The phrase “how to reduce profit of company” might sound strange. Isn’t profit the entire point? But what successful business owners really mean is how to legally reduce taxable profit. This isn’t about making less money; it’s about keeping more of the money you earn. By using smart, year-round tax planning, you can lower what you owe the IRS and reinvest that capital back into your business. This guide breaks down the legitimate strategies—from maximizing deductions to choosing the right business structure—that turn your tax bill into a tool for fueling growth, hiring new talent, and building a stronger company.
Key Takeaways
- Treat Tax Planning as a Year-Round Activity: The most effective tax reduction strategies are implemented long before April. By proactively timing expenses, managing income, and making key financial decisions throughout the year, you can strategically lower your taxable profit.
- Master Your Deductions Through Documentation: Every legitimate business expense, from software subscriptions to retirement contributions, is a tool for tax savings. The key is to use a reliable system to track every dollar and keep clear records, ensuring you can claim and defend every deduction you’re entitled to.
- Use the Right Tools for Maximum Impact: Don’t stop at deductions. Tax credits provide a more powerful dollar-for-dollar reduction of your final tax bill, while choosing the right business structure can fundamentally lower your tax burden by saving you money on self-employment taxes.
How Can You Legally Reduce Your Company’s Profit?
When you hear “reduce your company’s profit,” it might sound a little strange. After all, isn’t making a profit the whole point of being in business? But what we’re really talking about is strategically and legally reducing your taxable profit. This isn’t about making less money; it’s about keeping more of the money you make by minimizing what you owe in taxes. Smart tax planning allows you to reinvest in your business, build a cash reserve, and fuel future growth. It’s a fundamental part of a healthy financial strategy that successful businesses use every year. The key is to do it correctly, using the tax code to your advantage without crossing any legal lines.
Tax Avoidance vs. Tax Evasion: What’s the Difference?
Let’s be crystal clear: there’s a huge difference between tax avoidance and tax evasion. Tax avoidance is the legal practice of using tax laws to lower your tax bill. This involves legitimate strategies like claiming all your eligible deductions, taking advantage of tax credits, and structuring your business in a tax-efficient way. Tax evasion, on the other hand, is illegal. It involves deliberately misrepresenting your income or expenses to the IRS. Falsifying financial statements or hiding income are forms of tax evasion that can lead to severe penalties. Our focus is entirely on legal tax avoidance, ensuring every strategy keeps you in good standing with tax authorities and prepared for any potential audit representation.
The Goal: Lowering Your Taxable Income
The primary goal here is to lower your taxable income, which is the portion of your profit that the government actually taxes. By maximizing deductions and credits, you reduce this number, which in turn reduces the amount of tax you owe. This isn’t some secret loophole; it’s how the tax system is designed to work. In fact, effective business tax planning is so common that in some years, a majority of U.S. corporations have paid no federal income tax. Reducing your taxable income helps your business keep more cash on hand. You can use that extra capital to hire new team members, invest in better equipment, or expand your marketing efforts—all things that help you grow your business for the long term.
Maximize Your Business Expense Deductions
One of the most straightforward ways to lower your company’s taxable profit is by claiming every business deduction you’re entitled to. Think of it this way: every dollar you spend on a legitimate business expense is a dollar you don’t have to pay tax on. The IRS allows you to subtract these “ordinary and necessary” costs from your revenue, which directly reduces your taxable income. The key is understanding what qualifies as a business expense and keeping immaculate records to back it all up. Getting this right helps your business keep more of its hard-earned cash, which you can then reinvest for growth.
Deduct Everyday Operating Costs
Let’s start with the basics. The everyday costs of keeping your business running are generally deductible. This includes expenses that are both common and helpful for your line of work. Think about your monthly overhead: office rent, utility bills, internet service, and phone lines are all prime examples. The list also covers employee salaries and benefits, office supplies, software subscriptions, and marketing or advertising fees. Diligent business accounting and management is crucial for tracking these expenses throughout the year, ensuring you don’t leave any money on the table when tax time rolls around. These deductions form the foundation of a solid tax strategy.
Write Off Equipment and Technology Purchases
Larger investments in your business, like computers, machinery, office furniture, or vehicles, can also lead to significant tax deductions. Because these assets lose value over time—a concept known as depreciation—the IRS lets you write off that loss. A powerful tool for this is the Section 179 deduction, which often allows you to deduct the full purchase price of qualifying equipment during the year you put it into service, rather than depreciating it over several years. This can provide a substantial immediate tax benefit, making it easier to invest in the technology and tools you need to scale your operations.
