Tax Planning
A plan made each year to lower your tax bill. We look at how the practice is structured, how you are paid, your retirement contributions, and when to buy equipment.
Before the Year Ends
A tax return records what already happened. By the time it gets prepared in March or April, the year is closed and most of the decisions that set your tax bill have already been made. Tax planning happens earlier, while there is still time to change the outcome.
Once a year we sit down with you and look at the practice and your personal finances together. We project where income is heading, review how the practice is set up and how you are paid, and put together a written plan with specific steps and dates. Then we check in during the year as things change.
The Written Plan
The Written Plan
You get a short document that lists what we recommend, why we recommend it, and the estimated effect on your tax bill. Each step has a deadline and a note on who handles it. Some steps are ours to carry out. Others need a decision from you or a conversation with your financial advisor.
Practice and Owner Together
Practice and Owner Together
For most practice owners the business return and the personal return are tied together. Profit from the practice flows through to you. Planning one without the other misses the point, so we look at both, along with a spouse’s income and any outside work like a medical directorship or locums shifts.
Where the Savings Come From
Practice owners tend to be high earners, which means a handful of decisions carry a lot of weight. How the practice is structured, what you pay yourself, how much goes into retirement accounts, and when you buy equipment can change the tax bill more than most owners expect.
None of this relies on unusual strategies. These are ordinary, well-established rules. The challenge is that each one has its own deadlines and conditions, and they affect each other. A higher salary raises payroll taxes but can allow larger retirement contributions. A big equipment purchase lowers this year’s income but may be better saved for a stronger year. We work through those tradeoffs using the real numbers from your books.
Structure and Owner Pay
Structure and Owner Pay
Many practices lower payroll taxes by electing S corporation status, which lets the owner take part of the profit as a distribution instead of wages. The salary still has to be reasonable for the work a physician or clinician does, and the IRS does look at this. We help you set a salary you can support and review it each year as the practice grows. If the election doesn’t make sense for you yet, we will say so.
Retirement and Equipment
Retirement and Equipment
Retirement plans are often the largest deduction available to a high-earning owner. Depending on your age, income, and staff, that might be a 401(k) with profit sharing or a cash balance plan added on top. Equipment is mostly about timing. A laser or imaging system placed in service in December rather than January moves a large deduction into the year where it helps most.
Through the Year
A plan made early in the year is only useful if someone follows it. When we also keep your books, we can see how the year is actually going and adjust before it is too late. If revenue jumps in the third quarter, we revisit your estimates and retirement contributions before December, not after.
Tax work at Baker’s is handled by enrolled agents, who are federally licensed to represent taxpayers before the IRS. The firm has been preparing returns since 1995 and files about 1,000 a year. Our clients often mention that we bring them ideas before they think to ask, and that is how we want this service to work for you.
Estimates That Match the Year
Estimates That Match the Year
Quarterly estimated payments are updated as the plan changes, so you are not overpaying all year or facing a large balance and penalty in April. We also look at state options, such as paying state income tax at the entity level where your state allows it, which can help work around the federal limit on deducting state taxes.
Next Year Already Started
Next Year Already Started
By the time your return is filed, planning for the following year is already underway. We note what worked, what changed, and what is coming, whether that is a new provider, a second location, or buying the building. You go into each year with a good idea of what you will owe and what you can still do about it.
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