How to Avoid a Surprise Tax Bill as a Small Business Owner
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Episode Summary
In this episode of The Profit Pillars Show, Parker Stevenson, CEO of Evolved Finance and author of Profit Pillars, explains how to avoid the dreaded “surprise tax bill” that catches so many business owners off guard. Taxes can feel confusing and stressful, but with the right systems in place, you can stay ahead of what you owe and plan with confidence.
He starts by breaking down why quarterly estimated tax payments are essential for avoiding last-minute panic. When you pay taxes throughout the year, you prevent the temptation to spend money that should be reserved for the IRS and make year-end filing much smoother. Parker also shares how to talk with your accountant about the right percentage of profit to save, usually between 25% and 40%, depending on your income and tax situation.
From there, he highlights how accurate monthly bookkeeping gives you the insight you need to stay on track. Clean financial reports show you real profitability, which helps you forecast taxes and set aside the right amount each month. Parker also explains why having a dedicated tax savings account, separate from your operating reserves, is key for healthy cash flow and peace of mind.
Finally, Parker encourages business owners to build a year-round relationship with their accountant, not just a once-a-year tax prep exchange. Real tax savings come from proactive planning, not last-minute filings. A good accountant helps you strategize ahead of time, monitor your numbers, and ensure you’re fully prepared for tax season.
He closes by reframing the idea of a “big tax bill.” A large tax payment doesn’t mean you did something wrong, it usually means your business was profitable and growing. When you’ve planned ahead, a big tax bill is simply proof that your business is thriving.
Important links from this episode:
Profit Pillars Book: evolvedfinance.com/book
Evolved Finance Services: evolvedfinance.com/services
Finance Tools and Courses: evolvedfinance.com/learn
Frequently Asked Questions
Here are a few common questions business owners ask around this topic:
Most small business owners should set aside 25–40% of their monthly profit for taxes. The exact percentage depends on your filing status, income level, and where your business operates. Tracking monthly profit through accurate bookkeeping makes it easy to calculate that amount and transfer it into a tax savings account. Your accountant can help you fine-tune the percentage so you never come up short at tax time.
Yes, paying quarterly estimated taxes is one of the most effective ways to prevent a surprise tax bill. These payments spread your tax obligation evenly throughout the year instead of waiting until April to pay everything at once. This approach helps stabilize cash flow and reduces financial stress. If your income changes during the year, your accountant can help you adjust your quarterly payments to stay on track.
Bookkeeping gives you an accurate picture of your business’s profit, which directly affects how much you owe in taxes. Without clean, consistent financial records, it’s nearly impossible to estimate taxes correctly or make smart financial decisions. Reviewing your books each month helps you spot trends, plan for growth, and avoid surprises when it’s time to file. Reliable bookkeeping is the foundation for confident tax planning.
No, your tax savings should always be kept in a separate business savings account. Keeping it separate ensures that you don’t accidentally spend money that needs to go toward taxes. This also helps you maintain a clear view of your true operating cash flow. When tax season arrives, you’ll have the funds ready without tapping into your working capital.
Not necessarily. Having a larger tax bill often means your business was profitable. The real problem isn’t the size of the bill, but being unprepared to pay it. If you’ve been saving consistently and working with your accountant to minimize your tax liability legally, a bigger payment simply reflects a successful year. It’s a sign that your business is growing, not that you did something wrong.
Mid-year is the best time to start tax planning for your business. That’s when your accountant can still make strategic adjustments that impact your year-end results. Waiting until tax season is too late for most money-saving moves. Regular check-ins with your accountant throughout the year keep you proactive and prepared.
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The Profit Pillars Show
The Profit Pillars Show by Evolved Finance gives online entrepreneurs and modern small business owners the real-world guidance and insights they wish they had sooner. Each episode delivers actionable, straight-to-the-point advice on finances, operations, and overall business strategy, drawn from host Parker Stevenson’s years of experience helping entrepreneurs build stronger, more profitable businesses.