The small business owner’s guide to a stress-free tax season

Follow these five tax time tips to better understand deductions, tax credits, and staying organized. 

Tax season is in full swing, and for many small business owners, it can be an incredibly stressful time of year. Not only is it a lot of work sifting through your past year’s finances and getting things organized (on top of running your business), but it’s also a crucial process that can impact your overall financial well-being. 

Whether it’s understanding which deductions you qualify for—from home office expenses, to vehicle use and professional development to developing an effective tax strategy, taxes for small business owners can feel overwhelming. On top of that, it can feel like one wrong move can create costly penalties that could result in thousands of dollars in unanticipated expenses. 

The bad news? Complicated taxes are an inescapable part of being a small business owner. The good news? With a little preparation and proper documentation, the process can be drastically simplified, making it straightforward for you to be in the best position to file your taxes accurately and on time, and for your taxes to be stress-free.

Tax season is well underway and there’s no better time than now to get organized and prepared. This comprehensive guide and the new HoneyBook Tax Hub will walk you through everything you need to know as you get your financial documents in order for this year’s tax filing.  

Better yet, use this guide as a template for future tax seasons, to create a clear system for gathering documentation and meeting deadlines throughout the year.

From essential paperwork to key deadlines, we’ll help ensure you’re ready to file with confidence. Here’s what we’ll cover: 

• Gather your forms and numbers as early as possible
• Understand what tax credits you’re eligible for
• Track and report all business tax deductions
• Get proof of your quarterly estimated tax payments
• Consult an accountant or tax expert 

1. Gather your forms and numbers—today

As a small business owner, getting your tax filing requirements and deadlines right is a big deal. Most businesses need to file by April 15 for the 2024 tax year. Running an S-Corp? Your deadline comes a bit earlier— typically March 15 (or the 15th day of the third month after your tax year ends). 

Don’t worry if you need more time though—filing an extension will give you until October 15—unless you’re filing as an S-Corp,  which will give you until September 15 instead. 

Now, let’s talk about what you’ll need to get your taxes filed properly. You’ll want to gather the basics like:

• Your social security number and the social security numbers of your spouse and dependents
• Employer identification number (EIN) or Taxpayer identification number (TIN)
• Income records
• Receipts for business expenses like rent, internet, contractor payments, and marketing and advertising expenses. You may keep these digitally for your records and future reference. 
• Any W2s you’ve received from an employer 
• Any 1099 forms you’ve received from clients for freelance income, contractor work, interest, dividends, and any other income sources/forms personally issued to you (like HoneyBook referral payments or template marketplace earnings). 

As a small business, you’ll also need to send forms to the vendors and contractors who’ve worked on your business in the past year. Here’s one in particular you need to be aware of:  

• 1099 forms: The rule of thumb is pretty simple: if you paid someone $600 or more during the tax year, they need a 1099 from you. However—for the 2024 tax year—if you paid them via credit card or through a credit card processing service like Stripe or HoneyBook, the credit card processor should provide them with a 1099 instead. 

To make future taxes easier, consider grabbing a Form W-9 from any new vendor who you expect to pay more than $600. That way, when it’s time to prepare those 1099s at the end of the year, you’re not scrambling to collect everyone’s information.

The deadline for forms 1099 and W-2 to be filed for the prior tax year is usually January 31 of the following year. For example, for the 2024 tax year, it would be January 31, 2025.

2. Understand the tax credits you’re eligible for

While most small business owners diligently track expenses for tax deductions, many overlook the powerful impact of tax credits. The difference is worth understanding: deductions reduce your taxable income, but tax credits directly lower your tax bill dollar for dollar. 

For example, if you owe $10,000 after filing and qualify for $5,000 in tax credits, your tax bill drops to $5,000. Even better, some tax credits are refundable, meaning they could increase your tax refund if they exceed what you owe.

The IRS offers numerous business tax credits worth exploring. Here are some common ones that might apply to your business:

• Small Employer Health Insurance Credit: Available if you provide health coverage for your employees, helping offset the cost of premiums.
• Paid Family and Medical Leave Credit: Rewards businesses that offer paid family leave benefits to their workforce.
• Disabled Access Credit: Supports businesses that maintain or improve accessibility for people with disabilities.
• Retirement Plans Startup Credit: Available when you establish retirement plans like SEP IRAs, SIMPLE IRAs, or 401(k)s for your employees.

