Here’s the truth: If you’re a small business owner, you may be paying more in taxes than you need to because you don’t know which tax breaks are available to you. As a CPA who works mainly with creative entrepreneurs, my team and I look beyond the obvious expenses when helping clients prepare for tax season. We also know which questions to ask to help small business owners uncover legitimate tax savings that they might have otherwise overlooked.

We’re not looking for loopholes or trying to find ways to deduct every purchase. And while we might know how others break tax rules, we make sure we understand those rules and explain them clearly to our clients so that we don’t jeopardize their money or their business. This knowledge is how we help our clients take full advantage of deductions, credits, and tax-planning strategies that they are legally entitled to claim and use.

If you’re wondering what a CPA can do for you or if you want to find out if there really are deductions you could be missing, then this post is for you. My goal in writing this is to help small business owners understand that they don’t have to do shady things to save money on their taxes.

How does a CPA find tax deductions that small business owners miss?

One of the biggest advantages of working with a CPA is having someone who knows what questions to ask. You might remember to deduct your website hosting, business insurance, and office supplies. But do you always remember to deduct expenses like the cost of the software you use to edit videos, the mileage you drive to client photo shoots, or the online course you took to improve your design skills?

You’re so busy doing all of the things all of the time that you can easily overlook expenses, especially when purchases are spread across credit cards, bank accounts, and online subscriptions.

For example, let’s say you’re a freelance graphic designer who spends $45 per month on design software, $30 per month on cloud storage, and $400 per year on professional education. That adds up to $1,300 in potential business expenses for the year.

If those expenses are ordinary and necessary for a graphic designer in your area or in a similar role, you can deduct them to reduce your business’ taxable profit by $1,300. If your marginal tax rate is 25%, that could mean around $325 in tax savings.

Of course, the actual amount a business owner can save depends on the owner’s income, business structure, self-employment taxes, and other tax rule specifics, but this example shows how a CPA who asks the right questions can help you remember and keep track of all of your expenses.

You can also see how those forgotten expenses can add up to big tax savings!

What tax deductions are creative business owners most likely to overlook?

Creative businesses often have expenses that don’t look like traditional business costs. A photographer might buy lightning equipment, a blogger might pay for stock photos, and a designer might purchase fonts or specialized software.

Knowing beforehand what types of purchases you need to keep track of is helpful in making sure that you don’t miss any, so here are some common types with examples:

• Software and Digital Subscriptions
• Adobe Creative Cloud
• Bookkeeping software
• Email marketing platforms
• Social media scheduling tools
• Website hosting
• Cloud storage
• Stock image subscriptions
• Professional Education
• Courses
• Workshops
• Conferences
• Marketing
• Website design
• Business cards
• Advertising
• Portfolio hosting
• Product photography
• Payment Processing and Platforms
• Online marketplace transaction fees
• Payment processor fees
• Commissions
• Accounting and Professional Services
• Bookkeeping
• Tax preparation
• Business legal advice

What other questions does a CPA ask to help a business owner save more in taxes?

There are some “heavy hitters” when it comes to questions a CPA asks small business owners. These questions are ones that you can also ask yourself to determine if you need to do more research or reach out to an accountant to be totally sure that you’re not missing any tax breaks:

• Should you claim the home office deduction?
• If you work from home, your CPA can help you figure out whether you qualify for the home office deduction. They can also help you decide which of the 2 calculation methods will add up to the most savings for you.
• Is your business structure the right one for you?
• Which business structure you choose can have a significant impact on how you pay taxes, but there isn’t one best option for everyone. A CPA can help you determine if your business is profitable enough to consider electing S-Corporation status. They can also run different scenarios to help you figure out if and when you should make that election.
• Do you have business mileage you can deduct?
• Many creative entrepreneurs drive for their business without thinking of themselves as people who need to track mileage. A CPA can help you figure your mileage and explain what you must include in your business mileage records so that you can properly track and claim this deduction. There are 2 calculation methods available for this one too, and you should definitely run the numbers to see which one saves you the most.
• Are you using retirement savings as a strategy to save tax money?
• Retirement planning is another tax-saving opportunity that many small business owners overlook, especially if they’re only focused on growing their business and reinvesting all available profit into doing so. Depending on your circumstances, contributing to a retirement account can actually help you save for retirement and reduce your taxable income at the same time. This change can be huge, and a CPA can help you analyze which type of retirement plan works for you and your business. They can also help you decide how much you should contribute to your retirement account so that you’re maximizing your tax savings.
• Are you taking the Qualified Business Income (QBI) deduction?
• The QBI deduction is another valuable tax break that many eligible owners of pass-through businesses often overlook. If you meet the requirements, you could deduct up to 20% of qualified business income, so this is one you don’t want to miss and one that you should definitely talk through with an accountant to make sure you understand the requirements.

How does a CPA know which tax breaks apply to your specific business?

There’s no universal checklist that works perfectly for every business. Different professionals and artisans obviously have different expenses, income patterns, and tax considerations.

A good CPA begins their work by understanding how your specific business operates. That typically means reviewing your bookkeeping, profit-and-loss statements, banking transactions, and other business receipts. The CPA should then review any past tax returns or arrangements your business already has in place. And, in my opinion, they should also help you develop your business goals and determine which tax-saving strategies you should be using throughout the year and not just at tax time.

Once your CPA has all of that information, then they can identify applicable tax rules and any missed or underused opportunities to reduce your taxable income and tax bill.

Sometimes the biggest opportunity for a business owner is an overlooked deduction, but other times it’s a change to their retirement contributions or how they manage payroll.

And sometimes, a CPA’s review can confirm that you are already doing everything you should be doing, and that reassurance has value too.

Can a CPA find deductions I missed on a previous tax return?

Yes, a CPA can potentially find errors or overlooked deductions on previously filed returns. They can also help you decide if an amended return will result in a refund.

Abridged by Amy

As a business owner, you already have a lot going on. You don’t have time to review the tax code and second guess every business purchase or money move you make.

It’s important to keep in mind that finding tax savings isn’t about uncovering secrets of the rich and famous or about outsmarting the IRS. If you want to make sure you’re not missing tax breaks, start by reviewing your books, keeping clean records, and asking questions.

Reaching out to a knowledgeable CPA is also a good idea because they can help you understand which deductions apply. They can also help you make informed decisions about your business and personal finances so that you can identify your biggest opportunities for tax savings.

After all, you’re working hard to build your business. Your tax strategy should be working just as hard at helping you keep more of your hard-earned money.