by

What Every Physician Should Know About Taxes

Are you treating taxes like an annual chore instead of a long-term strategy?

Taxes are one of the biggest ongoing expenses physicians face, yet most doctors receive little to no formal education on how to manage them strategically.

In this episode, Daniel Wrenne sits down with Logan Foltz, founder of TaxSmart MD and a former practicing psychiatrist, to talk about what physicians should really understand about tax planning, tax preparation, and how to avoid costly surprises.

Listen in to learn why so many doctors feel frustrated with their accountants, the difference between tax preparation and tax planning, and what to look for when hiring a tax professional.

—————————————————————————————————————————

Transform your financial outlook today! Access our exclusive free resources for physicians and conquer financial stress. Access here. P.S. We value your opinion! Share your thoughts and insights with us. Your feedback helps us improve and tailor our content to your needs. Click here to give us a piece of your mind.

Links

 

Full Episode Transcript:

Logan Foltz: It is a lot easier if you work with someone who prepares your tax or does tax planning with you because then there should be no big surprises on the tax return. There shouldn’t be as many questions. It shouldn’t be very much confusion because really you’re just implementing the strategies you talked about all year, and you know what to expect. And it’s just a simple matter of documenting everything in the tax return. And it tends to be pretty smooth and efficient.

Welcome to Finance for Physicians, the show where we help physicians like you use money as a tool to live a great life. I’m your host, Daniel Wrenne, and I’ve spent the last decade advising physicians on their personal finances with the mission to help them understand that taking control of their finances now means creating a future where they can practice medicine where, when, and how long they want to.

Daniel Wrenne: Hey, everyone. I got Logan Foltz joining me today. Logan, thanks for coming on.

Logan Foltz: Yeah, thanks so much for having me, Daniel.

Daniel Wrenne: Yeah. So Logan, you guys will find out, has a fairly interesting career progression. I know you started in psychiatry, and we were just catching up on that.

Have now transitioned completely out of practicing medicine and you’ve recently made this I would call pretty big career shift into helping other physicians with tax planning. And so in my opinion, I would call that like a major career transition and a very unique career path.

But we’re gonna dig into that today. And then we’re also gonna talk about some of the services and unique benefits Logan is helping provide today in his practice, now helping physicians. So you went through residency, did you do a fellowship? Just residency?

Logan Foltz: Yeah, I just did the four year residency and then I transitioned straight to being attending.

Daniel Wrenne: Okay. So what made you go into psychiatry in the first place, or even medicine?

Logan Foltz: Yeah, that’s a great question. What I wish I had done in hindsight was find mentors, understand the importance of finding a work environment and workflow that fits your personality.

But instead, what I did is I picked the subjects I liked most in high school and college. Tried to see it was a good fit for my intellectual strengths. And then selected a career that I thought would provide security, stability, and would also help me become financially independent fairly quickly because I wanted to live life in my own terms.

I never really thought I would have a passion for working and in talking to my family, talking to other relatives, talking to my friend’s parents, it seemed like the three main paths were business, law, and medicine. And I like science classes. I like math. I admire doctors, so I just said, “Well, I’ll pick that.”

And yeah, and that’s how it happened. And it’s mind boggling in hindsight, but I never really questioned all as I was following that trajectory, is that really what is going to provide the long-term fulfillment and satisfaction?

It was just more let’s get from point A to point B and get to the end of the journey.

Daniel Wrenne: Yeah. You’d mentioned you didn’t really think you could have a passion in a career. I think, I would say I would echo that thought. And I probably actually had a very similar mindset of a career when I was transitioning out of school and into a career

What was unique about, “Oh, I ended up in finance at the very beginning and I think medicine is a little bit or maybe a lot harder to shift around.”

Logan Foltz: Yeah there’s not that much flexibility. Once you finish your training, you’re in one lane and if you’re in certain specialties, there’s different clinical and nonclinical options you can follow.

But you can’t go from being a psychiatrist to a dermatologist, as some clinicians can.

Daniel Wrenne: Yeah. So you kinda have, I could see where it’d be like, “Okay, let’s do this.” I feel like as soon as I get my first student loan payment, I’d be like, “Okay it’s go time.”

We’re off to the races.

Logan Foltz: Yeah.

