Spring is coming. The snow is melting. The crisp air is warming up. And accountants everywhere are dusting off their calculators. And if we’re being honest it’s one of our favorite times of year. But we know you probably aren’t as excited as we are when tax season rolls around. But what if we told you we could change that? I mean who doesn’t get excited about saving money? And the secret is out…here’s our best tax saving tips for you!

1. Make Estimated Tax Payments

Estimated tax payments are the IRS’s way of getting you to break up what might be a larger tax bill into quarterly increments. You pay a little bit throughout the year and then when tax season rolls around you owe less (or none at all) because you’ve already been contributing. Typically, you make these payments to the IRS and your state in April, June, September, and January.

As far as numbers go, we recommend making federal tax payments of 15% of your quarterly net income and state estimated tax payments of 5% of your quarterly net income. This amount will generally cover more than your tax liability, which means you’ll be all set come tax season and you may even get a refund (fingers crossed). 

Sidenote: While it may sound like this is an optional thing, it really isn’t. Estimated taxes are required and if you don’t pay them, you could get slapped with some penalties. So make sure that you’re contributing to this on time every quarter and everyone wins!

2. Track All of Your Business Expenses

You pay taxes based on your business’s net income. That’s your sales income minus all of your expenses. So the more expenses you have, the lower your net income, which means less taxes to pay. In order to deduct those expenses, you need to actually track them. That means staying up-to-date on your bookkeeping and properly categorizing your expenses each month. You’ll also want to make sure you keep track of any expenses you pay for personally, such as phone, internet, home office, and mileage expenses. 

Remember: If you don’t categorize your expenses, you won’t know which things are deductible or not when it comes time to work with your accountant. We have a whole article on categorizing expenses that you can check out here.

3. Contribute to a Traditional IRA

So this isn’t specifically for business owners since the deduction is taken on your personal tax return, but money is money right?! Contributions to traditional IRAs can be deducted on your individual tax return. Brace yourself for the next part because we’re going to throw around numbers…If your adjusted gross income (AGI) is less than $218,000, you can deduct the full amount of your IRA contributions, up to your contribution limit for the year. If your AGI is more than $218,000, you’ll get to deduct a portion of your total contributions. So if you want to take advantage of saving some money on personal taxes, this can be a great way to do that!

4. File and Pay on Time

This is perhaps the easiest one to do of all! Becaaaaause…there are penalties for filing late (without an extension) and for paying late (even with an extension. The late filing penalty is 5% of your unpaid taxes per month, up to 25%. The late payment penalty is 0.5% of your unpaid taxes per month, up to 25%. These penalties may also include interest if you don’t file and  pay right away, so avoiding these penalties altogether is your best plan. Because this can really add up. 

Stay on top of your tax deadlines!

Corporations need to file by March 15, and individuals by April 15—and those dates aren’t just for filing; they’re also your payment deadlines. If you file your return early (say, in February) but don’t pay what you owe until July, you’ll rack up late payment penalties plus interest.

Need more time? You can file for an extension, which gives you an extra six months to file (moving your individual tax return deadline to October 15). But heads up—an extension only postpones the paperwork, not the payment. You’ll still need to pay by April 15 to dodge those pesky late payment penalties.

5. Use Expenses Wisely

Not all business expenses are created equally. As a business owner, you’re welcome to spend your money on whatever you want, but just know that not all expenses can be deducted on your tax return. Some expenses are only partially deductible. Let’s take a look at some expenses we’re commonly asked about: entertainment, meals, and gifts. While it may be a smart move to attract or retain clients, entertainment expenses are not deductible on your taxes. Meals are deductible, but only 50%, and the meals must be purchased from a restaurant (and obviously be related to your business).

Gifts to clients may be deducted up to $25 per client. In order to save on taxes, you can try to spend more on things that are fully deductible, like advertising, office supplies, and contractors. In fact, we could probably talk all day about things you can write off on your tax return. Or you can just read about it here.

 

6. Hire a tax accountant

Sure, DIY tax software exists, but when you’re running a business, tax prep isn’t just about plugging in numbers—it’s about strategy. A tax professional can help you:

–Find every deduction you qualify for (even the ones you didn’t know existed)
–Make sure you’re paying the right amount in estimated taxes so you avoid penalties
–Optimize your business structure for better tax savings
-Stay compliant with tax law changes (because the IRS loves to switch things up)
–Save time and stress—because let’s be real, tax season is already enough of a headache

Think of it this way: A great tax pro isn’t just there to file your return; they’re there to help you strategize and understand your taxes. 

So yeah…tax season might be inevitable, but that doesn’t mean you have to dread it. Hopefully, these tips help you save a bit this season. For more tax advice, and help preparing your tax return, reach out to us here.