Claim Professional Service and Consulting Fees
The money you spend on professional advice is not just a smart investment—it’s also a tax-deductible expense. Fees paid to accountants, lawyers, business coaches, and other consultants for services related to your business can be written off. This includes the cost of hiring a firm like Clear Peak for year-round business tax planning or help with your bookkeeping. By engaging experts to handle complex financial and legal matters, you not only protect your business but also reduce your taxable income. It’s a win-win that supports your company’s health and financial efficiency.
Don’t Miss These Overlooked Deductions
Beyond the obvious costs, many business owners miss out on less common but equally valid deductions. For example, did you know you can deduct bank fees on your business accounts, premiums for business insurance, or the cost of professional development courses related to your industry? If you work from home, you may be able to claim the home office deduction. Other often-overlooked expenses include business-related travel, meals with clients, and membership fees for professional organizations. The IRS provides a broad guide to business expenses, but careful record-keeping is essential to prove these costs were for business purposes.
Use Strategic Timing to Your Advantage
When it comes to reducing your taxable profit, timing is everything. Making strategic decisions about when you pay for expenses and when you receive income can have a major impact on your tax bill. This isn’t about finding loopholes; it’s about understanding the tax code and using it to your advantage through smart, year-round planning.
This proactive approach allows you to manage your financial picture more effectively, especially if your income fluctuates. By shifting certain transactions between tax years, you can smooth out high-earning periods and maximize your deductions when you need them most. This is a core component of effective business tax planning, turning a year-end scramble into a deliberate, ongoing strategy. Let’s look at a few ways you can make timing work for you.
Accelerate Expenses to Lower This Year’s Tax Bill
One of the most straightforward timing strategies is to accelerate your expenses. This means making necessary purchases for your business before the end of the year instead of waiting until the next one. By paying for these items now, you can deduct them from this year’s income, which lowers your immediate tax liability.
Think about the expenses you know you’ll have in the first quarter of next year. Could you pay for them in December instead? This might include stocking up on office supplies, prepaying for professional association dues, or buying new equipment like laptops or software. For example, if you were planning a website redesign in February, paying your deposit to the designer in December allows you to claim that expense on this year’s return. The key is that these are legitimate, planned business costs—you’re simply adjusting the purchase date to your benefit.
Defer Income to a Future Tax Year
If your business uses the cash method of accounting, you have some flexibility in when you recognize income. Deferring income means pushing it into the next tax year. If you’ve had a particularly profitable year and are worried about a big tax bill, you might consider delaying your late-December invoicing until January. This moves that revenue into the next tax period.
This can be a powerful tool for managing your taxable income, especially for service-based businesses or freelancers who have control over their billing cycles. For instance, if you complete a large project for a client on December 20th, you could wait to send the invoice until after the new year begins. This strategy requires careful cash flow management, but it can prevent a single high-earning year from pushing you into a higher tax bracket.
Choose the Right Accounting Method: Cash vs. Accrual
The strategies of accelerating expenses and deferring income hinge on your business’s accounting method. Choosing the right one is a critical decision that affects your entire tax strategy. Most small businesses use either the cash or accrual method.
With cash-basis accounting, you record income when you actually receive payment and expenses when you pay them. This method provides the flexibility needed to time your income and expenses. Under the accrual method, you record income when you earn it (like when an invoice is sent) and expenses when they are incurred, regardless of when money changes hands. The IRS has specific rules about which businesses can use which method, but understanding your options is the first step. Your choice of accounting method is a foundational piece of your financial structure, and getting expert advice on business accounting and management can ensure you’re set up for success.
Put Depreciation to Work for Your Business
Think about the big-ticket items you buy for your business—a new fleet of computers, a company vehicle, or specialized machinery. These assets naturally lose value over time, and this loss is called depreciation. The good news is that the IRS allows you to deduct this loss from your taxable income. It’s a powerful and completely legal way to lower your tax bill by accounting for the wear and tear on your essential business property.