Daniel Wrenne: But it sounds like it’s worked out well in that you were able to provide, gain some financial independence, and so now you’ve done this transition. Did you just all of a sudden say, “ like taxes,” or was there a slow progression into like you having interest in taxes?

Logan Foltz: Yeah, that wasn’t a hard turn. It was more like a slow winding shift in the steering wheel. But I went into psychiatry really ’cause I thought I had the best income and work-life balance, and also the day-to-day was—I enjoyed the day-to-day, at least at first. It was interesting.

But after practicing for about 10 years, I was following all the fundamental principles you need to accrue wealth, to become financially independent. I was maxing out my 401(k), my 457(b), my HSA, all those things you try to check off when you’re working.

Daniel Wrenne: Yeah.

Logan Foltz: When you’re working with doctors initially, and as you remember, the stock market was just going gangbusters after the great recession in 2008. So I was hoping I could retire by 50, but I’ve also always been naturally frugal.

I just had a much higher savings-to-spending ratio, and so eventually I realized I don’t really need to work for money like I thought I would. And then question becomes what’s next? And is it retire early?

And what does that look like? And that was kinda what I assumed it would be when I was maybe 25, when I was working 80 hours a week, doing those ICU rotations and just wanting to—at the time it just seemed really appealing to just getting an RV and just travel all the national parks and do what people do when they go on the FIRE train.

But I tried stepping away from work. And as you can relate, and as what you’ve probably heard from other clients is there was a lot that was missing. It’s you gained a lot, you lose a lot of stress. You get a lot of free time.

But like I was saying earlier, the question of what provides meaning and purpose isn’t something you typically think about in your early twenties, and that was something that I didn’t appreciate as much once I stepped away. So to answer your question about exactly what I did, in 2019, I hit my five-year mark at my at my W2 job, and I became vested in their defined benefit plan.

That was the point where I just wanted to get to before I just evaluated where I considered doing something else.

And then I tried to negotiate, but they drew a hard line on that and wouldn’t really make any concessions. So then I just stepped away and then for about five months I just did my own thing and I was getting bored.

But what really motivated me to start looking for other kinds of work was COVID happened, and then there wasn’t anything to do. So I knew I really needed to work, then I needed something. And so I went to Locums for a while. But then I also started doing education in financial planning and taxes.

Because that had always interested me. I’d been a financial hobbyist for the last 10 years. I love teaching people about it. I liked that more than talking about psychotropic drugs or talking about the psychopathologies and things.

So I liked doing that, and so I just decided just to see what, just to start on that journey and just take it one step at a time and seeing where that would go and, I can kinda elaborate what happened the last five years, how I got to this point. But basically I started learning and then started looking for work and got experience in this whole other field of these other professional fields.

Daniel Wrenne: So you were doing some education for other physicians back then? Is that what…?

Logan Foltz: Yeah, it was pretty informal. It was just talking to colleagues on the wards and in the lounge, and also interfacing online with people. I didn’t have a coaching business and I wasn’t an online presence at that point, but I still tried to do as much as I could just with my social network.

Daniel Wrenne: And so you realized you enjoyed that more than you did your practice in medicine?

Logan Foltz: Yeah. Yeah. And then I just started talking to other CFPs, and I thought the work was interesting and I thought it would be rewarding, just helping people achieve the same things I had and not be tethered to working for hospital administration and just gaining control of their time.

That really inspired me.

Daniel Wrenne: Yeah. It’s interesting how, yeah, I think as you progress in life, you are probably more likely to think about, like you mentioned, the purpose and meaning and passion and all that stuff, but then also as you get closer to having some financial independence that typically also helps you to think a little bit more.

Unfortunately, especially when we’re young and broke, we gotta think about the financial implications of a lot of things. But as you gain more financial independence, you can kinda like park that on the side and be like, what’s really most important is it independent of all of the income.

But as a tax professional though, you can, I would say, earn a very good income, even potentially one pace with a physician’s income. But maybe before we get into the specifics, I was just really curious, have you noticed any similarities between being a psychiatrist and being a tax professional?

