Smart Tax Planning for Medical Professionals: Reduce Taxes, Build Wealth, and Avoid CRA Audits
You trained for years to care for patients. You shouldn’t have to carry the stress of complex tax rules, surprise CRA letters, or year-end scrambles. For doctors, dentists, and other healthcare providers, smart tax planning isn’t about complicated tricks. It’s about a simple, proactive routine that keeps more of what you earn, protects your practice, and helps you build long-term wealth.
At Dexado, that routine is built by a team led by Boris Davidkov, CPA an ex-CRA auditor. We design your plan to work in the real world of clinics, OHIP/private billing, locum work, and professional corporations. Our goal is to reduce your taxes today, keep your file “boring” to CRA, and grow your after-tax wealth over time.
Why doctors need a plan (not just a tax return)
Most medical professionals only think about accounting at tax time. By then, many opportunities are gone: the salary/dividend mix is locked in, GST/HST mistakes have piled up, and recordkeeping gaps make audits harder to defend.
A better approach is year-round planning. That means a clear structure, clean monthly books, and short check-ins during the year. It also means your accountant plays offence—anticipating CRA questions and preventing them—rather than just filing forms
Step 1: Pick the right structure—and make it work for you
Many physicians move quickly from residency into a mix of clinic work, locums, and eventually incorporation. Each setup changes how you’re taxed and what you must file.
- Sole proprietor: Simple to start; income is taxed personally.
- Professional corporation (PC): Opens tax planning options, including a lower small business corporate rate on active income, flexible compensation, and long-term wealth building.
- Group practice/partnership elements: Adds payroll, shared costs, and more complex GST/HST and expense allocations.
The structure is step one. Step two is how you pay yourself:
- Salary: Creates RRSP room and steady cash flow; CPP applies.
- Dividends: Flexible and simple; no CPP, but no new RRSP room.
- Balanced mix: Often best—fine-tuned each year.
The right mix changes with your income, family needs, and retirement goals. We revisit it at least annually so you’re not overpaying tax or leaving RRSP/IPP opportunities on the table.
Step 2: Build an audit-proof foundation (the calm clinic file)
Audits are stressful, but they’re predictable. CRA looks for patterns. We design your file to answer questions before they’re asked.
GST/HST: what’s exempt vs taxable—keep the codes clean
Many physician services are exempt, but not all. Cosmetic procedures and product sales (e.g., skincare) are often taxable. A few small coding errors, repeated, can become a large assessment with interest.
- Use separate POS codes for exempt services, taxable services, and product sales.
- Run a quarterly mapping check: do invoices and POS totals match your GST/HST working papers?
- If you discover an error, fix it quickly and document the correction.
Bank deposits vs reported income: one page, once a month
CRA compares deposits to reported revenue. Gaps happen because of clinic transfers, OHIP timing, or inter-account moves. Your best defence is a short monthly reconciliation that explains unusual deposits in plain language—who paid, what for, and which month it belongs to.
Personal Services Business (PSB) risk: avoid the “incorporated employee” label
If your PC bills one clinic, follows their direction, and bears little business risk, CRA may argue you’re an incorporated employee (PSB), which can mean a much higher tax bill.
Lower the risk with three practical moves:
- Contract language that shows independence (control over schedule, right to refuse assignments, invoicing per engagement, ability to send a qualified substitute).
- A second payer where realistic—occasional locum shifts, telemedicine, medico-legal reviews, or teaching. Even modest amounts help.
- Business markers: a basic website, insurance in your PC’s name, and your own practice tools or systems.
Shareholder loan hygiene: aim for zero
The cleanest file has no balance—no “due from” and no “due to” shareholder. If you must borrow from your corporation, make it real: a short loan agreement, interest at least at the CRA prescribed rate, and a simple repayment schedule. Pay the annual interest and record it. If funds are personal, consider dividends or payroll instead of leaving a lingering loan. Try to clear any debit balance by year-end or early in the next year.
Step 3: Keep books you can trust (and CRA will respect)
Disorganized books cost you twice: you miss deductions and you look risky to CRA. A simple cloud setup fixes this:
- QuickBooks Online (or similar) for core bookkeeping.