Depreciation isn’t just for massive corporations with factory equipment. If you’re a tech founder like ‘Scaling Sara’ buying laptops for your team or a content creator like ‘Creator Carla’ investing in new camera gear, you can use depreciation to your advantage. By strategically writing off the cost of these assets, you can significantly reduce your taxable profit and free up cash flow for other areas of your business. The key is understanding the different methods available and choosing the one that best fits your company’s financial strategy for the year. Making the right choice can mean the difference between a hefty tax payment and having extra capital to reinvest in growth. This is where year-round business tax planning becomes essential, helping you map out major purchases and maximize their tax benefits.
Take Advantage of the Section 179 Deduction
One of the most direct ways to leverage depreciation is with the Section 179 deduction. This part of the tax code is a game-changer for many small and medium-sized businesses. Instead of spreading out a deduction over several years, Section 179 allows you to deduct the full purchase price of qualifying equipment and software in the year you put it into service. This creates an immediate and substantial reduction in your taxable income. For example, if you buy $50,000 worth of new computers, you may be able to write off that entire amount on this year’s tax return. The IRS has specific rules about what qualifies, so it’s a good idea to understand the limits and types of property that are eligible.
Capitalize on Bonus Depreciation
Bonus depreciation is another powerful tool for accelerating your deductions. It allows you to deduct a large percentage—sometimes up to 100%—of the cost of eligible business assets in the first year. This applies to both new and used property, which gives you more flexibility in your purchasing decisions. While it sounds similar to Section 179, there are key differences in how they are applied and the types of limits that exist. In some cases, you can even use both. The rules around bonus depreciation can change from year to year, making it a perfect example of why ongoing tax planning is so important for keeping your strategy current.
Pick Your Method: Accelerated vs. Straight-Line Depreciation
Beyond the special provisions of Section 179 and bonus depreciation, you have a choice in your general depreciation method. You can use an accelerated method to take larger deductions in the early years of an asset’s life and smaller ones later on. This is great for maximizing tax savings right now. The alternative is the straight-line method, which spreads the deduction evenly over the asset’s useful life. This approach provides a more predictable, consistent deduction each year. The best choice depends entirely on your business’s financial picture. If you anticipate higher income this year, an accelerated method might be best. If you prefer stability, straight-line could be the way to go.
Lower Taxes with Retirement and Charitable Contributions
Some of the most effective ways to lower your company’s taxable profit involve planning for the future and giving back to your community. By making strategic contributions to retirement plans and charities, you can reduce your tax bill while also investing in your team, your own future, and causes you care about. It’s a powerful way to make your money work for you in more ways than one.
These strategies aren’t just about finding deductions; they’re about building a stronger, more resilient business. Offering solid benefits helps you attract and retain top talent, while a well-funded retirement plan provides peace of mind. Charitable giving can also align your brand with your values, resonating with customers and your community. A proactive tax plan incorporates these elements to support your financial and business goals.
Fund Your Future with a SEP-IRA or Solo 401(k)
If you’re self-employed or have a small business, retirement plans like a SEP-IRA or Solo 401(k) are fantastic tools. Every dollar you contribute for yourself and your employees is a business expense, which directly reduces your company’s taxable income for the year. These plans allow for significant, tax-deferred contributions, meaning you can build a substantial nest egg while lowering your current tax liability. It’s one of the best ways to pay yourself first and ensure your business is setting you up for long-term financial security. You can find more information on retirement plans for small businesses directly from the IRS.
Offer Tax-Deductible Employee Benefits
Investing in your team is always a smart move, and it comes with tax advantages. Contributions your company makes to employee retirement plans, like a 401(k), are deductible business expenses. The same goes for other benefits, such as health insurance premiums. Offering a competitive benefits package does more than just lower your taxable income; it helps you attract and keep great employees, which is essential for growth. This turns a standard business expense into a strategic investment in your company culture and stability. Thinking through these options is a key part of effective business accounting and management.
Give Back Strategically Through Charitable Donations
Supporting causes you believe in can also provide a valuable tax deduction for your business. Corporations can generally deduct charitable contributions of up to 10% of their taxable income. To qualify, your donation must be made to a registered 501(c)(3) organization. This is a great way to formalize your company’s community involvement and build goodwill. Just be sure to keep meticulous records of all contributions. Strategic giving allows you to make a positive impact while also benefiting your company’s bottom line, making it a true win-win.
Claim Tax Credits to Cut Your Tax Bill
While deductions lower your taxable income, tax credits are even better—they reduce your final tax bill dollar-for-dollar. Think of them as a direct discount on what you owe the IRS. The government offers these credits to encourage specific business activities, from innovation to investing in your team and adopting green technology. For business owners, especially in a forward-thinking state like California, these incentives can add up to significant savings.
