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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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Every year, physicians across the country watch hard-earned money slip out of their hands—not for a well-deserved vacation or a new road bike, but because of sneaky, avoidable tax mistakes. It’s like tipping at a restaurant when you meant to order takeout—except you have no idea you tipped, and Uncle Sam is off somewhere with your “extra” cash.
Here’s the kicker: You don’t have to be a tax genius to avoid these mistakes. You just need the right guide, a dash of vigilance, and maybe a little coffee. Let’s break it down, plain and simple, so you can finally stop leaving hundreds or even thousands of dollars on the table year after year.
Let’s call it like it is: Doctors are overpaying taxes every year because of simple, avoidable tax mistakes. Even the best accountants (yes, even yours) or the fanciest tax software can miss things that hit physicians the hardest. Think of your tax return as a complex science puzzle, but the instructions are missing, and everyone just hopes they’re right.
You might be wondering, “Isn’t my accountant supposed to catch this?” Sometimes yes, sometimes no. If you’re not asking the right questions or double-checking the details, you’re at risk of leaving extra money on the table.
The good news? Most of the common tax headaches for doctors show up year after year—and they’re absolutely fixable if you know where to look.
Here’s your cheat sheet. These are the main traps that cause doctors to accidentally leave a tip for the IRS:
These mistakes don’t care if you’re a genius in the OR or have a top-rated accountant—they’re equal-opportunity offenders.
Let’s cut straight to it: Many physicians make too much to contribute directly to a Roth IRA. So, you use the “backdoor” method—put money into a traditional IRA, then convert it to a Roth IRA. Sounds simple? It should be… but here’s where the IRS likes to lay a few banana peels.
1. Form 8606 is Missing or Just Wrong
2. 1099-R: The Surprise Guest
3. Pro Rata Rule: The Stealth Tax Monster
So, here’s what trips up a lot of smart doctors:
Form 8606, 1099-R, and the pro rata rule are the three musketeers of Roth mistakes.
Let’s tell the truth: Having a rollover IRA at some big firm makes your backdoor Roth plan way less effective—sometimes totally pointless. Here’s how it happens:
A doctor rolls over an old 401(k) to an IRA. Years later, they start doing backdoor Roth IRAs—sometimes at the very same place. The advisor or firm likes to manage all the pieces, but no one is connecting the dots. The IRS sees the pre-tax IRA money and treats the conversion as partly taxable.
Let’s say you put in $7,000 as a non-deductible contribution… but you also have $70,000 in a rollover IRA. When you convert $7,000, only a tiny part comes out tax-free—the rest gets taxed. The fix is usually to roll your rollover IRA into a workplace 401(k) or solo 401(k) before you start the backdoor Roth. No leftover pre-tax IRA, no extra taxes. Simple, but easily skipped.
Whenever there’s an advisor who doesn’t deal with a lot of doctors, you see this mistake pop up again and again.
Picture tax season for a second. It’s a 6–8 week tornado where accountants eat lunch at their desks and dream of sleep. It’s pure chaos. Even the best accountants aren’t mind readers—they won’t know you did a Backdoor Roth unless you tell them or send all your paperwork.
Here’s where things go off the rails:
Want to stop this madness? Get in the habit of reviewing your draft tax return, not just the final copy. One little review can save you from a five-digit disaster.
If you take just one action from all this, let it be this: Always, always review your tax draft before it’s filed. You’d be shocked how many errors get caught just because someone paused to take a second look.
Ask your accountant for a draft. Sit down with your financial advisor. Invite a tax-savvy buddy (pizza helps). A quick review can find missed forms, crazy math mistakes, or unexplained numbers before the IRS or your wallet gets burned.
Catching a Roth error, for instance, can mean thousands of dollars back. Think of it as finding money in the couch, except way better.
A 1099 is how your bank, brokerage, or side gig says, “Hey IRS, Joe received $500 from us, just making sure you know.” It covers interest (1099-INT), dividends (1099-DIV), freelance income, and more. If you receive a 1099, the IRS gets a copy too—and expects that income on your return.
Don’t assume your accountant can track all this. Their software only knows what you give them.
The IRS matches what the banks and brokers report to what you filed. If the numbers don’t line up, you can face an audit or a tax bill plus penalties and interest. It’s not fun and not worth risking.
Solution: Make a simple checklist. Once a year, log in to every bank, broker, and app you use. Download every 1099 and cross-check it with your tax return. You’re not just preventing problems—you’re saving yourself stress and money.
An S-corp lets self-employed doctors treat part of their income as a distribution, not subject to self-employment tax, and (if set up and managed right) can save a chunk of money in taxes. It’s especially tempting if you’re making income as a contractor—think emergency docs, anesthesiologists, or any 1099 physician.
A good accountant will help you figure this out, walk you through the numbers, and set things up so you’re safe—and not on the IRS’s radar.
Think of these as the IRS’s way of saying, “Hey, you didn’t pay us enough during the year, so now we’re adding a little extra bill.” This is especially common when you get 1099 income, partnership K-1s, or any type of income not subject to normal payroll withholding.
Check your tax return: Underpayment penalties show up on line 38. If there’s a number there, that’s money out of your pocket.
You’re supposed to pay taxes throughout the year, not just in April. This means making quarterly estimated payments—usually due:
Doctors often believe, “I’ll just pay it all at the last deadline.” Nope. The IRS wants money as you go. Delay, and they’ll ding you with penalties and interest.
These aren’t tiny, “fix-it-later” numbers. The penalty rate has jumped from about 3% to 7-8% in recent years. If you underpay by $20,000 throughout the year, you could owe $1,400 to $1,600 easy. Do this every year—and you’re literally tipping Uncle Sam a used car’s worth.
One year of penalties—fine, things happen. But two years in a row? It’s time to fix it.
Physicians move. A lot. Maybe you go from training in one state to practice in another. Or you work remotely for a hospital in a neighboring state, or even move but forget to update your address and payroll info.
Examples that trigger headaches:
Doctors usually focus on the massive federal tax bill and wave away state taxes as “whatever.” That’s a bad call, because if you file wrong—or not at all—states will eventually catch up. Also, big-name tax software sometimes asks the wrong questions or misses complicated, multi-state decisions.
When should you file a return in a state? When you worked there, lived there, or earned money there at any point in the year. That can mean filing two (or more!) state returns in one year.
Yes, state tax bills are usually smaller. But mistakes can cost you refunds—and add audit risk and paperwork later.
You guessed it: Right now is the prime time to fix your tax plan for the next year. Waiting until tax day in April is like showing up to the airport as your plane’s taking off. Sure, you’ll get to your destination eventually, just with lots of headaches.
If you’re graduating residency, starting a new job, or planning a big income jump, map out your “tax year” now. Check your draft return, update your W4 if you’re employed, or plot out those quarterly payments if you’re self-employed.
Talk to your accountant now—not in the middle of tax season chaos. You’ll get better advice, more time to adjust, and peace of mind.
The best way to keep your cash in your pocket? Treat your financial team like—you know—a team!
Good communication saves money. Double-checking saves money. Do both and, well, you keep more of what you actually earned.
High fives all around—you made it to the end and (hopefully) picked up a few ways to stop tipping Uncle Sam for services you don’t want. Here’s what to do next:
Ask questions. Review your drafts. And build a financial team that understands physicians, not just generic tax rules. Trust me—you’ll sleep better at night.
Now go double-check those tax drafts. No more tipping required!
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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Conversations helping graduating medical students to attending physicians build a strong financial foundation
