PRN: Thoughts on Taxes

Physician's Money Digest, March31 2005, Volume 12, Issue 6

Okay, I'll admit it: My favorite thingto do isn't taxes, or, to be morespecific, organizing last year's data formy certified public accountant (CPA).Years ago, I used to do the whole thingmyself, figuring that this would minimizeany added expense involved inhiring an expert and keep me abreastof what I needed to know for planningand record-keeping purposes.

Complex Filing

But as your professional and personalaffairs become more complicated, therecomes a point where you realize thatdoing taxes on your own is costing youmore than you're saving. In my case, whatpushed me into the arms of a professionalwere depreciation schedules. If you buyequipment or property for professionalpurposes and you want a little economicforgiveness from Uncle Sam, depreciationschedules are the deep, dark, ever-changingplace you need to go to.

I've since then also learned aboutthe alternative minimum tax, which hasbrought, or soon will bring, joy to manytaxpayers. Add in Congress'annualpenchant to tinker with the 54,000-page tax code and the possibility ofkeeping up with tax law becomesdaunting. So, we go to CPAs.

While we are trying to manage taxcode complexities with a CPA to savemoney, keep in mind that when youinvolve another person, you're also gettinganother set of attitudes, expenses,and just one more interface to dealwith before you're through your annualtest. I've been through several CPAsover the years because this one waspoor at returning calls, that one couldnot do anything in a timely manner, theother one really didn't add any value,etc. It's tough to find a top professionalin any field, especially one who has asimilar sensibility to your own. So, youreview your CPA annually, just as youwould any vendor, and keep an eyeopen for new prospects. This year, inertiarules the roost and I have too manythings on my plate to add another task.

Bookkeeping Perspective

How can we think about this annualfrenzy of amateur bookkeeping? Is it likea term paper with a proper sense ofpride upon completion? Or how about atask that could pay you more per hourthan practicing medicine? That's it. Let'sthink about this pile of canceled checks,receipts, etc, as a treasure map that, iffollowed correctly, will lead us to newfounddeductions, money in the bank.

Perhaps it will lead us to the HolyGrail of income taxes, a small refund.Why small? Well, it means you plannedyour withholding properly so that theIRS didn't hold on to too much of yourmoney without paying you interest thisyear. On the flipside, unless you made abundle on the amount that you heldback, you don't want the dubious pleasureof writing another check to theIRS. In any event, enjoy the process.Rumor has it that we'll get to gothrough this again next year.

a practicing

physician who is a partner on

the Stanford University Graduate

School of Business Alumni Consulting

Team, teaches in the Stanford

School of Medicine Family

Practice Program. He welcomes questions or

comments at

Jeff Brown, MD, CPE,