Industry
Tax work for physicians and dentists
Medicine is the largest share of my client base, and the return looks nothing alike depending on whether you are employed, own the practice, or hold a partnership interest.
Physicians and dentists are the largest share of my practice. Medicine is unusual in how sharply the tax picture turns on career stage. What matters to an employed hospitalist has almost no overlap with what matters to a partner receiving a K-1, and neither looks much like a solo owner running payroll and depreciating an operatory.
So this page is organized the way a medical career actually runs. Employed on a W-2. Owning the practice. Holding a partnership interest. Plenty of people are in two of those at once, and the overlap is usually where the mistakes live.
Employed on a W-2 from a hospital or group
Start with the part nobody tells you. As a W-2 physician you can deduct almost none of your professional expenses. The 2017 tax act suspended miscellaneous itemized deductions and they have not come back. Board certification fees, DEA registration, state licenses, CME tuition and the travel to get there, society dues, loupes, a tail policy. Federally, none of it comes off your return.
Two real responses exist. One is contractual: negotiate a CME and expense stipend, or push your employer toward a proper accountable plan under Reg. 1.62-2, where you substantiate the cost and are reimbursed tax-free. The other is state-level. Some states did not follow the federal suspension and still allow the deduction on the state return, so I check yours before writing the expenses off as dead.
What is not a response is opening a Schedule C to run licensure and loupes through. I see it every year, usually on the recommendation of someone in the physicians' lounge. There is no trade or business, the expenses belong to your W-2 job, and it manufactures an apparent basis for a Solo 401(k) you are not eligible for.
The 403(b) and the 457(b) are not the same account
The biggest unpulled lever for employed physicians is stacking a 457(b) on top of the 403(b). They carry separate elective deferral limits, so funding one does not consume the other. The limits and the catch-up amounts are indexed and change annually, so I work from the current IRS figure rather than last year's.
Before you fund the 457(b), find out which kind it is. A governmental 457(b) at a state university or county system is a real retirement account, rollable and held for your benefit. A non-governmental 457(b) at a nonprofit hospital is an unfunded promise. The balance is an unsecured claim against your employer's general creditors, with a distribution schedule you often have to elect years in advance. That can still be worth doing. It should be a decision rather than a surprise, so I want to read the plan document and your distribution election before you max it.
Withholding, and where the April number comes from
Two-physician households under-withhold almost by construction. The W-4 assumes one job unless you tell it otherwise, so two attending salaries are each withheld as though they were the only income in the house. Then the productivity bonus lands, payroll withholds it at the flat supplemental rate, and the income is actually taxed at 35 or 37 percent. The gap surfaces in April.
Withholding counts as paid evenly across the year no matter when it was actually withheld. A W-4 change in November retroactively repairs an underpayment from March. A January estimated payment cannot. When a shortfall turns up in the fall, adjusting withholding is almost always the cheaper repair.
Moonlighting, locums, and expert witness work
Any 1099 income is a separate business and is taxed like one. Self-employment tax is 15.3 percent on 92.35 percent of net earnings, but the 12.4 percent Social Security piece stops at the annual wage base, and your hospital W-2 usually fills it first. For most attendings what is left on moonlighting profit is 2.9 percent Medicare plus the 0.9 percent additional Medicare tax, stacked on your marginal rate with nothing withheld. Between the top brackets, that Medicare piece and state tax, a moonlighting year that felt like extra money frequently lands north of 40 percent all-in. I ran that arithmetic with actual numbers in moonlighting and locums income.
It also pulls you into quarterly estimates, where the safe harbor is the whole game. You avoid the underpayment penalty by paying the lesser of 90 percent of this year's tax or 100 percent of last year's, and that 100 becomes 110 percent once prior-year AGI clears $150,000. Nearly every attending is in the 110 percent bucket. The penalty is computed period by period, so overpaying in April does not cure a missed September installment. For the 2026 tax year the estimate dates are April 15, June 15 and September 15, 2026, then January 15, 2027.
