Small Business Tax Tips for SMB Owners for 2024
A smooth tax season in 2025 starts with proactive tax planning and diligent record-keeping in 2024. Organizing your business well, making the most of tax deductions and credits, and making sure you are taxing your remote employees and interstate sales correctly will help ensure that tax filing is a smooth process. It could also reduce your tax liability. By incorporating these tips, every small business owner can face the 2024 calendar year with confidence.
1. Keep Financial Records Organized for the Entire Tax Year
Late-night cramming might be okay for college students, but business owners need to stay on top of their bookkeeping all year long. This prevents surprises and eleventh-hour tax preparation scrambles when tax return time comes.
The following tips will help you stay organized:
Keep all receipts: This simple step will save you time down the road. File all receipts related to incoming and outgoing payments in an organized file system.
Digitize receipts: Use apps like Quickbooks or other accounting software to digitize and organize receipts for business expenses.
Back up digital files: Back up digital receipts and documents to ensure you can substantiate the details on your tax return if the original files are lost.
Separate your bank accounts: Maintain separate bank accounts for personal expenses and business expenses to avoid confusion.
Regular bookkeeping: Schedule time each month for regular bookkeeping. This dedicated time will help you identify business expenses that are eligible for tax deductions and allow you to identify overlooked information promptly. Alternatively, invest in outsourced small business bookkeeping services to make sure your financial records are always in order.
Analyze your financial statements regularly: Analyzing your financial statements every month can help you optimize your taxes with strategically timed invoicing and business spending.
Establish a retention protocol for tax documents: It's essential to know how long a small business owner is required to keep past tax returns, receipts, and tax information for past employees. Research the relevant tax laws on the federal, state, and local levels to ensure you remain compliant.
2. Optimize Your Business Structure and Tax Classification
Small business owners should understand how to structure their small businesses to potentially save money on taxes. Here are several questions to ask when choosing a structure and tax classification for your small business:
What level of personal liability protection do I need? A sole proprietorship does not offer any liability protection. An LLC provides a limited amount of liability, and a corporation offers the highest level of protection.
How will small business taxes be managed? A business set up as a sole proprietorship records business income on the business owner’s personal tax return. This can make tax returns easier but does not allow for tax flexibility. On the other hand, an LLC business structure provides flexibility. LLCs can be taxed as a sole proprietorship, partnership, or corporation.
How much control do you want over your business? A sole proprietorship gives you full control over business decisions. An LLC business structure is more flexible; decisions can be made by a manager OR a member.
3. Understand Your Tax Obligations for Remote Employees and Interstate Sales
Having remote employees and selling products in other states have tax implications. You can find the relevant information for each state by researching online and talking with a knowledgeable tax professional.
Take the following points into account:
Economic nexus laws: Products sold in other states may be subject to economic nexus laws or different sales tax rates than products sold in your business’s home state.
Tax withholding requirements: It is essential to withhold the correct amount of state taxes for remote employees. For instance, a remote employee who lives in Jacksonville, Florida won’t pay income tax to the state whereas a remote employee living in Spartanburg, South Carolina will. Remitting state taxes sometimes requires the business to be registered in multiple states.
Correct classification of employees: Penalties and even back taxes can be required if a remote employee's classification is recorded incorrectly. This happens most frequently when an employee is classified as an independent contractor. Classify your employees correctly at each point in time to prevent any problems with the IRS.
4. Claim Small Business Tax Deductions and Credits
Tax deductions and credits both reduce the amount of taxes that small businesses pay. Plan for these from the start of the year with proactive tax planning services to maximize your tax savings.
Business Expenses You Can Deduct
A tax deduction reduces your business's taxable income. The following are some of the most common small business tax deductions:
The home office deduction: Self-employed homeowners and renters can deduct eligible home office expenses including rent, mortgage interest, insurance premiums, utilities, repairs, and depreciation on the business portion of their property.
Your car: If your car is used for business, you may be able to deduct the related costs and recover the cost of the car gradually through depreciation. Keep accurate records of the business use of your car and only deduct the business portion of use.
Health insurance premiums: Deduct health insurance premiums on Schedule 1. You must keep accurate records and meet certain eligibility criteria.
Educational materials: Educational materials can often be deducted if they are related to your current line of work.
Essential business travel expenses: Some of the costs of work-related travel can be deducted, including hotel costs, rental cars, fuel, and meals (limits apply).
Office supplies: Work supplies such as printers, paper, ink, and computers may be tax deductible for small businesses.
Small Business Tax Credits
A tax credit reduces the amount of taxes you owe dollar for dollar. There are several tax credits for which small business owners may be eligible:
Small Business Health Care Tax Credit
Retirement Plans Startup Cost Tax Credit
Disabled Access Credit
Business Energy Investment Tax Credit
5. Hire a Tax Professional
Hiring a tax professional can fuel small business growth. Tax professionals know how to dig into the tax code and find any tax benefits that are available—whether dealing with an S corporation, limited liability company, partnership, or sole proprietorship.
A tax professional can also:
Separate your business expenses from your personal expenses: A clear separation is essential for avoiding confusion and ensuring you only claim tax deductions for business expenses.
Help with tax planning: A tax professional can provide income tax advice and help you save money on future tax bills by planning your tax history proactively.
Help with year-end planning: A tax preparer can help you organize your receipts and fill in your tax return accurately.
6. Make Timely Tax Payments
Self-employed individuals must make estimated quarterly tax payments and may also have a tax bill after filing their tax returns. You can pay taxes via:
Electronic Funds Withdrawal
Credit card
Check or money order
Short or long-term payment plans
There are numerous benefits to making an income tax payment on time. Each of these benefits directly affects the life of the small business in a positive way:
Avoid penalties and interest
Maintain good financial standing
Peace of mind
Better cash flow management
Eligibility for installment plans
Compliance with legal obligations
Small Business Tax Tips Summary
"Success usually comes to those who are too busy to be looking for it." This quote by Henry David Thorough speaks to business owners, who are typically busy with the ins and outs of their day-to-day work. Be encouraged that while business growth takes work, success is waiting just around the corner.
Small businesses have a lot to do with keeping accurate and detailed records, processing payroll correctly for local and remote employees, keeping track of deductions, and optimizing their business structure and tax classification. Partnering with an experienced tax professional can provide you with purposeful foresight and transform tax time from a stressful season to a positive exercise that strengthens your small business.
