Most small business owners focus on taxes when filing deadlines approach. But according to tax strategist Matt Chancey, that’s often too late to make a meaningful difference.
Chancey, a Certified Financial Planner™ and the author of Tax Alpha Solutions: Effective Tax Management Strategies For High-Net-Worth Investors, specializes in tax-planning strategies and comprehensive financial planning for high-net-worth clients.
The biggest opportunities to reduce taxes, improve cash flow, and strengthen a company’s financial position happen throughout the year—not during the rush to file a return. Yet many entrepreneurs spend more time preparing for tax season than developing an ongoing tax strategy.
I spoke with Chancey about the difference between tax filing and tax planning, the mistakes business owners commonly make, and why treating taxes as a year-round business issue can help companies keep more of what they earn.
Rieva Lesonsky: Small business owners are always trying to stay ahead of tax obligations, but what’s changing right now that they may not be paying enough attention to?
Matt Chancey: Most owners are still running a tax strategy their father’s accountant wrote in 1995. The code has changed. Their business has changed. Their income has changed. The strategy hasn’t. What’s actually shifting right now is the cost of standing still. The owners who plan are keeping 15% to 25% more of what they earn than the owners who just file, every year, compounding. That gap used to be a nice-to-have. Now it’s the difference between growing and stalling.
Lesonsky: What are the biggest mistakes you’re seeing small business owners make when it comes to tax planning, not just filing?
Chancey: Owners keep asking their tax preparer to do a job they weren’t hired for. Filing is looking backward; it’s an accurate report of what already happened. Planning is looking forward; it’s making decisions now that change what your return looks like later.
Those are two different jobs, and most CPAs will be the first to tell you they don’t have time to do the second one well during tax season. The mistake isn’t hiring a CPA. The mistake is thinking you’re done once you have one.
Lesonsky: How should small business owners be thinking about taxes as part of their overall financial strategy, especially in an uncertain economy?
Chancey: Taxes are the biggest expense in your business. Bigger than rent. Bigger than payroll, over a career. Bigger than anything else you negotiate, shop around for, or lose sleep over. And yet, most owners spend more time picking a health insurance plan than they do on tax strategy. In a tight economy, that’s the line item with the most give. You probably can’t cut payroll by 15% without breaking something. You can almost always find 15% in a tax plan that hasn’t been looked at in three years.
Lesonsky: Are there deductions or credits that small business owners commonly overlook?
Chancey: Every year, yes, the R&D credit, the QBI deduction, home office, accountable plans, retirement plan timing. Those matter. But I’ll tell you what matters more: structure. How your business is organized, how income flows between you and the business, what you pay yourself versus what the business retains, and whether you’re using the right entity for where you are now, not where you were when you started. Most owners set up their entity once, ten years ago, and never revisit it. That one decision is worth more than every deduction combined.
Lesonsky: How can business owners better prepare throughout the year, so tax season isn’t so stressful?
Chancey: Tax season should be a confirmation, not a discovery. If you’re surprised in April, something broke last July. The fix is a rhythm, not a tool. Close your books every month, not every quarter—every month. Have a 30-minute planning call with your CPA in October, before the year is locked in. Know roughly what you owe by Halloween, not April 14th. Owners who do those three things don’t dread tax season. They don’t even notice it.
Lesonsky: With ongoing economic uncertainty, are you seeing changes in how small businesses manage cash flow related to taxes?
Chancey: The smart ones have stopped treating tax bills like a surprise and started treating them like rent. It’s a fixed, predictable expense that hits on known dates. Budget for it monthly, move it to a separate account, and it stops being a crisis. The ones still getting wrecked are the ones paying estimated taxes out of whatever’s in the operating account that week. That’s not a tax problem. That’s a cash flow problem wearing a tax costume.
Lesonsky: What systems or tools should small businesses have in place to stay compliant and organized year-round?
Chancey: Less than the internet tells you. Three things, in order: a bookkeeper who closes the books monthly, a CPA who will answer the phone in October, and a simple cash flow forecast that includes tax payments. That’s the system. Owners who spend $30,000 on software and $300 on strategy have it backward. The tools don’t save you money. The rhythm does.
Lesonsky: What’s one piece of tax advice small business owners hear all the time, but shouldn’t follow blindly?
Chancey: “Just buy a truck and write it off.” Or equipment, or a vehicle, or whatever else you can Section 179 before December 31st. Look, if you needed the truck anyway, buy the truck. But spending a dollar to save thirty cents isn’t a strategy. It’s a rationalization for a purchase you already wanted to make. I’ve watched owners buy equipment they’ll never fully use because a buddy told them it was a tax move. The IRS didn’t get richer. They did get poorer. The deduction is a reward for a smart purchase. It’s not a reason to make a dumb one.
Lesonsky: If there’s one thing small business owners should do now to avoid problems later, what would it be?
Chancey: Calculate your real effective tax rate. Not your bracket, your actual rate across federal income tax, state tax, self-employment tax, and payroll tax combined. Most owners have never done this. When they do, they find out they’re paying 35, 40, sometimes 45% of every dollar the business makes. Once you see that number written down, everything else changes. Tax planning stops being something you’ll get to next year. It becomes the most obvious place to get a raise without working more hours.
Rieva Lesonsky is the founder of Small Business Currents, a content company focusing on small businesses and entrepreneurship. You can find her on Twitter @Rieva, Bluesky @Rieva.bsky.social, and LinkedIn. Or email her at Rieva@SmallBusinessCurrents.com.