Claiming tax credits isn’t a passive activity you can handle at the last minute. It requires careful planning and meticulous documentation throughout the year. Identifying which credits your business qualifies for is a key part of a proactive business tax planning strategy. By understanding the opportunities available, you can make strategic decisions that not only help your business grow but also directly cut your tax liability. It’s about aligning your business goals with available government incentives to keep more of your hard-earned money.
Get Rewarded for Research and Development (R&D)
If your business is focused on innovation, the Research and Development (R&D) tax credit is one of the most valuable incentives available. This isn’t just for companies with high-tech labs; it applies to a wide range of activities. If you’re developing new or improved products, software, formulas, or manufacturing processes, you might qualify. For a tech founder like “Scaling Sara,” this could include the costs of developing a new app feature or improving a platform’s algorithm. The credit is designed to reward companies for investing in activities that push their industry forward. Both the federal government and California offer R&D tax credits, allowing you to potentially double up on savings.
Earn Credits for Employee Health Care
Investing in your team can also lead to direct tax savings. The Small Business Health Care Tax Credit is designed to help smaller companies afford health insurance for their employees. To qualify, you generally need to have fewer than 25 full-time equivalent employees, pay average wages below a certain threshold, and contribute a uniform percentage toward your employees’ premium costs. This credit can be a powerful tool for attracting and retaining top talent without breaking the bank. While contributions to employee retirement plans like a 401(k) are deductions rather than credits, they work in a similar way to lower your taxable income while providing a valuable benefit to your team.
Find Incentives for Going Green
Making your business more environmentally friendly can also make it more tax-efficient. Federal and state governments offer a variety of business energy credits to encourage sustainable practices. These incentives can apply to a range of investments, from purchasing commercial clean vehicles for your fleet to installing solar panels on your office or manufacturing facility. You may also find credits for making energy-efficient upgrades to your commercial buildings, such as installing new HVAC systems, insulation, or windows. For any California business owner, these credits not only reduce your tax burden but also lower your long-term operating costs and align your brand with environmentally conscious values.
Choose the Right Business Structure for Tax Savings
Choosing how to structure your business is one of the most important financial decisions you’ll make as an owner. It’s about much more than just the name on your paperwork; it directly shapes how much you pay in taxes each year. The right structure can create significant tax savings, while the wrong one can lead to unnecessary costs and complications. This decision sets the foundation for your company’s financial health and requires a strategic analysis of your business objectives to find the most suitable entity type. Whether you’re just starting out or considering a change, understanding your options is the first step toward building a more tax-efficient business.
Understand S-Corp vs. LLC Tax Rules
Many business owners get tangled up in the S-Corp versus LLC debate, but it helps to know they aren’t mutually exclusive. A Limited Liability Company (LLC) is a legal structure formed under state law that protects your personal assets from business debts. An S-Corporation (S-Corp), on the other hand, is a federal tax election. This means an LLC can choose to be taxed as an S-Corp. The primary tax advantage of this election is the potential to save on self-employment taxes. As an owner, you must pay yourself a “reasonable salary,” which is subject to payroll taxes. Any remaining profit can be taken as a distribution, which is not.
Explore the Benefits of Pass-Through Entities
Both S-Corps and most LLCs are considered “pass-through” entities. This means the business itself doesn’t pay corporate income tax. Instead, the profits and losses are “passed through” to the owners and reported on their personal tax returns. This structure avoids the double taxation that C-Corporations face, where profits are taxed once at the corporate level and again when distributed to shareholders as dividends. A major benefit for many pass-through businesses is the Qualified Business Income (QBI) deduction, which allows eligible owners to deduct up to 20% of their business income from their personal return. This is a powerful tool for lowering your overall tax burden.
Select Your Entity for an Optimal Tax Strategy
There is no single best business structure; the right choice depends entirely on your specific situation. An entrepreneur like “Creator Carla” with a growing online business might benefit from an S-Corp election to manage self-employment taxes. Meanwhile, a startup like “Scaling Sara’s” that plans to seek venture capital may need to be a C-Corporation. A comprehensive evaluation of LLC, corporation, partnership, and sole proprietorship options is essential. Factors like your projected profits, number of owners, industry, and long-term goals all play a role. As your business grows, the optimal structure may change, making it a critical part of your year-round tax planning.
