How Should a Small Business Plan for Rising Taxes?
Instead of expecting your CPA to go above and beyond, owners of small businesses should take ownership of their own tax planning and/or seek specialized advice elsewhere.


A buzzword appeared in the world of small business about a decade ago: the accountant as “most trusted adviser.”
As a certified public accountant, I’m flattered that we’re consulted for a growing range of business needs, including rising taxes. But with the increasing complexity of modern business and regulations, and a worsening shortage of CPAs, the truth is that small-business accountants rarely help clients optimize their tax strategies.
Dedicated tax-planning services are a must-have for most business owners, as the IRS’ tax codes are bloated with ever-newer reporting requirements. But accountants never should have been expected to do anything beyond their job description, much less act as an adviser to a business.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
That’s no dig at my fellow CPAs. Accountants are trained to record transactions, rather than to look forward and create plans. So while your accountant may be doing great work tracking the ups and downs of your business and helping it stay in compliance, expecting her to advise on complex, time-consuming tax-mitigation strategies is a bridge too far.
It’s understandable that business owners haven’t thought of ways to get more out of their accountant. Everyone is wearing more hats and juggling more balls these days. Still, the failure to recognize the importance of proper tax planning adds up. Depending on your state and business type, at least a third of your profits will go to various layers of government. And overpaying taxes not only prevents owners and employees from accumulating wealth or enjoying more income, but it also starves a business of capital, restraining growth and making it more vulnerable to economic downturns and other adverse events.
Sometimes the best way to improve a company’s return on capital is to better manage tax liabilities. The dramatic impact that a favorable turn in tax-related flows can have was demonstrated by the Employee Retention Credit, the refundable tax credit given to companies during the COVID-19 pandemic. A similar boost was the Tax Cuts and Jobs Act of 2017, which slashed corporate taxes to a 21% rate. A good tax strategy can be akin to having such a tailwind every year, with a 40% reduction a realistic benchmark.
Meanwhile, it is hard to overestimate the pending tax burdens facing small-business owners. Many of the benefits of the 2017 tax bill, including the qualified business income deduction and bonus depreciation, are set to phase out in the next two years. And that prized 21% corporate rate might soon go away. The upshot: Taxes are going up — big-time — at least for those who are not planning ahead.
So what should business owners do?
The first step is to avoid frantically Googling for a tax lawyer or those who give specialized advice, which can run the gamut from comprehensive tax planning for small businesses to transaction-specific services. Instead, you ought to get a better understanding of your firm’s financials and current tax situation — what is on your tax return and why — and otherwise take ownership of the process.
The second step is to sit down with your current accountant, once the rush of the tax-filing season is over, and do a deep dive on your company’s books. Ask your accountant what specific proactive steps she would have taken to reduce taxes in the past — and those in the next couple of years. And if the answer is “none,” don’t be disappointed. After all, tracking your business’ transactions and keeping you in compliance is, essentially, an accountant’s job, nothing more.
Instead, the responsibility falls on the business owner, who reflexively sends her accountant information without taking the time to ask whether anything is being done to minimize tax obligations.
Meanwhile, remember that “planning” is exactly that. You can’t begin work on a tax plan in mid-December and successfully execute a new strategy right after the holidays — not to mention enjoy benefits for the year that has gone by.
I like to encourage business owners to look at the problem as if it’s a supply-chain issue, such as a shortage in a component that’s necessary for their business. What do you do? You investigate the problem. You ask questions and talk to people you know and trust about what they are doing. And above all, you don’t assume that someone else is going to solve your problem if you aren’t.
Finally, if you decide to explore the option of specialized tax planning, be rigorous in asking about the potential benefits. A professional in this niche should have success stories about companies such as yours.
And don’t assume your business is too small to be their next success — especially as everyone’s business taxes, including theirs, are soon about to get much bigger.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Bruce Willey has been working with small to midsize businesses across the country for more than a decade, helping them navigate business and tax law in a variety of situations. His services include assisting with business start-ups, operations, growth, asset protection, exit planning and estate planning.
-
Social Security Will Continue Sending Paper Checks Sparingly, Reversing Course
The Social Security Administration has backed off from plans to eliminate paper checks. However, it will only send checks in the mail as a matter of last resort.
-
Ask the Editor — Tax Questions on Four New Tax Deductions
Ask the Editor In this week's Ask the Editor Q&A, we answer tax questions from readers on four new tax deductions in the "One Big Beautiful Bill."
-
How Divorced Retirees Can Maximize Their Social Security Benefits: A Case Study
Susan discovered several years after she filed for Social Security that she is eligible to receive benefits based on her ex-spouse's earnings record. This case study explains how her new benefits are calculated and what her steps are to claim some of the money she missed.
-
From Piggy Banks to Portfolios: A Financial Planner's Guide to Talking to Your Kids About Money at Every Age
From toddlers to young adults, all kids can benefit from open conversations with their parents about spending and saving. Here's what to talk about — and when.
-
I'm an Investment Pro: Here's How Alternatives Could Inject Stability and Growth Into Your Portfolio
Alternative investments can often avoid the impact of volatility, counterbalancing the ups and downs of stocks and bonds during times of market stress.
-
A Financial Planner's Guide to Unlocking the Power of a 529 Plan
529 plans are still the gold standard for saving for college, especially for affluent families, though they are most effective when combined with other financial tools for a comprehensive strategy.
-
An Investment Strategist Takes a Practical Look at Alternative Investments
Alternatives can play an important role in a portfolio by offering different exposures and goals, but investors should carefully consider their complexity, costs, taxes and liquidity. Here's an alts primer.
-
Ready to Retire? Your Five-Year Business Exit Strategy
If you're a business owner looking to sell and retire, it can take years to complete the process. Use this five-year timeline to prepare and stay on track.
-
A Financial Planner's Prescription for the Headache of Multiple Retirement Accounts
Having a bunch of retirement accounts can cause unnecessary complications. Consolidation can make it easier to manage your savings and potentially improve investment outcomes.
-
Overpaying for Financial Advice? A Financial Planner's Guide to Fees
Take five minutes to review how much you're paying for financial advice. If you're overpaying, you could be better off with an adviser who charges a flat fee.