Are You a U.S. Clinic Owner? Here are 4 Expert Tips for a Smoother Tax Season
Please note: this article is for U.S. clinics and should not be interpreted as tax or financial advice in any way.
If you’re a clinic owner, you’re being pulled in every direction.
You’re balancing your patients’ needs, daily admin work. and charting… and then, like clockwork, there it is.
Tax season.
At best, you feel like there’s not enough time on any given day. When it comes to taxes, where do you even start?
This is a pain point that Katrina Watkins knows well. She and her business partner, Cheryl Belber, identified a financial management gap in the health and wellness industry.
“We saw business owners who were really good at running their business, but when it came to the financial side, there were a lot of questions,” Katrina says. “They didn't know the nitty gritty of how to pay themselves, how much they should be paying in taxes, what to do at tax season.”
Together, Katrina and Cheryl founded Empowered to Profit, an accounting agency that specializes in the health and wellness community, and helps small business owners take control of their finances.
We sat down with Katrina to gather some insight and tips that can help make this tax season run more smoothly and feel less intimidating.
Here are her top four tips for U.S.-based practitioners:
Tax season tip #1: Plan… and remember to breathe
(This article should not be interpreted as tax or financial advice. Consult your tax or business advisor or accountant as appropriate to determine your business category.)
Tax season can feel pretty overwhelming. But take a deep breath — with a little preparation, it gets easier each year, and remember: you’re not in this alone.
One of the kindest things you can do for your future self is to be prepared. Katrina explains that in every Empowered to Profit consultation, she and Cheryl talk with each new business owner about the following elements:
- Know what your business structure is, and know your tax due dates. Here are two examples:
- If you’re a partnership or an S Corp: taxes are due March 15th.
- If you’re a sole proprietor LLC: taxes are due April 15th.
2. If you need more time to file your taxes, you can request an extension by the April due date — this gives you until October 15 to file without penalties. An extension can offer you a little bit of breathing room, but it’s important to remember that the payment deadline stays the same. According to the IRS, you will need to pay any tax you owe by the April filing date (the extension is only for filing your return).
3. Many people find it helpful to separate their personal and business finances. Keeping your monthly expenses organized — even something as simple as separate tabs in an Excel spreadsheet — can take the stress out of tax time and help you feel more in control of your finances throughout the year.
4. Some business owners set money aside for taxes as a safety net. Depending on your situation, this could be beneficial in case you owe more than expected. And, on the bright side, if you owe less, you’ll be able to put that money back in your pocket!
Tax season tip #2: Know what you can deduct
It’s a tax season buzzword that can help you save money in the long-run: deductions.
The IRS defines a deduction as “an amount you subtract from your income when you file so you don't pay tax on it. By lowering your income, deductions lower your tax.”
So, what are some deductions that business owners can write-off as business expenses?
- Software purchases (like Quickbooks, Microsoft Office suite, etc.)
- Mileage (i.e. traveling to meet a client or business partner)
- Business use of your car
- Professional developmental (i.e. such as a mentor or anyone else you’re employing to help you learn in your business)
- Business insurance
- Meeting a potential client for coffee or lunches
- Money you put in an IRA (individual retirement arrangements)
- Money you put in health savings accounts
- Penalties on early withdrawals from savings
- And even hiring your teenage child to do social media or administrative work
Katrina advises that it’s worth doing your research or speaking to an accountant about your unique situation. For more tips on how to select a reputable tax accountant, you can check out the IRS’ website.
Tax season tip #3: Software and other digital tools can help you
We know tax season comes around every year, but with a little planning, you can make it feel less like a last-minute scramble and more like a smooth step in your journey as a business owner.
Katrina recommends starting off easy by choosing an accounting software that works for you. QuickBooks Online, for example, has tutorials on how to get started and keep track of your finances. The benefit of QuickBooks is that you can choose a monthly plan that fits your needs, with features like income and expenses tracking, bookkeeping, mileage, invoices, payments, and tax deductions. There is also expert tax help available with all plans.
Just starting out or on a tight budget? You can use simple, budget-friendly tools like Excel spreadsheets or Google Sheets.
No matter which software or tool you choose, remember that the best tools are the ones that fit seamlessly into your daily life, helping keep track of the numbers so you can focus on your patients.
Tax season tip #4: Make the most of your time
When you’re filing your taxes, you’re bound to encounter some bumps along the way.
That’s why Katrina recommends keeping your business expenses organized and separate from your personal finances. Setting aside a small block of time — even 15 minutes — every Monday to sort through and organize the previous week’s expenses. This can help make tax time run a lot smoother, and reduce your chance of any mistakes.
Sometimes, Katrina mentions, the IRS may ask for a breakdown of your expenses. By staying on top of your organization, you’ll be able to share your expenses easily, which can save you (and your accountant!) a lot of stress.
As part of your expense-tracking, it’s also a good idea to stay updated on any changes in legislation, something you can do right on the IRS website. Katrina points out that there have been recent changes in terms of depreciation, especially for equipment or machines used for business, as well as tax credits that have been phased in or out due to the pandemic.
Prepare for next tax year, every year
Here’s the silver lining: right now, you’re in the perfect position to prepare for next tax season.
As Katrina says: “Pick a lane, because then you know which way you're going to drive.” Whether you decide to manage your own books, use software or digital tools, or hire a tax professional to do the heavy lifting on your behalf, she suggests you choose your approach early, so you can file with confidence when tax season rolls around next year. Think of it like a “choose your own adventure.”
And, finally: if something doesn’t make sense, ask questions. If you’ve hired a tax professional, they are there to guide you through tax season with confidence.
“Make sure you understand it,” Katrina says. “This is your business. This is your money. You need to own it.”
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