Many therapists own an office outside their homes to conduct therapy sessions with their clients. A type of business registered on the state level that can elect one of a number of different business entity types or tax filing statuses at the federal level. An LLC gives you more liability protection than a sole proprietorship (the default entity type for new businesses), while also giving you more flexibility in how you file your taxes. Regularly reviewing financial reports helps you understand the financial health of your practice. Looking at all three reports (not just your P&L!) is essential to getting a wholistic view of your practice’s financial health.
Role of a CPA in Managing Therapy Practice Finances
- For example, the use of online accounting software for managing patient payments and financial records introduces potential security risks that may not be immediately apparent to many therapists.
- With a dedicated accountant, you will know that everything is taken care of, including your tax services, so that you can focus on your patients.
- If bookkeeping isn’t your strong suit, or if you’re months or years behind, you might make mistakes and miss tax deductions and tax planning opportunities that could save you money.
- The numbers in your financial reports can help create and map out your journey.
- Manually tracking your income and expenses can be tedious and error-prone.
If you practice in an office outside your home, the cost of rent is fully deductible. The cost of utilities (heat, water, electricity, internet, phone) is also deductible. If you frequently use your personal car for business purposes, you can deduct some of the cost of fueling and maintaining it.
Review financial statements regularly
If your therapy practice is a pass-through entity, meaning a sole trial balance proprietorship or an LLC filing as a sole proprietorship, your personal and business tax returns are one and the same. You can check out my article on tax write-offs in private practice if you’d like to learn more about the land of tax deductions. As a small business owner, most of your business-related expenses are tax-deductible. Which means, rather than pay taxes on your private practice revenue, you first subtract a majority of your expenses and pay your taxes from that amount of money instead. By doing so, you’ll be able to transfer income data to your accounting program to keep your books current.
Keeping Detailed Records
If you travel for business—for instance, to a conference, or in order to give a talk or facilitate a workshop—you can deduct most of the costs. And you may even be able to squeeze in some vacationing while you’re at it. Because of this, this option is likely a great fit for many therapists in private practice. The big win of this option is you get to have the pros of both the affordability of automated software and the professional work of an accountant directly consulting with you for your financial needs.
Determining Your Salary as a Private Practice Owner
Each person should consult their own attorney, business advisor, or tax advisor with respect to matters referenced in this post. While the principal Law Firm Accounts Receivable Management of your student loans is not deductible, you may be able to write off the interest. Using the regular method you can deduct $5 per year for each square foot of your home you use as office space, up to a maximum of 300 feet. You can deduct the cost of courses, workshops, and certification programs related to your profession as a therapist, but it needs to meet at least one of two criteria. “Business purposes,” in this case, do not include your regular commute to work. You need to be driving somewhere other than your office (or wherever you normally hold appointments) in order to qualify for this expense.
- Because of this, this option is likely a great fit for many therapists in private practice.
- We provide financial reports every month so you can quickly see when things look off.
- However, you can gain insight into your practice’s financial health by reviewing its financial statements on a frequent basis.
- A type of business registered on the state level that can elect one of a number of different business entity types or tax filing statuses at the federal level.
- If you frequently use your personal car for business purposes, you can deduct some of the cost of fueling and maintaining it.
- Therapeutic Tax Solutions helped me to streamline my business income and expenses and cut down hours of work that I don’t enjoy.
- Violations involving the disclosure of Protected Health Information (PHI) can lead to substantial fines and legal consequences.
- To simplify this process, consider automating payment collection as much as possible.
- There’s a reason why QBO is the most popular accounting software on the market—it is a powerful tool that can help ensure your financial records are accurate and up-to-date.
- Personal therapy for family issues or couples counseling wouldn’t qualify as a business expense.
Our services are designed to free you from the burden of financial tasks, allowing you to concentrate on what you do best. Manage your bookkeeping, taxes, and accounting in one powerful platform, surpassing DIY methods or traditional accounting services. Built for therapist entrepreneurs, our expert guidance and innovative tools save you time and money while empowering you to build the practice of your dreams. Make sure you give your books and billing the attention it deserves and invest in the right tools to streamline your bookkeeping process, whether you do it yourself or hire a pro.
When you get an EIDL loan, you need to stay current with your bookkeeping. Learn bookkeeping for therapists more about Bench, our mission, and the dedicated team behind your financial success.