Logan Foltz: That’s a very interesting question. It’s a great one. I haven’t formulated an answer for in my mind, but I think that the behavioral aspects of money and finance really influences people’s behavior. You just see that there’s a wide gamut of what I think of as money scripts, just how people think about money and how they how they manage it, how they decide to spend it, how they decide to save it, and just how aware of their financial health they are. So some clients, and this was always myself, and this is just what I project on other people, I’m always hands-on.

I want to know as much as possible. I like dealing with numbers. I like to make decisions and plan around it. But other people are money avoiders and they use money as a way to relieve their stress or cope with or cope with anxiety.

So I have had to learn how to work with clients of different styles, and just try to understand how to connect with them, understand their goals and priorities more. And the other thing I would say is that there’s a wide spectrum of values, and what people see as the purpose of money and in my financial education, as I summarized earlier, it was mainly to get a good return on investment, to grow your net worth. But that’s not how I think a majority of people see money. I think you teach your clients, too, that money is a tool, to live your great life.

And it’s helpful to understand just what people think their great lives are when when they make certain decisions about how to either invest or spend their money. And as a tax official, I don’t get into that as much as you do with your clients. I don’t talk as much about the big picture, but I do try to understand my clients better to help them decide whether, for instance, they want to make a cash balance, plan contribution, or reinvest in their business, or set money aside for a second home.

So that comes up too. And it’s really helpful to collaborate with planners too when you’re trying to help clients decide what decisions they want to make.

Daniel Wrenne: Did that kind of stuff come up in psychiatry?

Logan Foltz: I was an in-patient psychiatrist.

So it wasn’t the topic of most of my interviews and encounters with patients. At least it wasn’t talked about openly with patients.

Daniel Wrenne: Yeah.

Logan Foltz: It’s hard, it’s hard for me to like recall a specific patient encounter or case, but you do observe over time what’s important to people and try to understand why they make decisions that seem irrational to you.

And then it’s helpful to understand why it’s rational to them and use that framework to—you can do motivational interviewing with patients and sometimes you can even do it in the setting of working with tax clients or financial clients.

So it is just helpful to understand what’s important and get them to—and if you want to challenge them, get them to understand themselves better and what their different options are just when you first understand just how the framework they use to make their decisions.

Daniel Wrenne: Yeah. People a lot of times don’t think about the underlying, or they just roll with their decisions or actions or whatever. And so it’s like almost like autopilot, not quite, but like close to just rolling with the flow. And I think the flow, and in the case we’re talking about, I think ends up just being like, you do what the people around you do or like keeping up with the Joneses.

Or from a financial standpoint, you end up with the same car as your average friends or whatever and that’s like just the natural pool of things, but what you talked about with you can take a minute to yourself or through another professional, peel back the layers on what’s most important, and then look at the behavioral tendencies that you have as a human and then maybe even the unique ones you have as like the unique person that you are.

That’s like the key to really start to understand what’s the ultimate direction for you? But most people don’t get there ever even.

Logan Foltz: Yeah. Most of us like to hang out with people that are similar to ourselves, and I think that one of the greatest personal benefits of practicing in psychiatry was just opening up a much wider window of human experience and developing empathy for people. Because at least when I went into medical school and residency, as I alluded to earlier, I assume that most people, by default, thought long term that they were thinking about retirement, but understandably, a lot of people are just living paycheck to paycheck.

Especially when I was working with patients who are homeless or who—

Daniel Wrenne: That’s day by day, like…

Logan Foltz: —who’ve been through trauma, it’s more about survival. And I don’t work with clients that are quite that way, but for understandable reasons, some people are thinking short-term.

Some people are overwhelmed by life and overwhelmed with stress, and they’re just trying to get through the week. They’ve got family stress, they have demanding jobs, and they might have just other stressors too, or personal problems, and so money’s not always the most important thing, but you just you but I view my goal in helping those clients is just to help them decide, or just help them talk about their taxes and help to save them at least for more stress if they’re not in a great situation, at least try to, if they view money and taxes is a stressful, just try to make it less stressful.

Daniel Wrenne: I think most people view it as stressful, especially people that are gonna pay somebody else or consider paying somebody else. There’s the DIY types that are out there, but I think the average person out there looks at the tax code and they’re like, “This is overwhelming and quite stressful, and I don’t wanna mess it up.”

So you started TaxSmart. TaxSmart MD is your practice, right?

Logan Foltz: Correct. Yeah.