Track and Document Every Deductible Expense
Maximizing your deductions is one of the most effective ways to lower your taxable profit, but it only works if you have the records to back it up. The IRS requires proof for the expenses you claim, so meticulous documentation isn’t just good practice—it’s a necessity. Think of it as the foundation of your entire tax strategy. Every legitimate business expense, from office supplies and software subscriptions to client dinners and travel costs, can potentially reduce your tax bill. But without a clear paper trail, those valuable deductions can be disallowed during an audit.
This is where many business owners, especially founders like “Scaling Sara” who are focused on growth, can get into trouble. Moving fast is great, but not at the expense of organized financials. Establishing a robust system for tracking and documenting every dollar you spend is the single most important habit you can build for your company’s financial health and tax compliance. It ensures you capture every possible deduction and can confidently defend your tax return if the IRS ever has questions. A proactive approach to business accounting and management transforms tax season from a frantic scramble into a straightforward review of records you’ve maintained all year.
Set Up a Solid Record-Keeping System
A reliable record-keeping system is your best defense against overpaying taxes and your strongest ally in an audit. This means more than just stuffing receipts in a shoebox. You need a consistent process for capturing every transaction, including the date, amount, vendor, and a clear description of the business purpose. Whether you use a digital system with cloud storage or a physical one with organized folders, the key is consistency. Make it a weekly habit to organize your expenses so nothing falls through the cracks. This simple routine ensures you have all the necessary information to claim your deductions and prove them if the IRS ever asks.
Use Accounting Software to Stay Organized
The easiest way to manage your record-keeping is with accounting software. Tools like QuickBooks or Xero are designed to make this process seamless. By linking your business bank accounts and credit cards, transactions are automatically imported and categorized. This not only saves you countless hours of manual data entry but also provides a real-time view of your company’s financial health. High-quality accounting software is essential for recording financial data accurately and generating the reports you need to make smart business decisions. If you’re unsure where to start, our team offers accounting software implementation and support to get you set up for success.
Keep Receipts and Document Business Purpose
While accounting software is great for tracking transactions, it doesn’t eliminate the need to keep receipts. A credit card statement simply shows that you spent money; a receipt shows what you bought. For certain expenses, like meals and entertainment, the IRS also requires you to document the business purpose. For example, if you take a client to lunch, you should make a note on the receipt of who you met with and what business topics you discussed. It’s much easier to jot this down right after the meeting than trying to remember the details months later when you’re filing your taxes.
Know Your Deduction Limits and Carryforwards
Not all deductions are unlimited. It’s also possible for your business to spend more than it earns in a given year, resulting in a Net Operating Loss (NOL). In this situation, you may be able to carry that loss forward to lower your taxable income in future years. The rules around NOLs and other deduction limits can be complex and change over time. Understanding these nuances is a core part of strategic business tax planning. A proactive approach ensures you’re not just claiming deductions for the current year but are also positioning your business for long-term tax efficiency.
Stay Compliant and Audit-Ready
Reducing your taxable income is all about smart, legal strategy—not cutting corners. The last thing you want is for your hard-earned savings to be wiped out by penalties from a compliance misstep. Keeping your financial house in order is the foundation of any good tax plan. It ensures your strategies are defensible and protects your business from unwanted attention from the IRS. Think of it as locking the door after you’ve put your valuables inside; it secures all your efforts.
Follow IRS Rules for Business Expenses
The IRS has specific rules about what qualifies as a deductible business expense. The core principle is that an expense must be both “ordinary and necessary” for your business. An ordinary expense is common in your industry, while a necessary one is helpful and appropriate. You don’t have to prove it was indispensable. Good tax planning is about using these rules effectively. In fact, a 2016 study showed that over two-thirds of U.S. corporations paid no federal income tax, highlighting how impactful a solid understanding of the tax code can be.
Avoid Common Mistakes That Trigger Audits
Certain actions can raise red flags with the IRS. Common triggers include mixing personal and business finances, reporting large losses year after year, or claiming deductions that seem unusually high for your industry. Simple math errors are another frequent culprit. As TurboTax notes, “It’s smart to plan your taxes ahead of time. Consider working with a tax professional to make sure you find all the deductions and credits you qualify for.” Proactive planning helps you catch these potential issues before you file, ensuring your return is accurate.
