Small Business Taxes Made Simple: What You Need to Know

Let’s be honest—taxes aren’t the most exciting part of running a business, but they’re definitely one of the most important. If you’re self-employed, a freelancer, or own a small business, taxes work a little differently than they do for employees.

The good news? With a little planning, you can make tax season way less stressful (and even save some money along the way!). Let’s break it all down.

1. Know What Taxes You Need to Pay

As a business owner, you’re responsible for more than just income tax. Depending on how your business is structured, you might owe:

💰 Income Tax: Just like a regular job, but based on your business profits.
📝 Self-Employment Tax: Covers Social Security & Medicare (since there’s no employer withholding it for you).
🏢 State & Local Taxes: Depending on where you live, you may owe extra.
📦 Sales Tax: If you sell products, you may need to collect and file sales tax.
💼 Payroll Taxes: If you have employees, you’ll need to handle withholding & payroll taxes.

Pro tip: Check with a tax professional or accountant to be sure you’re covering all your bases!

2. Keep Business & Personal Finances Separate

If you haven’t already, open a separate business bank account. Why?

✔️ Makes tax time easier (no sorting through personal expenses).
✔️ Helps with bookkeeping and tracking deductions.
✔️ Shows the IRS you’re a legit business (if you ever get audited).

A business credit card can also help keep expenses organized and separate.

3. Track Your Expenses (Hello, Tax Deductions!)

Instead of waiting until tax time, update your records weekly or use apps like Expensify, Shoeboxed, or QuickBooks to scan and store digital copies of your receipts. The IRS accepts digital records, so this keeps everything tidy.

One of the best things about owning a business? Tax write-offs! Keeping track of eligible business expenses can lower your taxable income (meaning you pay less in taxes).

Common tax deductions include:
📱 Phone & internet bills (if used for business).
🏡 Home office expenses (if you work from home).
🚗 Mileage & travel expenses (for business-related trips).
🖥️ Software & subscriptions (accounting tools, Canva, etc.).
👩‍⚕️ Health insurance premiums (if self-employed).

Pro tip: Use an app like QuickBooks, Wave, or even a simple spreadsheet to track expenses throughout the year.

4. Set Aside Money for Taxes (So You’re Not Shocked in April)

Unlike a regular job where taxes are withheld from your paycheck, business owners have to set aside money themselves.

A good rule of thumb:
💵 Save 25-30% of your income for taxes (especially if you’re self-employed).
📅 Pay quarterly estimated taxes (if you owe more than $1,000/year in taxes).
📂 Plan ahead so tax season doesn’t hit you like a truck!

5. Should You DIY or Hire a Tax Pro?

If your taxes are simple, you might be able to file them yourself using software like TurboTax or H&R Block.

But if you:
❌ Have multiple income streams
❌ Own rental properties
❌ Struggle with bookkeeping
❌ Want to maximize deductions

…it might be worth hiring an accountant. They can help you find deductions you might’ve missed and make sure everything is filed correctly.

6. Consider Your Business Structure

How you’re legally set up affects your taxes. The main options:

• Sole Proprietor: Easiest setup, but you’re taxed on all profits.

• LLC: Protects personal assets, and you can choose how to be taxed.

• S-Corp: Can reduce self-employment taxes but has more paperwork.

Not sure which one’s best? Talk to a tax pro—they can help you choose the most tax-friendly structure for your business.

7. Don’t Forget About Retirement Savings!

One of the downsides of being self-employed? No company 401(k) match. But that doesn’t mean you can’t save for retirement!

Options include:
📌 SEP IRA – Good for solo business owners with high earnings.
📌 Solo 401(k) – Ideal if you want to contribute as both an employee & employer.
📌 Traditional or Roth IRA – Great for anyone, even if you have another plan.

The bonus? Contributions to some of these accounts are tax-deductible!

Final Thoughts: Plan Now, Stress Less Later

Handling taxes as a business owner might seem overwhelming, but staying organized and planning ahead makes all the difference.

💡 Key takeaways:
✔️ Know which taxes you need to pay.
✔️ Track expenses & take advantage of deductions.
✔️ Save money for taxes so you’re not surprised later.
✔️ Work with a tax professional if needed.

Taxes might not be fun, but getting them right helps your business thrive. And that’s worth it! 💪