CPA for Doctors

Posted Monday, November 17, 2025

Your Money, Your Practice, Your Playbook

You can diagnose a subtle murmur from across the room and probably recite the brachial plexus in your sleep. But when the hospital’s benefits package looks more complex than a metabolic pathway and your side gig income is creating a tax migraine, you might feel a little out of your element. It’s okay. You save lives; we save you from spreadsheets.

Let’s give your financial health a quick check-up. Any of these symptoms sound familiar?

  • Financial Tachycardia: A racing heart every time you think about your six-figure student loan balance.
  • Fiscal Anemia: A nagging feeling that despite your high income, your bank account looks surprisingly pale and weak.
  • Tax-Induced Vertigo: Dizziness from trying to figure out W-2s, 1099s, and K-1s all at once.
  • Retirement Myopia: You know you need to save for the future, but it feels blurry and far away.
  • Compliance Fatigue: The sheer exhaustion of trying to keep up with state licenses, DEA renewals, and business filings.

If you checked one or more, you’re not alone. Welcome to the Physician’s Financial Playbook—a no-nonsense guide to getting your money, your practice, and your future in order.

The Specialist Advantage: Why Your Uncle’s CPA Won’t Cut It

You wouldn’t ask a dermatologist to perform a craniotomy. So why trust your hyper-specialized financial life to a generalist accountant? A CPA who lives and breathes the medical world sees things others miss.

Let’s look at a few cases.

Case Study #1: The Hospitalist with a Side Hustle

  • Patient: Dr. Chen, a W-2 hospitalist, started doing expert witness reviews, earning an extra $40,000 via a 1099.
  • Generalist’s Treatment: Told her to just “set aside 30%” for taxes. She gets a massive, unexpected tax bill because she didn’t account for self-employment tax.
  • Specialist’s Treatment: Immediately recommends forming a single-member PLLC taxed as an S-Corp. Sets her up with a “reasonable salary” of $20,000 and the other $20,000 as a distribution. This move alone saves her ~$3,000 in self-employment taxes. He then opens a Solo 401(k) for her S-Corp, allowing her to defer another huge chunk of that income, further slashing her tax bill.

Case Study #2: The Dermatology Practice Adding Cosmetics

  • Patient: A thriving dermatology practice decides to add a laser and cosmetic injectables.
  • Generalist’s Treatment: Mixes all the revenue and expenses together. The practice owners can’t tell if the new service line is actually profitable.
  • Specialist’s Treatment: Restructures the chart of accounts to track medical vs. cosmetic revenue and direct expenses separately. They identify that while cosmetic revenue is high, the cost of consumables and marketing is eating up profits. This data allows the practice to adjust pricing and marketing spend, turning the new service into a true profit center.

Case Study #3: The Globe-Trotting Anesthesiologist

  • Patient: Dr. Rodriguez takes high-paying locum tenens assignments in four different states throughout the year.
  • Generalist’s Treatment: Files a federal return and a home state return, hoping for the best. Dr. Rodriguez later gets tax notices from three other states with penalties and interest.
  • Specialist’s Treatment: Proactively tracks income earned in each state. Registers Dr. Rodriguez for withholding accounts where needed and files four separate non-resident state tax returns, ensuring taxes are paid correctly and credits for taxes paid to other states are properly claimed on her home state return, avoiding double taxation and penalties.

Decoding Your Paycheck: The Many Lives of Physician Income

Physician compensation is a wild ecosystem. Here’s how to plan for each species.

  • W-2 Employee: You get a steady paycheck with taxes withheld.
    • Tax Playbook: Max out your 401(k)/403(b) ($23,000 in 2024). Max out your HSA ($4,150 for self, $8,300 for family). If your plan allows, explore the Mega Backdoor Roth. Easy wins.
  • 1099 Independent Contractor: You get a gross check. You are the business.
    • Tax Playbook: Form an entity (we’ll get to that). Pay quarterly estimated taxes (federal and state). Deduct everything. Open a Solo 401(k) or SEP IRA. This is where strategic tax planning makes the biggest impact.
  • RVU/Production Bonuses: Your income swings with patient volume.
    • Tax Playbook: When you have a massive month, don’t just see a bigger paycheck—see a bigger tax liability. Automatically sweep 35-50% of that bonus into a separate savings account labeled “Don’t Touch – For the IRS.”
  • Medical Directorships & Call Pay: Often paid via 1099, even if you’re a W-2 employee.
    • Tax Playbook: This is the perfect income to shelter. Use it to fund a Solo 401(k) or pay down high-interest debt. Don’t just let it get absorbed into your checking account and spent.