Know When to Call a Tax Professional
While it’s great to be informed, tax law is complex and constantly changing. A tax professional can provide clarity and help you apply strategies correctly. As one expert advises, “Always talk to your tax advisor or accountant before making any financial decisions related to your taxes.” This is especially true if your business is growing, you’re making a major purchase, or you receive a notice from the IRS. Instead of handling it alone, getting expert tax notice & audit representation can save you time, stress, and money.
Let Clear Peak Accounting Build Your Tax Strategy
Trying to piece together a tax strategy from blog posts and checklists can feel overwhelming, and it often leaves money on the table. The most effective way to reduce your taxable profit is with a proactive, year-round plan tailored to your specific business. This isn’t about finding loopholes; it’s about building a sustainable financial framework that supports your growth. At Clear Peak Accounting, we act as your strategic partner, moving beyond simple compliance to create a forward-thinking plan that aligns with your goals. We handle the complexities so you can focus on running your business with confidence.
Get Year-Round Strategic Tax Planning
A smart tax strategy isn’t something you pull together in April. It’s a continuous process of making informed decisions all year long. By strategically timing your expenses and revenue, especially around the end of the year, you can manage your taxable income much more effectively. This is where our Business Tax Planning services come in. We engage with you through proactive quarterly reviews and ongoing consultations, ensuring you’re always positioned to take full advantage of every available deduction and credit. We help you look ahead, not just at the past, turning tax season into a predictable part of your business rhythm.
Secure Expert Compliance and Audit Representation
Staying compliant with ever-changing tax laws is a full-time job in itself. When you’re implementing strategies to reduce your tax liability, it’s crucial to know you’re doing everything by the book. Working with a CPA firm gives you that peace of mind. We ensure your strategy is sound, documented, and fully compliant with IRS regulations. And if a notice does arrive in the mail, you won’t be alone. We provide expert Tax Notice & Audit Representation to analyze any communications from tax authorities and represent you, so you can stay focused on your work.
Receive a Customized Plan for Your Business
Your business is unique, and your tax plan should be too. A generic approach won’t uncover the specific opportunities available to you. We dig deep to understand your operations, industry, and goals to build a truly customized plan. This could mean identifying valuable tax credits for research and development, finding incentives for hiring certain employees, or structuring your benefits package for maximum tax efficiency. Our Business Accounting & Management services are designed to create a strategy that fits your business perfectly, ensuring no opportunity is missed.
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Frequently Asked Questions
What’s the difference between a tax deduction and a tax credit? This is a great question because they sound similar but have very different impacts. Think of a tax deduction as something that lowers your total taxable income. A tax credit, on the other hand, is much more powerful because it directly reduces the final amount of tax you owe, dollar-for-dollar. While both are valuable, a $1,000 tax credit will always save you more money than a $1,000 tax deduction.
Is it too late in the year to start tax planning? It’s never too late to make smart financial moves. While the most effective tax planning is a year-round process, there are still many strategic decisions you can make before December 31st, like accelerating expenses or making retirement contributions. The best time to start was yesterday, but the second-best time is right now. Getting organized today can still have a significant impact on this year’s tax bill and sets you up for a much stronger start next year.
How do I know if my business structure is still the right one for me? Your business structure isn’t set in stone, and it’s smart to review it as your company evolves. Key moments to re-evaluate include a significant increase in profitability, plans to bring on partners or investors, or a desire to manage your self-employment tax liability more effectively. If you find yourself wondering whether your current structure still serves your financial goals, it’s a strong signal that it’s time to have a conversation with a tax professional.
How do I prove an expense was for my business and not personal? The key is clear and consistent documentation. The best practice is to maintain separate bank accounts and credit cards for your business to avoid mixing funds. For every expense, you should have a receipt and a record of its business purpose. For something like a client meal, a quick note on the receipt detailing who you met with and what you discussed is all it takes. This simple habit makes your expenses easily defensible and keeps your records clean.
What’s the most common mistake business owners make when trying to lower their taxes? The biggest mistake is easily poor record-keeping. Many business owners have a good sense of their deductible expenses but fail to track them properly throughout the year. Without the receipts and documentation to back up your claims, even the most legitimate deductions can be disallowed in an audit. A solid strategy is useless without the proof to support it, which is why organized bookkeeping is the foundation of any effective tax plan.