If you’re in the medical field, you probably don’t have time for taxes, or you are confused about how the tax world works. Your taxes could be complicated or simple, depending on your situation.
First let’s start by determining your employment status.
Are you an employee or an independent contractor?
Some medical professionals are considered employees and others are considered an independent contractor. An employee is someone who fills out a W-4 once hired to establish the amount of taxes that will be withheld from their paycheck. You typically receive W-2 during tax season and are limited on the amount and type of deductions you receive.
Independent contractors fill out a W-9 for each service they perform. This allows each practice to properly report information to the IRS and send a 1099-MISC to the contractor at tax time. IC typically bill for their work and make estimated tax payments.
What tax breaks are available for medical professionals as employees?
Since the development of the tax reform, medical professionals who are employees are not able to itemize work related expenses on schedule A, even if you are not reimbursed by your employer. However, you state may allow you to still deduct out of pocket expenses. You can still deduct education expenses and mileage if you drive from work location A to another work location.
What tax breaks are available for medical professionals as independent contractors?
As an independent contractor, you have more flexibility to deduct out of pocket expenses. You’ll submit that information on schedule C. These deductions can range from
- Phone bill
- Rent/mortgage if you have a home office
- Malpractice insurance
- Medical equipment
- Education expense
- And much more
You will need to keep track of your business expenses and revenues to properly take these deductions.The caveat is you are responsible for paying estimated and self-employment taxes, but the payoff could be more rewarding.
Download our sample income statement and balance sheet to help keep you up to date on your expenses, we recommend you downloading a mileage app that will keep track of your expenses.
What documents do I need?
If you are an employee, ensure you have your W-2 along with any other pertinent information that pertains to your taxes. See our comprehensive tax checklist at www.cswestcpas.com/library
If you’re an independent contractor, keep careful and exhaustive records of all your business-related expenses throughout the year (including uniforms, travel, equipment, licensing fees, etc.) so you can deduct them from your income on Schedule C.
Filing your taxes
Taxes can be overwhelming and cumbersome however; it doesn’t need to! Talk to a tax professional to help you along for the best tax strategies. Once you’ve set aside your records throughout the year, the hardest part is over. I offer a 30 minute tax consultation to help guide you on the right path.
go to www.cswestcpas.com to learn more.