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Welcome to the latest episode of the Physician Cents Podcast, where we explore complex financial topics tailored specifically for physicians. Whether you're a medical student, resident, fellow, or attending physician, you're going to find valuable insights that can help you increase your financial IQ, further your financial journey, and improve your overall well-being. Hosted by Chad Chubb and Tyler Olson, let’s dive in!
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Physicians are some of the highest earners in the country and some of the biggest overpayers in taxes. Not because you're bad with money, but because the tax code punishes complexity.
If your pay comes from more than one place (hospital, university, physician group, moonlighting, locums, consulting), it's easy for the pieces to stop talking to each other. That's when "I thought payroll handled it" turns into a five-figure April surprise. This first part of a three-part series covers five common errors that show up again and again, and what to do instead.
In this post, we cover mistakes #1 through #5 from Tyler's Tweet.
A lot of tax pain isn't caused by "aggressive" moves or exotic strategies. It's more like an administrative paper cut that keeps happening.
Here's the typical setup:
Each payer does withholding in its own little bubble. None of them know what the others are doing unless you force coordination. Add high income into the mix, and the default systems (like the W-4 and bonus withholding rules) often come up short.
The theme you'll see in every mistake below: the tax bill is usually manageable, but the surprises and penalties are what make people angry.
When you have multiple income streams, the biggest issue is simple: withholding doesn't coordinate across sources.
Your university payroll system withholds based on the W-4 you gave them. Your physician group withholds based on the W-4 you gave them. Your 1099 client withholds… nothing. And bonuses follow their own rules.
A few common traps show up for physicians:
One misconception that refuses to die: bonuses aren't taxed differently than regular W-2 income. The issue is that the withholding on bonuses may be too low, so it feels like the bonus was taxed harder when you settle up at filing.
If you've ever thought, "Why did my bonus get destroyed by taxes?", the real answer is often, "It wasn't withheld enough up front."
Start by reviewing pay stubs earlier in the year, not in March when you're hunting for tax forms. If you know you've got W-2 income plus irregular 1099 income, you need a system that smooths payments throughout the year.
A simple move that can work well: estimate the tax on your 1099 income, then add extra withholding on your W-2 job to cover it. That way, your W-2 payroll becomes the "engine" that pays taxes steadily, even if the side income is lumpy.
A quick note on expectations: paying a basic tax prep fee to file a return usually doesn't include year-round tax planning. You may need separate planning time to get this dialed in.
If underpayment penalties are showing up on your return, it's a signal your payments weren't paced correctly. Two common safe harbor targets were highlighted:
Here is a practical "sweet spot": you don't want giant refunds, and you don't want giant bills. If you're within about plus or minus $1,000 at filing, you're usually pretty close to dialed in.
If you do need to make a payment, use the IRS tool that's built for it: IRS Direct Pay for individuals. It's straightforward, and it helps you keep clean documentation of what you paid and when.
The S-corp conversation is everywhere for physicians with side income. Sometimes it's helpful. Sometimes it's a headache with little payoff.
The key point is this: an S-corp is not a personality trait. It's math.
If you're earning enough 1099 income, staying a sole proprietor (Schedule C) can mean you're paying more self-employment tax than you need to. On the other hand, setting up an S-corp too early can backfire once you add payroll, additional tax filing, and extra professional fees.
Self-employment tax is 15.3% in the U.S.:
The S-corp strategy typically aims to reduce the portion of income hit by self-employment tax by splitting income into salary (subject to payroll taxes) and distributions (not subject to the same payroll taxes).
That said, you still have to pay yourself a reasonable salary. If you're a radiologist doing teleradiology and decide your "reasonable" salary is $10,000, that may not pass the sniff test if the IRS ever looks.
A few reasons this goes sideways:
If the S-corp saves you $2,300 and the additional costs are $2,000, you didn't really "win." You just bought yourself more complexity for $300.
A clean decision process looks like this:
If the math works, great. If it doesn't, you're not "missing out." You're avoiding a setup that doesn't help.
Some tax errors feel dramatic, like creating an entity. Others are quieter, like failing to track expenses or missing quarterly payments. The quiet ones are painful because they're so avoidable.
This one is simple and brutal: physicians often have legitimate deductions tied to 1099 income, but they don't track them, so they never claim them.
Important limitation: these deductions apply to 1099 work. If you're only W-2, you generally can't deduct unreimbursed employee expenses on your federal return (rules changed years ago).
The episode called out examples many physicians recognize instantly:
Travel is where people get sloppy fast. Commuting from home to the hospital is not deductible. Mileage that can qualify is usually travel between work locations (for example, from a primary site to a satellite site).
There's also a home office angle. If you truly do work from home (teleradiology is a common example), then travel from that home office to other work sites may be treated differently. The key word is "truly." If you claim it, you need to be able to back it up.
