The Annual New Therapy Practice Review Checklist

Running a therapy practice means wearing many hats, and taxes are one of the least glamorous but most critical. If you opened your doors in the last 12 months, your first annual review is your chance to catch mistakes, save money, and avoid IRS headaches. This checklist walks you through the essential financial and tax tasks for your new practice, with concrete steps you can take this week.

1. Reconcile Your Books

Before you can file taxes, your records must match your bank statements. This is the foundation of everything else.

• Pull all bank and credit card statements for the year. Compare every transaction against your accounting software (QuickBooks, Xero, or a spreadsheet).
• Categorize every expense correctly. Common therapy practice categories include: rent, utilities, malpractice insurance, continuing education, software subscriptions, marketing, office supplies, and professional fees.
• Flag any personal expenses mixed with business ones. You cannot deduct personal items, so separate them now.
• Reconcile monthly, not yearly, if you can. If you are behind, start with the most recent month and work backward.

Cost: If you use an accountant or bookkeeper, expect $150-$400 per month for ongoing bookkeeping, or $500-$1,500 for a one-time cleanup.

2. Review Your Business Structure

Your entity type affects your tax bill and liability. If you started as a sole proprietor, you may want to consider an S-corp or LLC for future savings, but changing now may not be worth it.

• Sole proprietorship: Simplest, but you pay self-employment tax on all net income (15.3% in 2026).
• Single-member LLC: Same tax treatment as sole prop, but adds liability protection.
• S-corp: You pay yourself a reasonable salary (subject to payroll taxes) and take the rest as distributions, which avoids self-employment tax on that portion. Setup and payroll costs run $800-$2,000 initially, plus $100-$300 per month for payroll processing.

Action: If you are profitable and expect to stay so, talk to a CPA about whether an S-corp election makes sense for 2027. The deadline to file Form 2553 for the current tax year is March 15, 2026, so you have time.

3. Check Your Estimated Tax Payments

As a self-employed therapist, you must pay taxes quarterly. If you underpaid, you may face penalties.

• Review your 2025 payments (if you made any). Compare them to your actual income.
• Calculate your 2026 liability using Form 1040-ES. Use your profit from the year, minus deductions.
• If you missed a payment, pay the remaining amount as soon as possible to minimize penalties. The IRS charges about 0.5% per month on the unpaid balance.

Typical quarterly payment for a new therapy practice: $1,000-$5,000 per quarter, depending on income. If you are unsure, use the safe harbor rule: pay at least 100% of last year’s tax (or 110% if your adjusted gross income was over $150,000).

4. Maximize Deductions for Your Practice

New practices often miss deductions. Here are the most common ones for therapists:

• Home office deduction: If you use a dedicated space exclusively for work, you can deduct $5 per square foot (up to 300 sq ft) using the simplified method, or actual expenses. For a 150 sq ft office, that is $750.
• Continuing education: Courses, workshops, and books directly related to your license are deductible. Keep receipts.
• Professional liability insurance: Premiums are fully deductible.
• Software and subscriptions: EHR systems, telehealth platforms, scheduling tools, and practice management software are deductible. Average $50-$200 per month.
• Marketing: Website costs, Google ads, business cards, and networking lunches (50% of meals) are deductible.
• Health insurance premiums: If you are self-employed, you may deduct premiums for yourself and your family, subject to limits.

Action: List every expense you had this year and check it against IRS Publication 535. If you are missing receipts, request duplicates from vendors.

5. Verify Your 1099 and W-2 Forms

If you hired contractors or employees, you must issue forms by January 31, 2026.

• 1099-NEC: For independent contractors (e.g., a part-time billing specialist) paid $600 or more. You can e-file for free through the IRS.
• W-2: For employees. You must also file W-3 with the Social Security Administration.
• If you received 1099s from insurance panels or payment processors, make sure they match your records. Discrepancies trigger IRS letters.

Cost: If you use a payroll service, expect $50-$150 per month. For 1099s only, you can use free e-filing services.

6. Plan for Retirement Contributions

Retirement plans reduce your taxable income now and build your future. As a new practice, you have options:

• SEP IRA: Contribute up to 25% of net earnings, max $69,000 in 2026. Easy to set up, no annual filing.
• Solo 401(k): Higher contribution limits (up to $69,000 plus catch-up), but requires more paperwork.
• Traditional or Roth IRA: $7,000 limit (or $8,000 if over 50). Simpler but lower limits.

Action: You can open a SEP IRA and contribute until your tax filing deadline (April 15, 2026, or October 15 if you file an extension). Even a $5,000 contribution saves you $1,100-$1,500 in federal taxes, depending on your bracket.

7. Review Your Tax Deadlines

Missing deadlines costs money. Here is the 2026 schedule for most practices:

Deadline	What’s Due
Jan 15, 2026	Q4 2025 estimated tax payment
Jan 31, 2026	Send W-2s and 1099s
Mar 15, 2026	S-corp election (Form 2553) for 2026
Apr 15, 2026	File 2025 tax return or extension
Apr 15, 2026	Q1 2026 estimated tax payment
Jun 15, 2026	Q2 2026 estimated tax payment
Sep 15, 2026	Q3 2026 estimated tax payment
Oct 15, 2026	Final deadline for extended 2025 return
Jan 15, 2027	Q4 2026 estimated tax payment

Action: Put these dates in your calendar today. Set reminders two weeks before each.

8. Consult a Professional

Tax laws change, and a CPA who works with small practices can save you more than their fee. Look for someone with experience in healthcare or self-employment.

• What to ask: “What deductions do you see I’m missing?” “Should I change my entity structure?” “What’s my break-even for an S-corp?”
• Typical fees: $300-$800 for a simple return, $1,000-$2,500 for a more complex practice with employees or an S-corp.

Action: Book a consultation before December 31, 2025, so you can make any year-end moves (like buying equipment or prepaying expenses) that reduce this year’s tax.

FAQ

Q: Do I need to file taxes if my practice lost money this year? A: Yes. You should file to report the loss, which can offset other income or carry forward to future years. A loss may also reduce your self-employment tax.

Q: Can I deduct my therapy license renewal fees? A: Yes, license renewal fees are a deductible business expense. Keep the receipt and note the date.

Q: What if I forgot to make estimated tax payments? A: Pay as much as you can now. The IRS will charge a penalty based on how much you underpaid and for how long. Filing on time reduces additional penalties.

Q: Should I use the simplified home office deduction? A: For most new practices, yes. It’s less paperwork and still gives a solid deduction. If your office is large or your utility costs are high, the actual expense method may yield more, but it requires detailed records.

Related guides

• The Complete New Therapy Practice Startup Checklist
• 7 Mistakes New Therapy Practices Make in Their First Year
• 7 Questions to Ask Before Buying a New Therapy Practice

The bottom line

Your first year in practice is a learning curve, but taxes don’t have to be a nightmare. Reconcile your books, review your structure, make estimated payments, and claim every deduction you’re entitled to. Use this checklist now, before year-end, to save money and avoid penalties. If you’re overwhelmed, hire a professional; the cost is worth the peace of mind. Start with the first step today: pull your bank statements and compare them to your records. Future you will thank you.