Year-end for Self-employed Physicians

If you’re a self-employed physician, year-end can feel overwhelming as you organize what you need to file your taxes. Even with the availability of accounting software, it’s difficult to choose the right system and to implement it effectively in a way that saves you time come tax season. 

It’s a good idea to consider hiring an expert accountant to help you file your taxes. You’ll be assured of accurate reporting and won’t miss out on valuable opportunities to reduce your tax burden and take advantage of eligible deductions.  

With tax season just around the corner, make sure you understand your reporting obligations and are prepared to file on time. Self-employed physicians will need to report their professional income to the Canada Revenue Agency through the Statement of Business and Professional Activities.  

First, consider what method of accounting you’ll use. The cash method of accounting records income when cash or cheques are received in your bank account and is the most straight-forward method. However, it doesn’t accurately reflect accounts receivable for services that have already been rendered but for which no payment has yet been received. 

The accrual method of accounting is generally preferred. In this method, income is recorded for the period in which it’s been earned, whether or not accounts receivable have been collected. When you provide a service to a patient, it’s recorded as income immediately, even before payment is received.  

Despite this method being widely preferred, many physicians resort to the cash method of accounting because of the complexity of reporting via the accrual method. It can be challenging to track the multiple billing sources most physicians have, and it’s also tedious to account for non-collectibles due to rejected claims. If income is reported but never received, it requires the deductions to be made in subsequent years as bad debt. 

Some physicians may choose to use a modified accrual method that blends the greater accuracy of accrual accounting with cash accounting. This requires adjusting the year slightly to account for income collected in the beginning of the new year. 

Many accountants specialize in the complex accounting requirements of self-employed physicians and sole-proprietors who can benefit from the knowledge and expertise of these tax specialists. In addition to tax-reporting, they may offer additional consulting services for both personal and corporate taxes, support for payroll and bookkeeping, and even assistance implementing an accounting software program that can streamline and simplify your taxes for future reporting years. 

Physicians may be tempted to file their own taxes, but it can ultimately be a frustrating and time-consuming process that takes them away from their own area of expertise. Typically, a professional accountant can complete the same tasks with greater accuracy in much less time, leaving physicians available to focus on their patients and their practices. 

Additionally, accountants are knowledgeable about deduction eligibility that can save physicians a lot of money. There’s a lengthy list that applies to most self-employed physicians, including office expenses and supplies; rent, utilities, and property taxes and insurance; business taxes and fees for licensing and professional memberships; and fees for professional support. Handily, accounting services are included. 

Physicians can also claim partial expenses for meals and entertainment in some circumstances. Interest on bank loans acquired for business purposes, and travel or motor vehicle expenses that are work-related may also be covered. Occasional costs such as those related to starting up a new practice or costs for continuing education, conferences, or the acquisition of medical books are claimable expenses. 

Medical professionals are more in demand and busier than ever these days. With year-end approaching, now is the time to invest in making sure your finances are healthy. Often, the nominal fees charged by accountants can help identify lucrative measures that significantly reduce your tax burden, saving you both money and time in the long run.  

Head into the new year with the support you need to keep your medical practice running smoothly and efficiently with accounting services that are specific to the complex needs of physicians.