If you're a veterinarian you most likely have a pet... or two... or more... Let's be realistic, you went into veterinary medicine because you love animals. And throughout your career you've likely collected a small group of four legged kids who may need a little more maintenance than your average pet. And what better way to take care of your animals - and your finances - than to purchase their meds through your clinic at a discounted rate?
But did you know this is something the IRS is going to look for if they come knocking during an audit? The IRS actually has an audit technique guide specifically for veterinarians. And they train their auditors to ask about animals owned by practice owners. The medications that you purchase through your clinic cannot be wrote off as a clinic expense (unless your business is selling them to the practice owners and recognizing income from the sale).
If that sounds like something you may be doing here's what you can do to help protect yourself in an audit.
All of the medication you purchase for your personal animals needs to be kept separate from clinic medication. Track the cost of the medication and how the bill for that medication was paid. If it was paid by the clinic you need to have a written business policy for the reimbursement of that expense and it needs to be followed. Depending on your business structure that medication should either be recorded on the books as an owner distribution or there should be a record of the sale of the medication from the practice to the owner. The medication cannot be sold for less than the cost to the practice.
In other words the practice should never lose money on animals owned by practice owners. That is not a business tax write off and the IRS trains their staff to look for this issue when auditing vet clinics.