Tax Prep for Therapists
Our team receives many questions each year from therapists who don’t know what they should do to prepare for tax season. We would love to help you prepare the best you can for tax season this year by giving you some of our best advice and tips.
First and foremost, please seek the services and advice from a qualified accountant. Accountants have been around since Rome was established and for good reason. Tax law and the tax code is extremely complicated and changes frequently. It is important to avoid tax penalties and even jail time to get this important part of your business looked at from a qualified expert. The first bit of advice that we have for you is: get an accountant.
Second, it is not enough just to seek the services of an accountant who can help you with taxes and bookkeeping. As the owner of a successful practice, it is up to you to maintain detailed financial records of your business. Whether you are doing that on a spreadsheet or an accounting software like Quickbooks, it is critical that every dollar of revenue and every dollar of expense is accounted for and you can prove it through receipts. We highly recommend Quickbooks as a solid accounting software.
It is important to make a distinction between accounting software and electronic health record software. They are not the same and should not be used interchangeably. This is one of the biggest mistakes that we see in private practice that causes a significant amount of stress for practice owners. They believe that they can run their practice accounting through their EHR system and they end up missing payroll or expenses, and it can cause a tremendous amount of undue burden on you and your team. Please consider signing up for and learning about an accounting software that you can use to track your finances.
The next thing that you can do to prepare for tax season is to look out for a 1099 from the insurance company. It is important to understand that you are not an employee of the insurance companies. They are not going to send you a W2 at the end of the year showing you how much money they took out for taxes and how much they paid you. They are going to send you a 1099 showing you the bottom line number of dollars they gave you throughout the year.
This is a very important document to hold onto for a couple of reasons. This document is the official record of how much you were paid in the year. Which means that if you are showing a different dollar amount received in your accounting software, then you have a problem with the insurance company. You will need to contact them immediately to rectify the situation. The government will expect the 1099 number to match the tax forms that you submit. They need to match so make sure you are watching out for that.
Finally, you can prepare for taxes by creating systems and structures that allow you to track your finances throughout the year. Many people and business owners drop a bag of receipts off at their accountants office every year and it can be stressful to be compliant with your tax records. Be sure to keep track of your finances throughout the year to avoid any complications with the government or your business.
We have some wonderful recommendations of people that do bookkeeping just for private practices and we would be happy to make an introduction for you. Feel free to reach out for any questions or concerns you may have!