Bookkeeping That Actually Supports Tax Savings

By Brian Giesecke, CPA/EA | Giesecke Advisory

How confident are you that your bookkeeping is helping you save on taxes?

Not just "getting done." Not just "up to date." But actually structured in a way that supports real tax planning?

For most practice owners, the honest answer is... they're not sure.

And that's understandable. Bookkeeping feels like a back-office task. Something that has to happen. You get it done, move on, and hope it's good enough.

But here's the thing. Your books are the raw material your accountant uses to find savings. If that material is messy, incomplete, or poorly organized... the planning suffers. Every time.

Why Bookkeeping Matters for Taxes

Let's start with the basic idea.

Tax planning is only as good as the data behind it. If your Profit & Loss statement doesn't reflect reality, your tax projections won't either. Your accountant can't optimize what they can't see.

Think of it this way. If your P&L shows $400,000 in revenue and $250,000 in expenses... but $30,000 of those expenses are in a vague "miscellaneous" category... that's a blind spot. Some of those might be deductible in ways that save you real money. Some might need to be reclassified. Some might be personal expenses that shouldn't be there at all.

Clean data gives your accountant something to work with. Messy data gives them something to work around.

And that's the difference between proactive tax planning and reactive tax prep.

The Foundation: A P&L That Reflects Reality

Your Profit & Loss statement is the single most important financial report for tax planning. If it doesn't reflect what actually happened in your practice, everything downstream breaks.

Here's what "reflects reality" means in practice:

Revenue is recorded accurately and consistently. Patient collections, insurance payments, and any other income streams are captured in the right period. If you're on cash basis (most small practices are), that means revenue shows up when cash hits the bank — not when services are rendered.

Expenses are categorized meaningfully. Not just "supplies" and "other." But categories that actually help you understand where money went — and categories your accountant can use to identify deductions.

Personal and business are separated. This one sounds obvious, but it's one of the most common issues I see. Personal charges on business cards. Business expenses on personal accounts. It creates noise that makes everything harder.

When your P&L is clean, your accountant can look at it and immediately start asking the right questions. When it's messy, they spend their time cleaning up — not planning.

The Categories That Matter

This is where bookkeeping moves from "good enough" to genuinely useful for tax planning.

Your chart of accounts — the list of categories you use to classify transactions in QuickBooks, Xero, or whatever ledger you use — should be set up to support tax reporting. Not just operational reporting.

Here are the categories that matter most for medical practice owners:

Retirement plan contributions. SEP-IRA, Solo 401(k), Cash Balance Plan, employer match — these should each have their own line item. They're often the single biggest tax lever you have, and they need to be tracked separately so you know exactly where you stand throughout the year.

Owner compensation. If you're an S-corp, your reasonable salary (W-2 wages) and shareholder distributions need to be clearly tracked. This is one of the first things the IRS looks at in an S-corp audit. It's also critical for calculating your qualified business income (QBI) deduction under Section 199A.

Vehicle expenses. If you use a vehicle for business — commuting between practice locations, driving to the hospital, meeting with vendors — track those expenses separately. You'll need either actual expenses or mileage logs for your Schedule C or corporate return.

Home office expenses. Mortgage interest or rent, utilities, insurance, property taxes — the portion attributable to your home office. Even if you use the simplified method ($5 per square foot), having actual expenses tracked gives you the option to use the actual expense method, which often yields a larger deduction.

Equipment and technology. Computers, medical equipment, software subscriptions, practice management systems. These may qualify for Section 179 expensing or bonus depreciation. Having them in a dedicated category means you and your accountant can evaluate the best depreciation strategy each year.

Professional development. CE courses, conferences, medical journals, professional memberships, licensing fees. These are fully deductible and easy to miss when they're lumped into "miscellaneous" or "other expenses."

Professional services. Legal, accounting, consulting, IT support. Having a clear category for professional services makes it easy to verify these deductions at year-end.

Insurance premiums. Health insurance premiums for the practice owner (and family) are deductible differently than employee benefits. Keep them separate so the deduction is handled correctly on your return.

