EP. 291 The Tax Mistakes Costing Your Practice Thousands (And How to Fix Them)With Hallee Literal from Incite Tax

In this episode, I sat down with Haley Literal to break down the tax mistakes I see therapists making over and over again, and more importantly, how to fix them before they cost you more money.

The biggest takeaway is this: most tax stress and overpayment doesn’t come from complicated rules. It comes from not setting things up properly, not tracking consistently, and waiting too long to get help.

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Setting your business up correctly matters more than you think

One of the first things we talked about is getting your foundation right from the beginning.

That means:

• Creating an LLC
• Getting an EIN
• Opening a separate business bank account
• Securing the right licenses and insurance

This isn’t just about compliance. It’s about clearly separating your business from your personal finances so you can track income, claim expenses properly, and make informed decisions as you grow.

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The most expensive mistakes are often the simplest ones

The biggest money leaks happen in everyday decisions.

Many therapists:

• Rely on DIY tax software that misses deductions
• Wait until tax season to think about taxes
• Don’t fully understand their business expenses
• Underprice or mismanage cash flow

Using software alone can result in higher taxable income, which means paying more in both income tax and self-employment tax.

Planning ahead, even just a little, changes that completely.

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Your tax strategy needs to evolve as your income grows

As your business becomes more profitable, your tax approach should change with it.

A key milestone is around $15,000–$20,000 in net income, where it may make sense to explore an S Corp election to reduce self-employment tax.

As you grow toward or beyond $100K in revenue, additional strategies open up:

• Retirement accounts like Solo 401(k)s and SEP IRAs
• The Qualified Business Income (QBI) deduction
• More advanced tax planning opportunities

These strategies aren’t automatic. They require timing and guidance.

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Managing inconsistent income requires structure, not perfection

Because therapy income can vary month to month, having a system matters.

A simple starting point:

• Set aside 15–30% of every payment for taxes
• Use a separate savings account

The Profit First approach adds more structure by dividing income into:

• Taxes
• Profit
• Owner’s pay
• Operating expenses

This helps you stay consistent even when your schedule isn’t.

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Many therapists are missing legitimate deductions

There are more deductible expenses than most people realize.

Commonly overlooked ones include:

• Laundry and cleaning
• Supplies and equipment
• Subscriptions used in sessions
• Decor and workspace items

There are also gray areas, like personal treatments or clothing, where documentation and justification matter.

Other important strategies include:

• Home office deductions
• Choosing between contractors and employees
• Health insurance deductions
• Retirement contributions

All of these come back to one rule: if it’s ordinary and necessary for your business, it may qualify.

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The habit that makes the biggest difference

If you do one thing differently this year, make it this:

Track your income and expenses monthly.

Not at the end of the year. Not when you’re stressed. Monthly.

This reduces errors, lowers stress, and gives you a clear picture of your business before tax season arrives.

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The role of a tax professional goes beyond filing

One of the most important distinctions we discussed is the difference between:

• Someone who files your taxes
• Someone who helps you plan your taxes

Planning happens throughout the year. That’s where the real savings and clarity come from.

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What to do next

If you want to apply this to your own business, start with the free guide mentioned in the episode.

Download the Self Employed Taxes Explained resource from the show notes, fill it out, and use it to understand your numbers.

From there, you can have a conversation with a tax professional to review your situation and decide what makes sense for you.

That step alone can help you stop guessing and start making decisions with actual data.

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Guest Contact Information

Connect with Hallee Literal — Tax Professional Incite Tax | Website

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**This podcast is not medical advice and is not a substitute for consultation with an appropriate medical professional. We make no representations as to any physical, emotional, or mental health benefits that may be derived from listening to our podcast. Likewise, we do not make any representations or guarantees as to any possible income, business growth, additional clients, or any other earnings or growth benefits that may be derived from our podcast. Any testimonials, examples, or other results presented are the experiences of one client. We do not represent or guarantee you will achieve the same or similar results. You understand and agree you are solely responsible for any decisions you make from the information provided.**

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