It used to be that a medical degree was a ticket to a relatively secure life: in exchange for spending years achieving at school and amassing formidable learning, and just showing up at your practice for 50 or more hours a week, a doctor could be guaranteed a comfortable income, if not outright wealth. No longer.
On the left, regulation hampers their free exercise of their business and practice. On the right, insurance companies lower their income by cutting benefits. The general practitioner, like Marcus Welby, is a relic from another time and place: fierce competition among medical providers leads to ever-narrower specializations, while some segments of society become more skeptical about the benefits of empirically-based western medicine. Medical professionals who focus only on the practice of medicine, and ignore the business climate, get trampled by more nimble actors. And they are filing for bankruptcy protection. Moreover, IRS audits for doctors and other medical professionals are on the rise. The stereotype of doctors is that they have a lot of income and keep poor records. The IRS is making hay with this stereotype when it is accurate.
I recently assisted one doctor with an audit. The revenue agent asked for verification of auto expense: the doctor had no mileage log, but he could verify driving between his office and various hospitals on a seven-day-a-week basis. His preparer had done something of a slapdash job. I got the IRS to agree to allow more auto expense than he had claimed on his return. The IRS will also examine income closely for unreported income. The standard procedure: they add up all deposits into all accounts, and ask the taxpayer to verify that any of the deposits are not taxable. If there is a discrepancy between the income claimed on the return and the deposits into the accounts (minus nontaxable deposits), that difference is determined to be taxable. It’s hard to argue against the documentation. Tax problems can sink a medical practice. If this happens to your medical practice, call me.
I enjoy helping doctors and medical professionals to wind down their practices, file for bankruptcy, help with tax agency troubles, or otherwise handle their crushing debts or financial challenges. I feel a kinship, because there are a lot of similarities to a law practice and a medical practice: lots of education, a profession focused on helping people, and a changing economic scene that requires thinking outside the boxes we learned in graduate school for a successful practice.
April 19, 2013