6 Tax Tips for Small Business Owners in 2025

Whether a SaaS company or an e-commerce store, small businesses benefit from an organized approach to tax management. With a clear understanding of your tax obligations, you are able to:

• Stay compliant with the law
• Avoid penalties and fees
• Make smarter financial decisions for your business.

You can implement changes to your tax planning strategies, such as using the right software tools and taking advantage of overlooked tax credits.

In this guide, you’ll learn practical tips around small business tax strategies, so you can save money where it counts and focus on growth.

1. Use Tax Compliance Software

The rules for sales tax, VAT, and GST are always changing. Business owners feel uncertain about when to charge sales tax and whether they’re charging the correct amount. Rather than try to manage several different tax policies manually, a cost-effective solution is to subscribe to a tax compliance software.

With the right sales tax compliance software, you can:

• Automate tax calculations
• Collect the correct tax on every sale
• Automate invoicing
• Track due dates and registration thresholds
• Simplify reports for quick tax return filing

Tools like Quaderno take all the guesswork out and automate all of these processes for you. You can automatically generate tax reports, get timely reminders for filing deadlines, and even handle multi-currency transactions if you sell internationally.

Sales tax compliance software often integrates with the tools you already use to run your business. Quaderno syncs seamlessly with platforms like PayPal, Stripe, Shopify, WooCommerce, and Xero. Your sales data is automatically sent between platforms, so tracking your tax liabilities around the world is up to date.

2. Simplify Multistate Workforce Tax Obligations

For anyone who’s dealt with managing taxes across multiple states, you know how much of a headache it can be. Each state has its own unique set of income tax rules, thresholds, and filing requirements.

As a business owner, you’ll need to keep tabs on where your employees work, figure out if you’ve established a “nexus” (a taxable presence), and register with tax agencies in those states. Yet, no stress.

Start by keeping clear and detailed records of where each team member works and for how long. Tools like Gusto or Quaderno can be lifesavers here, helping you calculate state-specific withholdings and handle the required forms automatically.

For instance, if your team includes members working in California, you’ll need to register with the Employment Development Department to manage state income tax and unemployment insurance payments. This process becomes much more manageable with the help of an EOR service, which takes care of tax withholding, payroll, and tax filings for you.

Oh, and here’s a pro tip: set calendar reminders for quarterly filings and payment deadlines for every state you’re dealing with. Or, better yet, consider hiring a payroll service or an accountant with expertise in multistate taxation to stay ahead of any compliance surprises.

3. Unlock Tax Savings by Claiming Relevant Credits

You can reduce your tax burden by taking advantage of various tax credits available at federal and state levels.

First things first, you need to identify credits tailored to your operations. For example, the Research and Development Tax Credit supports businesses investing in innovation, while the Work Opportunity Tax Credit is for hiring from certain target groups.

Many credits, such as the Small Business Health Care Tax Credit, require filing specific forms, so it’s worth double-checking the deadlines and prerequisites.

Here’s a step-by-step of how to apply:

1. Check Eligibility: Ensure your business meets IRS requirements, including offering health insurance and having fewer than 25 full-time employees with average wages under $58,000.
2. Calculate the Credit: Use IRS Form 8941 to determine your potential credit based on premiums paid.
3. Gather Documentation: Collect payroll records, health insurance invoices, and proof of employer contributions.
4. File with Taxes: Include Form 8941 when submitting your tax return and transfer the credit amount to Form 3800, General Business Credit.
5. Meet Deadlines: Double-check submission deadlines to maximize your savings without delays.

Lastly, make sure you don’t leave potential savings on the table. Schedule a meeting with your accountant or tax advisor to evaluate credit opportunities annually. They can also help you stay compliant with any supporting documentation requirements for audits.

4. Automate Your Bookkeeping to Reduce Errors

As a SMBs owner, you need to keep accurate financial records for filing taxes to avoid costly mistakes. Automation tools can save you time, reduce errors, and give you a clear financial picture. Here’s how to get started:

1. Choose a reliable software: Pick a bookkeeping tool like QuickBooks or Xero. These platforms sync with your bank accounts, track expenses, and categorize transactions automatically.
2. Set up recurring processes: Automate tasks like invoicing, expense tracking, and bank reconciliations. Most software allows you to schedule reminders and recurring entries, so nothing slips through the cracks.
3. Integrate with tax tools: Many bookkeeping tools connect directly with tax compliance software like Quaderno, making tax filing easier by organizing and storing receipts, invoices, and other documentation.
4. Review regularly: Schedule a monthly check-in to review your automated records for accuracy. Fix discrepancies promptly to avoid bigger issues at tax time.

If you use automation properly, you’ll have your books clean and reduce the stress of last-minute number crunching. Perhaps most importantly, it’ll free you up to focus on running and growing your business instead of drowning in spreadsheets.

5. Maximize Your Tax Deductions Strategically

If you’re not maximizing your tax deductions, you’re leaving money on the table. And who doesn’t want to keep more of what they’ve earned? Tax deductions can significantly lower your taxable income, but staying on top of them requires a bit of strategy and planning.

Categorizing your expenses is the first step you can take. That includes: office supplies, travel, software subscriptions, or even home office costs. Just be sure to hang on to those receipts and maintain detailed records to back up your claims if an audit ever comes knocking.

Then, you could make your life easier by using an accounting tool like FreshBooks to automatically organize expenses. It can let you tag deductible items and generate clear, audit-ready reports.

And don’t forget about those sneaky, industry-specific deductions! For instance, if you’re running a restaurant, you can deduct food waste. If you’re a small business consultant, you might be able to write off professional development courses. In some cases you can even deduct shipping taxes, which is huge for e-commerce entrepreneurs!

It’s also worth scheduling regular check-ins with your financials. Focus on major transactions and recurring expenses. Sometimes the biggest opportunities are hiding in plain sight.

Oh, and here’s a tip you won’t want to miss: Section 179 allows you to deduct equipment purchases immediately instead of spreading the cost out over years. Talk about a cash flow game changer!

6. Build Tax Efficiency Through Smart Retirement Planning

Securing your future and saving on taxes sounds like a win-win, right? Contributing to retirement plans can do just that by reducing your taxable income while helping you build a safety net.

Options like Simplified Employee Pension (SEP) IRAs, Solo 401(k)s, or SIMPLE IRAs are tailored for small business owners and their teams, making them perfect for your needs. These plans let you contribute pre-tax dollars, cutting down your current year’s tax burden.

Start by considering your business’s cash flow and workforce size to find the plan that fits just right. For instance, if you’re self-employed or don’t have employees, a Solo 401(k) might be your best bet. On the other hand, a SEP IRA works well for businesses with a few team members and income that varies year to year.

Once you’ve got the plan in place, partner with your payroll provider or accountant to automate contributions and stay on top of annual limits. For 2024, these limits have gone up, so make sure you check the IRS website for the latest details for 2025.

What’s next?

When it comes to simplifying tax management for your small business, you have plenty of tools and strategies to make the process easier. With tools like Quaderno for compliance and automation software for bookkeeping, you can stay organized and avoid costly errors.

Ready to give it a try? Start a free trial today.