Today we hear from a doctor’s wife, with a common problem, (note: I can’t find the original question, so I hope you read this reply.) “We have a couple of doctors who use my husband’s physician number to bill insurance companies and Medicare for services. When we receive the money, we pay it over to them. Since it’s not our money, I don’t include it in our income. IRS just sent us an audit notice, saying we owe taxes on all that money.
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What do we do now?”
Dear Doctor’s wife,
This is a common problem. It also happens with physicians employed at various clinics and radiology facilities. The facility uses their physician number for all their medical billing, and only pays the physician their share of the revenue, or their wages.
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Then the physician gets hit with all the taxes.
There’s a way to do this properly. ALWAYS report all the income generated from billings under the physician’s identification number. The insurance companies and Medicare will be sending 1099s to IRS with that information. If you don’t have the information, because you’re an employee, get it from the medical facility’s accounting department.
Then, issue a 1099 to the doctors or medical facility for the amount you aren’t receiving or don’t get to keep.
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And deduct that amount from your tax return as professional services. The net effect on your taxes will be the same. You’ll simply avoid any potential audits.
Now, speaking of audits, the doctor’s wife didn’t really get an audit notice. It was a computer-generated letter because their tax return didn’t match the 1099s.
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There’s no need to file an amended return. Simply write a reply to IRS, explaining why this is not your income. Provide the name, address and Social Security number of the physician(s) who received the income. You know they reported the income, so you won’t be causing them any problems.
And remember, you can find answers to all kinds of questions about casualty losses and all kinds of other tax issues, free. Where? Where else? At TaxMama.com
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