Small Business Tax Planning: How to Stop Overpaying the IRS

Most small business owners find out they overpaid in taxes sometime in March or April, when there is nothing left to do about it.

The problem is not a bad CPA. The problem is timing. Tax planning only works if it happens before December 31. After that, the options are limited.

Here is what year-round tax planning actually looks like and what it can save you.

Why April Is Too Late

When your CPA prepares your return in the spring, they are reporting history. They are recording what already happened.

Planning is different. Planning changes what happens.

If you find out in April that your business made $200,000 in profit, there is not much you can do about it. But if you know in September that you are tracking toward that number, you have time to:

• Max out retirement contributions
• Accelerate deductible expenses
• Consider the timing of large purchases
• Evaluate whether an S-corp election makes sense
• Discuss estimated payment adjustments

Every one of those decisions requires lead time. Most require action before December 31.

The Four Planning Windows Small Business Owners Miss

1. The Mid-Year Check-In (June/July)

Six months in, you have real data. Your CPA can run a projection based on actual results and tell you where the year is tracking.

If you are ahead of last year, you have time to plan. If you are behind, you have time to adjust.

Most business owners skip this entirely because their CPA never scheduled it.

2. The Q3 Review (September/October)

This is the most valuable window of the year.

With three months left, you still have time to act on most planning strategies. Retirement contributions, equipment purchases, timing of invoices and expenses, entity structure decisions.

A CPA who is paying attention will reach out in September with a number and a few options. That conversation is worth doing.

3. Year-End (November/December)

The final window. Some strategies are still available. Some are not.

This is when most business owners finally hear from their accountant, and it is often too late for anything other than documentation.

4. Q1 of the Following Year (January/February)

This is not a planning window. This is cleanup.

By January, the tax year is closed. A good Q1 conversation focuses on setting up the current year correctly, not fixing the last one.

What an S-Corp Election Actually Saves

One of the most common missed opportunities for small business owners is the S-corp election.

If you are operating as a sole proprietor or single-member LLC, your entire net profit is subject to self-employment tax (15.3% up to the Social Security wage base, 2.9% above it). That adds up fast.

An S-corp allows you to split income between a reasonable salary and a distribution. You pay payroll taxes on the salary, not the distribution.

A business earning $150,000 in net profit might save $8,000 to $15,000 per year in self-employment taxes with the right structure.

The timing matters, though. An S-corp election has deadlines. Waiting until March to ask about it means you missed the window for the current year.

Retirement Contributions Are a Direct Reduction in Taxable Income

A SEP-IRA allows a sole proprietor or S-corp owner to contribute up to 25% of compensation (up to $69,000 for 2024). Every dollar contributed reduces taxable income by a dollar.

A solo 401(k) offers even more flexibility, with higher contribution limits in some situations.

These are not complicated strategies. They are straightforward deductions most business owners leave on the table because no one brought it up before December.

What This Looks Like in Practice

Here is a simplified example.

A sole proprietor in Nebraska has $180,000 in net profit at year-end. They filed on their own last year and paid $42,000 in federal and self-employment taxes.

After a mid-year planning conversation this year:

• Opened a SEP-IRA, contributed $30,000 (reduces taxable income to $150,000)
• Accelerated $8,000 in equipment expenses into the current year
• Identified that an S-corp election would save roughly $11,000 starting next year

Total impact this year: roughly $9,000 in reduced taxes. Next year, another $11,000.

None of this required unusual strategies or aggressive positions. It required a conversation in September instead of April.

What to Look for in a CPA

If you only hear from your accountant at tax time, the relationship is not working as well as it could.

A CPA focused on planning will reach out mid-year with a projection. They will schedule a Q3 conversation. They will ask about equipment purchases, retirement contributions, and changes to the business before the year closes.

They will also give you a fixed quote so you know what the engagement costs before it starts.

If that is not happening, it might be worth a conversation with someone who works that way.

Jahn CPA is a remote CPA practice serving small businesses across the United States. Fixed pricing. Direct CPA access. Year-round planning.

Book a free intro call to talk through your situation.