How Small Business Owners Can Avoid Surprise Tax Bills
No small business owner wants to open their tax return and discover they owe thousands more than expected. But it happens every year. The good news? With proactive planning, these surprises are completely avoidable.
Here are five smart ways to avoid an unexpected tax bill this year and beyond:
1. Stay Ahead on Quarterly Taxes
If you're self-employed or run a small business, the IRS expects you to pay estimated taxes four times a year. Missing or underpaying these can lead to penalties and a bigger tax bill at the end of the year.
Tip: Set aside a percentage of every payment you receive. Use a separate account so the money is ready when quarterly deadlines come.
2. Keep Your Books Up to Date
Accurate books help you track profits, expenses, and tax obligations. Without them, you're guessing — and those guesses can lead to underpayment or missed deductions.
Tip: Update your income and expense records monthly. Use accounting software or work with a bookkeeper to stay organized.
3. Track Deductions Throughout the Year
Don't wait until tax season to gather receipts. Keep track of deductible expenses like business travel, office supplies, home office costs, and professional services as they happen.
4. Adjust Your Withholdings if Needed
If you pay yourself a salary through your business, your withholdings might need to change when your income goes up or down. Adjusting withholdings mid-year can prevent a surprise balance at tax time.
5. Talk to a Tax Expert Before the Year Ends
Don't wait until filing season to get advice. By then, it's often too late to make tax-saving moves. A tax professional can help you adjust your strategy, catch missed deductions, and plan ahead.
Common Questions About Tax Planning
When’s the best time to start tax planning?
Ideally, early in the year. But the next best time is before your final quarter ends. That’s when you still have options to adjust income, expenses, and estimated payments.
What if my income changes mid-year?
Your estimated taxes and withholdings may need to be adjusted. Regular check-ins help you avoid penalties and surprises.
Can a tax preparer also do tax planning?
Yes—but not all tax preparers do. Rowe & Jimenez offers proactive tax planning for individuals and small businesses, not just filing services.
Do small businesses really need year-round tax help?
If you want to avoid surprises and keep more of what you earn, yes. Year-round planning lets you take advantage of deductions and strategies before the year ends.
Ready to Plan Ahead?
If you're unsure where to start, we offer a free 15-minute consultation to help you plan ahead and avoid unwanted tax surprises.
