If you were to get a peek behind the curtain of any large corporation, you’d see that they’re very intentional and strategic about business tax. Big companies optimize everything they can to lower their tax bills, often with entire departments dedicated to tax filing and planning.
As a solo business owner, you probably don’t have those same resources at your disposal—but that doesn’t mean you can’t learn a thing or two from big businesses about how to handle your taxes.
Here are six secrets you can implement in your business-of-one to reduce your taxable income and keep more of your hard-earned money where you want it: with you.
Big companies don’t sit back and wait for tax season to roll around—they have entire teams focused on tax strategy all year long. They plan ahead, forecast profits, and make moves before the end of the year to minimize their liability.
You don’t have an in-house accounting department, but you can still adopt this mindset. Instead of treating taxes like something that happens to you, think about them as something you can actively manage. This is called tax planning and could mean even small changes like:
Put simply, taxes shouldn’t be an annual panic—they should be a part of how you run your business every single day.
Don’t need yet another thing to keep track of in your solo business? Let Lettuce do it for you. From tracking and categorizing expenses to proactively setting aside money for your tax payments, Lettuce can put your taxes and accounting on autopilot.
Big businesses write off everything they possibly can—and you can too. Every dollar you deduct lowers your taxable income, which means you keep more of what you earn.
As a solo business owner, you can write off any expense that legitimately supports your business. That could mean anything from your software subscriptions to your ergonomic desk accessories.
There are many categories of tax deductions that solopreneurs can justifiably write off. But, if you’re looking for a simple golden rule, ask yourself this question: Does this expense help generate business revenue? The IRS considers a deductible business expense to be both ordinary—common and accepted in your business—and necessary—helpful and appropriate for your business. If you can confidently answer “yes,” that’s a deductible expense.
The key here is to get in the habit of tracking and categorizing these expenses as they happen. Waiting until tax time to sort through purchases and old receipts is when things get missed—and that means leaving money on the table. Lettuce can handle this for you, so you can spend less time logging transactions and more time on billable work.
Many big corporations make strategic choices about where or how they incorporate, such as setting up holding companies or subsidiaries in states (or even countries) with lower tax rates.
You’re probably not setting up an offshore entity in the Cayman Islands anytime soon, but you can still be strategic about your business entity (this is the legal framework that dictates how your business is operated and taxed). One great example? Electing S Corp status.
An S Corp is a tax status that reduces the amount of self-employment tax you pay. Rather than paying this tax on your entire taxable income, you only pay it on the salary you set for yourself (called a “reasonable salary”). The rest of your business income is still accessible to you in the form of owner’s distributions, but it’s not subject to self-employment tax.
This can mean major tax savings for your solo business, especially if you’re a high earner. Curious how much you could save? Plug your numbers into our tax calculator to see what an S Corp election could mean for you.
Large corporations understand the importance of good timing. They might push a product launch into the new year or accelerate a major purchase to control when it hits their books. It’s all about managing when income and expenses show up for tax purposes.
You can use this same trick in your solo business, just on a smaller scale. For example, you might hold off on sending a few December invoices until January if you want to keep your taxable income lower this year. Or, if you know you’ll need a new laptop soon, you could buy it in December so you can deduct it on this year’s return and reduce your individual income tax.
Again, it’s all about understanding the tax calendar and planning accordingly so you aren’t making last-minute moves just to dodge taxes.
Big companies offer employees 401(k) plans to keep employees happy, and because contributing to retirement plans comes with significant tax perks for the business.
The same is true for your business-of-one. Contributing to a retirement account like a Solo 401(k) or a SEP IRA means you can set aside money for your financial future while also lowering your taxable income right now.
Understandably, you’d rather save your money than hand it over to the IRS, and retirement accounts let you do exactly that.
Every business—whether big or solo—needs to keep clean records. Not only does this give you peace of mind in case of an audit, but it also makes it easier to:
This means logging expenses and payments as they happen, saving receipts, and having easy access to important financial reports and statements. Using an automated system like Lettuce will help you keep everything organized (without the messy spreadsheets). You’ll have more confidence, better compliance, and most importantly, more cash in your bank account.
Big businesses don’t just stumble into tax savings—they plan for them. And while freelancers and solopreneurs like you don’t have a dedicated accounting department, you can use some of the same strategies to keep more of what you earn.
Whether it’s choosing the right business structure, writing off every justified expense, or letting Lettuce handle all of the heavy lifting, you’ll build tax habits that pay off (quite literally) year after year.
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