To claim these credits, you’ll need to file Form 3800 with your tax return. While this form lets you compile all your eligible credits in one place, you’ll also need to submit separate documentation for each specific credit you’re claiming.

Don’t forget to consider personal tax credits when filing your Form 1040. For instance, the Earned Income Tax Credit can provide significant tax relief for business owners with low to moderate income levels. Taking time to research available credits could significantly reduce your overall tax burden and improve your business’s bottom line.

3. Track and report all business tax deductions

Maximizing tax deductions starts with proper expense tracking. A simple spreadsheet along with saved receipts can work for most business expenses. However, certain deductions like mileage and home office use require more detailed documentation.

Not sure of what tax deductions qualify? Here’s an overview of some of the most common: 

• Home office: This can be claimed if you have a dedicated space used exclusively for business. There are two different calculation options; the Simplified Method that allows you to deduct $5 per square foot of space up to 300 feet; or The Regular Method where you calculate the percentage of your home used for business and then apply that percentage to eligible expenses like rent, mortgage interest, utilities, insurance, and maintenance costs. 
• Business mileage: This covers expenses for all business-related vehicle use. Currently the rate is 67 cents per mile for deductions. You can also deduct gas (if not deductions mileage), tolls, parking, maintenance, insurance, and depreciation proportional to business use. However keep in mind that you’ll need detailed documentation to deduct this on your taxes. Throughout the year, be sure to keep a comprehensive log of trips, dates, purpose, and total miles. 
• Professional services: This includes fees paid to professionals like accountants, lawyers, consultants, and other experts who provide services essential to running your business. 
• Internet and phone usage: You can deduct the percentage of your phone and internet used specifically for your business. A good place to find this information is through your monthly phone and internet bills from your provider. While there’s no hard and fast rule for this—make sure to be reasonable with your deductions. 

A good rule of thumb for your future taxes is to start tracking all business-related expenses from January 1st and continue through the year. On a regular cadence, review your expenses against available small business tax deductions and credits to ensure you’re not missing any opportunities. Remember, you can claim these business deductions in addition to taking the standard deduction on your personal taxes.

4. Gather proof of your quarterly estimated tax payments  

When tax season arrives, you’ll also need documentation of all of your quarterly estimated tax payments made during the previous year. Quarterly estimated tax payments are generally required if you expect to owe $1,000 or more in taxes for the year and are due—per their name—four times a year (April, June, September, and January of the following year).  

This requirement applies to:

• Individual taxpayers
• Sole proprietors
• Partners
• S corp shareholders

These payments factor into your final tax calculations, so maintaining accurate records throughout the year is essential. 

But quarterly estimated tax payments are also exactly that, so working with a tax professional may help you nail down a more accurate estimate. A good rule of thumb is to set aside approximately 25-30% of your taxable income as savings for estimated tax payments.

5. Consult with an accountant or tax expert

While you can file your taxes independently, don’t hesitate to seek professional help if you feel overwhelmed. Tax software can be useful, but a professional tax preparer offers personalized guidance tailored to your specific business needs–which makes them well worth the investment.

And it’s important to be prepared. Make sure to educate yourself through different tax resources (like this guide!) before meeting with a tax expert. That way, you’ll know which questions to ask that specifically pertain to your business,  and have a firm understanding of what to cover and where they can help. Here are some topics you might want to cover: 

• Auditing your returns for any errors or mistakes before filing
• Strategies to reduce future tax liability
• Electing S Corp status, which could lower your tax burden by allowing you to pay yourself a reasonable salary while taking additional profits as distributions
• Establishing a quarterly estimated tax payment schedule to avoid large year-end bills
• Exploring tax-advantaged retirement accounts like SEP IRAs, Solo 401(k)s, or Traditional IRAs as ways to reduce taxable income

Have a successful 2024 tax season

Filing taxes can be stressful, especially when you’re running your own business. However, staying organized and focusing on four key priorities—deductions, credits, estimated tax payments, and consistent bookkeeping—will help streamline the process. 

Remember, tax planning is a year-round activity. The steps you take now to organize can significantly impact your tax situation in this tax season and in the years to come. And remember, help is always here. We have the new HoneyBook Tax Hub to help you simplify your tax prep; get the forms you need; maximize your tax savings and deductions; and much more. 

So, take a step back, and focus on one task at a time, you’ve got this. 

This article is intended for general educational purposes based on generalizations and does not replace professional accounting, investment, legal, tax or business advice and is based on the IRS guidance for tax year 2024. You should employ the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.