Healthcare

Profitable on Paper, Tight on Cash

A 30-minute consultation is $150, credited against your first engagement if you go ahead with us.

Your practice looks profitable on paper and the bank account disagrees. The schedule was full, the billing went out on time, and checking still does not match the bottom of the income statement. That gap is usually not a bookkeeping mistake. It is the reimbursement cycle showing up in your financial statements.

We work with medical, dental and clinical practices. Four things usually need sorting, and they tend to arrive in this order.

Books that match the reimbursement cycle

Billing and collecting are separate events, often months apart. Work billed in one month and paid two or three months later makes a cash-basis income statement useless for judging a month's performance, which is why the choice between cash and accrual matters more for a practice than for most other small businesses.

Then there is the difference between what you bill and what the payer actually allows. Gross charges are not revenue, and receivables have to be carried at what you realistically expect to collect rather than at face value, or the balance sheet describes a practice you do not have. Done properly, monthly books record revenue net of contractual allowances, match it to the period the work was performed, and age receivables by payer instead of lumping them into one total. Kept that way, a month's statements tell you whether the month was good. Kept the other way, they tell you when checks landed.

The tax decisions that turn on income and timing

Medical and dental practices are a specified service trade or business under section 199A, which the law treats specially. Below a certain income level the practice claims the qualified business income deduction on the same terms as any other business; above it the deduction shrinks across a phase-out range and eventually disappears (IRS: Qualified business income deduction). The deduction is now permanent, after having been scheduled to end after 2025, the rate is unchanged, and from 2026 the phase-out range is wider, which softens the edge for owners near the limits. Because the result turns on income timing and entity structure, and because the thresholds move with inflation, it is a conversation every year rather than a settled answer.

Equipment belongs in the same conversation. 100% bonus depreciation is permanent for equipment acquired after 19 January 2025. Many states do not follow it and cap section 179 expensing far below the federal limit, so the federal and state answers on one purchase can differ sharply. Whether any of this helps you depends on your own income and structure, so we work it through before December rather than reporting it in April.

Clinician classification and payroll

This is where practices carry quiet risk. Treating a physician or a clinician as a 1099 contractor when the working relationship looks like employment is a real exposure, and it usually surfaces years later with back taxes and penalties attached. The test is the substance of the relationship, not the agreement (IRS: Independent contractor or employee?).

We run the payroll, and we will say plainly when a classification looks hard to defend rather than leaving it in place because it is what you already have.

Partners joining and leaving

Entity structuring and buy-in and buy-out accounting are ongoing work, not one-time paperwork. When a partner joins or leaves, the capital accounts, the valuation and the tax treatment all have to agree with each other — and they are easiest to make agree before the deal is signed rather than after.

Common questions

Should my practice be on cash or accrual?

It depends on your size, your entity type and how far your payer mix stretches the gap between billing and collecting. Accrual usually tells a practice owner more, because it puts the revenue in the month the work happened. Cash is sometimes the better tax answer. They are not the same question and we do not assume the answer from your last return.

Do I get the qualified business income deduction?

Sometimes, and it turns on your income rather than on your specialty. A practice is a specified service trade or business, so below the threshold the deduction is available on ordinary terms, and above it it phases out. Where you sit depends on taxable income, entity structure and timing, all of which can be planned before year end.

One of my providers is on a 1099. Is that a problem?

It might be, and it is worth knowing now rather than in an examination. The question is whether the working relationship looks like employment in substance — who sets the hours, who sets the rates, who supplies the equipment, who owns the patient relationship. Tell us how it actually works and we will tell you plainly whether it holds up.

This page is about whether we recognize your situation. The current figures are deliberately not on it: the section 199A thresholds and phase-out ranges move with inflation, and a service page that restates them goes stale quietly. We work from the authority's own current guidance and against the year being filed, and the phase-out mechanics, the entity comparison and the buy-in accounting are worked through in a planning engagement rather than on a web page.