How to make taxes less painful for your practice utilizing advanced tax planning for doctors of chiropractic
Tax time doesn’t have to be an intimidating mystery. After staying connected to IRS tax updates1 throughout the year, advanced planning is the next best way for small businesses to take charge of their filing. There are some essential tips which will not only make things less stressful but could also increase your chances of retaining more of your hard-earned income with advanced tax planning for doctors of chiropractic.
Confirm or change your current business structure
Being sure your small business is classified correctly (and if it’s even small2 at all) makes a difference. Knowing your business model3 allows for better advanced tax planning for doctors of chiropractic , while shifting to another framework could benefit you.
Changing models is a complex process4 best undertaken with an experienced tax professional and IRS guidance5.
Complete payroll ASAP
Fourth quarter panic sinks potential tax savings. The earlier your small business takes care of payroll the better.
The IRS will scrutinize it and any errors, omissions or questionable data are much easier (and less costly) to fix the further out you are from the deadline6. Follow these steps to get payroll right7.
Leverage the Tax Cuts and Jobs Act (TCJA)
You may be eligible for a 20% tax deduction under IRS Section 199A8 for Qualified Business Income (QBI). You may be one of them if your taxable income exceeds the tax year’s stated amount for single or joint filing (a figure that’s regularly updated on the IRS website).
Chiropractors can improve their chances of a 20% deduction by doing the following before year’s end:
- Donating to charity – Charitable donations reduce taxable income and boost your itemized deductions. Up to 60% of your adjusted gross income can be deducted, however, financial gifts must check the three IRS boxes9 to qualify.
- Harvesting capital losses – Too many capital gains can decrease the chances of a QBI deduction. It’s possible to get tax breaks from investment losses if you do so wisely. Consult this quick guide10 to review the basics and some practical examples and review Investopedia’s more in-depth definition11.
- Purchasing business assets – Buying and using equipment your practice needs can lead to tax write-offs of those costs as long as it’s done before the last day of the year. Expensing under IRS Section 17912 provides more details on how this can lower your taxable income.
Employ family members
Parents who are partners in business or who run a sole proprietorship can employ their child and avoid both Medicare and social security taxes (if the child is under 18) and Federal Unemployment Tax13 if the child is under 21.
Income tax is also withheld no matter the child’s age. Spousal employment also results in the above taxes being avoided except for Federal Unemployment (see the IRS guide14 for married couples for more details).
Be prepared for an audit
Sloppy planning can make an audit all but inevitable. However, even the best-prepped small businesses can be put under the microscope.
You’ll need to keep a very close eye on income, expenses and expenditures if you want to stand up to IRS inquiry.
Advanced tax planning for doctors of chiropractic: find the right financial advisor for you
Financial advisors help people manage their money and reach their financial goals. Picking the right financial advisor for your situation is key — doing so means you won’t end up paying for services you don’t need or working with an advisor who isn’t a good fit for your financial goals.
NerdWallet15 offers a great overview of the type of financial advisors that are available and the questions to ask when seeking a new advisor for your business.
Summarizing savvy tax planning
Be sure to file as early as you can and leverage every resource the IRS can offer to see where you can save (their Small Business Tax Workshop16 is a good place to start).
Combining this with advice from a qualified tax advisor will help you budget strongly and have the money ready to pay.
RAY FOXWORTH, DC, FICC, is a certified medical compliance specialist and president of ChiroHealthUSA. He has served as president of the Mississippi Chiropractic Association, is a former staff chiropractor at the G.V. Sonny Montgomery VA Medical Center and is a Fellow of the International College of Chiropractic. He can be contacted at chirohealthusa.com.