Small Business Taxes 2025: How to Save Money, Avoid IRS Trouble, and Sleep at Night
Running a small business can be the ultimate dream—but that dream often comes with a tax nightmare.
Many entrepreneurs think they can “wing it” on taxes, only to get blindsided by unexpected bills, penalties, or audits. In a recent interview with IRS Enrolled Agent and master tax advisor Roger Pearson, we broke down exactly how to protect yourself—and your profits—in 2025 and beyond.
Here are the most important takeaways every business owner should know:
📌 1. Know Your Legal and Tax Structure Early
Choosing the right entity matters more than you think.
Sole Proprietorship: Easy to set up, but be prepared—at least 25% of your net profit will go to taxes (self-employment + income taxes), and possibly much more if you have state tax.
LLC: Provides liability protection but doesn’t automatically change how you’re taxed. A single-member LLC is still taxed as a sole proprietorship unless you make elections.
S Corporation: Once your net profit hits $70,000–$100,000, consider switching. S Corps can shield a portion of income from self-employment tax—but only if you do it correctly, with payroll and proper documentation.
Pro Tip: Don’t let social media gurus convince you to form an LLC or S Corp before you understand why. Consult a qualified professional who asks detailed questions about your business.
📌 2. Documentation Is Everything
The IRS doesn’t really care about your money—they care about your paperwork.
If you can’t prove it, it doesn’t exist. Period.
Keep clean records:
Mileage logs (apps make this easy now).
Receipts for all expenses.
Clear records of income and bank deposits.
Updated depreciation schedules for equipment purchases.
📌 3. Understand Depreciation Rules
Any business purchase over $2,500 typically goes on a depreciation schedule:
Computers: 5 years
Office furniture: 7 years
Commercial property: 39 years
The 2017 Tax Cuts and Jobs Act allowed accelerated depreciation, but those benefits are tapering off. Plan your deductions carefully—sometimes spreading them out over future years is smarter.
📌 4. Make Estimated Tax Payments
Many small business owners ignore estimated taxes, only to face penalties later.
Rule of thumb:
Estimate and pay at least 25% of your net profit quarterly.
Even better: schedule a planning meeting in October or November each year to adjust your payments and avoid surprises.
📌 5. Hire Smart, Stay Involved
You can’t delegate all tax responsibility:
Learn the basics so you can ask good questions.
Avoid tax preparers who just say, “Drop off your paperwork, I’ll call you when it’s done.”
Look for professionals who are proactive and understand your business.
🎯 The Bottom Line
Being organized, proactive, and educated is the only way to avoid IRS nightmares.
“As long as you have it documented and can back it up, you’re not going to have a problem with the IRS.” – Roger Pearson
Take the time to know your numbers, get expert advice, and keep good records. That’s the difference between stressed-out entrepreneurs and successful business owners who sleep well at night.
Need help? Start by tracking your net profit monthly, scheduling an annual tax planning session, and using modern tools to automate documentation. Your future self—and your wallet—will thank you.
For more insights and detailed discussions like this, don't forget to subscribe to The Common Cents Show on YouTube and catch each episode live for the opportunity to engage with the experts.