The Entity Playbook: S-Corp Myths and Must-Dos

For anyone with significant 1099 income, forming an entity is step one. Most physicians will use a Professional LLC (PLLC) or Professional Corporation (PC), then make an election to be taxed as an S-Corp.

Busting S-Corp Myths

  1. Myth: “I can pay myself a $1 salary and take the rest as a tax-free distribution!”
    • Busted: The IRS requires you to pay yourself a “reasonable salary” based on your work. Try this, and you’ll get a very unfriendly letter. A good CPA helps you document this to keep you safe.
  2. Myth: “It’s too complicated to run payroll for just myself.”
    • Busted: Modern payroll platforms make this a 10-minute-a-month task. Your CPA can even manage it for you. The tax savings are well worth the tiny effort.
  3. Myth: “I can deduct my new car, my vacations, and my dog’s therapy sessions.”
    • Busted: Deductions must be “ordinary and necessary” for your business. The S-Corp isn’t a magic wand for personal expenses. It’s a strategic tool for tax efficiency.

Your S-Corp Compliance Calendar

  • Quarterly: Pay estimated federal and state taxes (Jan 15, Apr 15, Jun 15, Sep 15).
  • Monthly/Quarterly: Run payroll to yourself for your reasonable salary.
  • Annually (Jan 31): Issue your own W-2.
  • Annually (Mar 15): File the S-Corp business tax return (Form 1120-S).

Student Loans: Your Two Paths in the Woods

You have a choice: pursue forgiveness or go for aggressive payoff.

Path 1: The Public Service Loan Forgiveness (PSLF) Trail

  • Is this for you? → You work for a 501(c)(3) non-profit or government entity.
  • Your Strategy? → Get on an Income-Driven Repayment (IDR) plan like SAVE. Your goal is the lowest possible monthly payment for 120 qualifying payments.
  • Your Tactic? → Maximize AGI deductions. Every dollar into a pre-tax 401(k), traditional IRA, or HSA lowers your loan payment.
  • Timeline (Resident-to-Attending): Years 1-3 (Residency): Payments are tiny. Years 4-10 (Attending): Payments jump, but AGI reduction helps. After 10 years: The remaining balance is forgiven, tax-free.

Path 2: The Refinance & Attack Gauntlet

  • Is this for you? → You work in private practice or plan to. Forgiveness isn’t on the table.
  • Your Strategy? → Pay the least amount of interest possible over the life of the loan.
  • Your Tactic? → As soon as your income stabilizes post-training, refinance to the lowest possible interest rate. Attack the loan with any extra income.
  • Timeline (Mid-Career Switcher): Year 1: Switch to private practice. Refinance a $300k loan from 7% to 4%. Years 2-7: Apply an aggressive portion of your higher income to the loan, paying it off in a fraction of the time and saving tens of thousands in interest.

Your Retirement Toolkit: Stacking for the Future

Think of retirement accounts as different tools for the same job. A good CPA helps you stack them.

  • Tool 1: The Practice 401(k): Your workhorse. Contribute your employee max ($23,000).
  • Tool 2: Profit Sharing: Your practice can contribute up to 25% of your compensation, often adding another $20k-$40k+.
  • Tool 3: The Cash Balance Plan: A supercharged pension. This is for high-earning practice owners. It lets you contribute an additional $50k, $100k, even $200k+ pre-tax, depending on your age and income.
  • Tool 4: The HSA: The triple-tax-advantaged “secret IRA.” Max it out and invest it. Don’t just use it as a checking account for copays.
  • Tool 5: The Backdoor Roth: For high earners. Contribute to a non-deductible Traditional IRA, then immediately convert it to a Roth.
  • Tool 6: The Mega Backdoor Roth: If your 401(k) allows after-tax contributions, you can add even more, then convert it to a Roth.

