The Annual New Medical Practice Review Checklist

2026-08-21

A practical annual checklist for new medical practices to review finances, taxes, and compliance. Covers key deadlines, deductions, and steps to take now.

Running a new medical practice means wearing many hats, and taxes are one area where small mistakes can cost thousands. This annual review checklist helps you stay organized, catch missed deductions, and avoid penalties. Follow these steps each year to keep your practice financially healthy and compliant.

1. Review Your Business Structure and Entity Status

Your practice’s legal structure (LLC, S-corp, PC, etc.) affects your tax liability, self-employment taxes, and personal liability. At least once a year, confirm your structure still fits your situation.

Check if your structure is still optimal. For example, an S-corp can save on self-employment taxes but requires paying yourself a “reasonable salary.” A solo provider might benefit from an LLC taxed as a sole proprietorship.
Review your operating agreement and bylaws. Make sure they reflect any changes in ownership or roles.
Confirm you’ve filed any required annual reports with your state (fees range from $0 to $300 depending on state).

Action step: Schedule a 30-minute call with your CPA or tax advisor to review your structure. Do this before December 31 to make changes effective for the current tax year.

2. Reconcile Your Books and Financial Statements

Accurate books are the foundation of tax preparation. If your numbers are off, you’ll either overpay or risk an audit.

Reconcile bank and credit card accounts for every month of the year. Use accounting software like QuickBooks or Xero, or hire a bookkeeper (cost: $200-$500/month for a small practice).
Review your profit and loss statement (P&L). Compare it to last year to spot trends or anomalies.
Check your balance sheet for any unreconciled loans, owner draws, or missing liabilities.

Action step: If you haven’t reconciled in the last quarter, block out a half-day to do it now. If you use a bookkeeper, ask for a monthly reconciliation report.

3. Maximize Retirement Plan Contributions

Retirement plans are one of the best tax deductions for practice owners. The earlier you contribute, the more you save.

Solo 401(k): For a self-employed physician, you can contribute up to $70,000 in 2026 (employee deferral of $23,500 plus profit-sharing up to 25% of compensation).
SEP IRA: Contribution limit is 25% of net self-employment income, up to $70,000 for 2026. Easy to set up, but contributions must be made by your tax filing deadline (including extensions).
Defined Benefit Plan: For higher earners, this can allow contributions over $300,000, but setup costs are higher ($2,000-$5,000).

Action step: Calculate your maximum contribution for 2026 and set up automatic transfers to reach that limit before year-end. If you haven’t set up a plan yet, do it before December 31 to make contributions deductible for this year.

4. Identify and Document All Tax Deductions

New practices often miss deductions because they don’t track them throughout the year. Here’s a list of common deductions for medical practices:

Equipment and software: EHR systems, practice management software, computers, and medical devices. Section 179 allows you to deduct the full cost in the year of purchase (up to $1,220,000 for 2026).
Office rent and utilities: If you rent office space, deduct rent, electricity, internet, and phone. If you work from home, use the home office deduction (simplified rate is $5 per square foot, up to 300 sq ft).
Malpractice insurance: Premiums are fully deductible.
Continuing medical education (CME): Course fees, travel, lodging, and 50% of meals.
Marketing and advertising: Website costs, Google Ads, patient brochures.
Professional fees: Legal, accounting, and consulting fees.
Employee wages and benefits: Salaries, health insurance, and retirement contributions.

Action step: Create a folder (physical or digital) for all receipts and invoices. Go through your bank statements and credit card statements to identify any business expenses you haven’t recorded.

5. Review Your Payroll and Employment Taxes

If you have employees, payroll taxes are a major compliance area. Mistakes here can lead to severe penalties.

Verify that you’re paying payroll taxes on time. Federal deposits are due semi-weekly or monthly, depending on your total tax liability. Late deposits incur penalties from 2% to 15%.
Double-check employee classifications. Misclassifying employees as independent contractors can result in back taxes and penalties. The IRS uses a 20-factor test; when in doubt, consult a professional.
Review your payroll provider. If you use a service like ADP or Gusto, confirm they’re handling all filings correctly. Costs range from $50-$200/month plus per-employee fees.

Action step: Pull your payroll records for the year and compare them to your tax deposits. If you see discrepancies, contact your payroll provider or accountant immediately.

6. Prepare for Quarterly Estimated Taxes

As a practice owner, you’re responsible for paying estimated taxes quarterly. Missing these can result in underpayment penalties.

