Your license to deliver healthcare is essential. You zealously protect it from threats and even refuse to participate in certain procedures for fear of operating outside of your assigned scope of practice. A number of actions—negligence, criminal activity, or alcohol or drug abuse—can cause your license to be revoked, suspended, or placed under probation. But did you know that failing to file state tax returns also could jeopardize it?

Lately, our firm has noticed some state tax commissions threatening to suspend or refuse to renew licenses held by practitioners who have not filed state tax returns or who have delinquent tax liabilities. In an era of stricter enforcement of professional standards, this is not surprising, but with the recent increase in frequency, we decided to investigate further.

Last summer, we contacted the nursing boards in all 50 states and the District of Columbia and asked these questions:

2) Are non-filers at risk for suspension of their licenses?

3) Can delinquent state taxes affect a license renewal?

4) Do you check for any federal tax filings in the renewal process?

The answers were consistent and can be summarized with this statement: We can and we will, if necessary.

What does this mean for you?

For the majority of healthcare professionals who file their returns and pay their taxes on time, this trend has no affect on their licenses. If you are among those who have yet to file previous year returns and/or are "delinquent" in the payment of state tax liabilities, your license may be in jeopardy. You are considered to be "delinquent" if you have outstanding tax liabilities that are not being addressed by a payment plan or if you have taken insufficient action toward resolving the balances owed.

Currently, Louisiana, Oklahoma, and Kansas aggressively cross-reference tax filings and delinquencies when monitoring healthcare practice licenses. All states have the capacity to act similarly.

More cross-referencing concerns

There was one question that we did not address in our survey, which we will possibly explore with state tax agencies at a later time. While it is clear that state license boards may cross-reference information from their respective state tax commissions, what about the reverse? Can state tax offices review professional license applications, renewals, or employment and cross-reference this information with state tax filings?

In our experience, the answer is yes. Since federal wage and tax filings are readily available to state agencies, employment data can be matched to W2s to establish a reasonable basis for the amount of income earned in the state.

California, in fact, routinely procures data concerning license and employment. Suppose, for example, that you are a traveler who obtains a new license in The Golden State and you fail to file a tax return. Or perhaps you travel with an agency that fails to report the wages you earned in California on your W2. In either scenario, you likely will receive a notice within 3 years requesting information or assessing income tax on the amounts you earned.

Positive impact

No one likes government intrusion into his or her private life, but by the same token, no one likes to bear the expense of another's negligence or laws that go unenforced. Regardless of our feelings about such scrutiny, it has a positive impact on professional standards. Just as we carefully guard our licenses to practice, we must realize that filing tax returns is an important part of our duties as citizens—and give this legal requirement the prompt attention it deserves.

Any tax advice contained is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.

Special thanks to Diane Gillis, TravelTax's administrative assistant, for her work in surveying the state nursing boards.