Daniel Wrenne: In 2024 or 2025, correct?

Logan Foltz: Yes, I have been in practice on my own since for about eight months now. Before that, I was working with another firm.

Daniel Wrenne: So you’ve been doing the tax preparation or tax planning professionally for several years, but then you went out, and you officially started your own firm, which is called TaxSmart MD in 2025, 8 months ago.

Logan Foltz: Yeah, that’s right. And I mentioned earlier that I thought about going into financial planning, which I decided to do something with a narrower scope. That’s why I have a tax practice. But I still enjoy the planning and find it more rewarding and valuable to clients.

But I do the preparation too. I try to service my client’s needs, and usually they want help with that too. And the person best positioned to do the tax preparation is the person who is advising clients and planning and who knows them best.

So I try to be just an all encompassing resource for taxes for my clients.

AD BREAK

Daniel Wrenne: Let’s take a quick break to talk about our firm, Wrenne Financial Planning.

The goal of our podcast is to empower you to make better financial decisions, but sometimes the best financial decision you can make is to work with someone who understands your financial goals and has the expertise to keep you on track to reach them. That’s where Wrenne Financial Planning comes in. We are a full-service financial planning firm that works with over 400 physicians and their families across the country.

We charge a transparent monthly flat fee for our services and offer virtual meetings you can take from anywhere. Best of all, you’ll get to work with a team that specializes in working with physician families. So whether you’re starting out and wondering how you’ll balance your student loan payments and saving for a home, or you are established physician trying to figure out how to pay for your kids’ college and how much you need to save to reach financial freedom, we can help.

I’ll put a link in the show notes to schedule a no-obligation meeting with one of our certified financial planners. Wrenne Financial Planning, LLC is a registered investment advisor. For more information about our firm, please visit wrennefinancial.com. That’s W-R-E-N-N-E financial.com.

AD BREAK END

Daniel Wrenne: Yeah, so we were talking about it before we started recording, like how do people ideally find a tax professional? I’m curious, how do people typically find you? And then maybe we can transition into ideally how people listening would find a good tax professional.

Logan Foltz: Yeah, I think that if it’s a referral from someone you know, you’re most likely to get the most accurate impression

And you can probably have the most confidence going in if it’s from a trusted friend, family, or other professional. So where I’ve gotten most of my referrals is from my colleagues I formally worked with. I worked at a practice with a tax firm and some clients are just not good fits for them, but are good fits for me.

And I tend to prefer working with self-employed physicians and business owners. And so some other planners there, they have clients who need an accountant and either they’re at capacity or they’re just looking for someone else.

So I’ve gotten most of my referrals from colleagues, from advisors, just other folks, my network. And some clients have come to me just because they’ve been referred by other clients. And so if you know someone who has a good tax professional, then that’s a good place to start.

Or you can ask your financial planner who they recommend for you, because most likely if you have a financial planner, they have a network and they know what niche their clients are, what niche their tax professionals in their network works with.

And they know what clients do best with certain kinds of with certain kinds of people. For instance, I’m someone who likes to educate. I like to be hands-on. I like to meet with clients. I like to have them engaged. And some clients really enjoy that.

Some clients really just want to send their documents and just offload and delegate everything. And so there’s law firms that do that service and do it as well as you can. And so that’s a good place to start is just by asking your professional resources and also just asking people that are similar to you in your social network.

Daniel Wrenne: Yeah. And like you were mentioning a lot of different flavors of I say tax professionals, probably a broad word. I think there’s some misconceptions about what tax professional actually does.

In my experience, when you talk about like a CPA or an accountant, just the average one down the street or something, the primary services they’re providing are tax preparation. Sometimes that’s all that they’re providing, but maybe there’s some additional like tax form-related help or follow-up, like tax preparation and questions related to the tax return, we’ll say.

And I think the average consumer goes to a tax person, and they’re expecting like proactive tax strategy, and very accessible, proactive tax strategy, we’ll say. And so I’ve noticed that—at least with the physicians we work with—there’s a pretty common disconnect with like average expectations of especially early career physician and then what you typically see on Main Street with what an accountant’s providing.

But I’m curious of your thoughts on that.

