Urgent Care & Telehealth Practice Owner Tax Playbook

Entity Structure for Multi-Location Practices

Urgent care and telehealth practice owners face unique entity structuring challenges because of multi-location operations and the mix of clinical and administrative functions. The most common structure is a management services organization (MSO) model: a management company (S-Corp or LLC) provides administrative, billing, and management services to the clinical practice entities (PLLCs or PCs) and charges a management fee. The management fee income in the MSO is not SSTB income and qualifies for the full §199A QBI deduction.

For single-location urgent care practices, the S-Corp election is typically the optimal structure. For multi-location practices, a holding company structure with separate operating entities per location provides liability protection and allows for flexible ownership arrangements with physician partners.

SSTB Analysis and QBI Planning

Urgent care and telehealth practices are generally classified as SSTBs under §199A because they provide services in the field of health. However, the MSO model can preserve the QBI deduction on management fee income. The management fee charged by the MSO to the clinical entities must be at arm's length to withstand IRS scrutiny.

Telehealth platforms that provide technology infrastructure (not clinical services) may not be SSTBs. Practitioners who own both a clinical practice and a telehealth technology platform should analyze each entity separately for SSTB status.

Telehealth: Multi-State Nexus and Apportionment

Telehealth practice owners who provide services to patients in multiple states face complex state tax issues. Most states impose income tax nexus on businesses with employees, contractors, or customers in the state. A telehealth practice with patients in 20 states may have income tax filing obligations in all 20 states. State apportionment rules vary — some states apportion based on sales (patient location), others use a three-factor formula (payroll, property, sales).

Practitioners should advise telehealth clients to: (1) identify all states where they have patients or employees; (2) determine the nexus threshold for each state; (3) register and file in all nexus states; and (4) consider the impact of state apportionment on the overall state tax burden.

Retirement and Benefits Planning

Urgent care and telehealth practice owners can implement the same retirement plan stack as other medical practice owners: S-Corp Solo 401(k) + cash balance plan. For practices with multiple physician employees, a defined benefit plan or cash balance plan must cover all eligible employees, which can significantly increase the cost. Practitioners should model the cost of covering employees before recommending a cash balance plan to a multi-physician practice.

The ICHRA (Individual Coverage HRA) is an attractive health insurance strategy for urgent care practices with a mix of full-time and part-time employees. The ICHRA allows the employer to reimburse employees for individual health insurance premiums on a tax-free basis, without the complexity of a group health plan.

Billing, Coding, and Tax Documentation

Urgent care practices must maintain meticulous documentation of medical billing and coding to support tax deductions. The IRS has scrutinized urgent care practices that deduct personal expenses through the business or that misclassify employees as independent contractors. Practitioners should advise urgent care clients to: (1) maintain separate business and personal accounts; (2) document all business expenses with receipts and business purpose; and (3) properly classify clinical staff as employees (not independent contractors) to avoid TFRP exposure.

Frequently Asked Questions