It’s hard enough to run a successful small business these days without having to worry about taxes too. We’re going to go out on a limb here and guess that you got into business to sell the products or services that you’re really good at…not spend all your time trying to figure out ever-changing tax laws.
That’s why we’re here to help with this post, which is full of small business tax tips designed to make your life easier. No one should be stressed over taxes. That’s what we’re here for.
So read on and breathe easy. After you put some of these tips in place, you’ll be able to get back to taking care of your customers instead.
Small Business Tax Tips
Let’s start with something that isn’t officially a tip, but it’s a truth that will affect everything else: tax season isn’t just one time a year.
To navigate filing your taxes (whether on April 15th or any other time), you must prepare all year long. The tips we have for you will help you do just that. And then when it’s time to file, you’ll be ready.
- Save your receipts. You need to be able to justify any and every deduction you claim related to all of your “ordinary and necessary” business expenses. You’d be amazed how much money you could be leaving on the table by not deducting many of the things you spend money on day-to-day. (More on that in tip #2.)
We get it. Keeping up with piles of tiny paper receipts can be a hassle and take up a lot of space in your office. That’s why investing in a receipt scanner (also deductible) is a good idea. That way you can make digital versions as you record each expense in your accounting software. For more suggestions, take a look at a post we did on “How To Keep Up With Receipts Like A Pro.” - Take advantage of all credits and deductions. Now that your receipts are in order, you’re in a great position to reduce your taxable income through a variety of credits and deductions.
Credits are dollar-for-dollar reductions to your tax burden. You can qualify for them by doing certain things like having employee health insurance plans, operating EVs, doing research, and hiring from within certain populations. Learn more directly from this IRS page on credits and deductions for businesses.
Deductions decrease your taxable income, and this is where your receipts matter. You can deduct all business expenses that are “ordinary and necessary” for operating your company along with many other things. Read more in this related post we wrote: “16 Small Business Tax Deductions To Really Save You Money This Year.” - Estimate your quarterly taxes. No one likes being caught by surprise in business. We’d rather be able to know what is coming so we can prepare. Your tax payments shouldn’t be any different. By estimating your quarterly taxes and setting aside that amount every few months, you aren’t caught off-guard at the end of the year.
(The IRS actually requires quarterly payments instead of a single year-end check if your tax bill is over $1000 anyway.) - Be generous. One of the most rewarding ways to reduce your tax liability is to donate to charities. It’s a scenario where everyone benefits. You can donate used office furniture and equipment (deducting its fair market value) as well as cash.
- Think about how your business is structured. The way you set up your company can have a big impact on how it is taxed, and you have a lot of options: Sole Proprietorship, Partnership, Limited Liability Company (LLC), Single-Member LLC, C Corporation, and S Corporation for example.
Each entity comes with its own pros and cons, so it’s worth having a conversation with your CPA to see if switching could save you money. - Keep business and personal finances separate. One of the biggest mistakes we see small business owners make is running everything in their life out of one account. When your personal and professional finances mix, it can lead to a lot of messes.
Instead, keep dedicated bank accounts for your business that are completely separate from your personal money. And only use business money to pay business expenses. That way you’ll be prepared in case you are audited, you’ll make filing your taxes much easier, and you’ll avoid unnecessary headaches. (Plus, depending on how you’ve structured your business…see tip #5…the IRS might require it.)
Home Business Tax Tips
Small business owners who operate out of their homes need to keep some additional tips in mind.
- Deduct your office space. Whatever percentage of your total home square footage that is dedicated to your workspace can be deducted. It can be an entire room set aside as an office, or a desk in the corner of the family room. Just be sure that you don’t try to claim the pool too.
- Keep track of your calls. If talking to your clients is a regular part of your business, be sure to log the dates and times of those conversations (or highlight them on your phone bill) since they’re deductible. If you have a separate cell phone or landline for your business, be sure to write that off at the end of the year as well.
- Shared internet isn’t fully deductible. If you are doing business on the same internet connection that the rest of the family is using, you can’t claim more than 50% of that cost as a business expense. So make sure whatever you estimate it to be is reasonable enough that the IRS won’t raise an eyebrow.
Read more: “3 Important Things You Need To Know About Working With Family Members.”
New Small Business Owners
If you’re starting a new business this year, you’ll want to be sure to take a look at another post we did with “6 Top Tips For Filing Your Small Business Taxes The First Time.” It will help you:
- Know which forms to use.
- Gather your documents.
- Pick your accounting method.
- Choose a depreciation model.
- Claim your deductions.
- Know when things are due.
That way you can be excited about opening a business instead of terrified by the taxes.
Ways To Save Money On Your Small Business Taxes
Merril Lynch has some additional ways to save money on your small business taxes, including these 8 tax tips for small business owners. Their article is worth reading (after this, of course) but here’s a quick summary to give you some ideas:
- If this has been a “down” year and you operate on a cash basis, consider deferring payment on some of your expenses until next year. This year’s income may be taxed at a lower rate, and you may want those deductions next year when (hopefully) you make more money.
- Give family gifts in 2025. The high estate and gift tax limits are set to return to 2017 levels ($5 million for individuals, $10 million for couples). If your business is doing well and you have been thinking about transferring wealth to your family, this might be a good year to do it.
- Be aware of differing state tax laws if you have remote employees.
Business taxes can be complicated. Trying to do them yourself can quickly become a nightmare.
The best way to save money on your small business taxes is to team up with a good CPA firm that can help you navigate it all. So if all these tips aren’t enough, here are 8 great ways that small business tax services can help your company.
The Top Tax Tip? Trust a Pro.
Business taxes can be complicated. Trying to do them yourself can quickly become a nightmare. The best thing you can do to make tax time easier is to trust a pro to help guide you through it.
Why waste your valuable time and create avoidable stress by doing something you didn’t get into business to do in the first place? Let our team of experienced tax experts–we’ve been doing this for over 40 years now–help take the pressure off of this year’s tax season.
Schedule a call today to get started.We look forward to talking with you soon. Need even more reasons to partner with a pro? Check out “9 Ways A Small Business Tax Advisor Can Really Help Your Company Grow.”
