7 Mistakes New Speech Therapy Practices Make in Their First Year
Avoid costly tax errors in your first year of speech therapy practice. Learn the 7 common mistakes and how to fix them now.
Starting a speech therapy practice is exciting, but the first year brings a steep learning curve, especially around taxes. Many new owners make avoidable mistakes that cost them money, time, and stress. This guide outlines the seven most common tax mistakes new speech therapy practices make and gives you concrete steps to correct them this week.
Mistake 1: Choosing the Wrong Business Structure
Many new speech therapists start as sole proprietors without considering the tax implications. As a sole proprietor, you pay self-employment tax (15.3% in 2026) on all net income, plus income tax. An S-corporation can save you thousands by splitting your income into a reasonable salary (subject to payroll taxes) and distributions (not subject to self-employment tax).
What to do this week: If you expect to net more than $40,000 in your first year, consult a CPA to compare sole proprietorship vs. S-corp. The cost to form an S-corp ranges from $100 to $500 in filing fees, plus annual compliance costs of $300 to $800. The tax savings often outweigh these costs.
Mistake 2: Mixing Personal and Business Expenses
Using one bank account for personal and business expenses creates a bookkeeping nightmare and raises red flags with the IRS. You lose deductions, and if audited, you may have to justify every transaction.
What to do this week: Open a separate business checking account and credit card. Use them exclusively for practice expenses. This simple step makes tracking deductions easier and protects you in an audit.
Mistake 3: Ignoring Quarterly Estimated Taxes
As a self-employed owner, you must pay estimated taxes quarterly if you expect to owe more than $1,000. Missing these payments triggers penalties and interest. In 2026, the IRS penalty rate is 7% per year on underpayments.
What to do this week: Calculate your estimated tax using IRS Form 1040-ES. Pay 25% of your projected annual tax by April 15, June 15, September 15, and January 15. Use the Electronic Federal Tax Payment System (EFTPS) to schedule payments. If you are already behind, pay the missed amount immediately to minimize penalties.
Mistake 4: Overlooking Home Office Deduction
If you use a dedicated space in your home for administrative work, you can deduct it. The simplified method gives you $5 per square foot, up to 300 square feet, for a maximum deduction of $1,500. The regular method allows you to deduct a percentage of mortgage interest, rent, utilities, and insurance.
What to do this week: Measure your home office space. If it is used exclusively and regularly for business, claim the deduction. Keep a floor plan and photos as documentation. For most new practices, the simplified method is easier and sufficient.
Mistake 5: Failing to Track Mileage
Driving to see clients, buy supplies, or attend meetings is deductible. In 2026, the IRS standard mileage rate is 67 cents per mile. If you drive 5,000 miles for business, that is a $3,350 deduction.
What to do this week: Start a mileage log today. Use a dedicated app like MileIQ or a simple spreadsheet. Record the date, starting and ending odometer readings, destination, and purpose. Retroactive logging is not allowed, so begin immediately.
Mistake 6: Not Hiring a Tax Professional
Trying to do your own taxes can save money upfront but cost you in missed deductions and errors. A CPA who works with healthcare practices knows industry-specific deductions, such as continuing education, liability insurance, and equipment depreciation.
What to do this week: Interview two or three CPAs. Ask about their experience with speech therapy practices. Fees range from $500 to $1,500 for a basic return, but they often find enough deductions to pay for themselves. If you cannot afford a CPA, use reputable software like QuickBooks Self-Employed, but still consider a year-end review.
Mistake 7: Forgetting to Pay Yourself a Reasonable Salary
If you form an S-corp, you must pay yourself a reasonable salary for the work you do. The IRS requires this to prevent owners from avoiding payroll taxes. In 2026, the median speech-language pathologist salary is around $85,000, but for a new practice, $50,000 to $70,000 is reasonable.
What to do this week: If you have an S-corp, set a salary that reflects your duties. Run payroll through a service like Gusto or ADP, which costs $40 to $100 per month. Pay payroll taxes on time to avoid penalties.
FAQ
Q: Can I deduct startup costs for my speech therapy practice? A: Yes, you can deduct up to $5,000 in startup costs in your first year, with the remainder amortized over 180 months. Keep receipts for all pre-opening expenses.
Q: What if I miss a quarterly estimated tax payment? A: Pay it immediately. The IRS charges a penalty based on the amount and time overdue. Filing your annual return on time may reduce the penalty, but it is best to correct it as soon as possible.
Q: How long should I keep tax records? A: Keep all tax returns and supporting documents for at least three years, but for business assets, keep records for the life of the asset plus three years. In practice, seven years is safer.
Q: Can I deduct health insurance premiums? A: Yes, if you are self-employed and not eligible for an employer plan, you can deduct health, dental, and long-term care premiums for yourself, your spouse, and dependents. This deduction reduces your adjusted gross income.
The Bottom Line
Your first year as a speech therapy practice owner is full of learning, but tax mistakes can be costly. By avoiding these seven errors, you keep more of your hard-earned money and avoid IRS headaches. Take action this week: separate your finances, set up quarterly payments, and consult a professional. Your future self will thank you.