It’s tax season, which means private practice owners are likely googling how to file their taxes, what counts as a tax write-off, and wondering if they should hire accounting help. Today’s guest is Andrew Riesen. Andrew is a co-founder of Heard, an accounting and bookkeeping platform designed for private practice therapists. Prior to Heard, Andrew built a tax software startup for small businesses, worked as a financial accountant for PricewaterhouseCoopers, and spent time working at a wealth management firm.
This post and accompanying podcast are to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult their attorney, business advisor, or tax advisor with respect to matters referenced in this post and podcast.
Bookkeeping for therapists and private practice accounting
First things first when you do bookkeeping as a therapist: make sure your business and personal finances are separate. That means no comingling of personal spending with business expenses. Keep your business bank account and related credit cards separate from your personal ones.
Make sure you have a place and method of tracking what money is coming in and what money is going out in your business (aka income and expenses). This could be as simple as an excel sheet (if you are organized and have a good system), or it could mean using free or low-cost software that helps you categorize your transactions and stay on top of bookkeeping such as Wave or Quickbooks. “Reconciling” is matching transactions on your bank statement and should be done at least monthly as a way to stay on top of your bookkeeping.
And, of course, pay your taxes in full and on time. In the U.S., small businesses pay quarterly estimated taxes and file taxes annually. Here’s a quick glance at important tax deadlines for small business owners in the U.S.
Quarterly Tax Filing Deadlines:
Pay Period: January 1 - March 31 - Due Date: April 15th
Pay Period: April 1 - May 31 - Due Date: June 15th
Pay Period: June 1 - August 31 - Due Date: September 15th
Pay Period: September 1 - December 31 - Due Date: January 15th
Annual Tax Filing Deadlines:
S Corporations - Due Date: March 15th
Sole Proprietors - Due Date: April 15th
Bookkeeping for private practice therapists
How long should a person spend on bookkeeping? In general, bookkeeping should take about an hour each month. In this amount of time, a clinician can reconcile and categorize their expenses, decide if their current expenses are worth it, and plan for the next month's income. In deciding if it's time to hire someone for bookkeeping or accounting, think about how much you as a therapist could earn in an hour, let's say $175, and if it takes you more than an hour to do your bookkeeping and accounting, it may be time to hire someone. At the time of this post/podcast, Heard charges $75/month for bookkeeping, quarterly tax estimates, annual tax filing, and accounting, so you'll be better spending your time seeing a client and hiring someone to help with bookkeeping and accounting.
How much should I pay myself as a therapist?
How much a person should pay themself varies. As a private practice therapist, at minimum, make sure you're setting aside money for federal and state taxes, retirement, business expenses, and your salary. I'm a fan of paying yourself 1-2x a month every month, rather than taking money from your business here-and-there when you feel like it.
An "entity" for your business means how your business is structured and what your business is called. These are often LLC, PLLC, or S-Corps. A "reasonable salary" is something you need to consider when you file paperwork to become an S-Corp. A clinician might want to "upgrade" from being an LLC or PLLC when their business grows to a point where they can benefit financially. A "reasonable salary" is state-specific and dependent on a person's profession. When a business is an S-Corp, they pay themselves a "reasonable salary" (taxed money) and can take owner distributions from their business that are not taxed. Becoming an S-Corp requires some paperwork but may be worth it depending on your business’ earnings.
What's the difference between a bookkeeper and an accountant?
A bookkeeper manages a businesses' books; they are looking at a businesses' income and expenses and reconciling expenses. They can also generate profit and loss statements. An accountant takes the information from bookkeeping to help planning ahead for the health of a business. A tax accountant has a specialized, niche skillset that focuses on how tax laws impact a business.
Why would a clinician use a tax accountant vs a tax lawyer?
A tax accountant can help with anything related to quarterly estimates, annual tax filings, and helping out with setting up an LLC/PLLC or filing paperwork to become a different business entity. A tax lawyer can help with the paperwork and legalities of setting up a partnership, say moving from an individual practitioner to a group practice. A good tax accountant will also refer you to a tax lawyer if they feel outside of the scope of their practice.
Why use Heard?
I mentioned on the podcast that I connected with Andrew and learned of Heard through another therapist friend, Dr. Marie Fang. Prior to finding Heard, I'd been shopping around for a new accountant. Why? Because while my accountant was ok, I felt like I was getting penalized anytime I had a question. Transparency and competence are important to me, and with all the new information (I recently changed my status from LLC to S-Corp and was looking for help with new PPP guidelines) I found myself pinging my accountant more than usual. But those questions often came with fees. I'd get my question answered, then get an invoice. I didn't like that feeling. I called around to several other small accounting firms and got the same answer: we can help you. It'll be $300-400 a month, and then another $1,500-2,500 to file your annual taxes.
It made no sense to me that as a small business owner with a relatively straightforward business model, that I'd need to spend several thousand dollars on bookkeeping and taxes.
When I found Heard I was relieved. For $149 a month, I'd get a dedicated expert, bookkeeping help, profit and loss statements, access to a human who I could ask all my questions (and not get penalized), tax estimates, annual tax filings, I literally couldn't sign up fast enough.
Plus, they specifically work with private practice owners because they believe in the importance of mental health clinicians having sound businesses. Because I appreciate their service so much, I'm an affiliate for them. I wouldn't be an affiliate for anything I didn't absolutely love and use. If you are looking for tax and bookkeeping help, I strongly recommend at least booking a consultation call with them.
Here’s more about their Heard’s services and pricing:
Heard’s services are bundled into a single price point of $149 per month or $1,341 (25% discount for annual payments), and include the following offerings:
Accounting Services:
Heard accounting platform
Customized set-up, implementation and training
Import of income and expenses to QuickBooks
Ongoing bookkeeping and accounting support
Tax Services:
Tax estimates and salary recommendations (four times a year)
Business income tax returns (federal and states)
Year-round advice to maximize tax savings
Additional Services:
Advice to set up Retirement Plans (Solo 401k, 401k, Roth IRA)
Payroll setup & ongoing payroll support through Gusto
Entity formation services – PLLC or LLC + S-Corp registration
Reach out to Heard to get help with your private practice accounting today!
