16 Jul IRS Audit 2020: The Physicians’ Phobia
IRS Audit 2020 causes one of the most common phobias among today’s physicians. With all there is to fear in today’s world, Gavrilov & Co would like to cure this phobia for doctors, dentists, Physician’s Assistants, and other medical professionals.
There are very few authorities that can strike such terror in our minds as the Internal Revenue Service or an IRS audit. Few words inspire such fear in the hearts of American physicians as “IRS audit.”
Now, that might be true for people in many walks of life. But many doctors seem to have gravitated to this fear and, pardon the expression, perhaps blown it a little out of proportion.
Doctors! Fear Not the IRS Audit: Confront the Phobia
Now one of the biggest side effects of this physician’s phobia is that they allow fear of the IRS to prevent them from taking the benefits of the savings they deserve on taxes. “Especially for locums tenens docs and other 1099 income earners since the 67,000-page tax code favors this type of income heavily.” (In case you aren’t familiar with Latin, Locums Tenens refers to doctors who work in an office and substitute or take over for each other during vacations and sicknesses.)
We hope knowing how highly favored Doctors and 1099 taxpayers are in the current tax-code, can relax some of your Physician’s phobia fears about an audit. At the famous doctors’ blog, “Kevin, MD,” we learn, “A tax audit might be a nuisance, but it’s usually not more than that…” — And then the author adds a second cheerful thought, saying, “Chances are extremely high that it will never happen at all.”
IRS Audits and Truth behind the Doctors’ Fear
Now here at Gavrilov, we know how seldom doctors discuss their tax situations with other physicians. We know you simply do not hear about other doctors who go through IRS audits. If you did, you’d know you had nothing to fear.
We think this reticence among medical professionals might account for the fear physicians often express in our office, about audits. Why? Because we always fear the unknown.
Relieving Your Apprehension About IRS Audit 2020
The following 3 “Points to Ponder” will help relieve apprehension.
1. Our mention that the tax code is generous overall, to physicians and others in the medical profession, is not meant to be encouragement for you to “fudge” on your tax forms.
2. Gavrilov & Co advises doctors to be meticulously honest. And your tax squad at Gavrilov & Co will make certain you are tax compliant. But don’t worry we will mine your deductions and find some true gems that validate the time spent on your tax return.
3. (You are going to love this one.) Did you know that this year the IRS audit rates are historically low? In fact many experts agree that it pays to be aggressive. (This means, we encourage you to take the deductions that are due!)
In summary, it is highly improbable that your most legitimate deductions will even be red flags or stand out for special attention.
Replace Fear with Respect for the IRS Audit 2020
Some of our physician-clients have recently arrived at our office a little shaken. They had received IRS letters informing them that they are being audited.
If this were to happen to you, Gavrilov & Co wants you to be prepared. Your courteous IRS Audit letter will also contain at least 3 pages of requested documents.
Sometimes this can cause a minor panic attack. After recovering, a physician usually comes to see us or another tax accountant specializing in medical taxation. And we assist them in assembling the proper documentation.
Nipping Some IRS Audit 2020 Issues in the Bud Takes A Little Time
We can avoid some audit issues if you spend some time with us in the initial meeting. We sometimes need a little dialogue to answer questions before we blithely put information on a tax return.
- Less experienced CPAs often “take information from their doctor clients and put it on a tax return without enough “questioning.”
- CPAs “frequently complain that physicians do not make the time to meet and thoroughly discuss the material provided.”
- Likewise, we are all familiar with physicians that dump “all their records on the CPA just before tax filing is due.” (Please don’t be “that guy,” or if you are, please let us help you change so you will be better prepared next year, and you’ll no longer be “that guy.”)
- There are times that “Being too busy” is sometimes just a disguised excuse for procrastination, enhanced by fear.
In other words, physicians should respect the IRS, but not fear it.
The Red Flags that Might Earn You an IRS Audit 2020
It might help for physicians to know what some of the “red flags” that could lead to an IRS tax audit
Where did those dollars come from? Unreported Income, such as investments.
Small Business Blues
Do you own a small business other than your doctor’s practice? The IRS is especially sensitive to “sole proprietorship or an in-cash industry like coin-operated laundromats.”
Avoid that Flight: Be very careful to avoid “Reporting losses from businesses that the IRS classifies as hobbies.” For example “If you fly to interview for a new 1099 locums gig, that’s not a hobby expense.” It is clearly in the category of your business, perhaps, but not a hobby expense.
Don’t Take Too Much Credit: The IRS watches unique or odd amounts of deductions and credits. For example, if you claim that you gave half your income to charity last year, the IRS might notice you.
And by the way, the excessive home office deductions for your new mahogany-paneled home office will definitely wave a red flag. That might cause the IRS to invite you to IRS Audit!
We Help Doctors Take Their Due Deductions
We don’t mean to discourage you about the home office deduction. Of course, you deserve a reasonable one. As we have stated above some doctors who suffer from IRS audit phobia refuse to take good credits and deductions out of fear. Your Gavrilov tax squad knows the tax-code. We see far too many physicians lose out on good deductions. Just keep your documents so we can discover all your legal and above-board deductions.
More Red Flags You Do Not Want To Wave at the IRS
Below we list a few more items that can cause doctors to “earn” an IRS Audit.
- A Red Flag on Entertainment: Be aware that business entertainment expenses are no longer deductible, and most meals are now only 50 percent deductible.
- The Double Deduction Red Flag: It is important you deduct losses, of course. However you are not permitted to deduct losses that were already reimbursed by your insurance company.
Our Terrific Tax Take-Away about Physicians and IRS Audits 2020
But here’s the truth of the matter, doctors:
- It’s always appropriate to claim your honest, legitimate expenses.
- Your list might be long and that’s also appropriate.
- There are ranges for amounts of your itemized deductions, dependent on your income.
Fear Not the IRS Audit 2020 Scanning System
Now the IRS scanning system can flag deductions because they register as above normal for your area—or if they are unique. However, with the support of your tax accountant, if you are truthful, please don’t avoid deductions you should take. Keep scrupulous books and you will have valid documentation. Then an IRS audit 2020, in the unusual event that you got one, would be just an paper-chasing annoyance.
We hope you know that an audit won’t hurt you legally. In the words of Noah T. Kaufman, emergency physician and tax ninja, “Honest mistakes or even negligence aren’t likely to trigger a criminal investigation. This means the average American shouldn’t worry about being charged with criminal tax fraud or evasion.”
Medical Tax Specialists: IRS Audit 2020 or Not, We are at Your Service
We would be remiss if we did not invite doctors who read this to allow Gavrilov & Co to help you, not just at tax-time but year round. We can show you amazing deductions and credits.
And we believe in tax-planning so you can really see the big financial picture of your medical practice in light of your taxation, income and expenses. Many doctors have been surprised to see that tax-planning can save them money and set them free for more important things, like saving lives and spending time with family.