Gimme a break
Physicians are the beneficiaries of several types of tax breaks. Contributing to a pretax 401(k) account was the most common exemption, with 60% of physicians surveyed using this plan. Other tax breaks cited by respondents were: contributing to charity (54%), home mortgage interest (46%), and writing off business expenses (39%).
About one in five physicians has experienced an audit, but that risk has declined significantly in recent years, thanks to tighter IRS budgets. Overall, only about 1 in 167 U.S. taxpayers were audited in 2020, according to the IRS. Even for taxpayers reporting $5 million or more in income, the audit rate is only about 0.25%, the Government Accountability Office says.
The odds of a physician being summoned to a meeting with an auditor probably won’t increase for a few years, Mr. Gallati said. But the good news for doctors is bad news for lower-income Americans. “The IRS is woefully understaffed and underfunded, with the result that the agency is going for lower-hanging fruit and auditing more people in lower income brackets,” she said in an interview.
While one respondent described his experience with the IRS as “the audit from hell,” others thought it not so bad, with 72% saying the auditors treated them fairly. One respondent described the audit as “boring, short, and successful for me. The IRS owed me money.”
When it comes to taxes, physician respondents, on the whole, did not seem to be optimistic about the future. About 61% expect an increase in their tax rate because of Biden administration policies. One respondent veered into hyperbole with the comment: “I believe taxes will increase for physicians until they have no more money!”
Mr. Chahal doesn’t see it that way. He pointed out that recent attempts to raise taxes completely failed. “I personally don’t see that happening unless there’s a significant shift in the House and the Senate.”
A version of this article first appeared on Medscape.com.