Pays Less Taxes Why a similar business pays less tax than you

Two businesses with the same sales can owe very different tax. These are the reasons we find most often.

• Different profit. Sales are only the start. Payroll, rent, supplies and loan payments decide what's left to tax.
• An S corp salary. The other owner may pay payroll tax on a salary instead of self-employment tax on all the profit. How the salary works.
• A retirement plan. A Solo 401(k) can move up to $72,000 out of taxable income for 2026. Compare the plans.
• Equipment written off in the year it was bought. Section 179 and bonus depreciation.
• Deductions owners often miss: a home office, an accountable plan, business miles, self-employed health insurance and an HSA.
• Wages paid to their children for real work.
• A credit, such as the research credit or the retirement plan startup credit.

Pull out last year's Form 1040 and look for these. Each one you can't find is a question for the call.

• Schedule SE with a large self-employment tax: your profit may be paying more payroll tax than it needs to.
• Form 8995 or 8995-A: this is the QBI deduction. Most pass-through owners should see it.
• Form 4562: this is where depreciation and Section 179 go, if you bought equipment.
• Form 8829: the home office, for a sole owner who works from home.
• On Schedule 1, a deduction for a self-employed retirement plan, for self-employed health insurance, and for an HSA.
• Form 8889: the HSA form, if you have an eligible health plan.

If you drive your own car for the business, you can deduct the miles. The IRS standard rate for 2026 is 72.5 cents a mile for January through June and 76 cents a mile from July 1.

Example: 8,000 business miles in the first half of the year is $5,800 of deduction. The record that holds it up is a log with the date, the miles and the reason for each trip. A phone app can log the trips automatically.

Some fixes only work while the year is open, such as an S corp salary, 401(k) deferrals from payroll and equipment in use by December 31.

Others can still be done after the year ends, up to your filing deadline: a SEP IRA deposit, an IRA and an HSA.

A deduction you missed on an earlier return can often be claimed on an amended return, Form 1040-X, generally within 3 years after you filed. We check what's still open for you.

Do I need to see the other owner's return? No. Your own return shows which moves you're using and which you aren't. That's all we need.

Their sales are bigger than mine, but they pay less. How? Higher sales often come with higher costs, a bigger retirement plan or more equipment. Profit and planning decide the tax, more than sales.

Can I catch up this year? Often, yes. Bring last year's return and your profit so far, and we'll show you what still fits before December 31.