Taxes may be unavoidable, but overpaying them isn’t. Whether running a small business or managing a growing company, thoughtful business tax planning can significantly impact your bottom line.
Too often, tax planning is left until the last minute, usually around filing season. But when it’s part of your year-round strategy, it becomes a powerful tool for saving money, improving cash flow, and avoiding costly surprises.
We’ll walk through practical tax planning tips that could save your business thousands. These aren’t just quick wins—long-term habits that set your business up for success.
1. Choose the Right Business Structure
Your business entity type has a significant impact on your taxes. Sole proprietorships, partnerships, LLCs, S-corporations, and C-corporations all follow different tax rules.
Why it matters:
- Sole proprietors and single-member LLCs are taxed on personal returns.
- S corporations allow owners to split income between salary and distributions, potentially lowering self-employment tax.
- C-corporations pay corporate tax rates but may benefit from flat rates on higher earnings.
Tax tip:
Review your entity type with a CPA each year, especially if your income has increased or you’ve expanded. The proper structure could reduce your effective tax rate.
2. Track and Maximize Business Deductions
Missing deductible expenses is one of the most common tax planning mistakes. Keeping accurate records helps ensure you’re claiming everything you’re entitled to.
Common deductions include:
- Office rent and utilities
- Payroll and contractor payments
- Marketing and advertising
- Travel and meals (with documentation)
- Business insurance
- Software subscriptions
- Equipment purchases
Tax tip:
Use accounting software or work with a bookkeeper to keep your records organised. Set aside time each month to review expenses and categorise them correctly.
3. Take Advantage of Section 179 and Bonus Depreciation
When you buy equipment, computers, or office furniture, you can write off the entire cost in the purchase year rather than depreciate it over several years.
Section 179 allows businesses to deduct the full cost of qualifying property up to a specific limit.
Bonus depreciation lets you write off 100% of eligible assets purchased after Sept 27, 2017, and before 2023 (phasing down in later years).
Tax tip:
If you plan to invest in large purchases, time them before year-end. Make sure your tax advisor confirms eligibility for accelerated deductions.
4. Pay Yourself Strategically
If you own an S-corporation, how you pay yourself can impact your tax bill. The IRS requires reasonable compensation, but splitting your income between salary and distributions may reduce payroll taxes.
Tax tip:
Work with your CPA to determine a reasonable salary based on industry standards. Keep clear payroll records and ensure you file required forms (e.g., W-2, 941).
5. Set Up a Retirement Plan for You and Your Employees
Retirement plans don’t just help you prepare for the future—they’re also a great way to reduce taxable income today.
Plan options include:
- SEP IRA (ideal for small businesses with few or no employees)
- SIMPLE IRA (for businesses with 100 or fewer employees)
- 401(k) and Solo 401(k) plans (flexible contribution options)
Tax tip:
Contributions made before the tax deadline (including extensions) can count for the prior year. These plans also help attract and retain employees.
6. Make Estimated Tax Payments
The IRS requires quarterly estimated payments if you expect to owe more than $1,000 in taxes. This applies to corporations, partnerships, and sole proprietors.
Why it matters:
Missing estimated payments can result in penalties and interest. Spreading your payments also helps with cash flow throughout the year.
Tax tip:
Use last year’s tax return and current income to calculate quarterly payments. Adjust as needed if your revenue increases or decreases.
7. Review Payroll and Contractor Classification
Misclassifying workers can trigger IRS audits and fines. Employees and independent contractors follow different tax rules, and the wrong label could raise red flags.
Key differences:
- Employees receive W-2s and are subject to withholding.
- Contractors get 1099s and handle their tax obligations.
Tax tip:
Check how much control you have over each worker’s schedule, tools, and job method. If in doubt, ask your accountant or refer to IRS guidelines.
8. Leverage the Qualified Business Income (QBI) Deduction
Eligible businesses structured as pass-through entities (sole proprietorships, partnerships, S corporations) may qualify for a 20% deduction on qualified business income.
Limitations apply:
This deduction phases out based on income level and industry type. Certain service businesses, such as law or consulting, may face additional restrictions.
Tax tip:
Track your taxable income thresholds throughout the year. Strategic planning, like adjusting salaries or deferring income, can help preserve eligibility.
9. Plan for Year-End Tax Moves
The last quarter of the year is your final chance to make impactful tax-saving decisions. Don’t wait until December—start reviewing your books and projections early.
Smart year-end strategies:
- Defer income to the next year (if cash flow allows)
- Accelerate deductible expenses (like maintenance or supplies)
- Donate to charity for additional deductions.
Tax tip:
Meet with your tax advisor in Q4. They can help run forecasts and guide your year-end spending to lower your liability.
10. Work With a Professional Tax Advisor
Even the best tax software can’t match the insight of an experienced CPA. A tax advisor doesn’t just file returns—they guide you throughout the year with personalised planning, reminders, and risk management.
Tax tip:
Choose a firm that understands your industry, communicates clearly, and is available beyond tax season. Year-round support helps you make better financial decisions.
Conclusion
Tax planning is one of your business’s most valuable tools—yet it’s often underused. These strategies don’t require risky moves or aggressive tactics. They simply involve knowing the rules, tracking your numbers, and working with someone who helps you plan.
Whether you aim to reduce your tax bill, grow your business, or avoid surprises at year-end, thoughtful business tax planning can help. Want to explore how proactive tax planning can benefit your business? Speak with GCK Accounting and start saving with confidence.
