Who Needs A CPA?

As a medical professional wrapping up the year, you’re probably wondering: “How do I get my taxes right this time? Should you try filing yourself? Rely on TurboTax? Or is it time to bring in a CPA? These aren’t just checkboxes; they’re choices that could save—or cost—you thousands. 

_{👉🏻 Looking for expert guidance? We’ve partnered with Bryan Martin, CPA at Taxstra, to provide tailored tax strategies for medical professionals.}

Let’s break down the situations where a CPA is truly worth the investment, and where they can help with more than just filing, especially for those navigating complex strategies like public service loan forgiveness, real estate, or self-employment.

When Should You Bring in a CPA?

1. Married and Pursuing Public Service Loan Forgiveness (PSLF)

For couples where one partner has substantial federal student loans, choosing the right tax filing status can have a huge impact on loan repayment costs. A CPA experienced with PSLF can help you decide between “Married Filing Jointly” and “Married Filing Separately,” making sure you minimize your monthly repayment amount.

Example: 

Imagine one spouse has $98,000 in student loans at an interest rate of 5.75%, while the other has none. Both partners are high earners. By switching from “Married Filing Jointly” to “Married Filing Separately” on the SAVE repayment plan, this couple could save tens of thousands of dollars on student loan repayment. A CPA can evaluate this scenario, considering how it impacts not just your taxes but your overall loan strategy.

2. Managing a Backdoor Roth IRA Conversion

If you’re contributing to a backdoor Roth IRA, especially if you’re making contributions at different times in the year, this process can get complex. Reporting a backdoor Roth IRA requires filing Form 8606 to indicate non-deductible contributions, and it’s easy to make mistakes if you’re handling contributions made under a separate year (between January 1st and tax day) with conversions on a different year.

Example: 

Let’s say you’re dollar-cost averaging your Roth IRA contributions from January to April for the previous tax year. This could result in a situation where your Form 8606 for non-deductible contributions is in a different filing year than the 1099-R that’s generated after the conversion. A CPA can help ensure everything is correctly reported, saving you from errors that could lead to tax penalties.

3. Earning 1099 Income and Running an S-Corporation

If the majority of your income is from 1099 sources, setting up an S Corporation (S Corp) can help you reduce self-employment taxes. However, running an S Corp comes with payroll requirements and tax filing rules that can get complicated.

Example: 

For a medical professional doing clinical work as an independent contractor, running income through an S-Corp can reduce your tax burden, but you’ll need a CPA to manage payroll, quarterly filings, and ensure compliance with tax laws. A good CPA can ensure you’re optimizing deductions while staying compliant, helping you make the most of this tax-saving structure.

4. Real Estate Investors Using Specific Tax Strategies

Real estate offers some of the most powerful tax benefits, but it also requires careful handling, especially for those using specific tax strategies. If you’re leveraging the short-term rental loophole (like Airbnb) or claiming real estate professional status, these tax strategies can raise audit risks if not managed correctly.

Example 1: 

Suppose you’re using the short-term rental loophole, allowing you to offset active income from medicine with real estate depreciation. This is a highly audited area, and a CPA familiar with real estate tax laws can help you document everything properly.

Example 2: 

If one partner in a marriage claims real estate professional status, allowing passive losses to offset active income, a CPA’s guidance is crucial. Even if you’re not using these specific strategies, a CPA can ensure you’re maximizing depreciation, capturing passive losses, and understanding how these benefits impact your tax return.

5. Business Owners and Side Hustlers

If you own a practice or have a side hustle that generates significant income, a CPA can help maximize deductions and ensure compliance with tax laws.

Example: 

Let’s say you’re earning $15,000 annually from a consulting side hustle. A CPA can guide you on deductions for expenses like home office, supplies, and travel that you may not realize you qualify for. This is especially valuable if you’re earning a substantial income from your side business and want to minimize your tax burden effectively.

Strategic Tax Planning: When It’s Worth the Investment

Beyond tax preparation, there’s strategic tax planning—a proactive service where a CPA helps you map out a year-round tax strategy. This is ideal if you have a high income, complex investments, or want to explore strategies like real estate and alternative asset classes to reduce your taxable income.

Let’s say you’re considering investing $100,000 in oil and gas to offset active income. A strategic tax planning session with a CPA can provide you insight on this style of investment with  maximum tax benefits.

For medical professionals, hiring a CPA isn’t just about avoiding paperwork—it’s about leveraging expertise to keep more of what you earn. If you’re managing situations like PSLF, real estate investments, or self-employment income, a CPA’s guidance can save you money and help you navigate complex tax regulations.

Who Doesn’t Need Strategic Tax Planning?

If you’re a straightforward W-2 earner with no side hustles, real estate, or alternative investments, paying for strategic tax planning might not bring you enough value to justify the cost. But for those with multiple income streams, business interests, or high net worth, a strategic tax planner can be an invaluable part of your financial team.

With the right tax strategies, you’re not only maximizing your deductions and minimizing taxes; you’re also setting yourself up for long-term financial growth.

If you need a CPA, we recommend Taxstra for their high value, reasonable prices, and extensive experience with medical professionals. Click here to learn more.

If you prefer watching over reading, I’ve covered the same strategies discussed in this blog in my YouTube video. It’s a straightforward breakdown of when hiring a CPA makes sense, and how tax strategies can help medical professionals save big. Watch it here: Medical Professionals: Do You Need A CPA?. 

Not sure saving on taxes matters? Here's a quick & dirty example of how you can use simultaneous moves that reduce tax burden and build wealth: