Essential Tax Tips for Entrepreneurs: Build Smarter, Keep More

Deductions and Credits That Actually Save Founders Money

Calculate square footage used exclusively and regularly for business, then apply that percentage to utilities, rent, and internet. Keep photos, a simple floor plan, and receipts. A separate work zone reduces audit anxiety and creates a consistent method you can defend confidently.

Deductions and Credits That Actually Save Founders Money

The Qualified Business Income deduction can cut taxes for eligible pass‑through owners, but wage levels, taxable income, and specified service trades complicate matters. Track wages, capital, and aggregation elections early. A midyear checkup can prevent losing the deduction by surprise.

Bulletproof Recordkeeping Without the Headache

Use one bank account and one dedicated credit card exclusively for business. This separation reduces missed deductions, speeds reconciliation, and demonstrates professional intent. Many founders report instant clarity on cash burn and taxes after committing to clean financial boundaries.

Many entrepreneurs follow safe harbor thresholds to sidestep penalties: pay 100% of last year’s tax (110% for higher incomes) or 90% of current. Recalculate after big wins or pivots. A quarterly calendar and quick projections keep surprises to a minimum.

Hiring Help: Payroll, Contractors, and Classification

1099 vs. W‑2: Behavioral, Financial, and Relationship Tests

Contractors control how work is performed and often supply tools, while employees follow your detailed direction. Misclassification risks back taxes and penalties. Document expectations in writing, collect W‑9s or I‑9s promptly, and keep signatures centralized for a clean compliance trail.

Payroll Taxes, Filings, and Deadlines You Can’t Miss

Register for federal and state payroll accounts before the first paycheck. Deposit withholdings on schedule, file quarterly forms, and issue year‑end W‑2s. A reputable payroll platform plus a calendar checklist prevents expensive, completely avoidable notices and time‑draining cleanups.

Contractor Compliance: W‑9s, 1099‑NEC, and Clean Books

Collect W‑9s before paying contractors and track amounts eligible for 1099‑NEC. Exclude payments processed by certain platforms as required. Consistent categorization in your ledger ensures reports match filings, making January forms painless and building trust with contractors and advisors.

Economic Nexus Thresholds After Wayfair

Many states require registration once you cross sales or transaction thresholds, even without physical presence. Track totals by state monthly. A simple dashboard flags registrations early, prevents back‑tax risks, and keeps your checkout process honest and customer‑friendly.

Marketplace Facilitators and Platform Collections

Some platforms collect and remit sales tax for you, but not always for every product or jurisdiction. Verify reports, reconcile with your books, and keep certificates on file. Clear documentation prevents double payment and supports clean, confident audits later.

Multi‑State Registrations and Simplification Tools

Consider automation tools for rate lookups, filings, and exemption certificates. When possible, use streamlined agreements to reduce administrative friction. A consistent SKU taxability map across states saves hours and avoids costly mismatches during seasonal spikes or rapid product expansions.

Year‑End Moves and Audit Readiness

Prepaying Expenses and Deferring Income Thoughtfully

Timing matters. Prepay eligible expenses, invoice strategically, and evaluate whether accelerating or deferring income helps smooth brackets. Pair tactics with cash flow realities. Document the business purpose, not just the numbers, so your story is consistent if questions arise later.

Inventory, COGS, and Counting What Counts

Accurate counts drive accurate taxes. Choose a consistent inventory method, reconcile shrinkage, and document cut‑off procedures. Founders often discover hidden margins simply by tightening counts and purchase coding, which also improves pricing decisions and lender conversations significantly.