Don’t get confused by small business taxes and don’t short change yourself either! Read this article for everything you need to know about small business taxes!

Small business taxes can feel like the death of you.

There are plenty of common mistakes, but taxes for your small business include even more hurdles. Hurdles that only apply to the self-employed. Because the IRS is nice that way.

We could tell the joke about death and taxes, but let’s just make taxes easier. Keep reading for your essential tips to making tax season simpler.

Organization Changes Small Business Taxes

Remember the good old days when you worked for the man and the man took a slice out of your paycheck every month? It was the only good thing about working for the man.

Dorothy, we’re not in Kansas anymore.

Before you get scared, though: small business taxes aren’t actually all that complicated. Once you know the ins and outs, anyway.

The big takeaway is this: because nothing is being deducted automatically, your deductions and your taxes are going to be a bit steeper.

Here are a few to watch out for.

Self-Employment Tax

Some surprises are fun. They come with confetti and champagne and dance music.

The self-employment tax isn’t one of them. Sorry.

Back when you worked for the man, you had a certain amount deducted from your paycheck for Medicare and Social Security. Your employer was required to match that amount on your behalf.

Nowadays, you’re your own boss and employee. Can you sense where this is going?

Yup. You’re paying as both the employer and employee. Thus, the self-employment tax.

And since you’re not getting automatic deductions every month, this can be a major shock to the wallet come tax season. The rate is 15.3% – if your business makes $100,000 a year, that’s $15,300. That doesn’t include income tax.


One way to offset the blow is that the self-employed are able to deduct up to 50% of the self-employment tax from their monthly income. In the tax bracket example included above, that levels out to a $1,900 tax reduction.

Make Sense of Deductions

Like we said before, the man’s not taking automatic deductions from your paycheck anymore.

Those deductions are a smidge important for your future. Things you should be deducting from your paycheck anyway.

Like, say, health insurance. Or retirement.

Health Insurance

This isn’t your mama’s health insurance. Health insurance markets have had a major transformation in the past decade (thanks, Obama!) which means that private insurance as we once knew it no longer exists.

Here’s the scoop. Insurance plans are more expensive, both because you have to buy it yourself and because you can no longer pick and choose what you want to be covered. The good news is that you can still deduct your health insurance premiums from your small business taxes.


Even if you work for yourself, you still want to retire at some point.

Except, if you’re like 40% of freelancers or the self-employed, you don’t have a formal retirement plan.

Small business owners have a few options for retirement plans. The most flexible is the Self-Employed 401k, also called the Solo 401k.

The short version of the story: if you don’t have any employees except me, myself and I, the Solo 401k is designed for you.

The maximum annual contribution is $54,000 for those under 50 and $60,000 for those 50 and up. If it sounds steep, keep in mind that you’re contributing as both employer and employee, instead of having an employer match your contribution.

Record-keeping is simple too: once your assets reach $250,000, you have to fill out the form 5500-EZ for the IRS. It shouldn’t take more than 10 minutes (don’t you love when that happens?)

Tips for a Better Tax Season

You know what you need to deduct. Now for the down and dirty: doing your small business taxes.

It isn’t life or death. Use these three tips to keep your tax season running smoothly before tax season has even started.

Start Early

Your mom and your tax guy will both tell you the same thing: start early.

Seriously, this isn’t your college term paper. You can’t do your taxes in twenty minutes fueled by caffeine and hysteria.

How to do taxes the smart way? It helps to start from the beginning – as in, the beginning of the year. Start organizing receipts and expenses at the start of the year right up until tax season.

Hard to forget oddball expenses when you’ve been tracking them all year.

Know Your Deadlines

Repeat: small business taxes are not your college midterm. The IRS is not your professor. You won’t get a retake if you take a sick day.

Not only are you risking late fines, penalties and interest charges, you’re getting the attention of the IRS.

Funny how they get suspicious when you don’t pay your taxes.

Taxes for C-Corporations are now due April 15. Partnerships and S-Corporations, however, are now due March 15.

Don’t get busted by the IRS. Pay your small business taxes on time.

Health Credit Advantages

Remember how happy you were when you got extra credit? That’s kind of how health credit works.

Basically, if you have less than ten employees who earn an average wage of less than $25,000 per, congratulations. You’ve got the perfect conditions to take advantage of the health credit.

As with all deductions, if you’re unsure it’s always best to bring in a professional. A good starting point is to spend quality time with the form 8941 to calculate your eligibility.

Small Business Made Simpler

Your small business is your sweat, blood, and tears. You want to get back to the important parts – like, you know, running your business.

That’s what That Southern Business Show is for.

For your small business questions, check out our blog. Like our post on whether or not you need a business coach.

But then, we’re a show. If you learn best by hearing someone talk, that’s what the That Southern Business Show podcast is for.

Still have questions? Good news: we have answers. We also love hearing what you think of the show, and what you want to hear next. Check out our contact page to get in touch.