These are the absolute most common tax & bookkeeping mistakes we see private practice owners making. If you see something on this list that applies to you or makes you feel something, it’s okay! We’d suggest taking some time to reflect on those thoughts or feelings.🤔🤔

We’re here to educate and support you because  ‘How to operate a business’, ‘Bookkeeping 101’ and ‘Tax 101’ weren’t part of grad school.

Most Common Mistakes We See Private Practice Owners Making:

✖️Not paying estimated taxes or underpaying

✖️Thinking client management/billing software (EMR/EHR like Simple Practice/Theranest/Fusion) doubles as bookkeeping software or is sufficient enough records for an audit, getting a loan, or tax preparation purposes

✖️Under reporting gross income on accounting records and tax returns, AND losing out on a great tax deduction…. Credit card fees!🤑🤑

✖️Asking for tax and bookkeeping advice from unqualified sources like social media groups or colleagues🙅‍♀️

✖️Not using dedicated business bank accounts

Let’s dive into these things in a little more depth👇

✅ Estimated taxes are….complicated! We get it! If you’re at least paying something each quarter, that’s great! But even if you’re paying something, but not remitting enough each quarter, the IRS can penalize you. To avoid this, you really should work with a professional who can provide you with LIVE tax estimates each quarter. Live meaning they take your actual income made in your practice, along with any other household income, and use that data to project your taxes due each quarter to state and federal. At our firm, this is how we project our tax estimates for our clients so they aren’t left with a surprise annual tax due balance or penalties for underpaying.

✅Your client management and billing system (Simple Practice, Theranest, etc) is NOT accounting software and cannot double as a billing and bookkeeping system. Your client management system does not accurately track all income and it definitely does not record your expenses, assets, liabilities, or equity. Real accounting records, which you’ll need for tax preparation purposes, IRS audits, and to secure any loans (like a business loan or for proof of income if you go to buy a house or car), will consist of at least a Balance Sheet which reflect the company’s assets, liabilities, and equities of your company and an Income Statement (Profit and Loss) which reflects your company’s gross income, cost of services, expenses, other income, and net income. And if you’re thinking your client management system will suffice for showing income and your bank account statements for showing your expenses, think again! Only up to date, accurate accounting records and financial reports are going to support you during loan processing and approval, tax preparation, and audits. Besides all of that – up to date, accurate accounting records and reports are the only way to truly understand the full financial story of your company; what you’re making, how much you’re spending, what are you spending it on, how much money is left over, and how profitable you are! You’ll never be able to get that full picture just from looking at your client billing system or your bank account!

✅Losing out on the credit card fee tax deductions and underreporting income… we see this mistake SO SO much! We even see it all the time from other ‘bookkeeping professionals/firms’, costing our clients a lot of money in missed deductions and inaccurate income numbers on the accounting records that won’t match up with the 1099 they receive (🚩can anyone say IRS red flag!🚩). It’s really important in your bookkeeping and accounting system that you’re recording the total gross amount you billed your client, not the amount after the credit card processing fee was deducted. Then, you need to also carefully record the credit card fee expense to ensure you’re not missing out on that tax deduction. This way, you’re recording the true total income, expense, and net income amount received!💪

✅I’m just going to come out and say it! Please stop asking for tax and bookkeeping advice in facebook groups for therapists and asking your colleagues who also own their own private practice!! I know it’s free advice, I know they may have more experience with entrepreneurship, but that does not make them qualified to give you tax and bookkeeping advice. Just like we are not qualified to hold a therapy session with one of your clients or treat your clients! We have the honor of being involved in a lot of wonderful facebook communities for therapists, and the ‘advice’ being freely given on tax and bookkeeping is always incorrect. The biggest thing to remember as well is that YOUR company and YOUR personal tax situation is never going to be the same as anyone else. Taxes and bookkeeping are so incredibly unique to each individual taxpayer, each individual company, and each of the 50 states. Only someone who is privy to all of those intimate, sensitive details is truly going to understand your full tax and bookkeeping situation and be able to adequately provide you with accurate advice and information. Please make the investment in yourself and the wellbeing and success of your company to work with someone who will truly get that full picture!❤️

✅As a business owner, even if you’re a sole proprietor or your business isn’t registered with your state, you need to setup dedicated business bank accounts and credit card accounts. Your business income, even if it passes through onto your personal tax return, is still income you earn separate from what the IRS considers ‘personal income’. When you use personal accounts for business expenses or receiving business income, that’s called ‘commingling business and personal funds’, and the IRS gets really cranky about co-mingling if they ever have to perform an audit. It really blurs the lines between what is actually a business expense and what’s a personal expense. If you use a personal credit card for your Amazon purchases, and those expenses can be for business or personal, how is the IRS supposed to know that and be able to differentiate between them? And how are YOU supposed to be able to remember which ones were which as well? It’s probably going to be really difficult. You want to have a dedicated business account(s) where only your business income is going into it and only business expenses going out! This avoids commingling and makes it a lot easier for you to manage your business finances!

🦄🦄If you’re ready to give up your (unpaid) part-time position as the bookkeeper and tax person at your private practice and get back to what you actually want to do ❤️ we’d love to have you apply to work with us here. ❤️Like our glowing review from our client, Liz, we’d love to ‘exceed your expectations and take a lot of time and stress off your plate’ as well!🦄🦄

👋👋At Therapeutic Bookkeeping, we’re not your typical, rigid tax & bookkeeping firm! We’re a husband and wife duo firm who truly take pride in our services and supporting our clients on being confident, profitable, passionate private practice owners with a positive money-mindset!

We work exclusively with therapists all over the United States offering top-notch, industry specific tax preparation, tax planning and advisory, bookkeeping, and much more!👋👋