A physician’s guide to making the most of a tax extension

When physicians hear the word “extension,” many assume something has gone wrong. They worry the IRS will see the filing as a red flag, or that requesting more time could increase their chance of an audit.

That is one of tax season’s most persistent myths. Filing an extension does not trigger an audit, and the IRS does not see it negatively. Extensions are common. In fact, the IRS expected more than 20 million taxpayers to request for one last year.

What a tax extension does and does not do

A tax extension is often necessary, as 82% of physicians believe they are already overpaying in taxes. So, an extension should be treated as a planning window, not a delay. This is because a return may involve W-2 income, 1099 income, partnership distributions, K-1s, investment statements, practice expenses and retirement plan decisions. Those records do not always arrive before April 15, and a rushed return can leave money behind.

The key thing to remember here is that an extension gives you more time to file, not more time to pay. If you owed taxes on April 15 and did not pay the full amount, penalties and interest may still be accruing. That is where many high-income professionals get caught.

After filing an extension, estimate the unpaid balance as closely as possible and pay what you can. If you missed the April deadline entirely, ask about First Time Abate relief. It will not erase the tax, but it may remove avoidable penalties.

What physicians should be doing during an extension period

The extension period is useful only if you use it.

The first move is to pull your IRS Wage and Income Transcript. This transcript shows wage and income information reported to the IRS by employers, brokerages and other payers. The IRS says taxpayers can access wage and income statements through their online account.

For physicians, this step can prevent avoidable notices. A missing 1099 from a locum tenens assignment, consulting project, expert witness engagement or investment account may not seem urgent in May. But it becomes a problem after the IRS matches your return against its records and sees income that was never reported.

Secondly, revisit your retirement contributions. In 2025, the IRS increased the defined contribution plan limit to $70,000. For physicians with eligible self-employment income, that can create enough planning room through a SEP-IRA or Solo 401(k), depending on the plan setup and contribution rules. A physician in the 37% federal bracket who makes a $70,000 deductible contribution, for example, could reduce federal tax by about $25,900 before any state tax benefit.

The third move is to review entity structure before the return is finalized. A physician with a profitable practice, recurring 1099 income, or a side business may benefit from evaluating whether an S corporation election would make sense. The IRS provides late election relief procedures for certain entities that intended to make an S corporation election but did not meet the requirements.

This decision should be reviewed with a tax advisor, as an S corporation election can affect payroll, reasonable compensation, state tax treatment and retirement plan design. The advantage of reviewing it during the extension period is that as a physician, you now have a clearer view of the year’s income. That makes it easier to estimate the potential tax savings before deciding whether the election is worth pursuing.

The tax benefits physicians commonly miss

Physicians and surgeons are among the highest-earning professionals in the US, with median annual wages of at least $239,200. At that income level, missed deductions quickly become expensive. That is usually because of the steady loss of smaller deductions that never get reviewed because the tax conversation is focused on filing, not physician-specific planning.

Many physicians assume the home office deduction does not apply because they work in a hospital, clinic or surgery center. That may be true for W-2 income, but physicians with 1099 income may still qualify if they use part of their home regularly and exclusively for business or practice management.

Mileage is another common gap, especially for physicians who earn income outside a primary W-2 role. Reports say nearly 40% of physicians have side gigs, and those assignments may require travel between work locations. Those miles can actually become deductibles when they are properly documented. However, the problem is many physicians try to recreate mileage months later instead of just tracking it as they go.

The same review should include the recurring costs of staying licensed and employable. Those CME expenses, licensing fees, board certifications, professional dues, journal subscriptions, and specialty memberships may look small on their own, but they can add up over a full year.

From there, physicians should look beyond deductions and review whether their income creates additional planning opportunities. For example, if you max out an employer 401(k), you may still have separate contribution options tied to 1099 income. In some cases, self-employed health insurance premiums may also be available.

The larger point here is that physician tax planning cannot be a one-size-fits-all. It has to reflect how you actually earn, do your practice, document expenses and save.

The extension window should not be wasted

You’ve probably read this over 100 times, but tax planning in medicine is (and should not be) a once-a-year task. I know most physicians file the extension, then return to their clinical schedules, and do not revisit taxes until September. By then, the return is mostly just a reporting exercise. We’ll often see retirement contribution decisions feel rushed. Entity structure conversations are now too complex to start. Mileage records are incomplete for who-knows-what reasons. CME, licensing, and professional expenses are buried in months and months of statements.

That is how the same missed opportunities repeat year after year.

The extension period creates time to review the full picture before the October 15 deadline forces quick decisions. It is the window to pull IRS transcripts, confirm all income has been reported, calculate retirement contributions, review entity structure, and identify deductions tied to how physicians actually work.

Now, the next best step is to schedule a conversation with a CPA who specializes in physician finances before summer is over. Not in September. Now. These tax moves that will help you reduce your 2025 bill have deadlines, and if you want to enjoy your options, start early.

Spencer Carroll is a CPA at Gelt