Conferences can qualify too if the trip is primarily for business. If you go to a two-day conference and stay two weeks for vacation, you've got a mixed-purpose trip. Some parts may be deductible, others not.
One more simple rule we emphasized: if an employer reimburses you for an expense, don't deduct it.
For more examples of what tends to get overlooked, this write-up lines up with what many docs experience in real life: common 1099 deductions doctors miss.
A surprisingly common complaint is, "My accountant sounds like they work for the IRS." What's usually happening is the accountant is protecting you, because they're signing the return and putting their reputation on the line.
If you want a second opinion on a gray area, that's fair. Still, hunting for someone willing to rubber-stamp fringe deductions is a good way to turn a small tax win into a big tax mess.
If you earn meaningful 1099 income, the IRS expects you to pay taxes during the year, not as one lump sum later.
This mistake shows up a lot with moonlighting, locums, and consulting. It also pops up when physicians assume a "practice accountant" is covering their personal situation, but the attention stays at the business level.
We referenced checking the underpayment penalty rate and seeing 7% at the time (it had been 8% before that). Either way, that's real money for doing nothing wrong other than paying late.
Even worse, you can pay your entire tax bill by April 15 and still get hit with penalties if the IRS decides you didn't pay enough throughout the year. Payment timing matters.
The big takeaway: you can't wait until January 15 and pretend you paid "quarterly." The IRS tracks payment dates.
First option: make quarterly payments and put them on your calendar. You can pay using IRS Direct Pay for individuals (and your state portal, if your state has income tax and requires estimates).
Second option: if your 1099 income isn't huge, you can often increase withholding on your W-2 job instead, then let payroll handle the steady payments.
One operational detail we emphasized: when you pay at the IRS site, you must select the correct reason for the payment. A payment for "balance due" is not the same as a "2026 estimated payment." If you owe for last year and also need to make Q1 estimates, split it into two separate payments so the IRS applies it correctly.
We also mentioned a useful cleanup move: if you overpaid and are due a refund, you can sometimes apply that overpayment to the next year's estimated taxes, which can help if you're already behind on Q1 and Q2.
High-income physicians love the backdoor Roth IRA for a reason. It's one of the cleanest ways to get Roth money when your income is too high for a direct Roth IRA contribution.
It's also easy to mess up.
The backdoor Roth process assumes you can contribute to a traditional IRA (non-deductible), then convert to Roth with little or no tax. The problem is the IRS pro rata rule.
If you have pre-tax money in any of these, the pro rata rule can cause a chunk of your conversion to be taxable:
We gave a clean illustration:
When you convert $7,000 to Roth, the IRS doesn't let you isolate just the non-deductible dollars. Instead, the conversion is treated proportionally:
That defeats the whole point for most people.
We highlighted the usual cleanup:
The key point: money in 401(k), 403(b), or solo 401(k) accounts doesn't trigger the pro rata rule the same way IRA balances do.
We also mentioned a creative angle some physicians use: generating a small amount of legitimate 1099 income (like paid medical surveys), then using that to open a solo 401(k) so they can control the assets and clear the IRA issue. Whether that applies to you depends on your situation, but the concept is consistent: clean up the IRA balances before you convert.
If you're doing backdoor Roth contributions and you still have a rollover IRA sitting around from residency, the odds are high you're paying extra tax without realizing it.
Most physician tax mistakes aren't dramatic. They're quiet coordination problems: mismatched withholding, missed estimates, untracked 1099 deductions, and retirement moves that trip hidden rules. Clean up those basics and you usually stop the "surprise bill" cycle fast. In the next part of the series, the list continues with mistakes #6 through #12, and yes, there are more of these sneaky ones. The goal is simple: keep more of what you earn by avoiding the avoidable stuff.
The best of the best list is a paid sponsorship, but these are professionals/companies that Tyler and Chad collaborate with within their own practices or have been vetted to earn a spot on this list. By supporting our sponsors, it allows Chad & Tyler to dedicate more time to you and the Physician Cents community. If you ever have a question (or not a great experience, which we don’t expect!) about a sponsor, please let us know. We call it the “best of the best” for a reason, and we will maintain that standard for our listeners & viewers.
This information is for general purposes only. This information is not intended to be a substitute for specific professional financial, tax, or legal advice, as individual circumstances vary. Please see a financial professional, CPA, and/or an attorney in regards to your own individual situation.
Wealthkeel’s Advisory Services and Financial Planning offered through Vicus Capital, Inc., a Federally Registered Investment Advisor. WealthKeel LLC, 615 Channelside Drive, Suite 207, Tampa, FL 33602 -- 267.590.9533.
Olson Consulting LLC, Offering Advisory Services and Financial Planning, is a State-Registered Investment Advisor.
A podcast designed specifically for physicians, offering a breakdown of complex financial topics to help you develop your financial IQ, further your financial journey, and improve your well-being. Whether you're a medical student, resident, fellow, or attending physician, you're sure to learn something new that will benefit your journey.
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