Stacking Example: Dr. Jones, age 45, practice owner.

  • 401(k) Employee: $23,000
  • 401(k) Profit Sharing: $35,000
  • Cash Balance Plan: $110,000
  • HSA (Family): $8,300
  • Backdoor Roth IRA: $7,000
  • Total Pre-Tax & Roth Savings: $183,300 → This could easily reduce her taxable income by $170,000+, saving $60,000+ in current-year taxes.

The Deductions Snack Bar: A Quick Guide

Grab what you need. But read the ingredients.

Green Light (Likely Deductible):

  • CME courses and related travel (airfare, hotel)
  • Board exam and licensing fees
  • Malpractice insurance premiums
  • Professional society dues (AMA, etc.)
  • Medical journals and subscriptions
  • Scrubs and lab coats with your practice logo
  • Lead aprons, surgical loupes, stethoscopes

Yellow Light (Maybe, With Good Records):

  • Home Office: Only if it’s an exclusive, regular space for admin work. Not your couch.
    • Substantiation Script: “My practice provides no private office for my administrative duties like charting, research, and telehealth calls. I use this 10×12 room in my home exclusively for these tasks, approximately 10 hours per week.”
  • Vehicle Use: Actual expenses vs. mileage. You need a detailed log. Commuting doesn’t count.
  • Cell Phone: The percentage you use it for business (e.g., on-call, patient communication).

Red Light (Almost Never Deductible):

  • Commuting to your primary workplace
  • Standard business suits
  • Country club dues (even if you “network”)
  • Fines and penalties

Big Ticket Items: Equipment & Improvements

Buying that new laser or ultrasound? Let’s talk strategy.

  • Section 179: Lets you deduct the full cost (up to a limit) in Year 1. Great if you need a big tax break this year.
  • Bonus Depreciation: Also allows a big Year 1 deduction (currently 80% in 2023, phasing down).
  • Spreading it Out (MACRS): Standard depreciation over 5-7 years. Better if your income is lower now but you expect it to grow.

Buy vs. Lease: Quick Math on a $100k Imaging Device

  • Lease: $2,000/month for 60 months = $120,000 total. The $24,000 annual lease payment is a simple deduction.
  • Buy (with loan): You own the asset. In Year 1, you can take a massive depreciation deduction ($80k+), creating a huge tax loss, while your cash outflow is just the down payment and loan payments.
  • The Verdict? It depends. A CPA can model the cash flow and tax impact of both scenarios to find your breakeven point.

State Line Bingo: The Fun of Telehealth & Multi-State Practice

Work from your home in Texas, see patients via video in Florida, and hold a license in California “just in case”? Welcome to the world of tax nexus.

  • Nexus: A fancy word for having a connection to a state that obligates you to pay taxes there.
  • Income Tax: You generally owe income tax in the state where you perform the work.
  • Payroll Tax: If you have an S-Corp, you may need to register for payroll accounts in states where you are physically present while working.
  • The Trap: Many physicians forget to file non-resident returns in the states where they see patients, leading to penalties later. A good CPA manages this compliance calendar.

Running the Practice: More Than Just Medicine

For practice owners, your CPA is your financial co-pilot.

MetricBenchmark Range (varies by specialty)What it Means
Total Overhead50% – 65% of revenueThe cost of keeping the lights on.
Staffing Costs18% – 25% of revenueYour biggest expense. Needs careful management.
Days in A/R< 35 daysHow fast you get paid. High numbers are a cash flow killer.
Net Collection Rate> 97%How much you actually collect vs. what you’re owed.

Micro-Scripts for Margin

  • Vendor Negotiation: “We’re reviewing our supply costs for the year. Our current spend with you is X. Your competitor just offered us Y. Can you match that to keep our business?”
  • Denial Triage: Your front desk should have a simple script to get missing patient info before the claim is denied, saving weeks of rework.

Wealth Choreography: The Physician’s Financial Ballet

High income is just the beginning. True wealth is a coordinated performance.

