You need to prepare your chiropractic business for tax season

Tax day can be a pain sometimes.

No matter what you owe for taxes each year, without the right preparation, taxes can be so much worse.

Spending
some time planning in advance will help reduce some of the heartache and
stress. There are many different tax structures, requirements, and regulations
– so spend some time familiarizing yourself. On top of this, there are also
state and local tax requirements that may apply, depending on where you live.

For
specific tax advice that applies to your situation, consider seeking advice
from a CPA or licensed tax preparer. We’ll cover a very short introduction to
some of the common taxes paid by chiropractors.

Clinic tax structures

What
structure you use for your business is generally what dictates your overall tax
situation. Even with tax reform changes passed in 2017, each structure is
treated differently.

Sole proprietorships, partnerships, Limited Liability Companies (LLCs), and corporations all come with their own tax rules and expectations. Your tax structure dictates how you file taxes and may impact how often you pay as well.

Depending
on your structure, state requirements, and local requirements, you may be
responsible for:

• Self-employment
• Taxes for your employees, if
  applicable
• State taxes

Self-employment taxes

You
may be responsible for self-employment taxes as well. This is an ongoing
payment you make four times per year, dividing up your tax liability and
covering your portion and the employer’s portion of Social Security and
Medicare taxes.

Here’s
how these payments break down:

• Social Security: Making up
  12.4 percent of your income, Social Security taxes pay in so you can withdraw
  Social Security payments later. Employed workers only pay half this, but since
  you’re self-employed, you’re responsible for the full amount.
• Medicare: Of your total
  income, this is 2.9 percent. It’s paying in to Medicare so you can receive
  these benefits in the future.
• Federal income taxes: The
  remaining portion goes towards your income taxes.

These
taxes are the alternative to automatic withholding –something not available to
the self-employed, unless you choose to structure your business so you can
become a W2 employee of your own corporation or organization.

Finding professional advice

Professional
tax advice can help the business side of your clinic stay on track. If you’re
unsure how to approach your taxes or if you need a plan that lasts your clinic
throughout the year, getting the right advice might be the answer.

Chiropractors
who are just starting a new business or making significant changes to their
organization are in a great position to get help from a CPA or other tax
professional. Even if you just consult with a tax pro once to create a
comprehensive tax plan, it may be a worthwhile investment.

These
tax scenarios may be signs that it’s time to get professional tax assistance:

• Status changes: Adjusting tax status, setting up a new company, or
  experiencing another major change. Family changes can be a reason for solo
  practitioners to visit a tax professional, too — undergoing a divorce or
  getting married may also be a reason to revisit your taxes, particularly if one
  of these changes represents an ownership or partnership change.
• Tax overhauls: With major changes to the national tax system occurring for
  the 2018 tax year, it may be a good time to visit a tax pro and see if these
  regulation changes impact you. Local and state tax changes happen too, so it’s
  a good idea to research these changes and seek out professional input.
• Personal preference: If you aren’t comfortable with doing
  taxes or if you don’t have the time to do it yourself, seeing a pro is the
  answer. And with the complexity involved in preparing business taxes, it’s a
  good idea anyway.

Plan ahead so you don’t have as much stress when tax
time comes around. Even if you’ve waited to do your 2018 taxes until the last
moment, take the time now and avoid the headache.

Sources:

NCMIC. “Starting Into Practice Guide.” NCMIC. Accessed: March 2019. Retrieved from: https://www.ncmic.com/webres/File/SIP%20Guide.pdf

IRS. “Self-Employment Tax (Social Security and Medicare Taxes).” Accessed: March 2019. Retrieved from: https://www.irs.gov/businesses/small-businesses-self-employed/self-employment-tax-social-security-and-medicare-taxes