5 Tax Tips from the Pros
Posted: Thu Jan 23, 2025 5:00 am
Keep in mind that this guide is not a comprehensive step-by-step guide to filing your taxes. These tips assume you already know the basics:
All the information you need about your business.
All the tax forms you need from the IRS (if your accounting software can't handle this part for you, it's time to upgrade ).
Your submission deadlines .
Once you do this, you will be ready for the next steps.
Tax Preparation Checklist for Small Business
1. Track all your income and expenses.
If you use accounting software all year, this should be as easy as creating a few reports. If not, you'll need to do a little more work.
Most of your income probably comes from sales, but don't advertising database forget to also account for capital gains — like profits from stocks, mutual funds, or the sale of real estate. If you fail to report these sources of income, you'll be subject to an audit and end up paying those taxes, along with a penalty.
On the other hand, if you don't report all of your expenses, you risk paying the government more than you actually owe because you're missing out on deductions.
CPA Irene Waxler says one of the most common mistakes she sees in small businesses when it comes to tax preparation is neglecting to reconcile their expenses with their bank statement each month, allowing unexpected expenses like eligible meals and supplies to slip through the cracks.
"These little expenses add up," she says.
PLAN FOR NEXT YEAR. If you haven't already, open a business bank account and a line of credit and never, ever use them for personal expenses, and vice versa. This will save you from having to sift through hundreds or thousands of transactions to figure out what was business related and what was just groceries.
"A separate bank account helps ensure that you have recorded all your income and expenses because you only have to find one place."
- Jeff Beebe , CPA
2. Remember the Tax Cuts and Jobs Act.
2019 Update: This year, be aware of a new deduction under Section 199A , also known as the qualified business income deduction. Certain individuals and small businesses are eligible to deduct up to 20% of their qualified business income, plus 20% of qualified real estate investment trust dividends and qualified income of publicly traded partnerships.
Pretty, right? Except Hocheiser says most eligible taxpayers exceed the $157,500 threshold for individuals and $315,000 for married couples filing jointly ( other limits apply ). Still, it's worth asking your tax professional.
The Tax Cuts and Jobs Act (TCJA) of 2017 is the largest tax reform in decades.
"This year has been the most significant change I've seen," Hoheiser says.
The good news is that if you successfully passed the TCJA in 2018 and 2019, you don’t have to worry about anything new this year. You have until the end of 2022 to take full advantage of the bonus depreciation by investing in your business.
Accounting software will handle the new rates, and your tax professional can advise you on all the ways the TCJA will affect your business. However, it’s important to know the basics, especially if you’re preparing your taxes yourself.
Here are some of the key TCJA takeaways from our recent article on the biggest challenges facing small business accounting professionals in 2019 :
Bonus Depreciation: This new tax rule allows businesses to deduct 100% of the depreciation on business assets like cars, computers, and other equipment immediately for any purchases made before January 1, 2023, making it a great time to invest in your business.
Paid Family and Sick Leave Tax Credit : There is a new tax credit available for employers who offer paid family and sick leave to their employees.
Cash Method of Accounting: Many more small businesses (those with annual gross revenues of $25 million or less, instead of the previous $5 million or less marker) are eligible to use the cash method of accounting , which is generally simpler and less expensive than accrual accounting.
Pass-through entities: Most small businesses are considered pass-through entities, including S corporations and LLCs, and can now deduct up to 20% of qualified business income.
While that 20% discount may seem tempting, switching to an S-corp or LLC may not be worth it, warns CPA Logan Allec.
All the information you need about your business.
All the tax forms you need from the IRS (if your accounting software can't handle this part for you, it's time to upgrade ).
Your submission deadlines .
Once you do this, you will be ready for the next steps.
Tax Preparation Checklist for Small Business
1. Track all your income and expenses.
If you use accounting software all year, this should be as easy as creating a few reports. If not, you'll need to do a little more work.
Most of your income probably comes from sales, but don't advertising database forget to also account for capital gains — like profits from stocks, mutual funds, or the sale of real estate. If you fail to report these sources of income, you'll be subject to an audit and end up paying those taxes, along with a penalty.
On the other hand, if you don't report all of your expenses, you risk paying the government more than you actually owe because you're missing out on deductions.
CPA Irene Waxler says one of the most common mistakes she sees in small businesses when it comes to tax preparation is neglecting to reconcile their expenses with their bank statement each month, allowing unexpected expenses like eligible meals and supplies to slip through the cracks.
"These little expenses add up," she says.
PLAN FOR NEXT YEAR. If you haven't already, open a business bank account and a line of credit and never, ever use them for personal expenses, and vice versa. This will save you from having to sift through hundreds or thousands of transactions to figure out what was business related and what was just groceries.
"A separate bank account helps ensure that you have recorded all your income and expenses because you only have to find one place."
- Jeff Beebe , CPA
2. Remember the Tax Cuts and Jobs Act.
2019 Update: This year, be aware of a new deduction under Section 199A , also known as the qualified business income deduction. Certain individuals and small businesses are eligible to deduct up to 20% of their qualified business income, plus 20% of qualified real estate investment trust dividends and qualified income of publicly traded partnerships.
Pretty, right? Except Hocheiser says most eligible taxpayers exceed the $157,500 threshold for individuals and $315,000 for married couples filing jointly ( other limits apply ). Still, it's worth asking your tax professional.
The Tax Cuts and Jobs Act (TCJA) of 2017 is the largest tax reform in decades.
"This year has been the most significant change I've seen," Hoheiser says.
The good news is that if you successfully passed the TCJA in 2018 and 2019, you don’t have to worry about anything new this year. You have until the end of 2022 to take full advantage of the bonus depreciation by investing in your business.
Accounting software will handle the new rates, and your tax professional can advise you on all the ways the TCJA will affect your business. However, it’s important to know the basics, especially if you’re preparing your taxes yourself.
Here are some of the key TCJA takeaways from our recent article on the biggest challenges facing small business accounting professionals in 2019 :
Bonus Depreciation: This new tax rule allows businesses to deduct 100% of the depreciation on business assets like cars, computers, and other equipment immediately for any purchases made before January 1, 2023, making it a great time to invest in your business.
Paid Family and Sick Leave Tax Credit : There is a new tax credit available for employers who offer paid family and sick leave to their employees.
Cash Method of Accounting: Many more small businesses (those with annual gross revenues of $25 million or less, instead of the previous $5 million or less marker) are eligible to use the cash method of accounting , which is generally simpler and less expensive than accrual accounting.
Pass-through entities: Most small businesses are considered pass-through entities, including S corporations and LLCs, and can now deduct up to 20% of qualified business income.
While that 20% discount may seem tempting, switching to an S-corp or LLC may not be worth it, warns CPA Logan Allec.