UBCNews - Business - Business Tax Optimization Strategies: How To Effectively Reduce Your Tax Burden

Episode Date: December 16, 2025

Welcome back, everyone! Today we're tackling something that affects nearly every small business owner and self-employed individual out there - are you paying too much in taxes? I'm talking about money that could be staying in your pocket, funding your business growth, or going toward your retirement. And honestly, it's way more common than you might think. Associates in Accounting, CPA City: Louisville Address: 9405 Mill Brook Road Website: https://www.associatesinaccountingcpa.com

Welcome back, everyone. Today we're tackling something that affects nearly every small business owner and self-employed individual out there. Are you paying too much in taxes? I'm talking about money that could be staying in your pocket, funding your business growth, or going toward your retirement. And honestly, it's way more common than you might think. Oh, absolutely. You know, overpaying taxes is one of the most common and completely avoidable mistakes I see. And here's the thing. People aren't. aren't doing it because they're careless. They just don't know what signs to look for at tax time. Right. And I think a lot of folks actually celebrate when they get a big refund check. Like how, hey, I got $3,000 back. But that's actually not the when people think it is, is it? Exactly. Here's the reality. About 64% of tax returns filed in 2024 resulted in refunds. And the average refund was $3,138. But that's a lot of tax returns filed. refund, that was your money all along. You essentially gave the government an interest-free loan

for the entire year. Mm-hmm. Interesting. So instead of using that money throughout the year to pay down debt, contribute to retirement, or even just earn interest in a high-yield savings account, it's just sitting there with the IRS. Precisely, and this is where adjusting your W-4 comes in. If you're consistently getting large refunds, you should work with a tax professional to adjust your withholding. The IRS even has a tax withholding estimator tool that helps you figure out the right amount. That's super practical. Now, another big issue I've heard about is filing under the wrong status. Can you break that down for us? Sure. Your filing status affects your standard deduction, your tax brackets, and what credits you're eligible for. A classic example is single parents who

qualify as head of household, but file a single instead. That mistake can cost them. hundreds, even over $1,000. So to everyone listening, if your situation changed, like you got married, had a child, or went through a divorce, you need to revisit that filing status, right? Definitely. Life events are huge triggers. I actually had a client who got divorced and kept filing jointly out of habit for two years. Once we corrected that, she saved nearly $1,500. It was a simple fix but made a real difference. Wow, that's the kind of mistake that adds up.

Now, speaking of life events, let's talk about investments. Managing investments without a tax plan can lead to some pretty nasty surprises come tax season. That's exactly it. Short-term capital gains, those are investments you held for one year or less, are taxed as ordinary income, with rates ranging from 10 to 37 percent depending on your tax bracket. long-term gains are taxed at zero, 15, or 20% depending on your income. There's also something called tax loss harvesting where you sell losing investments to offset gains. I mean, that sounds like something you definitely don't want to try without professional help.

I completely agree. A licensed financial advisor and a tax professional can help you manage that strategically. Sometimes a dip in income can actually create opportunities for things like Roth conversions. The key is planning ahead, not just reacting when April rolls around. Planning ahead really is what separates people who overpay from those who optimize their taxes. That point about planning ahead sets up our next piece, using tax-advantaged accounts. But first, a quick word from our sponsor. If you're a small business owner in Louisville trying to make sense of tax planning,

deductions, or whether you're overpaying, associates in accounting, CPA can help. Their experienced team of accountants and CPAs offers bookkeeping, tax preparation, payroll services, and retirement planning designed for businesses of all sizes. Whether you need help adjusting your withholding or identifying misdeductions, they're here to guide you through complex tax situations. Learn more at Associates and Accounting, CPA.com. Picking up on planning ahead, how should small business owners be thinking about tax-advantaged accounts before they just throw money into a regular brokerage account.

Great question. So many people start with a brokerage account because it's easy through their bank or an app. But you should max out your tax-friendly accounts first. Traditional IRAs or 401Ks reduce your taxable income right now. Roth IRAs let your money grow tax-free. And if you have a high deductible health plan, an HSA gives you triple tax benefits.

And for business owners specifically, there are even more options, right? Yes. If you're self-employed or have a side hustle, you can open a SEP IRA or Solo 401K. These let you save for retirement while reducing your taxable income. One change like that can save thousands annually.

I see. Now let's talk about deductions because I think this is where small businesses leave the most money on the table. Oh, for sure. Small businesses often miss deductions for business expenses. If you're using your phone for client calls or promoting your business on social media,

part of that phone bill could be deductible. Same goes for subscriptions, mileage, office supplies, even a portion of your home if you have a dedicated workspace. So basically, if you're not tracking expenses throughout the year, you're probably overpaying? Exactly. And here's another common mistake. Mixing business and personal expenses. You need a clear separation. Keeps separate. Keeps. keep separate accounts, maintain good records, and when you're unsure about whether something's deductible, ask your tax professional. I always say the worst they can say is no, but you'd be surprised how

often the answer is yes. Ha, that's true. Better to ask and look a little silly than leave money on the table. Absolutely. And that brings me to my last major point. Working with a qualified tax professional is worth every penny. Your situation doesn't even have to be a job. to be super complex. If you run any kind of business, have investments, bought a house, or had major life changes, get help. And the right tax pro should understand your specific situation, correct? Right. For example, if you run a consulting business, you need someone who understands business deductions. They should also be up to date on recent changes. The One Big Beautiful Bill Act signed in July 2025, made major changes to the tax code,

and some professionals are more current than others on how it impacts you. That makes sense. So what should people do if they think they've been overpaying? First, use that IRS tax withholding estimator to check if your withholding is correct. Second, review your filing status and make sure it matches your current situation. Third, meet with a tax professional beyond just tax time, um, quarterly, or at least mid-year. Ask them about deductions you might be missing,

whether you should adjust estimated taxes and how recent tax law changes affect you. And the goal here is to pay exactly what you owe, nothing more, nothing less. That's the sweet spot. The ideal tax refund is close to zero. You're not loaning the government your money, but you're also not scrambling to cover a big bill in April.

Paying what you owe, no more, no less. That's how you keep control of your cash. cash flow. Have you thought about how much of your hard-earned money might be sitting with the IRS right now instead of working for you? That's the question everyone should be asking themselves. Well, this has been incredibly helpful. Thanks so much for breaking all of this down in such a practical way. To everyone listening, don't wait until next tax season to address this. The sooner you make adjustments, the more money you'll keep throughout the year. Couldn't agree more. Take action. Take action. now and your future self will thank you.