Especially if you have a new or changed clinic or tax set-up, figure out the structure and types of business taxes to get ahead
No matter what you owe for taxes each year, without the right preparation, tax time can be a nightmare.
Spending time planning in advance will help reduce some of the heartache and stress. There are many different types of business taxes and 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. Some of the common taxes paid by chiropractors:
Clinic tax structures
What types of business taxes and structure you use for your business is generally what dictates your overall tax situation. Even with tax reform changes over the past two years, 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:
- 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% 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%. It’s paying in to Medicare so you can receive these benefits in the future.
Federal income taxes: The remaining portion goes toward 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 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 regarding types of business taxes. 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 now so you don’t have as much stress when tax time comes around.
Kaitlin Morrison is a freelance writer in Washington, and she specializes in health care and technology issues. A frequent contributor to this magazine, she can be contacted at firstname.lastname@example.org, or through kaitlinmorrison.com.