Most doctors loath dealing with financial reports and generally dealing with the business side of the practice of medicine. Most just want to focus on helping their patients. Failure to keep up with the “business” side of the practice of medicine can be devastating. Here are my top mistakes.
- Support Staff – It is vital to have great support staff. Great support staff are more expensive but will pay for themselves in the end. Be sure to have appropriate financial controls because employee embezzlement is common. One control is to never allow a staff member to have check writing authority.
- Don’t Ignore the IRS – In lean times it can be easy to not pay your taxes and take a short term “loan” from the IRS. This is usually done with employment taxes – but doing this can be devastating. Delinquency penalties and interest can easily become 50% or more of the original tax liability. Additionally the IRS can hit the doctors with personal liability for unpaid employment taxes.
- Business Entity. It is important to pick the right entity to do your business. This is a two part process. First you have to pick the type of entity for state law purposes, but they you also have to decide how you want the entity taxed. Failure to make the right choice can lead to “double” taxation or just paying too much in taxes.
- Tax Deferral. There are multiple options for retirement plans, 401ks, SEP Plans, SIMPLE IRA, etc. Choosing the right plan obviously saves for the future. Some doctors pick the wrong plan for their needs and situation – get qualified help.
- State Taxes. People think Texas is a great state taxwise – because of the lack of income tax. Unfortunately, the State has to get its money somehow and that comes from Franchise Tax, Sales and Use Tax and Property Tax. Make sure that you have someone who is confirms you are meeting your state responsibilities. A Texas Comptroller audit can be painful if you don’t.