As a medical professional, you have to pay close attention to every detail of your business and keep track of all the changes that can affect your taxes. While medical practices are somewhat exempt from the burden of taxation, they are technically subject to several specific taxes and fees.
The following five tax preparation tips will help you manage your taxes as a medical practice owner:
1. Keep a detailed record of your business expenses
The IRS requires businesses to keep accurate records of their expenses. You can use a paper or electronic system, but make sure that you have records that can be easily accessed when preparing your taxes. This will save you time and make it easier for your tax officer to figure out how much you can deduct.
2. Review billed vs collected days
Practitioners should review their audit reports from the previous year to see if there is any billing discrepancy between the number of days that were billed and the number of days that were collected. If there is a discrepancy, then it may be an indication that some patients are not paying their bills on time.
This can be resolved by implementing a collection policy that includes sending reminder letters, setting up payment plans, or even hiring a collection agency if needed.
3. Track the cost of business-related health insurance
Many medical practices are self-insured and have their own health insurance plans. If you’re self-insured, you can deduct the cost of your employees’ health insurance from your net income. However, to take advantage of this tax break, you need to keep track of it.
If you don’t track this information, how will you know if your employees qualify for a premium tax credit? And if they do, how will you be able to report it correctly? The IRS requires that all eligible individuals receive a Form 1095-B or Form 1095-C by February 1 each year so they can claim their premium tax credits on their tax returns when they file in April.
4. Set aside funds for taxes during the year
It may seem obvious, but medical practices need to set aside funds each month for the IRS and state tax agencies. This ensures that there’s enough cash on hand to meet your obligations when they are due. If you don’t have enough money saved up, you could face penalties and interest charges from the IRS or other government agencies if you’re unable to pay your taxes on time.
5. Hire a CPA to handle your taxes
The first step to minimizing your tax liability is hiring an accountant who’s familiar with the unique nature of medical practices. A professional accountant will help ensure that you’re taking advantage of all available deductions and credits as well as planning ahead for changes in the law — both of which could have a significant impact on your bottom line.
If you’re looking for a reputable, professional organization to take care of your medical practice’s taxes, look no further than Abbo Tax CPA. We offer a complete range of tax, accounting, and business services, including tax advice, tax planning and consultation, tax preparation and compliance, and accounting services.
Hire Abbo Tax CPA today and get your taxes done right!
