Taxes Overview (California)

Use this article for a general overview of taxes if your medspa is located in California.

Tax Overview

MSO (your LLC account): You will need to file taxes for your MSO (LLC) for earnings within your business. Revenue is all money coming into your account and expenses is all money coming out of your account.

PC / Professional Corporation:

Moxie Owned or Managed PC: If you are under a Moxie Managed PC (one that we own or manage for you and your doctor), Moxie will manage and pay for the tax filing. Please note these are C-Corps (designated as a Professional Corporation with the state).

Non-Moxie Owned/Managed PC: If you are under a PC you own or someone else owns, we suggest working with your PC owner on all tax-related work.

What forms do Medical Directors receive?:

• Moxie-managed PCs (Custom PC): If you are part of PC that Moxie set up, manages, and pays for, Moxie will issue 1099s to your MD partner. This 1099 will total all owner distributions they received under your PC (monthly medical director payments). These are sent by January 31, 2025. Your MD has been notified.
• Moxie-owned PC (Moxie Medical PC): If you are still part of or were part of at any time in 2024, a PC that Moxie owns, Moxie will also issue 1099s to your MD. This 1099 will total all medical director payments they've received by you under Moxie Medical PC. These are sent by January 31, 2025. Your MD has been notified.
  • Please note: Many of your MDs will receive two1099s if you migrated from Moxie Medical PC to the new custom PC structure in late 2024.
• PC that is not managed by Moxie: If you are under a PC that Moxie did not setup and does not manage, your PC owner needs to complete the appropriate tax form. Please speak with your accountant about the correct form based on your setup with your PC owner.

What forms do you receive for payment to yourself as a medspa owner? Please consult with your tax accountant to understand what form is relevant to your business setup.

*If you have a PC/MSO setup: Whether you are an owner of the PC or not, to streamline, it is typically recommended that you take a paycheck from the MSO side as owner of your MSO. Again, please consult with your tax accountant or attorney to seek further advice.

Why am I not the one issuing a W-9 to my MD since I am paying the MD?

As a reminder, all medical director payments should be paid out of your PC bank account directly to your medical director because this is treated as a medical expense. This means that the MSO’s revenue should only count sales at the medspa after taking out the md's payments (and any other medical expenses paid from the PC’s bank account). As a result, the MD payments can’t be counted as deductions from your MSO because that would be deducting it twice – it is correct that the MD payments should reduce the MSO’s revenue.

Why am I not independently handling taxes since it's my revenue flowing through the PC?

The payments received from services flow into the PC Bank Account. These funds are then first used to pay medical expenses.

The remaining funds (known as the management fee) are transferred into the MSO (LLC) bank account which is then used for non-medical payments, You will then file taxes for your MSO (LLC) for earnings within your business.

For additional context, it may be worth reviewing the MSO/PC explainer with the flow of funds diagram.

Moxie Bookkeeping

Moxie Bookkeeping makes it simple and organized by ensuring monthly P&Ls are completed that clearly show your PC vs MSO expenses. We highly suggest using Moxie Bookkeeping to ensure you have PC vs MSO expenses correctly managed through out the year. Interested in signing up for these services? Click here to learn more or contact your PSM.

CPA Recommendations 

Because your MSO is a management services business (the professional corporation is the medical practice), any business accountant with a filing license should be able to file your taxes. If you don’t already have a CPA you like, here are a few options: 

1. Your local H&R block office → they are efficient with helping small businesses, and we’ve found many business owners like having someone they can meet in person. *Top rec
2. TurboTax → Online system that makes it easy to follow how to properly file your taxes
3. Thumbtack → Great website for finding a local CPA 
   
   

Reporting: Your CPA may request access to certain information or reports for them to tally your income and profit. See below on what to use:

• Access to you bank account and any business credit cards:
  • If you are filing taxes for the MSO, they’ll specifically be requesting access to your MSO account and credit/debit card history, and will be able to calculate your revenue and expenses based on the inflows and outflows from that account. 
• The Year to Date (YTD) billing for my 9%: For simplicity in filing taxes you can use your MSO bank statement as described above.

• Total income :
  • You will use your MSO (LLC) bank account to determine your income for 2024. This equates to the total amount moved over from your PC bank account to your MSO bank account (total of all management fees). 
• Retail Tax: (your PC should include this when filing - not an MSO expense. This will only apply if you set up your own PC and are filing PC taxes)
  • Historical: If requested, we can send your PC Owner a customized historical report that shows sales tax accumulated from retail products sold based on the rate you had inputted into Moxie Suite. This report will also show a comparison of how much sales tax is truly owed with the correct, adjusted rate.
    • Example: when setting your tax rate it may have been set to 0% or an incorrect %. Per the email communication, we have adjusted your sales tax rate based on this calculator.

• • Custom Moxie-managed and owned PC: Moxie bills you quarterly for sales tax collection. These have been paid accordingly to the state every quarter. 

• If I have another provider or employee working for my practice, what do I need to do/submit if they are a W2? Contractor?
  • Contractor:
    • Contractor Agreement: Have a clear contract outlining the terms of the engagement. Make sure the relationship is clearly defined as an independent contractor arrangement to avoid misclassification issues.This should include scope of work, payment terms, and any other relevant details.
    • Tax Forms: Request your contractor to fill out a W-9 form. This provides you with their taxpayer identification number for tax reporting purposes.
    • If you have paid a contractor $600 or more during the tax year, you are generally required to issue a Form 1099-NEC (Nonemployee Compensation) to report their income. The IRS and the contractor get a copy. Any CPA should be familiar with this.
    • Payment Records: Keep detailed records of payments made to the contractor for tax and accounting purposes.
    • Compliance: Familiarize yourself with any state or local regulations related to independent contractors in your industry.
    • Remember, it's always a good idea to consult with a legal or tax professional to ensure you're meeting all legal requirements based on your specific circumstances.
• If I have another provider or employee working for my practice as a W2 employee, do I need to do anything or submit anything to them or for them?
  • If you use a recommended payroll provider, such as Gusto, they do all of the below, and you don’t need to do anything. If you paid your employee directly, work with your CPA to ensure the following are completed:
    • Wage Reporting: You are responsible for reporting wages, tips, and other compensation paid to your employees. This is done by filing Form W-2 for each employee. Your payroll provider may do this for you.
    • Form W-4: Ensure that each employee completes a Form W-4 to determine their federal income tax withholding. This form helps you calculate the correct amount of federal income tax to withhold from their pay.
    • Payroll Taxes: Deduct and withhold Social Security and Medicare taxes from your employees' wages. You also need to contribute a matching amount for Social Security and Medicare. Your payroll provider 
    • State and Local Taxes: Be aware of and comply with any state and local income tax withholding requirements. Some states have their own forms and regulations.
    • Employment Eligibility Verification (Form I-9): Ensure that you have a completed Form I-9 on file for each employee to verify their identity and employment eligibility.
    • Recordkeeping: Keep accurate records of wages paid, taxes withheld, and other employment-related information. These records may be subject to audit by government agencies.
    • Benefits and Compliance: If you offer benefits such as health insurance, retirement plans, or other employee benefits, ensure compliance with applicable laws and regulations.
    • Year-End Filings: At the end of the calendar year, you need to provide each employee with a Form W-2, summarizing their earnings and tax withholdings. File copies of the W-2 forms with the Social Security Administration.
  • It's important to stay informed about changes in tax laws and employment regulations. Additionally, consider seeking advice from a payroll or HR professional to ensure compliance with all requirements.