Logan Foltz: Yeah, I think there’s a lot of validity to that. So where there is the most demand, the most volume, and the most need for taxes is of course the preparation filing just with the public at large. There are hundreds of millions of people that need a tax repair, and they either don’t want to do it themselves or they don’t know how to do parts of it themselves.

And so they need someone to work with. And so there’s a tremendous amount of volume. The industry is I guess plagued by a deficiency of competence and experience with because it’s an older profession, the CPA profession I mean, and so the demand is only growing. A lot of firms are very much overwhelmed and you were telling me before to call a lot of doctors you work with, they find accountants who are swamped, and they just have a hard time saying no.

And the service doesn’t meet their expectations, and if they’re expecting planning, if the firms are just overwhelmed, if they have a high client census, then it just may not be feasible for them.

So I think that’s important to be clear about going in. Now there’s a wide variety of titles and practice styles. The one people think of first is CPA and they’re obviously strong with accounting and and they can do very good tax preparation, especially if they have experience with it.

But there’s a whole range of other credentials that taxpayers can have. The one that’s also well recognized is the Enrolled Agent, which is the designation I have. But if you weren’t the Enrolled Agent, you can be certain that they know enough about taxes to pass a fairly rigorous set of exams.

It’s not like USMLE, but it does take a lot of studying and someone who you know isn’t reasonably intelligent probably won’t pass those exams.

Daniel Wrenne: And it’s very focused on income tax or the tax return as opposed to the CPA is, like you were saying, much more broad around like accounting. Like you’re gonna learn how to do corporate accounting or whatever, like debits and credits and all those things.

Logan Foltz: Yeah, and I don’t know as much about the CPA training, but I know that they learned about audits and about accounting. But CPAs, they’re perfectly capable of learning everything that the enrolled agent curriculum teaches also.

But enrolled agents, they take tests for individual tax preparation, individual income tax. There’s a module that’s probably the most difficult one for businesses, S corporations, partnerships, C corporations, those things. So at least that they’ve learned about it before. And then they also take a course in representation, so they are admitted to practice and represent clients before the IRS.

So that’s a pretty strong credential. I know I’m biased, but I think it means something. There are other tax professionals that get other credentials. They might have a Master’s in tax or certified tax coach, which are not as widely recognized.

So that’s what I have to say about that. And also about the practice style. I’ve talked to some folks in my professional network who just do tax planning and tax mitigation. And really, I think generally to benefit from working with a tax or tax mitigation specialist, you need to have a certain profile.

It’s probably not worth it unless you’re wealthy and have a lot of money that you don’t need to spend, that you can set aside for some other purpose. Tax charges, I think also can help you avoid estate tax. They know about the more complex estate planning strategies, and also if you have a really strong income and you’re self-employed, they may be able to suggest some advanced strategies and help refer you to folks know how to implement them.

Sometimes that might be an attorney that can create an that create a legal document to help you achieve that. So some people just specialize in that and they don’t do any preparation. Those are both ends of the spectrum.

I’m somewhere in between. Most of my clients are not, honestly they’re Henry’s, they have a high income, but they’re not rich. They’re still working on their first million of net worth. And so really what’s on the table for them is the more standard tax strategies, learning how to take business deductions, learning how to deduct retirement account contributions.

Learning how to optimize your tax bracket and qualify for deductions that phase out certain incomes. That’s what I talk about a lot. So I try to offer hands-on planning as much as it helps my clients, their situation. But there’s only so many things you can do depending on how you earn income, how much income you have, and just how much cash you’re able to save and use for flexible purposes.

So that’s kinda a long meandering answer to your question, but there’s a whole range, I think, on that spectrum.

Daniel Wrenne: Yeah, that’s what I’ve experienced as well, is that the strategy, the complicated tax strategy, you gotta have a certain level of wealth and complexity. Otherwise, it’s not worthwhile.

But everybody has a little bit of tax strategy in play. It is just not complicated, like you said, more standard tax strategies.

Logan Foltz: The way I like to say it is I don’t have a patent on any tax deductions or strategies that no one else is using or that the IRS is not aware of.

I don’t think there’s any magic. I think it’s just knowing the tax code, following the rules and understanding just the substance of the limitations, to applying certain deductions and strategies.

Daniel Wrenne: So you’re helping them with the basic or more of an early career tax strategy, but then also you are doing the tax preparation, correct?

