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Jan 29, 2024

4 tactics (among many) contracted clinical supervisors should implement to ease tax stress

If you’re a contracted behavioral health clinical supervisor, here are a few things to keep in mind as you approach tax time, and the rest of the year, too.

Rachel McCrickard, LMFT

CEO and Co-Founder

We’re not accountants.

But this time of year, any advice (as long as it’s accurate) is useful.

Business taxes are complicated, so it’s always a good idea to talk to an accountant who understands tax issues unique to clinicians and 1099 contractors — but there are a few things we can touch on…

1. Keep your business and personal finances separate

When you’re an employee, it’s normal to have your employer direct-deposit your paycheck into your personal bank account.

But as a contracted clinical supervisor (or a practice owner), you’re running a business, even if you’re not an LLC.

You’ll have expenses related to your work that should be tracked. And it’s SO much easier to track them if income and expenses travel through one account (When you pay yourself from what you make, you can transfer that into your personal account).

And it’s not hard to open up an account. It can take ten minutes to open up an online account and that may be all you need. But if you prefer brick-and-mortar, ask banks if they offer free checking. It doesn’t have to be a business account if it’s only for your contracting — you just need a way to separate your finances.

How do I track receipts and expenses?

There are many options. Having a work account is a great first step. If you run all your expenses through those or through a credit card reserved for just work needs, you have a record.

For those who are running a very simple operation, there are apps like Wave that freelancers find useful. It tracks income and expenses in your bank accounts and categorizes them so you can run reports and monitor trends. Even a budgeting program like Monarch Money or You Need a Budget can track your income and expenses and let you see what’s happening with each.

But it doesn’t take long to outgrow a free app, especially if you’re combining your clinical supervision and your practice. Many therapists turn to programs like QuickBooks, but programs like Heard include a wide range of features and accountants who are experts in private practice issues.

What about saving receipts?

You definitely need to save receipts. You can be audited for the next 3 years or up to 6 if the IRS is concerned about tax fraud. So find a safe way to keep your records.

For online receipts, you can move them into a folder in your inbox so you can keep them in one place and always know where to find them.

For paper receipts, don’t just throw them in a box or a file. Scan them into your computer or take pictures. There are apps that will do this for you. Some are free, some have a small fee.

If you haven’t noticed, modern cash register receipts have a tendency to fade in just a few months. You could be ready to fill out your 1040 only to find a folder full of blank slips of paper.

2. Know your deductions

This is where it is really useful to talk to an accountant, because even if you use a home office, you can deduct part of it as a business expense.

Some of the expenses business owners stress about like overdraft or interest fees are deductible (You know that pesky 3% credit card fee? It’s deductible).

And your own therapist fees? According to Heard, if they make you a better therapist, those are deductible, too.

Heard’s blog has a terrific guide on deductions here along with a Tax Deduction Cheat sheet for Therapists.

But again, you really should talk to an accountant if this is something you’re unfamiliar with — because you have the option to itemize your deductions or take a standard deduction on your income tax return, and you should be aware of which is a better option for you.

3. Make sure you have your paperwork in order

Whenever you’re doing contracted work for another business, they should have you fill out a W-9 so they can send you proof of income at the end of the year. It’s part of the onboarding process for new clinical supervisors for Motivo.

Before February 1st, each company that you worked for in the previous calendar year should send you a 1099 that documents how much you made with them. You’ll include that with your tax forms just like you would a W-2.

If you’ve done any contracted clinical supervision or other work for business entities -- you were contracted by an employer, not directly by a pre-licensed clinician -- and you didn't fill out a W-9, you can download it here, fill it out, and then contact them to rectify the situation so they can send your 1099.

Make sure you do so with any new established practices or companies you work with. This isn’t necessary when you work directly with supervisees or individual clients.

4. Pay your estimated quarterly taxes

As a contractor or someone who is self-employed, talk to your accountant to figure out how much you need to pay in estimated quarterly taxes in April, July, October, and January (to finish off the previous year).

Your accountant or your tax software can let you know what the amount is and prepare the forms you need to include when you submit your quarterly payments.

If you pay too much, you’ll get a refund. If you pay too little or don’t pay, you could find yourself paying a penalty — so a talk with an accountant is a good idea (Are we hitting this point hard enough?)

Setting up good practices makes a difference

While these tips aren’t going to get your taxes completed, they’re habits that will provide a good foundation for every contract clinical supervisor — and you’ll be able to spend more time enjoying your work instead of worrying about your taxes.

Rachel McCrickard, LMFT

CEO and Co-Founder

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