Calculate your estimated tax for the next quarter. Use your prior year’s tax return as a baseline, adjusted for any income changes.
Know the due dates: April 15, June 15, September 15, and January 15 (for the previous quarter). If a date falls on a weekend or holiday, the deadline moves to the next business day.
Use the IRS Form 1040-ES to calculate your payments. Your state may have its own form.

Action step: If you haven’t made your Q4 estimated payment yet, do it before January 15. Set reminders for all future due dates.

7. Check Your Compliance with State and Local Requirements

State and local taxes and regulations can be just as important as federal ones.

State income tax: If your state has an income tax, ensure you’re paying estimated state taxes as well.
Sales tax: If you sell products (e.g., supplements, medical devices), you may need to collect sales tax. Check your state’s rules.
Professional licenses: Renew your medical license and any other permits. Late renewal fees can be $100-$500.
Corporate filings: Many states require an annual report or franchise tax. Fees range from $25 to $500.

Action step: Make a list of all your licenses and their renewal dates. Set calendar reminders at least 60 days in advance.

8. Plan for Major Purchases and Investments

If you’re planning to buy new equipment or expand your practice, timing can affect your tax bill.

Section 179 and bonus depreciation allow you to deduct the full cost of qualifying equipment in the year of purchase. This can be a huge tax saver.
Consider the timing of purchases. If you expect higher income this year, buying equipment before December 31 can reduce your tax liability. If you expect lower income next year, you might delay the purchase.
Lease vs. buy: Leasing equipment may offer different tax benefits. Compare the total cost and tax impact.

Action step: If you’re considering a major purchase, run the numbers with your accountant to see which option gives you the best tax outcome.

9. Review Your Insurance Coverage

Insurance is both a business expense and a risk management tool. Review your policies annually to ensure you’re not overpaying or underinsured.

Malpractice insurance: Premiums vary by specialty and state. For example, an OB/GYN in New York might pay $200,000/year, while a family physician in a low-risk state might pay $15,000/year. Get quotes from multiple carriers.
Health insurance for employees: If you offer group health insurance, review the plan’s costs and coverage. You may be eligible for the small business health care tax credit (up to 50% of premiums) if you have fewer than 25 employees and average wages under $56,000.
Business owner’s policy (BOP): This bundles property and liability insurance. Costs range from $500-$2,000/year for a small practice.

Action step: Contact your insurance broker and ask for a policy review. Compare your current premiums with at least two other quotes.

10. Set Up a System for Next Year

The best way to make next year’s review easier is to have a system in place.

Use accounting software to track income and expenses in real time. Set aside time each week to categorize transactions.
Create a tax calendar with all deadlines: estimated tax payments, payroll filings, license renewals, and annual reports.
Work with a tax professional who specializes in medical practices. They can help you plan throughout the year, not just at tax time.

Action step: If you don’t have a tax calendar, create one now. Use a spreadsheet or a tool like Google Calendar to set reminders.

FAQ

1. What is the deadline for filing my practice’s tax return?

For most practices, the federal tax return (Form 1120-S for S-corps, Form 1065 for partnerships) is due March 15. Sole proprietorships and single-member LLCs use Schedule C and file by April 15. You can request a 6-month extension, but estimated payments are still due on time.

2. Can I deduct the cost of my medical license?

Yes, the cost of your medical license and renewal fees are deductible as business expenses. Keep the receipts.

3. How much should I set aside for taxes each month?

A common rule of thumb is to set aside 25-35% of your net income for federal and state taxes, depending on your bracket and state. For example, if your practice nets $150,000, set aside $37,500-$52,500. Your accountant can give a more precise estimate.

4. What happens if I miss an estimated tax payment?

You’ll owe interest and possibly a penalty. The penalty is calculated based on the amount you underpaid and the time it was outstanding. To avoid this, make all four payments on time, even if you have to estimate.

The bottom line

An annual review of your medical practice’s finances and taxes is not optional; it’s essential for survival. By following this checklist, you’ll catch errors, save money, and reduce stress. Start with the action steps above, and if you’re overwhelmed, hire a professional. The cost of a CPA or enrolled agent (typically $500-$2,000 for a small practice) is far less than the cost of an audit or missed deductions. Set a recurring calendar reminder for next year, and you’ll build a habit that pays off every year.