Physicians React: Tax Burdens, Audit Experiences, and Sensible Reforms

Batya Swift Yasgur, MA, LSW

November 07, 2022

Few if any Americans relish the coming of April 15. Many people in the United States are unshakably convinced that the federal and state tax systems are unfair at their core, that they pay too much, and that the filing process is baffling and cumbersome. Physicians, it seems, are no different.

In Medscape's Physicians and Taxes Report 2022: Do Doctors Pay Too Much in Taxes?, about 3 in 4 survey respondents said the answer is yes. Some doctors said the tax system works fine, but many more argued it is deeply flawed and begging for a major overhaul. "The entire income tax system needs to be revised, but it will never happen because too many bureaucrats make a lot of money off this system," one respondent complained.

Survey responses and comments to the report offer insights on what doctors think of how our federal and state governments impose and collect taxes..

Tales of Audits

Nearly one fifth of respondents have been audited. How do they describe that experience? At the mild end of the spectrum, physicians used adjectives like "benign," "smooth," and "fair." But "awful" was used a lot, along with "inconvenient," "major nuisance," "time-consuming," and "ridiculous."

"A few years ago, I needed my original documents to justify expenses," one neurologist recalled. "They had been lost in the mail when my accountant sent them to me. I attempted to use scanned copies of the documents. What a nightmare! I had to pay around $4000."

An otolaryngologist respondent called an audit "absolutely the most horrifying experience ever." And a family medicine physician said "there is no easy recourse in dealing with these horrible people [IRS auditors]. War would be more pleasant."

Not every respondent used such hyperbole. One pathologist said his audit created no problems: "The key is keeping open communication and old records." And a physiatrist said that she got a bigger refund after the audit

Tax System Is Simple Enough — Until It Isn't

Around two thirds of respondents agreed that the US system makes sense to a taxpayer. But some physicians were emphatic that it doesn't.

One cardiologist urged simplification, stating that there are "too many rules to know, too many deductions to find out, which isn't workable for people who work hard and have long hours and have to figure things out."

And a family medicine physician similarly recommended "simplifying the system and doing a set-percentage tax with very limited and specific deductions that the public can understand and do themselves."

Change That Doctors Can Get Behind

How else might physicians seek to change the tax system? A number of them strongly endorsed a uniform income tax rate. "There should be a flat tax (4%-5%) for all individuals and corporations, no complications, no deductions, no exceptions. If you made $1, then you pay 5 cents. If you made $1 million, then you pay $50,000," a psychiatrist suggested. And a critical care doctor suggested a flat tax on every dollar of income beyond 200% of the federal poverty level (which is $27,750 for a family of four in 2022).

A common refrain was that the "super wealthy, which does not include physicians," as one internist put it, "need to pay their fair share" by having unfair tax shelters and loopholes eliminated.

"My doctor income is pennies compared to the wealth of billionaires, and wealth inequality will lead to destabilization of society if it continues to grow," an allergist warned.

A radiologist called for "reducing taxes for everyone except the ultra-rich. "If you make $30 million a year, you can easily pay 50% and won't feel it. But if you make $400,000, then 50% is a huge amount lost."

Apart from their discomfort with the prospect that doctors are considered "wealthy," respondents took issue with the idea they leverage tax loopholes. "I hate the term 'loophole,' because these are laws enacted by Congress and are legal," one physician complained.

More Creative Suggestions

Certain other taxation topics were triggers for physicians, too. One was student loan debt, especially given the prospect that the Biden administration's proposed forgiveness could be considered taxable income. "Only in America is debt magically considered income, and forcing someone to pay taxes on forgiven debt is highway robbery," wrote an indignant family medicine physician.

Many doctors accumulate huge sums of student loan debt for undergrad and med school, and an emergency physician suggested giving them tax credits for loan payments.

Other physicians emphasized the impact of income lost to unreimbursed care. "If my practice looks after indigent, non-paying patients, it should get a tax break," one respondent argued. Added an ER doctor: "Physicians who worked during the pandemic and suffered a loss of income should be given a tax credit."

Some physicians called for more deductions in their profession, like the orthopedic surgeon who wants required expenses (eg, medical textbooks, journal subscriptions, and CME courses) deductible, even if the physician is not self-employed.

Others focused on retirement issues, like the emergency medicine physician who wants to remove the limit on Social Security contributions and several respondents who feel taxing Social Security benefits is unfair.

Other physicians wanted to get rid of the federal alternative minimum tax or to replace income tax with a consumption tax like the European VAT.

Regardless of how taxes are imposed, one family medicine physician wants the dollars spent more wisely. "Having them squandered is infuriating but paying taxes and seeing clear benefits is encouraging."

Batya Swift Yasgur, MA, LSW is a freelance writer with a counseling practice in Teaneck, New Jersey. She is a regular contributor to numerous medical publications, including Medscape and WebMD, and is the author of several consumer-oriented health books as well as Behind the Burqa: Our Lives in Afghanistan and How We Escaped to Freedom (the memoir of two brave Afghan sisters who told her their story).

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