Logan Foltz: Yeah, that’s correct. What I do for clients—most tax professionals and advisors would prefer to onboard clients and get to know them before the tax season, so they can do planning.

Daniel Wrenne: Yeah.

Logan Foltz: And also understand them better, and to make tax preparations more smooth.

But what I do is outside of tax season, I’m meeting with most clients a couple times a year to talk about tax strategy and also answering emails if things come up and if they have questions or their situation changes, but that’s what I do outside of January and April, and this time of year, I’m also just doing the tax preparation, gathering the documents.

But it is a lot easier if you work with someone who prepares your tax or does tax planning with you because then there’s should be no big surprises on the tax return. There shouldn’t be as many questions. It shouldn’t be very much confusion because really you’re just implementing the strategies you talked about all year, and you know what to expect. And it’s just a simple matter of documenting everything in the tax return. And it that tends to be pretty smooth and efficient.

Daniel Wrenne: Yes. And so are you working with primarily or only business owners or self-employed only? W2 or any W2s?

Logan Foltz: I have not said no to very many clients at all. Most of the ones I’ve gotten are physicians. But I do get some from other service professions, but that’s only because it’s my first year in practice and I’m just trying to grow and I’m happy to work with clients that seem like a more of a good personality fit, even if they’re other professions.

It is an aspiration of mine to eventually only work with physicians if I feel like I’m busy enough just working with physicians just to understand them better, and also just be able to reach a certain type of client more easily if it’s just one type of client.

But I’m still gaining experience in working with other clients right now, but I’d say about 50% of my clients that I’ve gotten referrals for are physicians. Those are the types of clients I market to. And the simple reason is just because I have that professional background and just because I understand physicians best.

You can find a competent tax official that works with other types of professions or even works that’s generalist, because the tax code is pretty is not very occupationally specific. Yeah, tax rules are largely the same. But touching on what we talked about earlier, it’s helpful to work with clients that you understand and work with a professional that understands you.

Daniel Wrenne: Yes, I agree. You’ve gravitated towards the business owner or self-employed types, but a little bit mostly physicians and some other professions as well.

Logan Foltz: Yeah. Yeah. And I didn’t answer your question, but I do have a couple W2 clients and they don’t pay nearly as much as my business owner clients pay me.

There’s really not as much planning you can do with folks who are W2, and the tax return preparation process doesn’t take nearly as much time. So I do have a couple of those, they’re physicians. I like working with them.

But the type of client that I’m actively seeking is a physician who is self-employed, maybe a locum tenant physician. Or one who has a small practice and, either, is considering starting a separate business entity, like an S corporation, or is growing, and just wants help with planning around, building their business.

Daniel Wrenne: So when you’re starting to work with somebody for the first time, what would you say are some of the biggest issues you see that are like, problems or improvement opportunities?

Logan Foltz: Yeah, I think that what I see most often is difficulty keeping good records in books with people who are business owners.

And that’s critical for tax season. And it’s much easier to estimate your income and tax liability if you are keeping a real-time record of your net income with your business. So some clients, when they’re new, they might not be tracking any of these things.

They might be using just different accounts to pay for their expenses, and so they don’t have a good way of obtaining the history of what they’ve spent in their business. And it’s also a liability problem when you mix personal and business accounts.

So that comes up a lot, and a big part of my onboarding process with clients is just making sure they’re set up with a good a tracking system or system of bookkeeping. And just so we know in real time what their income is and how much they’re profiting.

So if someone is new and not doing that, sometimes the first tax season can yield a surprise, and this is even more true if they’re not paying estimated taxes. So the clients I see that might have the biggest the biggest bill to the IRS in April are ones who are self-employed, who don’t have any income withheld and just didn’t know they needed to pay the IRS quarterly taxes.

And so that’s a common mistake I see too. So those are the first two things come to mind. Other things are just not being aware of how to manage income from different states. And understanding how different states taxed your income. And so if you’re in that situation, I think it’s pretty hard to be a good do-it-yourselfer, if you’re working with different states and understanding how they tax your income, how they source it.

But that’s another thing that can just be a learning curve for people too. So there’s other things too, but I think those are what come up most often.

Daniel Wrenne: Yeah. I think another one is the business entity selection. That may be—

Logan Foltz: Good point. Yeah.

