Bookkeeping for Chiropractors

Most small chiropractic practices use cash-basis accounting for tax purposes — recording income when payment is received and expenses when paid — because it simplifies the treatment of unpaid insurance claims. However, accrual accounting gives a more accurate picture of practice performance by matching revenue to the period services were delivered. Luisa can maintain your books on the method that best serves your management needs while ensuring your tax return uses the method most advantageous for your situation.

A contractual write-off is the planned reduction from your billed charge to the payer's contracted rate — you knew this would happen when you joined the insurance network and it is not income. A bad debt write-off is the amount you billed and expected to collect but ultimately could not — from an insurer who denied the claim without valid basis or from a patient who did not pay their balance. Under cash-basis accounting, bad debts are generally not deductible because you never reported the income; under accrual accounting, they can be.

No — professional chiropractic services are exempt from Florida sales tax as health services. However, retail sales of supplements, orthotic devices, exercise equipment, and other tangible personal property you sell directly to patients are taxable. If you sell products as part of a bundled treatment program, the taxable and exempt components must be separated or the entire bundle may become taxable. Luisa ensures your point-of-sale setup separates taxable and exempt revenue correctly.

A patient on a payment plan who owes a balance after insurance has processed should be recorded as an accounts receivable — money owed to the practice. Each payment received reduces that receivable. For cash-basis tax reporting, you recognize the income as payments are received. For management reporting, Luisa includes an aging accounts receivable report so you can see how much patient balances are outstanding and how long they have been waiting to be collected.

An S-corporation allows you to split your practice income between W-2 wages (subject to payroll taxes) and profit distributions (not subject to self-employment or payroll taxes). If your practice generates $200,000 in net profit and you pay yourself a reasonable salary of $100,000, the remaining $100,000 in distributions avoids the 15.3% self-employment tax — saving up to $15,300 annually. However, the IRS requires that the salary be genuinely reasonable for the services the owner-doctor performs, and underpaying yourself is a known audit trigger. Luisa works with your tax preparer to document a defensible compensation figure.