Why Tax Planning Matters More Than Tax Prep for Medical Practice Owners

By Brian Giesecke, CPA/EA | Giesecke Advisory

How much of your medical practice tax bill is actually optional?

I don't mean illegal. I mean strategic. Choices you could've made differently throughout the year that would've changed the number on that return.

For most practice owners I talk to — dermatologists, internists, small group practices — the answer is: a lot more than they realize. The difference between tax planning and tax preparation can easily be $30,000 to $50,000 a year.

What Is the Difference Between Tax Planning and Tax Preparation?

Tax preparation is looking backward. It's taking everything that already happened — your income, your expenses, your deductions — and reporting it correctly on your Form 1040 and Schedule C (or Form 1120S if you're an S-corp). That's compliance.

Tax planning is looking forward. It's making decisions throughout the year so that when tax time comes, you're in a better position.

Here's how I think about it...

Tax prep is checking the score after the game.

Tax planning is calling plays while the game is still happening.

Both matter. But only one gives you control.

Why Do Most Medical Practice Owners Only Do Tax Prep?

There are a few reasons.

First, it requires thinking about taxes when you're not being forced to. And honestly, who wants to do that?

Second, a lot of accountants are set up for compliance, not strategy. They're processing returns — not necessarily looking for opportunities.

Third, it takes a little more effort upfront. You have to understand your numbers. You have to check in throughout the year.

But here's the thing... the effort is small compared to the payoff.

We're not talking about hours every week. We're talking about a mid-year check-in. A pre-year-end planning conversation. A few decisions made with good information.

What Does Good Tax Planning Look Like for a Medical Practice?

If you're doing real tax planning, you should expect a few things:

A planning conversation before year-end. October or November. Not April.

Someone who understands your situation. Not just your return — your practice, your goals, your cash flow.

A written plan. Here's where you are, here's what we recommend, here's what to do and by when.

Check-ins during the year. Even once or twice makes a difference.

If you're not getting this, you're doing tax prep. Which is fine. But you're probably leaving money on the table.

How Much Can Tax Planning Save a Practice Owner? A Real Example

I was working with a practice owner last fall. Great year — collections up, profit strong. But no planning had been done.

In October, we looked at where she was headed. Without changes, she was looking at a $140,000 tax bill.

We had about ten weeks before year-end.

We adjusted retirement contributions (maximizing her Solo 401(k) employer and employee deferrals). Looked at equipment purchases she'd been putting off — qualifying for Section 179 deductions up to $1,220,000 for 2024. Made sure her S-corp salary was optimized to reduce self-employment tax (the 15.3% FICA rate).

By December 31st, projected taxes were closer to $95,000.

That's $45,000 in tax savings. Not from aggressive strategies. Just from awareness and action before the deadline.

If we'd had that conversation in April? Nothing we could've done.

Key Takeaways

• Tax preparation is compliance; tax planning is strategy. Prep reports what already happened. Planning changes what will happen.
• The average medical practice owner can save $20,000-$50,000+ per year through proactive tax planning — using strategies like S-corp salary optimization, retirement plan maximization, and Section 179 deductions.
• October and November are the most valuable months for tax planning. By April, most tax-saving opportunities for the prior year have expired.
• Good tax planning requires at minimum two conversations per year — a mid-year check-in and a pre-year-end planning session.
• Tax planning is not aggressive or risky. It's making informed decisions with current data instead of looking backward.

Frequently Asked Questions

When should I start tax planning for my medical practice?

Ideally, tax planning begins at the start of the fiscal year and includes check-ins in June/July and again in October/November. The single most important conversation happens before year-end — not at filing time in April.

Is tax planning worth it if I only have a small practice?

Yes. Even solo practitioners and small practices (1-5 providers) benefit from planning. The savings scale with income, but practices earning $150,000+ in profit almost always benefit from strategies like S-corp election and retirement plan optimization.

Your Next Step

Pull out your last tax return. Look at the total tax you paid — you'll find it on Form 1040, line 24.

Ask yourself: Did anyone talk to me before year-end about ways to reduce that number?

If the answer is no... that's not a criticism. It's just a gap.

And gaps can be closed.