flags

• Inconsistent reporting year-to-year
• Amended returns
• Unusual expense categories
• Missing schedules
• Extensions filed repeatedly

Bottom Line

Tax returns provide verification of claimed income. Cross-reference with internal financials. Hire a dental CPA for complex structures.

Tax review help? Contact DentalBridge.