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What Do Therapists Need to Know About Taxes in Arkansas?

Arkansas therapists face state income tax, licensing requirements, and a growing focus on local business compliance. Whether you’re running solo or growing a group, this guide gives you a clear path through entity setup, tax deadlines, and deduction strategies.


Who this guide is for

This guide is for:

  • Licensed Arkansas therapists (LPCs, LCSWs, LMFTs, psychologists, etc.)
  • Therapists working independently or in groups
  • Providers offering in-person, telehealth, or hybrid care
  • Anyone wanting to minimize tax stress and avoid filing mistakes

Step 1: Pick the right structure for your practice

Arkansas offers flexibility, but not all structures are equally tax-efficient.

Sole Proprietorship

  • No filing required unless using a DBA
  • All income is taxed personally, including self-employment tax
  • Simple, but offers no legal protection

PLLC (Professional LLC)

  • Allowed in Arkansas for licensed professionals
  • Protects your personal assets
  • Default tax treatment is pass-through (same as sole prop)
  • Can elect S Corp for tax savings
  • Must register with the Secretary of State and notify your licensing board

S Corporation

  • Reduces self-employment tax by splitting salary and distributions
  • Requires payroll, bookkeeping, and corporate filings
  • Worth considering once net income exceeds ~$75K/year
  • Still pays Arkansas income tax on total income

Professional Corporation (PC)

  • Allowed in Arkansas
  • Can elect S Corp status
  • More admin overhead — usually for larger groups

Step 2: Know your state tax obligations

State income tax

  • Arkansas uses progressive income tax rates
  • 2025 rates range from 2% to 4.4% depending on income
  • All business income flows to your personal return (Form AR1000F or AR1000NR)

Franchise tax

  • All LLCs, PLLCs, and corporations must pay the Arkansas franchise tax
  • Flat fee: $150 annually (for most small entities)
  • Due May 1 each year
  • File with the Secretary of State

Business licenses

  • Arkansas does not issue a general statewide business license
  • But some cities or counties may require local licenses or permits
  • Check with your city or county clerk

Step 3: Pay taxes throughout the year — not just in April

Estimated taxes

  • Required if you’ll owe $1,000+ to the IRS or Arkansas
  • Due quarterly: April 15, June 15, Sept 15, Jan 15
  • Arkansas estimated payments go on Form AR1000ES

Self-employment tax

  • 15.3% applies to net income from sole props and default PLLCs
  • S Corps reduce this by paying you a salary and separating distributions

Filing requirements

  • Sole prop: Schedule C + AR1000F
  • PLLC: Franchise tax + individual income return
  • S Corp: 1120-S + W-2s + AR1100S + franchise tax

Step 4: Track and claim your deductions

Smart expense tracking helps lower your federal and state tax bills.

Deductible expenses for therapists

  • CEUs, licensure renewals, supervision
  • Malpractice insurance
  • Rent or home office
  • HIPAA-compliant software and billing platforms
  • Website, marketing, directory fees
  • Phone, internet, office supplies
  • Retirement contributions (Solo 401k, SEP IRA)
  • Self-employed health insurance

Step 5: When it’s time to consider an S Corp

An S Corp helps cut your self-employment tax — if your income supports it.

  • Pay yourself a W-2 salary
  • Take the rest as distributions
  • Reduces tax burden, especially over $75K net income
  • Must handle payroll, W-2s, and corporate returns
  • Still subject to Arkansas franchise tax and state income tax

Step 6: Common mistakes therapists make

  • Forgetting to file or pay the $150 franchise tax
  • Waiting too long to switch to an S Corp
  • Not registering their PLLC with both the state and licensing board
  • Missing estimated tax deadlines
  • Skipping deduction tracking for CEUs, software, and supervision
  • Not separating personal and business accounts

Step 7: Our recommendations by income level

Net Income Range

Suggested Action

Under $50K

Sole prop or PLLC; file franchise tax; track every deduction

$50K–$100K

Consider S Corp election; run payroll; review taxes quarterly

Over $100K

Use full S Corp setup; contribute to retirement; get CPA support

Need help figuring this out?

We help Arkansas therapists choose the right structure, reduce their self-employment tax, and avoid franchise tax surprises.

Book a consult or email us at david@leichtercpa.com

Disclaimer: This guide is for informational purposes only and does not constitute legal, tax, or financial advice. While we make every effort to keep the content accurate and up to date, state laws and regulations can change without notice. You should consult a licensed professional in your state before making any decisions based on this information. Leichter Accounting Services is not liable for any errors or omissions, or for any actions taken based on the contents of this guide.