  • Insurance: Your CPA should coordinate with your insurance agent. Do your disability policy benefits match your income? Is your malpractice tail coverage handled? Do you have a personal umbrella policy?
  • Cash Reserves: Aim for 3-6 months of essential living expenses in a high-yield savings account. For practice owners, you need a separate 2-3 month overhead reserve.
  • Behavioral Pitfalls:
    • Lifestyle Inflation: The #1 wealth killer. Your income jumps 3x post-residency; your lifestyle shouldn’t.
    • “Shiny Object” Syndrome: Buying into complex, high-fee investment products sold only to doctors. Stick to simple, low-cost index funds in your taxable brokerage.
    • Keeping up with the Joneses (MD): Don’t base your financial decisions on what the surgeon down the hall is driving.

Specialty Spotlights: One Tip, One Metric

  • Ophthalmology: Tip: If you own an ASC, a cost segregation study can accelerate depreciation on the building, creating massive paper losses to offset income. Metric: Revenue per square foot.
  • Dermatology: Tip: Carefully track inventory of injectables and cosmetic products. Use FIFO accounting. Metric: Medical vs. Cosmetic Revenue Ratio.
  • Anesthesia: Tip: For 1099 work, use a high-deductible health plan to unlock the HSA and use your business to pay the premiums. Metric: Effective hourly rate after all business expenses.
  • Radiology: Tip: If you’re a partner reading from home, nail the home office deduction. It can be substantial. Metric: RVUs per hour.
  • Ortho: Tip: For practices with DME, track inventory turnover. Dead stock is dead money. Metric: Days in A/R (often high due to surgery pre-authorizations).
  • Psychiatry: Tip: If you’re cash-pay, streamline your payment collection. Use platforms that automate invoicing and receipts. Metric: No-show/late cancellation rate.
  • Dentistry: Tip: Lab fees are a huge expense. Negotiate volume discounts and shop around. Metric: Production per provider per day.
  • Veterinary: Tip: Explore R&D tax credits for developing new treatment protocols or techniques. Metric: Average client transaction (ACT).

Hiring Your Financial Specialist: The CPA Interview

Ready to hire your co-pilot? Don’t just pick the first name on Google.

12 Must-Ask Questions:

  1. How many physician/practice clients do you have in my specialty?
  2. Can you walk me through how you’d structure a tax plan for someone with my income mix (W-2, 1099, etc.)?
  3. What’s your philosophy on reasonable compensation for an S-Corp?
  4. How do you help clients with retirement plan selection and contribution stacking?
  5. What’s your process for quarterly check-ins?
  6. Can you show me a sanitized example of a financial report you provide to practice owners?
  7. How do you handle multi-state tax compliance for telehealth?
  8. Who is my primary point of contact, and what is your team’s typical response time?
  9. How is your fee structured? Is it a flat monthly rate or hourly? What’s included?
  10. What bookkeeping and payroll software do you work with?
  11. How do you help clients prepare for major financial events like buying a practice or selling one?
  12. What do you think is the single biggest financial mistake physicians make?

6 Giant Red Flags:

  1. They say “all industries are pretty much the same.” (RUN.)
  2. They can’t clearly explain the benefits of an S-Corp or a Cash Balance Plan.
  3. Their pricing is vague. (“We’ll just bill you hourly.”)
  4. They only talk about filing taxes, not planning.
  5. They don’t ask you any deep questions about your goals.
  6. They have a fax machine. On their desk. That they use.

The ROI Scoreboard: What’s a Great CPA Worth?

This isn’t an expense; it’s an investment with a measurable return.

  1. Entity Election: S-Corp savings on a $150k 1099 income. Win: $10,000+/year.
  2. Retirement Plan Design: Maxing out a Cash Balance Plan. Win: $40,000-$80,000+ in annual tax savings.
  3. Section 179 Deduction: Expensing a $120k piece of equipment. Win: ~$45,000 one-time tax savings.
  4. Missed Deductions: Finding and substantiating $15k in missed CME, travel, and home office costs. Win: $5,500+/year.
  5. R&D/Energy Credits: For practices that qualify, this can be a five-figure windfall. Win: $10,000-$50,000+.

You’ve dedicated your life to mastering complex systems to improve patient outcomes. It’s time to apply the same specialist mindset to your own financial health. Find the right CPA, build your playbook, and get back to focusing on what you do best. Your financial future will thank you for it.

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