If you have a medical practice that has been set up as a Professional Service Corporation (PSC), you’ll want to make sure you address the special tax obligations associated with this type of business as the year comes to an end. Any profit shown in a PSC will be taxed at 35 percent, so it is important to correctly estimate your profits for the year and determine how those profits might be distributed through bonuses, profit sharing, dividends, salaries, benefits or other purchases.
Since bonus calculations are most often defined by your contract, now is the time to determine each professional’s bonus in your practice. A year-end meeting might also be a good time to review current salaries and pay rates for your staff. Your fellow doctors may not know what all your staff members are paid, so you may wish to review these figures with them. Your Rea professional can suggest average cost of living increase figures that may be appropriate. You and your partners may wish to discuss to whom you may also consider giving merit increases.
You will have two considerations as you prepare to allocate funds for profit sharing. First, you must meet the minimum federal requirements of your plan. Second, the amount of profit realized by the company would dictate if any discretionary funds are available for profit sharing or bonuses.
Finally, you’ll also want to review any equipment you may have purchased during the year and how it will be depreciated, as well as any future purchases for the coming year and how you will finance them.
This article was originally published in Illuminations: Facts & Figures from people with a brighter way, a Rea & Associates enewsletter, Sept. 24, 2008 issue.
Note: This content is accurate as of the date published above and is subject to change. Please seek professional advice before acting on any matter contained in this article.