Medical and Healthcare Practices

Unique industry accounting challenges.

Medical and healthcare practices — including doctor and dentist offices, medical groups and associations, outpatient treatment facilities and surgery centers — face a number of financial and accounting challenges that are unique to the industry.

Here at O’Brien and Panchuk, we have helped medical and healthcare practices deal with the following tax and financial issues:
Unreasonable compensation issues
The IRS may argue that a practice owner-employee’s compensation is too low. Such a determination often arises as a result of an income tax audit. This can result in recharacterization of dividends paid to shareholders as compensation and retroactive assessment of payroll taxes plus penalties and interest.

The solution is proper structure of executive compensation supported by a consistent compensation strategy. This strategy must adapt over time to changing IRS guidelines and the decisions of recent court cases. It should also be properly documented and supported by national averages.
Entity planning & formation issues
A majority of medical practices we consult with are overpaying their taxes due to improper entity selection. There are significant tax ramifications at the shareholder-employee level that must be understood in order to make the right entity selection from a tax standpoint.

Similarly, many medical practices don’t understand some of the obstacles involved in conversions to Subchapter S status, including built-in gains issues.
Practice-occupied lease arrangements
With multi-entity structures, rental losses may or may not be deductible. It takes expert guidance to know the difference and maximize the tax benefits of such arrangements.
Practice expense deductions
A number of business expenses typically deducted by medical practices are disallowed if the practice is audited. These include auto expenses and reimbursements to employees for auto and travel expenses. Tools are available to help practices overcome compliance issues related to expense deductions.
Internal controls
Fraud is a growing problem in some medical practices. Having solid internal controls in place can help prevent or reduce incidences of fraud related to assets, billing and collections.

For example, transaction authorization, recording and custody functions should be separated among two or more employees to prevent fraud as well as errors and other damages.
In addition, doctors and dentists often fail to implement a number of simple but effective financial and tax strategies, including the following:
  • The business’ operating history.
  • The overall outlook for the industry.
  • The strengths and weaknesses of the management team.
  • The business’ competitive position and unique selling proposition (or USP).
  • The overall outlook for the U.S. economy, as well as overseas economies if it’s an international business.
We will help ensure that your medical practice benefits from these and any other applicable strategies.
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Let us help you with your Healthcare Practice Accounting

We’re a progressive Tax CPA firm that focuses on each on our clients’ needs and circumstances to provide tailored services and solutions that address their situation. It’s not the “one size fits” all approach that you find at the big box store—it’s a calculated and measured process to ensure that the result is only the very best.

“Great work follows great fit. We  promise our clients award‑winning and  strategically designed experiences for a  digitally driven world.”

Israel morris | business OWNER

In 2007 I started a non profit 501c3 corporation to promote arts programs in public elementary schools. I was in need of a reliable professional accountant that could help me through the process of implementing a strong and well planned accounting program. Max Panchuk was recommended and his support, skill, and dedication has been more than I ever expected.

Steve Petersen, CEO | Steve Petersen Productions, Inc. 501c3

“Great work follows great fit. We  promise our clients award‑winning and  strategically designed experiences for a  digitally driven world.”

Thomas Doe | business OWNER
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