A Practical Chart of Accounts Setup

Here's a simplified chart of accounts structure that supports both operational clarity and tax planning for a medical practice:

Revenue

• Patient collections
• Insurance reimbursements
• Other income (labs, product sales, consulting)

Cost of Goods Sold (if applicable)

• Medical supplies
• Lab costs

Operating Expenses

• Rent and occupancy
• Staff wages and benefits
• Payroll taxes
• Owner compensation (W-2 salary)
• Owner health insurance
• Retirement plan contributions (employer)
• Office supplies
• Medical supplies and equipment
• Technology and software
• Professional services (legal, accounting, IT)
• Insurance (malpractice, general liability, property)
• Marketing and advertising
• Professional development and CE
• Vehicle expenses (business use)
• Home office expenses
• Meals (business-related, 50% deductible)
• Travel
• Depreciation
• Bank fees and merchant processing
• Dues, licenses, and subscriptions

Below the Line

• Owner distributions (S-corp)
• Owner draws (sole prop/LLC)
• Loan principal payments (tracked but not expense)

The goal isn't to have 200 categories. It's to have the right categories — ones that map cleanly to your tax return and give your accountant clear visibility into deduction opportunities.

Timeliness Matters More Than You Think

Here's a pattern I see all the time.

A practice owner does bookkeeping once a quarter. Or worse, once a year at tax time. They hand their accountant a shoebox of receipts (or the digital equivalent) in March and expect a clean return by April.

That doesn't work. Not for accuracy. And definitely not for planning.

Why? Because tax planning requires timely data. If you don't know where you stand financially until December... you've already missed most of your opportunities. Retirement contributions have deadlines. Equipment purchases need to be placed in service by year-end. Reasonable salary adjustments need to happen throughout the year.

Monthly close is the minimum standard. That means every month, your books are reconciled, categorized, and reviewed. Your bank accounts match. Your credit cards match. Your P&L is current.

When monthly close is happening consistently, a few things become possible:

• You can project full-year income mid-year and plan accordingly
• You can spot cash flow issues before they become emergencies
• Your accountant can run tax estimates quarterly with real numbers
• Year-end becomes a confirmation... not a scramble

If you're doing bookkeeping in QuickBooks Online or Xero, a clean monthly close shouldn't take more than a few hours for a typical 1-5 provider practice. If it's taking significantly longer, there's probably a process issue worth fixing.

Working With Your Accountant

This is the part that ties everything together.

Your bookkeeping and your tax planning should be connected. Not two separate activities happening in two separate worlds.

If you do your own books (or have an internal bookkeeper), here's the most important thing you can do: ask your accountant what they need.

That sounds simple. But most practice owners never have this conversation.

Ask them:

• "What categories do you want to see on my chart of accounts?"
• "How should I handle owner compensation and distributions?"
• "What reports do you need, and how often?"
• "Is there anything in my current setup that makes your job harder?"

A five-minute conversation can save hours of cleanup at year-end. And it ensures your books are structured to support the planning your accountant wants to do.

If your accountant does your bookkeeping too (or if you use a firm that handles both), this alignment should already be happening. If it's not... that's worth a conversation.

What Clean Books Make Possible

When your bookkeeping is structured to support tax planning, everything gets better.

Your quarterly planning conversations are more productive because the data is there. Your accountant can identify strategies in real time instead of looking backward. Year-end isn't a fire drill. Your tax return is clean and defensible.

And perhaps most importantly... you have confidence. You know your numbers reflect reality. You know deductions are being captured. You know nothing's slipping through the cracks.

That confidence is worth more than any single deduction.

The Real Takeaway

Bookkeeping isn't just an administrative task. It's the infrastructure that makes tax savings possible.

Clean categories. Timely closes. A chart of accounts that maps to your tax return. Communication with your accountant about what they need.

These aren't complicated things. But they make a meaningful difference in how much you pay in taxes every year.

If you're not sure your bookkeeping is set up to support planning... start with the categories. Pull up your chart of accounts. Compare it to the list above. See what's missing.

That's a 30-minute exercise that could change how the rest of your year goes.

Your Next Step

If you'd like a framework for reviewing your entire tax strategy — including how your bookkeeping supports it — I put together a Tax Planning Checklist for Medical Practices. It covers the key categories, timing, and questions to ask your accountant.

[Download the Tax Planning Checklist](#)

And if you have questions about your current setup... I'm always happy to talk.