Tax Audit Risk for Medical Professionals — How to Minimize It

Running a successful medical practice comes with unique financial responsibilities — and unfortunately, tax audit risk is one of them. Doctors, dentists, and other healthcare professionals often face a higher chance of being audited due to the complexity of their income streams, high earnings, and specific deductions unique to the medical field.

As a trusted CPA for medical practice and CPA for healthcare professionals, we at Velin & Associates, Inc. help medical professionals in Los Angeles and beyond protect themselves from costly mistakes and unnecessary IRS attention.

Below, we share practical steps to help reduce your tax audit risk — and keep your practice financially healthy.

Why Are Medical Professionals More Likely to Get Audited?

The IRS knows that medical and dental practices often handle:

• Large cash flows (copays, out-of-pocket payments)
• Complex write-offs (medical equipment, continuing education, malpractice insurance)
• Payroll for multiple staff members and contractors
• Potential mixed-use expenses (like a home office or vehicle)

If these deductions aren’t well-documented, they can raise red flags. Working with a CPA for dental practice or a dentist CPA helps ensure your records are clear and compliant.

Practical Steps to Reduce Your Audit Risk

1️. Keep Meticulous Records
Always save receipts and maintain organized, detailed records for all expenses and income. For example, if you deduct medical equipment, keep the invoice, proof of payment, and how it’s used in the practice.

2️. Don’t Overdo Deductions
A common mistake is claiming excessive deductions. For instance, if you run a dental practice, you can deduct business-related travel for conferences — but not a family vacation mixed in. A qualified Dental Business CPA can help you draw the line.

3️. Report All Income — No Exceptions
Failing to report all income is one of the biggest red flags for an audit. Whether it’s private payments, insurance reimbursements, or cosmetic procedure fees, make sure every dollar is properly accounted for.

4️. Hire a CPA Specializing in Medical and Dental Practices
Tax rules are always changing. A general accountant might not know about the specific deductions and compliance risks relevant to healthcare providers. A dedicated CPA for healthcare professionals understands how to legitimately lower your tax bill — and defend you if the IRS has questions.

Example: Common Pitfalls for Dental Practices

Imagine you run a small dental practice in Los Angeles. You claim a home office deduction for an unused guest room and write off 100% of your SUV’s expenses as a business vehicle. Did you know that both of these deductions could easily draw unwanted IRS attention?

Many dental and medical professionals don’t realize that the IRS scrutinizes deductions that seem too aggressive or poorly documented. For instance, a home office must be used exclusively and regularly for your practice — not just as a spare room. Likewise, if your vehicle is used for both personal and business purposes, you can’t write off 100% of its expenses without detailed mileage logs.

If you’re unsure about how to properly claim these deductions — or how to back them up in case of an audit — working with an experienced dentist CPA or CPA for dental practice can make all the difference.

Need help?

At Velin & Associates, Inc., we guide dentists, doctors, and healthcare professionals through these complex rules — so you can claim what you’re entitled to without taking unnecessary risks.

For more information about our services, please visit our website.

Velin & Associates, Inc

8159 Santa Monica Blvd STE 198/200 West Hollywood, CA 90046
323-902-1000
dmitriy@losangelescpa.org