This year’s Tax Day is Tuesday, April 18. And if you’re wondering why you’ve been granted a three-day extension (usually, the deadline is April 15), then check out this article that explains it all—along with an apropos GIF of Prince John in Disney’s Robin Hood counting his “beautiful, lovely taxes.” While Prince John may be a fan of this time of year, most of us are less than excited about it—unless we’re getting a refund, that is. So, in addition to calling in the refund fairies on your behalf, we’ve also put together a list of some things to avoid when doing your taxes. Hopefully, this will make the process that much easier.

Before we jump into that list, though, we must say this: We are not tax experts, accountants, or attorneys. Therefore, please take the following information as just that: information. It is general in nature, will not be suitable for everyone, and should not be construed as legal or expert advice. We strongly encourage you to speak with a tax expert and healthcare attorney to decide what’s right for your business before implementing any strategy, including what’s outlined below.

With that out of the way, here are five common tax slip-ups in PT private practice:

Physical Therapy Billing Open Forum - Regular BannerPhysical Therapy Billing Open Forum - Small Banner

1. Being unprepared.

As a busy practice owner, you’ve got a lot on your plate. And no one likes thinking about taxes. So, it might be tempting to put them off until—well—April. But, that’s not wise—especially considering that many small business owners may need to submit estimated taxes quarterly. Failure to do so could result in penalties and a huge tax responsibility at the end of the year. Additionally, this resource recommends estimating your adjusted gross income before the end of the year to determine which tax bracket you’ll fall into. If you’re on the cusp, you may want to work with your CPA to identify potential expenses that could knock you into a lower bracket. And speaking of things to think about before tax time, you may also want to consider funding a tax-favored retirement plan (as this article points out). David Schiller, a tax attorney in Norristown, PA, says healthcare providers should start funding these plans at the beginning of their career: “When you’re in your 30s and you fund a retirement plan, that’s your most valuable money, because you have 40 years of tax-deferred compounding in front of you.”

2. Not keeping receipts.

Over the years, we’ve hammered home the importance of defensible documentation. Well, today that recommendation extends beyond clinical documentation and into your business files. That’s because the IRS demands you maintain paperwork and receipts that fully support every line item and deduction you take on your taxes. Planning to write off the purchase of a new piece of clinical equipment—or perhaps take advantage of its depreciation over time? You won’t be able to do so without proof of purchase. What about that luncheon you held to drum up business from local physicians? With proper documentation, you could write off 50% of that expense. Without it, you’ll be out of luck. Sufficient documentation also allows you to deduct the cost of professional dues; seminars, workshops, and continuing education courses; professional publications; and a whole host of other business-related expenses. But, as this resource warns, “don’t exaggerate your deductions.” Doing so could land you in hot water.

3. Doing it all yourself.

There are few things in life more complicated than Medicare—and one of them is most definitely the US Internal Revenue Code. So, unless you majored in accounting and/or have a secret passion for puzzling out IRS guidelines, hire a tax expert. As WebPT President Heidi Jannenga pointed out in her most recent Founder Letter, “handling your business taxes is very different than doing your personal ones.” In other words, just because you’ve mastered the 1040EZ does not mean you should take on your business taxes singlehandedly. Not only could you put your business at risk for an audit, but you also could miss out on numerous tax breaks and incentives. And speaking of missing out on tax breaks, according to this resource, Benjamin Rucker—owner and founder of Rucker Tax and Consulting, LLC—says that many small businesses mistakenly file as C Corporations when there are more tax-friendly options available. This is yet another reason to hire an expert who can advise you on the best route for your particular business—one that aligns with your state practice act and ensures you’re keeping as much of your hard-earned money in your pocket as possible. That being said, as this resource suggests, run—don’t walk—from any so-called tax professional “who suggests you hide income or take write-offs you know you aren’t entitled to.”

4. Incorrectly classifying employees.

As WebPT’s Brooke Andrus explains in this post, while hiring contractors can provide some tax savings (namely, you’re not responsible for paying their employment taxes), misclassifying employees as contractors “is one of the most common—and most costly—mistakes startup business owners make.” According to this Justworks article Andrus cites, misclassifications can result in IRS and state penalties. In California, for example, the penalty for deliberately misclassifying an employee can range from $5,000 to $15,000 per violation. And according to this article, misclassifying workers is a “hot audit topic.” To learn the IRS rules for proper classification, click here.

5. Missing the deadline.

According to this resource, tax attorney Venar Ayar says “one of the big paying taxes late.” That’s because, as NOLO explains, “the IRS usually adds a penalty of .5 to 1% per month to an income tax bill that’s not paid on time.” This IRS computer usually adds this penalty on automatically whenever someone files an incomplete return or pays late. There’s also a penalty for filing late—the IRS can charge an additional 5% per month on balances due. However, “this penalty can only be applied for the first five months following the return’s due date—up to a 25% maximum charge.” That’s not all: there’s also a “special rule [that] applies if your business both files its taxes late and underpays. The IRS can (and probably will) impose a ‘combined penalty’ of 25% of the amount owed if you don’t pay in the first five months after the return and tax are due. After five months, the ‘failure to pay’ penalty continues at .5% per month until the two penalties reach a combined maximum of 47.5%.” Ouch. Furthermore, “late penalties for failing to make payroll tax deposits on time are much higher.” And, as this resource explains, approximately 40% of small businesses incur an average penalty of $845 annually for payroll-related errors.

