What it does
Three numbers and it shows what the practice really earned for you, how that splits between the salary that had tax withheld and the K-1 profit that did not, and whether the salary sits inside the range an associate would be paid for your production.
What you will need
- Collections for the year.
- True overhead percent. Everything spent before you were paid. If you are not sure, run the Overhead scorecard first; it hands you the number.
- Your W-2 salary.
- Your own production (optional). Doctor only. This sets the reasonable compensation range.
- Loan payments (optional). Turns profit into the cash that can actually leave.
How to read it
- What the practice earns for you should be 35 to 42 percent of collections. Below that, overhead is eating your pay.
- Reasonable compensation is 28 to 35 percent of your own production, what an associate would be paid to do what you do. A salary far below it is the pattern the IRS looks for. Far above it pays payroll tax for nothing.
- The April surprise is 32 percent of the K-1 profit, paid as four estimates during the year or found all at once in April.
- Profit is not cash: the loan principal comes out of after tax profit. A practice can show a profit and have nothing to distribute.
Why it matters in dollars
A $150,000 salary on $820,000 of doctor production is $80,000 under the associate range. A $350,000 K-1 with nothing withheld is a $112,000 bill in April. Both are planning problems, and both are fixed in an afternoon once you can see them.
Want the three numbers that matter most in your practice, from your own figures? That is what a Snapshot is. See the Path.