- A receipt-capture app so you never lose support.
- A mileage-log app to keep vehicle benefits defensible.
- Monthly reconciliations so nothing accumulates.
With clean books, you see your true after-tax income during the year not six months after year-end.
Step 4: Turn taxes into a wealth engine
You can reduce today’s taxes and build tomorrow’s wealth at the same time:
- RRSP/IPP strategy: Salary can create RRSP room; higher-income physicians may benefit from an IPP over time. We run the math.
- Holdco (when appropriate): If your PC earns more than you need to live on, a holding company can help separate operating risk from investments and create flexibility for future planning.
- Investment strategy inside a corporation: Understand how passive income rules can affect your small business rate and plan accordingly.
- Succession & exit: Early planning protects access to the Lifetime Capital Gains Exemption (LCGE) on a qualifying share sale and helps you manage Alternative Minimum Tax (AMT) risks.
These tools aren’t “one size fits all.” We tailor them so they fit your practice, family, and retirement timeline.
Step 5: Move from reactive to proactive (short checkpoints win)
Your tax plan should breathe with your life. We recommend short, scheduled touchpoints:
- Quarterly or semi-annual reviews to fine-tune salary/dividends, plan equipment purchases, and course-correct for GST/HST or PSB issues.
- A pre-filing check each year (think “mini-audit”) to make sure your logs, GST/HST codes, and shareholder-loan account are tidy before your return is filed.
The result: you file with confidence—and with a file that’s designed to pass a CRA review.
Myth vs Reality (doctor edition)
Myth: “If I’m incorporated, I always pay less tax.”
Reality: Incorporation gives you options, but how you pay yourself and how you invest matters just as much.
Myth: “If it’s not OHIP, it’s exempt from HST.”
Reality: Many items are taxable—especially cosmetic procedures and product sales.
Myth: “Dividends to my spouse are always fine.”
Reality: The tax on split income (TOSI) rules can apply. You need a plan that fits the law and your facts.
Myth: “If CRA audits me, I’ll just send everything and it will end faster.”
Reality: Oversharing can expand the audit. Send exactly what’s asked—clean, labeled, and on time—through your representative.
Mini case snapshots (anonymized)
- PSB flag avoided: A PC billing one clinic added periodic locum shifts and updated its contract to show real independence. CRA closed the review with no PSB reassessment.
- HST mis-coding fixed: A cosmetic stream was coded exempt. We remapped POS, calculated the correction, and negotiated a smaller assessment with interest relief discussions due to prompt action.
- Shareholder loan cleaned up: A lingering debit balance was converted to planned dividends over the year, with documentation. The next review found a nil balance and no shareholder-benefit issue.
Why medical professionals choose Dexado
Ex-CRA advantage. Boris has sat on the other side of the table—he knows what auditors look for, how files are picked, and where scope can creep. We build your plan with that in mind.
Strategy first. We don’t just file; we design your compensation, GST/HST mapping, and recordkeeping to reduce tax and risk all year long.
Audit protection mindset. Returns we prepare are built with CRA review in mind. If CRA asks questions, we’re ready—with organized support, clear narratives, and a calm, professional tone.
Technology that saves time. Cloud bookkeeping, simple apps, and tidy workflows keep your file clean and your stress low.
Your next step: a calm conversation that pays for itself
If you want lower taxes and fewer CRA worries, the best time to act is now—before year-end, before the next filing, before an audit letter arrives. A short meeting can uncover quick wins in your pay mix, GST/HST coding, and documentation—and set a path to long-term wealth.
Call to action: Book a consultation with Dexado. We’ll review your current setup, flag the top risks (PSB, GST/HST, shareholder loans), and map a simple plan that reduces tax, protects your practice, and grows your after-tax wealth.
Disclaimer
This article is for educational purposes only and does not constitute accounting, tax, or legal advice. Every situation is unique; obtain advice tailored to your circumstances before acting. Dexado Accounting & Tax Professional Corporation assumes no liability for actions taken based on this content.