Daniel Wrenne: If somebody becomes—maybe that’s not as big of a deal for a small business but I don’t know if you’ve already established your business. You probably don’t have to probably figured that out.

But a lot of new businesses, especially independent contractors, they’re like, the two common ones are the LLC tax sole proprietor, or taxes in S-corp. So basically how do I structure my business for tax purposes?

Logan Foltz: Yeah, there’s a lot of bad advice out there about that, especially the S-corp election. And if you don’t talk to someone who can analyze your specific situation and you just take generic advice, you’re likely to get it wrong with the S-corp, because there are several different components that can determine if it will be a tax savings, or it’ll be a strategy that saves in your taxes.

Or whether it’ll cost more money. And what makes it really hard to generalize is that it’s state specific to a large extent.

Daniel Wrenne: Yes. And then there’s this QBI thing. What I have noticed is that, even accountants that I think know this, maybe they don’t take the time to analyze this is there’s probably 5 to 15 factors that come into play with the whole how you structure a business decision. And I think a lot of accountants, they’re either, I don’t know, maybe, I think they’re stretched too thin to do the full analysis on that decision, or maybe they’re just technically providing you with tax preparation services.

So they’re kinda like, here’s a few bullet points of one versus the other, but really you have to do the—it’s an analysis actually that you ideally are doing on your specific circumstances, like how much income do you make? Where are you making it? What’s your current business setup?

Logan Foltz: Absolutely. Yeah. When I do this analysis for clients, I send them a three-page document, know it’s based off a template, but the calculations are pretty manual, so really it just takes time, and it’s analysis like you said.

And I think that if you’re only paying someone for tax preparation to answer simple questions about your tax return, you just honestly can’t expect them to do that for free. ‘Cause it does take a lot of time and expertise to do it. So I used to do that analysis for people who weren’t clients for free, but I do it for current clients, or people who become clients.

But it is pretty involved, like you said. And you mentioned the QBI deduction, which is one of the top three or four factors that can tip the scales either way. And yeah, there’s a lot of questions I ask clients that assessment. One of them is do you itemize your deductions or do you take a standard deduction?

Can you get the enhanced SALT cap deduction? Will you benefit from trying to deduct state taxes on your business? That’s another big one.

But also, yeah, just understanding, outlining what the costs of having S-corp are, administratively what the tax costs are, and if there’s any other fees, imposed by where you live. So that’s why I don’t really give out a rule of thumb for when you should have an S corporation. There’s certain factors that make it more appealing and more likely to benefit you.

But it’s something that I think where a consultation is worthwhile.

Daniel Wrenne: Yeah.

As we’re starting to wrap up, I had a couple things I wanted to make sure and ask about. One, for starters, like I’m curious about your pricing structure for how you build clients, and then also maybe we could talk a little bit about how the industry bills.

I can talk about the industry, like what our experience has been, is that the typical, we’ll say the main street CPA, like I was talking about earlier. Typically what we see is that they provide tax prep and maybe that’s it, maybe with questions around the tax return, like I said.

And for an average physician like we’ve been talking about so far, they’re probably charging hourly, although they may not show you the hourly calculation. You see it as just a bill that you get, and it usually gets billed right after you get the tax returns done. And in our experience, the range for that is like $500 to $2,500 for the year, or it feels like it’s just for the tax preparation project, but really they’re just keeping track of their hours throughout the year. And that’s what we see. But that’s for just the tax preparation services. But is that pretty accurate from your view?

And then I’m curious how you guys differ.

Logan Foltz: Yeah. Yeah. I think that is a good summary of the general practice in the industry is that it’s billed by the hour and there’s a lot of time tracking that happens behind the scenes.

One thing I don’t miss about medicine is having to track my time. It does take a lot of bandwidth and it’s just not something I enjoy. So what I do is I have a pretty transparent pricing scheme on my website and the main variables are whether you have a business, what type of business it is.

And then there’s just some other complexity-based fees that are mostly focused around tax preparation. Such as if you have multiple states, if you need a lot of calculation for things like cryptocurrency when there’s not good records.

Just those sorts of things. So that’s what I do. And I don’t track time religiously, but I do try to be mindful of how much time a certain project takes me to understand if my prices set, where I’m offering good value, but also, but also compensates me the amount of time it takes.