Locums adds the expensive question: where is your tax home? Travel, lodging and per diem are deductible only against a legitimate tax home under Section 162(a)(2), which turns on doing business in the area, genuinely carrying duplicated living costs, and keeping real ties there. If an assignment is realistically expected to run past twelve months it is indefinite, your tax home moves to the work site, and the travel deductions are gone from day one rather than from month thirteen. Recruiters describe the stipends as tax-free. They are tax-free only if that test is met, and nominal rent paid to a relative to hold an address does not meet it.
Owning the practice
Ownership moves the questions from deductions to structure. The S-corp election is the first one everyone asks about, and it is arithmetic rather than philosophy. Add up what the structure costs to run: payroll processing, a separate Form 1120-S, state filings, a higher preparation fee. Set that against the self-employment tax you avoid on distributions. Below a certain level of net earnings the comparison comes out negative, and if that is where you are I will say so instead of selling you an election.
Above it, know what you are actually saving. The Social Security portion of the tax stops at the annual wage base. Once your practice W-2 wages clear that ceiling, the only remaining savings on distributions is the 2.9 percent Medicare tax plus the 0.9 percent additional Medicare tax. The savings tables circulating online usually ignore the ceiling entirely, which is why they show a number your return will never produce. The full comparison, with the costs itemized against the savings, is laid out in should your practice be an S-corp.
Reasonable compensation is the piece that draws examination. There is no safe harbor and no percentage rule, whatever you were told at a conference. The analysis looks at training and experience, duties, hours devoted, distribution history, what comparable non-shareholder employees earn, bonus timing, and industry comparables, and the courts have rejected mechanical formulas. What reasonable salary actually means goes through those factors and the cases at length. I document the number against specialty and regional compensation data and keep the support in the file, because the time to build it is before a notice arrives, not after.
The rest of the owner work, which is duller and matters more
- An accountable plan, so CME, licensure, dues, malpractice and a qualifying home office get reimbursed tax-free instead of disappearing
- Depreciation choices on equipment and the build-out: Section 179, bonus depreciation, or a normal recovery schedule
- Payroll set up correctly the first time, including shareholder health insurance reported on your own W-2
- Books that reconcile every month rather than getting rebuilt each March
- The QBI question, where a medical practice is a specified service trade or business and the deduction only becomes live inside the annually indexed phase-in range
- Plan selection for the practice: solo 401(k), SEP, or a defined benefit plan when the numbers carry it
Partner in a group, on a K-1
The first year as a partner is the one that hurts, and the reason is cash flow rather than tax law. Withholding stops. Distributions arrive gross. The employer half of FICA that the hospital was quietly paying becomes yours. Benefits that were payroll deductions become after-tax purchases. If there is a buy-in note, you service it with after-tax dollars in the same year your withholding went to zero.
Then the K-1 itself. Your allocated share of income is taxable whether or not it was distributed, so a group retaining earnings for equipment or a build-out can hand you income you never received. The answer is knowing the distribution policy in November, not in March.
The mechanical fix is quarterly estimates set against the same safe harbor. If your spouse draws a W-2, there is a better lever: raise their withholding instead. Same dollars, treated as paid ratably, and penalty-proof.
One more, and it is worth real money. Most states with an income tax now allow a pass-through entity tax election, letting the partnership pay the state tax at the entity level and deduct it federally, which restores a deduction the individual SALT cap otherwise limits. The elections carry hard annual deadlines and several require a payment during the year. A missed election is not recoverable, which makes it one of the few tax mistakes with a provable dollar cost.
High income sitting next to a large loan balance
Medicine is the profession where a large income and a large student loan balance land on the same return, and the two are more tightly coupled than most people expect. Income-driven repayment is computed from adjusted gross income, so every dollar moved into a 403(b), a 457(b) or an HSA lowers the tax and lowers the required loan payment at the same time. That is the argument for treating retirement funding and loan repayment as one decision instead of two.
