Bookkeeping and payroll for mental health professionals in private practice

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What does the practice actually pay beyond an employee's wages?

The wage is only the starting number. Once someone is on payroll, a whole stack of employer costs sits on top of it, and knowing that stack is often the difference between a hire that works and a hire that quietly drains the practice.

Employer payroll taxes come first. You match your employee’s Social Security and Medicare, currently 7.65 percent of wages up to the annual Social Security wage base. Then there is federal unemployment tax on the first slice of each employee’s wages, and state unemployment insurance, which varies quite a bit by state and by your own experience rating. Workers compensation coverage is required in most states even for a small clinical office, and that premium is calculated as a percentage of payroll based on your state and job classifications. These rates and thresholds shift, so please confirm current numbers with your tax professional.

After that come benefits and the quieter costs. Health insurance contributions, a retirement match, paid time off, license renewal or CEU stipends, malpractice coverage, an EHR seat, payroll software fees. There are also the hours you pay for that never bill, like documentation time, team meetings, supervision, and the slots that open up when a client cancels. With a W-2 clinician, the practice absorbs the empty slot, and that shows up in your margin even though no line item is labeled that way.

This is why a 60 percent split means two very different things depending on classification. Picture an associate who collects $10,000 in a month. At a 60 percent W-2 split, the wage is $6,000, and once employer taxes, unemployment, workers compensation, and even a modest benefit contribution land on top, the practice’s real cost often runs $7,000 or more. At a 60 percent contractor split, the practice pays $6,000 and stops there, while the clinician carries self-employment tax and buys their own coverage. Comparisons circulating now put the gap in effective value at roughly a thousand dollars a month on a caseload like that. Read those figures as illustration rather than a quote for your practice.

Whether a role should be W-2 or 1099, and what benefits to offer, is a decision for your attorney and your tax professional. My job is making the real cost visible. When payroll runs through your books properly, your monthly reports show the fully loaded cost of each clinician, so you can see what adding the next associate really takes.

Bookkeeping for therapists and group practices is the whole of what I do, and I am happy to walk through your numbers with you. Book a consultation with me and let’s look at them together.

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More Questions

What does it actually cost to run a therapy practice?

Established solo practices commonly run somewhere between $1,500 and $5,000 a month in overhead, and lean virtual practices often come in well under that. Those figures move around and are worth verifying. The number that matters most is your own, and your books can tell you exactly what it is.

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I offer sliding scale to a good share of my caseload. What should my books show me about it?

Your books should show your effective rate per session, the gap between your posted fee and what you actually collect, and how much of your weekly caseload sits at a reduced rate. Those three numbers tell you what sliding scale really costs and how much of it your practice can carry.

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What's the difference between profit and the cash in my account?

Profit measures what your practice earned and spent over a period of time. Your bank balance shows what is sitting there at one moment, after payment lags, big annual bills, tax set-asides, and owner draws. Both numbers are true, and they answer different questions.

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What is a healthy overhead percentage for a practice?

Common guidance puts overhead under roughly 32 percent of revenue for a lean solo practice, with group practices running higher. Treat that as a starting reference to verify, since the number that actually helps you is your own, tracked month after month.

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Private-pay and insurance money arrive on completely different rhythms. How do the books keep that straight?

Card payments usually land in a couple of business days while insurance remittances take weeks, so any month's deposits are a mix of recent sessions and older claims. Clean books date revenue consistently, separate the payer streams, and break lump deposits back into their pieces so you can tell a slow payment week from a slow month of work.

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What kind of practice fits AD Keeps The Books best?

Mental health practices with one to about ten people, anywhere in the country. Solo therapists, psychologists, LCSWs, addiction counselors, psychiatric nurse practitioners, group practices, telehealth practices, and ABA providers. If you want your books current and a bookkeeper who already speaks your language, you're the fit.

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AD Keeps The Books is Aretha Dirden, a bookkeeper who spent more than 15 years as a licensed nurse in mental health before taking over the books for the people doing that work. She handles monthly bookkeeping, catch-up and clean-up work, and payroll for therapists, psychologists, counselors, and clinical social workers in private practice, and she does the work herself for every client. Based in Lancaster, California, serving practices nationwide. QuickBooks ProAdvisor certified.

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