So I worked in a firm before this where it was a flat monthly fee and I really liked that, it was subscription, and I prefer subscription because I think planning and tax service is a 12-month commitment. Most of my clients have questions for me or I have questions for them, or have some interaction every month.

So I think, so that’s what works for me because I’m pretty hands-on. And so I think that’s one of the, one of the options out there is to just have someone who’s available, and if you have someone like that, it’s probably someone who likes to engage with their clients, who wants to be available.

And I don’t like to work too much, but at the same time, I’d rather talk to clients and get questions from them now just so we can have a good tax season experience. So I think the time is worthwhile.

It, it’s time that will save you time and stress later on. So that’s how I do it. What I don’t like as much about the hourly service model or where you’re being billed for your time, is that it can just lead to de deferred service or deferred maintenance, as I would say.

Just because if you charge for every meeting, if you’re like an attorney and charge for every phone call, then people are gonna avoid you and it’s gonna be more to clean up later. So I think of myself more as a forward-looking tax advisor.

And that’s what I think I’ve tried to set up with my pricing too. So that’s what it’s set up as right now. And you can go to my website and look and see what the pricing structures are if you’re curious.

Daniel Wrenne: And it’s taxsmartmd.com, right?

Logan Foltz: That’s it.

Daniel Wrenne: Okay. So what about the future? I know you’re taking on clients now. Are you planning to take on clients until you get full? Or are you planning to kind of transition into a different flavor practice? I’m curious. Like over the next—we were talking about it before, we’re around the same age. So I think we got a few more years.

Logan Foltz: Yeah. Yeah, so as I was telling you before, when I got into medicine, I didn’t have a crystal ball. I didn’t really know what the future would hold or what work or the how to optimize my work to fit the life I wanted to build.

I think I’m closer to that now. I think I have a better idea. But I’m always learning. I’m always discovering new things about myself. Right now I just like working, just having full autonomy, independence, just having a reasonable work life balance.

And just being able to practice work in my own terms, which is something I had a hard time achieving in medicine. So what I think that looks like right now is hopefully in a few years finding enough clients that really like working with me and get the most value and just working with those clients that are the best fit.

I hope that over time I can get to that point. I think I’m pretty satisfied by, just by my. I feel like I help enough people right now, and I feel like I work as much as I want, but I’d like to work with more folks too and eventually get that number where I feel like we’re getting the most and building our relationship and seeing clients achieve their goals.

And eventually, I hope I’m doing a lot of that and less of helping people get started. So that’s what I hope it’ll look like in five years. I know that you’ve grown your firm over time and so I’ll keep that in mind as an option too.

Maybe I want to expand my impact and help more people just by growing my business and having staff that can help me do that. Right now, that’s not part of my plans though.

Daniel Wrenne: Yeah. Awesome. Yeah, part of it is you just gotta experience it and see how you like things. So that’s one of the nice things about being in business for yourself is you can chart your own course, and there’s a lot of unlimited different paths.

Logan Foltz: Yeah. Yeah. And I am in a nice position right now because I can still work with clients during tax season. I’m not stressed. I’m not overwhelmed.

I hope that’s not the case in future years, but this is the time where I’m hoping to find the best clients. And I think in general, if you’re looking for someone to help you with taxes, if everyone you know is at capacity, if it’s hard to find someone, then you’re most likely to be able to fit in with someone who’s new, and hopefully someone who is competent too. So I don’t want that to sound like too much self-promotion, but I think that—

Daniel Wrenne: No harm.

Logan Foltz: Yeah. That’s just the status of the profession right now. It’s just hard to find someone that is a good fit.

Daniel Wrenne: Yes. I can verify that.

All right, Logan. Thanks for coming on with me. It’s been fun talking about tax and your practice and your progression. So thanks again, bud.

Logan Foltz: Yeah. Thanks so much for having me on. It was a really fun conversation.

No guests or clients appearing on the podcast received any form of compensation for their appearance and obtained no other benefit from us. It should not be assumed that every client has had the same experience.

The post What Every Physician Should Know About Taxes first appeared on Finance for Physicians.

The post What Every Physician Should Know About Taxes appeared first on Finance for Physicians.