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small business taxes /
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Tax Avoidance vs. Tax Saving Strategies for Small Businesses

May 20th, 2024 | 5 min. read

By Bryan Cremeen

Most small business owners have a fairly tight budget. With a variety of large expenses, such as running payroll, renting a business location, and cost of goods, you don’t want to also face a larger tax bill than you need to.

So, how do you save money on taxes? What are the legal ways to save, and which methods should you avoid?

At CSI Accounting & Payroll, we’ve worked with small business tax strategy for over 50 years. That means we’ve talked to thousands of small business owners who wanted to know:

  • What is a tax avoidance strategy?
  • What is a tax-saving strategy?
  • How can an accountant help me save on taxes?

Tax Avoidance Strategies

When we hear “tax avoidance,” we get a little nervous. Legally, you’re required to pay the taxes that the government says you owe. However, we know that many people who say “tax avoidance” probably actually mean “tax saving” – which is a much better idea. 

This difference in wording can mean the difference between legal and potentially illegal tax strategies. 

What makes some of these strategies potentially illegal? If done incorrectly, then they’re illegal. However, even if they’re done correctly, the IRS may frown on them. For these reasons, many accountants will not participate in these strategies. 

Examples of tax avoidance strategies can include things like:

  • Tax shelters
  • Conservation easements
  • Captive insurance plans
  • DST (deferred sales trusts)
  • 1031 exchanges

We know that nobody wants to owe taxes, but make sure you know why having no business tax liability is actually a bad sign!

Tax-Saving Strategies

On the other hand, tax-saving strategies are perfectly legal. Unfortunately, they’re often not taken advantage of to their fullest extent. Many annual tax accountants will try to claim tax credits and deductions last minute and call that a tax-saving strategy. It is, but it’s not a great one.

Great tax-saving strategies are methods done throughout the year to reduce your tax liability, which is the amount that the government says you owe during tax season.

Want to hear something even better than that? If used properly, tax-saving strategies work even better when applied year-over-year. Sometimes, saving slightly less one year can give you the opportunity to save a lot more the following year!

How an Accountant Helps You Save on Taxes

As we mentioned in the section above, an annual tax accountant can offer some last-minute tax savings in the form of tax credits and deductions, but they can’t offer a year-round strategy to maximize the benefits. This is because they only work with you once a year. 

Your tax return only records history, but tax planning focuses on improving the future. 

A proper, year-round tax strategy consists of three things: tax planning, tax projections, and tax preparation. This means:

  • Working throughout the year to minimize what you owe
  • Knowing how much you’ll owe months ahead of time
  • Getting your taxes done accurately and on time

Only a monthly accountant works with you all year long and files your taxes each year. They can help you stay on track each month to legally minimize your tax liability. 

Throughout the year, a monthly accountant can guide you in business decisions to help with tax season, and they’ll know your business well enough to recommend tax credits and deductions.

Just like an annual tax accountant, a monthly accountant can’t guarantee huge tax savings. However, if you choose to work with CSI Accounting & Payroll, we can tell you that the most we’ve ever saved a client in annual taxes is $66,000. Plus, with year-round guidance, there are many other areas where you have the potential to save money.

Legally Save on Taxes With a Monthly Accountant

Now that you know about tax avoidance strategies, tax-saving strategies, and how a monthly accountant can help you save on annual taxes and beyond, are you ready to check out monthly accounting services?

If so, please consider CSI Accounting & Payroll! To see if we can be a good fit for your business, click the button below for a free consultation:

Not ready to talk? That’s okay! First, learn more about what you need to know about taxes by clicking the image below:

Bryan Cremeen

Bryan joined CSI Accounting in 2019. He joined the team after CSI purchased his accounting firm, AccountSource LLC, which he had owned since 2005. He graduated from St. Cloud State in 2001 with a Bachelor's Degree in Accounting and has been an Enrolled Agent since 2010. Before owning his own accounting practice, Bryan had worked at the State of MN handling financial reporting and had been in private industry as a Controller. His primary responsibilities include overseeing the accounting department and making sure clients are receiving quality service. Fun Fact: Bryan has played soccer since the age of 4. He still plays soccer year round through various adult leagues and is an avid supporter of the Minnesota United MLS soccer team. COYL!!! (Come on, you Loons!!!)