The federal repayment programs have been rewritten more than once recently, so the plan you enrolled in may not be the plan you end up in. For married borrowers, filing status moves both the tax and the payment, and it does not always move them the same direction. I run it both ways against the rules actually in effect rather than assuming. That work belongs in tax planning in October, not in a return filed in April.
When you don't need me
If you are a resident with one W-2, no moonlighting and no state complications, good software will file that return correctly, and I will tell you so on the call rather than after you have paid me. If your only question is whether to fund the 403(b), the answer is yes and you did not need to hire anyone to hear it. And a flat fee for a tax return does not include rebuilding two years of practice books. That is separate work, scoped and quoted separately, and you hear it before you engage me rather than in an invoice afterward.
I came over to Nottingham after being with another CPA for many years. The transition was very smooth, and I love the personal attention I get from Hunter.
How this starts
A free consultation
We talk through where you are in your career, what the income actually looks like, and what is on the return now. No charge, no obligation.
A complexity assessment
I score the return against countable factors: income sources, states filed, schedules and forms required, entities involved, transaction volume, prior-year cleanup. That score sets the price, not my read of what you can pay.
A written estimate before any work begins
You see the flat fee and the reasoning behind it before you decide. If actual complexity turns out different once documents are in, the price moves against the same scale, up or down, and I show you why.
How the number gets set is on the pricing page, and the return process is laid out under how it works. When you are ready, the contact form is the way in.
Further reading
Questions, answered plainly.
I'm a W-2 hospitalist. Is there actually tax planning to do?
Yes, though not the kind most physicians expect. The deduction side is nearly closed to you, so the work is retirement account selection and stacking, withholding accuracy against a two-earner household and a bonus withheld at the flat supplemental rate, any 1099 moonlighting treated as its own business, and the interaction between AGI and an income-driven loan payment. Those are all decisions made during the year, not at filing.
Should my practice elect S-corp status?
It depends on net earnings and on what the structure costs to run. Payroll processing, a separate Form 1120-S, state filings and a higher preparation fee have to come in under the self-employment tax you avoid on distributions, and below a certain level of net income they do not. Above that it often works, but remember the Social Security portion stops at the annual wage base, so once your practice W-2 wages clear it the only remaining savings is the 2.9 percent Medicare tax plus the 0.9 percent additional Medicare tax.
I just made partner. How much should I be setting aside?
It depends on your prior-year tax, not on a percentage rule. The defensible target is the safe harbor: 110 percent of last year's total tax, divided across the four estimate dates, since your prior-year AGI is almost certainly above $150,000. If your spouse has a W-2, increasing their withholding is usually better than writing estimate checks, because withholding is credited ratably across the whole year.
How much self-employment tax will I owe on moonlighting income?
Usually far less than the 15.3 percent figure you see quoted. That rate applies to 92.35 percent of net profit, but the 12.4 percent Social Security portion stops at the annual wage base and your hospital W-2 fills it first. If your salary already clears the base, the Social Security piece on the moonlighting profit is zero and what remains is 2.9 percent Medicare plus the 0.9 percent additional Medicare tax. It is still untaxed at the source, so the planning problem is getting it paid in on time rather than the rate.
Can I deduct my CME, board fees, and state licenses?
If you are a W-2 employee, not federally. Unreimbursed employee business expenses have been suspended since the 2017 tax act and have not returned. Some states did not conform and still allow the deduction on the state return, and the real fix is an employer stipend or an accountable plan reimbursement. Do not open a Schedule C to hold expenses that belong to your W-2 job.
Do you work with physicians outside North Carolina?
Yes. I am based in Charlotte and work with clients nationwide. Federal returns and IRS representation run on federal practice rights, and CPA mobility covers work across state lines, so multi-state filings and out-of-state practices are ordinary here rather than an exception. Documents, signatures and questions all move electronically, so nobody has to drive anywhere.
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