Smart Tax Tips: 10 Ways Small Business Owners Can Stay on the IRS’s Good Side in 2025
Running a small business means juggling daily operations, financial responsibilities, payroll, and taxes, all at once. While most individuals won’t draw much attention from the IRS, small business owners with high earnings are often more visible on the agency’s radar. In fact, in 2022 alone, over four million IRS notices were triggered by simple math mistakes.
Fortunately, there are practical steps you can take right now to stay compliant and avoid unwanted scrutiny. These 10 strategies can make tax season less stressful and keep your business on the right track.
1. Start organizing today
Don’t wait until tax deadlines are looming. Make it a habit to review your financials monthly. Check forms like the 941, verify your EIN and employee Social Security numbers, and store all related documentation, either digitally or physically, in one centralized location.
2. Hire an accountant who understands businesses like yours
Tax laws shift constantly. A knowledgeable accountant can help you keep up and identify deductions or credits that suit your unique situation, whether that’s related to being a high-income earner, a small business owner, or both.
3. Communicate with your accountant often
A quick meeting at the start of the year is helpful, but regular check-ins, monthly if possible, are even better. Real-time updates on your income and expenses can help catch errors early and give your accountant the chance to offer proactive guidance.
4. Consider outsourcing payroll
Tax compliance starts with correct payroll processing. A payroll service provider can ensure that tax payments are submitted accurately and on time. For example, Beyond offers its clients payroll support backed by an accuracy guarantee that helps resolve IRS issues when they arise.
5. Establish a 401(k) plan
Offering a retirement plan doesn’t just benefit your team, it can also bring tax advantages. Employer contributions may be deductible, and small businesses may qualify for up to $500 in credits each year for the plan’s first three years. Check with your payroll provider, like Beyond, to explore compatible retirement plan options.
6. Track business meals and travel costs carefully
Blurred lines between personal and business expenses can lead to trouble. Be meticulous with documentation. Since the Tax Cuts and Jobs Act cut back deductions for entertainment and limited business meals to 50%, the IRS now scrutinizes these expenses more than ever.
7. Keep detailed records of charitable donations
Charitable giving can be a powerful tax-saving tool, but only if you document it properly. For non-cash donations over $500, you’ll need to file Form 8283. And if you’re unsure whether the donation should be classified as personal or business, consult a tax professional to avoid classification issues.
8. Prepay vendor bills in December
If you use the cash accounting method, paying invoices before year-end, rather than waiting until January, can reduce taxable income for the current year. This strategy is especially useful for managing year-end liabilities.
9. Make large purchases before year-end
Need equipment or supplies early next year? Buy now to deduct the expense in the current tax year. Just be sure the deduction makes financial sense, talk to your accountant to confirm the timing is advantageous.
10. Prepare W-2s and 1099s early
Employees and contractors need their tax forms by January. Don’t wait until the last minute. Tackle this task early in the month, or let a payroll provider like Beyond handle it for you to ensure timely and accurate delivery.
Looking ahead
For more help, take advantage of our how-to guides on completing Form W-2 and Form 1099-NEC. These include detailed walkthroughs and visual aids to simplify the process.
Stay ahead with proactive tax planning
A little preparation goes a long way. By staying organized, working closely with financial professionals, and leveraging reliable payroll tools like those offered by Beyond, you’ll set yourself up for a smoother filing season, and maybe even enjoy it.
And remember, audits happen. If you ever face one, remain calm, consult your accountant, and refer to IRS resources to understand what to expect.
