The Annual New Pt Practice Review Checklist
A practical checklist for new physical therapy practices to review taxes, finances, and compliance annually. Includes deadlines, deductions, and tips.
Running a new physical therapy practice means wearing many hats, and taxes are one area where small mistakes can cost you. This annual review checklist walks you through the key financial and tax tasks you need to complete each year, with realistic timelines and dollar figures. It is designed for PT practice owners who want to stay compliant, maximize deductions, and avoid surprises at tax time.
Why an Annual Review Matters
An annual review is not just about filing your tax return. It is a chance to check your business health, catch errors, and plan for the next year. For a new PT practice, this is especially important because early mistakes can compound. The checklist below covers tax filing, bookkeeping, deductions, payroll, and compliance. Set aside a few hours each year, ideally in January or February, to work through it.
1. Gather and Organize Financial Documents
Start by collecting all income and expense records for the year. This includes:
- Bank and credit card statements
- Receipts for equipment, supplies, and software
- Invoices and payment records (from patients and insurers)
- Payroll reports (if you have employees)
- Loan statements and interest paid
- Mileage logs for business travel
Use accounting software like QuickBooks or Xero to keep these organized. If you use a bookkeeper, review their work for accuracy. A common mistake is missing cash transactions or mixing personal and business expenses.
2. Reconcile All Accounts
Reconcile your bank and credit card accounts with your accounting records. This means matching every transaction. Discrepancies can indicate errors or even fraud. For a new practice, aim to reconcile monthly, but at minimum do a full year-end reconciliation. If you find differences, investigate and correct them before filing.
3. Review Your Business Structure and Election
Your business structure (sole proprietorship, LLC, S-corp, etc.) affects your taxes. Review whether your current structure is still optimal. For example, if you are an S-corp, you must pay yourself a reasonable salary. If you are a sole proprietor, you may want to consider an S-corp election to save on self-employment taxes, but weigh the costs of payroll and compliance. Consult a tax professional if you are unsure.
4. Maximize Deductions for PT Practices
Common deductions for physical therapy practices include:
- Equipment and supplies: Treatment tables, exercise equipment, resistance bands, and other supplies. Section 179 allows you to deduct the full purchase price of qualifying equipment (up to $1,160,000 for 2026) instead of depreciating it over time.
- Rent and utilities: If you lease your space, deduct rent and a portion of utilities.
- Professional fees: Malpractice insurance, licensing fees, and continuing education costs.
- Software and technology: Practice management software, billing software, and computers.
- Marketing: Website, ads, and patient acquisition costs.
- Vehicle expenses: Use the standard mileage rate (67 cents per mile in 2026) or actual expenses.
- Home office: If you have a dedicated home office, you can deduct a portion of your home expenses.
Keep receipts and document business purpose for each deduction.
5. Review Payroll and Employee Taxes
If you have employees, ensure you have been withholding and paying payroll taxes correctly. This includes federal income tax, Social Security, Medicare, and unemployment taxes. Use a payroll service like Gusto or ADP to handle this. At year-end, verify that W-2 forms are accurate and filed with the IRS. Also, check that you have filed Form 941 quarterly and paid any deposits on time.
6. Check Quarterly Estimated Tax Payments
If you are a sole proprietor, partner, or S-corp owner, you likely need to pay estimated taxes quarterly. Review your payments for the year. If you underpaid, you may owe penalties. For 2026, the safe harbor is to pay at least 100% of your previous year’s tax liability (110% if your adjusted gross income was over $150,000). Use Form 1040-ES to calculate. If you missed a payment, adjust your next payment to cover the shortfall.
7. File Your Annual Tax Returns
For most practices, the key filing deadlines are:
- March 15: S-corporations and partnerships (Form 1120-S or 1065)
- April 15: Sole proprietors and single-member LLCs (Schedule C with Form 1040), and C-corporations (Form 1120)
If you need more time, file Form 4868 for an automatic 6-month extension, but note that any tax due is still payable by the original deadline. For a new practice, it is wise to file early to avoid last-minute stress.
8. Review Retirement Plan Contributions
If you have a retirement plan like a SEP IRA or Solo 401(k), review your contributions. For 2026, the SEP IRA contribution limit is 25% of net earnings, up to $70,000. A Solo 401(k) allows employee deferrals up to $23,500 (plus $7,500 catch-up if over 50) and profit-sharing contributions. Making contributions before the tax filing deadline can reduce your taxable income.
9. Assess Sales Tax Obligations
Physical therapy services are generally not subject to sales tax, but if you sell retail items like braces or therapeutic products, you may need to collect and remit sales tax. Check your state’s rules. If you do collect, file sales tax returns as required (monthly, quarterly, or annually).
10. Plan for Next Year’s Taxes
Use this review to plan ahead. Set aside a percentage of each month’s income for taxes (commonly 25-30% for self-employed). Consider increasing your quarterly estimated payments if your income is growing. Also, schedule a meeting with your CPA or tax advisor to discuss strategies for the coming year.
FAQ
Q: What is the biggest tax mistake new PT practice owners make? A: Mixing personal and business expenses. This makes bookkeeping messy and can trigger audits. Keep separate bank accounts and credit cards for your practice.
Q: Can I deduct the cost of my PT equipment in one year? A: Yes, under Section 179, you can deduct the full purchase price of qualifying equipment in the year you place it in service, up to the limit. For 2026, the limit is $1,160,000.
Q: Do I need to file quarterly estimated taxes if I have an S-corp? A: Yes, if you expect to owe more than $1,000 in taxes, you should make estimated payments. As an S-corp owner, you pay yourself a salary (with payroll taxes) and also pay estimated taxes on your share of profits.
Q: What if I miss the filing deadline? A: File for an extension (Form 4868) to avoid late-filing penalties, but pay any tax due by the original deadline to avoid interest and penalties. If you miss the deadline without an extension, penalties can be 5% per month of unpaid tax.
The Bottom Line
An annual review is essential for a new PT practice. It ensures you are compliant, saves money through deductions, and sets you up for success. Use this checklist as a starting point, and consult a tax professional who understands small healthcare practices. By taking a few hours each year, you can avoid costly mistakes and keep your practice financially healthy.