One of the quieter financial surprises that comes with owning a Direct Primary Care practice is the shift in how taxes work. In a traditional employment setting, taxes are withheld automatically from each paycheck. In a DPC practice, that responsibility falls entirely on the physician.
For many practice owners, quarterly estimated taxes are something they figure out reactively — often after an unexpected tax bill or a penalty notice. With a little planning, however, this part of running a practice can be straightforward and stress-free.
Why This Is Different From Employment
When you worked within a health system or group practice, your employer withheld federal and state income taxes, Social Security, and Medicare from every paycheck. The IRS received its share consistently throughout the year.
As a self-employed practice owner, no one is withholding taxes on your behalf. The IRS expects you to pay as you earn through quarterly estimated tax payments. These payments are typically due four times per year: in April, June, September, and January.
If you do not pay enough throughout the year, the IRS can charge an underpayment penalty, even if you pay your full tax bill when you file your return in the spring.
How to Calculate What You Owe
There are two common methods for calculating quarterly estimated tax payments. Understanding both helps you choose the approach that fits your practice.
The Safe Harbor Method
This approach bases your payments on what you paid in taxes last year. If you pay at least 100 percent of your prior year tax liability (or 110 percent if your income was above a certain threshold), you are generally protected from underpayment penalties regardless of how much you owe when you file. This method works well for practices with relatively stable revenue.
The Current Year Estimate Method
This approach estimates your actual current year income and calculates payments based on your projected tax liability. It requires more attention to your financial numbers throughout the year, but it can help avoid overpaying if your income has decreased or your deductions have increased.
Many DPC practice owners benefit from a hybrid approach: using the safe harbor as a baseline while adjusting payments upward when the practice has a strong growth period.
Self-Employment Tax Is a Common Surprise
Beyond income tax, practice owners are responsible for self-employment tax, which covers both the employee and employer portions of Social Security and Medicare. This amounts to 15.3 percent on net self-employment income up to the Social Security wage base, and 2.9 percent on income above that threshold.
For physicians accustomed to seeing only the employee side of these taxes, the full self-employment tax can feel significant at first. The good news is that half of the self-employment tax is deductible, which helps reduce your overall taxable income.
What Happens If You Miss a Payment
Missing a quarterly payment does not immediately trigger a penalty in most cases. The IRS calculates underpayment penalties based on the amount that was underpaid and for how long. Smaller underpayments may result in a modest penalty, while larger gaps can add up over time.
More importantly, missing payments often signals that cash flow management and tax planning are not yet working together. For a growing DPC practice, aligning these two areas can make a meaningful difference in financial stability and peace of mind.
Building a System That Works for Your Practice
The physicians who navigate quarterly taxes most smoothly tend to have a few things in common. They set aside a percentage of revenue each month specifically for taxes, they work with an accountant who proactively reviews their numbers before each payment deadline, and they treat tax planning as an ongoing conversation rather than a once-a-year event.
When tax strategy is integrated into the financial rhythm of your practice, surprises become rare. You know what you owe, when it is due, and how your current performance affects your projections.
Have questions about your tax strategy?
At Goodman CPA, we work exclusively with Direct Primary Care physicians to build proactive tax strategies that reduce surprises and keep more money in your practice. From quarterly estimated tax planning to year-round financial clarity, we help you stay ahead of the numbers instead of reacting to them.
Schedule a free discovery call to talk through your current situation and what a proactive tax strategy could look like for your practice.