The moral of this story? File—and pay—your taxes on time. And if you simply can’t get your tax paperwork done before it’s due, apply for an extension. However, please note that “an extension only pushes back the due date for the filing of your tax return documents. It does not give you extra time to pay on any taxes you may owe.”

There you have it: Five common tax slip-ups that affect PTs in private practice. How has your experience been with business taxes thus far? Have you learned anything that you think other providers should know? Share your stories—and advice—in the comment section below.

  • 6 Biggest Takeaways from PPS 2015 Image

    articleNov 16, 2015 | 10 min. read

    6 Biggest Takeaways from PPS 2015

    Last week, I joined hundreds of amazing physical therapy professionals, students, and vendors (including yours truly, WebPT) at this year's PPS Annual Conference in Orlando, Florida. Despite the uncomfortable combination of tropical heat and humidity outside—and near-freezing conference rooms inside—everyone was in high spirits. Though I never made it to Disney World, I still felt like I was in the most magical place on Earth, thanks to the inspiring and informative presentations I saw and the thought-provoking …

  • 7 Lessons Learned from Opening a PT Private Practice Image

    articleJul 25, 2017 | 9 min. read

    7 Lessons Learned from Opening a PT Private Practice

    A little over a year ago, Kaci Monroe was punching the clock as a staff physical therapist in a small outpatient clinic in northwestern Montana. And while there were a lot of great things about the job—the location was incredible, the patients were awesome, and the practice was growing—Kaci couldn’t shake the feeling that she was destined for something more. “As a new graduate, getting my first job, I remember during the interview telling them someday my …

  • Don't Flex Your PTs: 4 Ways to Make Use of Patient Cancellations Image

    articleApr 17, 2018 | 7 min. read

    Don't Flex Your PTs: 4 Ways to Make Use of Patient Cancellations

    Summer is approaching and, with family vacations competing for patients’ time, you might find yourself with quite a few cancellations and schedule gaps. Your first inclination may be to send your PTs home without pay. “Flexing,” as it is sometimes called, is becoming an increasingly common cost-cutting move. But, tempting as it may be to flex your PTs when things get slow, there’s a better way to use their non-billable time. Not only is being flexed insulting—your …

  • 5 Legit Reasons to Fire a PT Patient (and How to Do It) Image

    articleApr 26, 2019 | 10 min. read

    5 Legit Reasons to Fire a PT Patient (and How to Do It)

    One of the greatest joys of being a physical therapist is interacting with patients. There is truly no feeling in the world like helping someone improve his or her mobility and independence. But, as enjoyable as patient care can be, it’s not always sunshine and roses. There’s no guarantee that every patient will treat us with respect. In fact, some even act in a threatening way toward us. And while most therapists have some war stories, it’s …

  • Strategic Planning 101: The PT's Guide to Building a Better Business Image

    articleJun 19, 2018 | 7 min. read

    Strategic Planning 101: The PT's Guide to Building a Better Business

    If you’ve ever planned a vacation, then you know how important it is to plot your trip ahead of time. The planning process typically starts months in advance as you daydream of warm, sandy beaches or spectacular city nightlife. Once you have a destination in mind, you have to determine when is the best time for you to go. (Is there an event you’d like to attend? Will the weather be cooperative? Will you have enough time …

  • Exit Strategy: Succession Planning vs. Liquidation vs. Buyout Image

    articleJan 15, 2015 | 4 min. read

    Exit Strategy: Succession Planning vs. Liquidation vs. Buyout

    In my last post , I offered you some food for thought as you ponder selling your practice—specifically, the need to find a buyer. Regardless of your reasons for moving on from private practice (increasing expenses, reduced compensation, ever-changing regulations, administrative headaches, retirement, or perhaps a lack of passion), you have a number of options for getting out: Succession Planning Why it Works An important part of selling is withdrawing yourself from your clinic—a particularly emotional process, …

  • What to Expect at Ascend 2018 Image

    articleApr 3, 2018 | 3 min. read

    What to Expect at Ascend 2018

    This year, WebPT is celebrating our tenth year in business—and what better way to cap off a decade of innovation than to host the rehab industry’s premier business innovation summit in our own backyard? And who better to join us than rehab therapy’s top leaders, healers, and trailblazers? Clearly, we’re super excited for Ascend 2018 —coming to Phoenix, Arizona on September 28-29—and we hope you are, too. Last year’s event in Washington, DC was a massive hit. …

  • The State of Rehab Therapy Image

    downloadJul 14, 2017

    The State of Rehab Therapy

    To see results from our most recent industry survey, check out the 2019 State of Rehab Therapy Report. Health care is not a static industry. It’s always changing, evolving, and progressing. No healthcare provider is immune to the effects of that change, but some—including physical, occupational, and speech therapists—have felt a greater impact than others. In an effort to assess the scope of that impact—and thus, better anticipate the future needs of the rehab therapy community—WebPT conducted …

  • The State of Rehab Therapy in 2018 Image

    webinarJun 1, 2018

    The State of Rehab Therapy in 2018

    Falling reimbursements. Skyrocketing insurance premiums and copays. Crippling student loan debt. As a PT, OT, or SLP, sometimes it feels like it’s you against the world. After all, the challenges you face on a daily basis are many and complex. But, you’re not alone. In fact, we recently surveyed nearly 7,000 rehab therapy professionals on everything from payment rates and clinic budgets to education costs and salary, and we found some pretty strong—and surprising—trends. [video://]   Curious …

Achieve greatness in practice with the ultimate EMR for PTs, OTs, and SLPs.