Tax Strategy Mistakes Entrepreneurs Make (And How to Avoid Them)

Taxes can be one of the biggest expenses for entrepreneurs, but most business owners make avoidable mistakes that cost them money and peace of mind. In this episode, learn the most common tax strategy pitfalls, how to avoid them, and actionable steps to help you keep more of what you earn. 

Whether you’re just starting out or looking to optimize your tax approach, this episode will help you take control of your tax strategy and grow your business with confidence.

Want to discuss anything in this week’s episode? Just send an e-mail to grow@schweiger.cpa. You can also follow us on Instagram and join our community on Facebook for bonus tips to grow your business.

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Disclaimer: This podcast and related materials are designed only to provide general information regarding the subject matter discussed during the podcast episodes. The statutes, authorities, and other laws cited in this podcast are subject to change. This podcast and related materials are not intended to provide tax, accounting, legal, or other professional advice to any specific person or entity. Any advice or opinion regarding the application of the subject matter for a specific person or entity should be provided by a competent professional advisor based on an application of the appropriate law and authorities to the facts and circumstances applicable to that person or entity.

Transcript

Welcome and Introduction

Chip Schweiger 0:00

Tax strategy isn't about dodging your responsibilities. It's about making smart legal moves to keep more of what you earn and fuel your business's growth. Chip Schweiger here, and welcome to another edition of the Things Entrepreneurs Should Know, the business podcast for entrepreneurs, founders, and business owners who want to build lasting financial value and supercharge the growth of their business. Today, we're diving into a topic that can make or break your bottom line: the tax strategy mistakes entrepreneurs make and how to avoid them. Whether you're a seasoned business owner or just starting out, tax strategy isn't just a once a year event. It's an ongoing process that can save you money, reduce stress and help you grow with confidence. Let's make sure you're not leaving money on the table, and I think this episode can help with that. After the episode, check out the show notes at TESKPod. com/tax-strategy

Top Tax Mistakes Entrepreneurs Make

Chip Schweiger 1:32

Welcome back. Let's start with why tax strategy matters. Taxes are one of your biggest expenses as a business owner, but a lot of entrepreneurs treat tax planning as an afterthought, something to worry about when deadlines are looming. Here's the reality. A proactive tax strategy can mean the difference between keeping more of your hard-earned profits or handing over too much to Uncle Sam. Good tax planning frees up cash for growth, reduces surprise tax bills and helps you make smarter business decisions all year long. And the best part, most costly mistakes are totally avoidable if you know what to look for. Let's get into the biggest tax strategy mistakes I see entrepreneurs make and, more importantly, how you can avoid them. Mistake number one is waiting until tax season to start planning. A lot of folks only think about taxes when it's time to file, but tax strategy is a year-round process. If you wait until March or April, your options are limited. It's just too late. So how can you avoid it? Schedule quarterly tax check-ins with your CPA or tax advisor and review your financials regularly. Don't wait for year-end surprises. Mistake number two is mixing personal and business finances. It's tempting to blur the lines, especially for small business owners. I get it, but mixing personal and business accounts is a recipe for headaches and potential IRS scrutiny. Avoid this by opening separate bank accounts and credit cards for your business. Pay yourself a salary or owner's draw instead of using the business account like a personal ATM.

Chip Schweiger 3:19

Okay, mistake number three is missing out on deductions. Many entrepreneurs leave money on the table by not tracking expenses or misunderstanding what's deductible and what's not. Commonly missed deductions include home office expenses, vehicle mileage or actual expenses, professional development and education and retirement plan contributions. To avoid missing out, keep detailed, organized records of all business expenses. Use accounting software or apps to track receipts and mileage, and consult with your CPA about industry-specific deductions.

Chip Schweiger 3:59

Mistake number four is not paying enough in estimated taxes. Now, remember if you're self-employed through an S-corp or an LLC, you're likely responsible for making quarterly estimated tax payments. Missing these can lead to penalties and interest. Work with your CPA to estimate your tax liability each quarter and set calendar reminders for due dates. Remember April, June, September and January.

Chip Schweiger 4:29

Let's see, Mistake number five is choosing the wrong business structure. Your business entity an LLC, an S-corp election, a C-corp or a sole proprietorship all directly affect your tax liability. Many entrepreneurs stick with their original structure even as their business grows, but I think that's a mistake. Revisit your business structure annually as your revenue, profit and goals change. Talk to your CPA about whether an S-corp election or another structure could save you money. Election or another structure could save you money.

Chip Schweiger 5:06

Mistake number six is ignoring retirement and benefit plans. Retirement plans aren't just for big companies. Solo 401(k)s, SEP IRAs and SIMPLE IRAs can all help you save for the future and reduce taxable income today. Ask your advisor about retirement plan options that fit your business and consider setting up a plan before year end to maximize deductions. Mistake number seven is neglecting state and local taxes. Federal taxes get all the attention, but state and local taxes can be just as significant, especially if you operate in multiple states or online. Stay up to date on state and local tax rules, especially sales tax and franchise tax. You can use a software package or hire a professional to track your obligations in each state. And mistake number eight not documenting tax positions. If you ever get audited, documentation is your best friend. Many entrepreneurs don't keep adequate records to back up their deductions or positions, but you're smarter than that. Keep digital copies of receipts, contracts and correspondence. In fact, I recommend you keep a tax file for each year, and this can be electronic or physical.

Chip Schweiger 6:29

Now that you know what to avoid, let's talk about building a proactive tax strategy that works for your business. I've got five steps for you here. Step one work with a proactive advisor. Don't just meet your CPA once a year. Build a relationship. A good advisor will keep you up to date on tax law changes, suggest strategies tailored to your industry and goals and help you plan ahead, not just react.

Chip Schweiger 6:56

Step two is to make tax planning part of your routine Schedule quarterly reviews of your financials and tax position. It's a good idea to set aside time each month to organize receipts and update your records, and you can use checklists to make sure you're not missing deductions. Step three is to leverage technology. You can use accounting software like QuickBooks or Xero to track income and expenses. Consider apps for mileage tracking, receipt scanning and document storage. Step four is to stay educated Attend webinars, read articles or listen to podcasts like this one to stay informed about tax changes that affect your business. And step five is to plan for the future as your business grows.

Quick Wins and Final Thoughts

Chip Schweiger 7:45

Revisit your tax strategy. What worked when you started may not be optimal now. Think about succession, exit planning and long-term wealth building, not just this year's tax bill. Let's wrap up with a few quick wins you can implement this week. Schedule a tax check-in with your advisor, even if it's just a phone call. Separate your business and personal finances. If you haven't already, start a digital tax file for this year's receipts and documents. You can start that now. Review your last tax return for missed deductions or red flags and set reminders for estimated tax payments. Remember, tax strategy isn't about dodging your responsibilities. It's about making smart legal moves to keep more of what you earn and fuel your business's growth.

Episode Closing and Call-to-Action

Chip Schweiger 8:41

Well, that about wraps up another edition of the Things Entrepreneurs Should Know podcast. Be sure to check out our website at TESKPod. com, where you can find the show notes, an archive of our past episodes and other resources to help grow your business. And if you haven't done so already, I'd appreciate if you take one minute to give us a review on Apple Podcasts or rate us on Spotify. It helps out a lot to get this to more entrepreneurs and business owners. And if you've done that already, please consider sharing this show with family and friends who you think would get something out of it. As always, thank you for your support. This is Chip Schweiger reminding you that if you always do what you've always done, you'll always get what you've always gotten. Look forward to seeing you next time.