“The best accountants don’t just see numbers; they see the potential for financial transformation.” – Samantha Wilson
Welcome to our next series! We’ll be discussing the Doctor’s Dream Team, a group of key advisors every physician should have. The road to becoming a physician is jam-packed with learning and skill-building. You spend long hours in the hospital, staying up late studying and preparing for exams. Once you are a full-fledged physician, medical learning continues, and clinical workloads rise. So, instead of also taking on the burden of learning the ins and outs of the Canadian tax system, it may be worthwhile to hire an accountant.
What does an accountant do?
Chartered professional accountants, or CPAs, provide services beyond filing personal income taxes. They are trained professionals who offer valuable advice on personal and corporate tax planning, business planning, business purchases and sales, business valuations, audits, and reviews, among other services.
Benefits of an Accountant
As a physician, your financial situation may involve incorporation, income splitting with a spouse, retirement savings planning, managing payroll and bookkeeping, corporate financial reporting, correspondence with the CRA, filing personal income taxes, and filing corporate income taxes. Your finances can be complex, and having a trusted accountant can be invaluable. On average, a Canadian doctor may spend between $2,500 and $7,500+ per year on accounting services (based on 2023 values), depending on the complexity of their situation. That may seem like a considerable expense. However, I view it more as an investment in your financial health and future rather than a cost. Here are the top benefits of hiring an accountant as a physician.
Tax Optimization
Physicians tend to be high-income earners, and one of the main benefits of incorporating is that it is more tax-efficient (more to come on Incorporation later). Accountants can help you navigate all the rules to be as tax-efficient as possible. Let’s take the example of paying yourself a salary or a dividend. Do you know the difference? When you have a Medicine Professional Corporation (MPC), you can pay yourself a salary or a dividend. A salary is regularly paid to you personally from your MPC, and is subject to CPP contributions, but it also creates RRSP contribution room. Dividends are paid from the MPC’s profits, do not generate RRSP contribution room, and are not required to opt into CPP. In addition, a salary is a deductible expense in your MPC, whereas dividends are not. If the thought of trying to figure out which option would save you the most on taxes or provide the most benefit in your older age is making your eyes glaze over, then hiring an accountant would be very helpful. This is just one example of how an accountant can look at your financial situation and advise you on the best solution for you.
Avoid Expensive Mistakes and Gain Peace of Mind
If you do not have the proper financial setup as a physician, you could be paying far more in taxes than necessary. This can slow your wealth accumulation, reduce the amount of money you can invest, and even delay your retirement. In addition, tax rules can change, and having an accountant guide and advise you on these changes can help avoid costly mistakes, penalty payments, or missed opportunities. Working with an accountant can give you confidence that your taxes are done correctly and on time.
Free Up Your Time and Reduce Stress
Time is your most valuable and limited resource (see Blog 3). When I first started practicing, I was spending anywhere from 5 to 12 hours per month on bookkeeping and payroll. I eventually outsourced these tasks to a bookkeeper at my accountant’s firm, and it made a massive difference to my quality of life. I now had more time to catch up on clinical work, chores I had been putting off, or simply to have fun with friends and family. It also freed up so much mental space that had been consumed by a separate to-do list of things I needed to complete to keep my practice running smoothly. I felt much calmer and less overwhelmed, and that, for me, is priceless.
Which Accountant Should I Work With, and When?
I hope I have demonstrated the value of working with an accountant. Depending on the stage of your career, you may be able to delay working with an accountant. For example, if you are a medical student or resident, your finances are likely still relatively simple, and you could choose to file taxes without an accountant. However, once you are in practice, and especially if you have a corporation, working with an accountant becomes much more beneficial.
Make sure you consider these questions when looking for an accountant.
- Does this accountant have experience working with physicians/MPCs, or other similar professionals (dentists, veterinarians, etc.)?
- Does this accountant hold a CPA or CA (chartered accountant) designation?
- Do they offer additional services in-house, such as bookkeeping?
- Are they responsive to email communications?
- Have they been referred to you by someone you trust, such as a mentor, colleague, family member, or friend?
I hope you learned some valuable tips today. Join me next time as we explore the next topic in The Doctor’s Dream Team Series.
Until then, be well,
Laura
Disclaimer
I am not a certified financial advisor/planner, accountant, insurance broker, or lawyer. The content of this blog is for informational purposes only and is designed for a Canadian physician audience. The information provided does not constitute professional financial, tax, investment, insurance, or legal advice.
Readers should:
- Understand that every financial situation is unique
- Consult qualified professionals before making any financial decisions
- Not rely on this blog as a substitute for personalized professional advice
The views and opinions expressed are of the author and do not represent any affiliated organizations, including but not limited to L.J.A. Medical Communications Inc. The author does not warrant or guarantee the accuracy, completeness or usefulness of this information. Any reliance a user places on such information is strictly at the user’s own risk. The author does not assume any responsibility or liability for any actions taken based on the content of this blog.