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How Much Should Small Businesses Save For Taxes?
June 2026 Newsletter
One of the most common questions small business owners ask is, "How much should I be setting aside for taxes?"
The answer depends on your business structure, income, and expenses, but many business owners don't have up-to-date books and may not know exactly how much profit they've earned. In those situations, using a percentage of your deposits can be a simple and effective way to stay ahead of tax season.
For sole proprietors, a good starting point is to save approximately 20% of all business deposits. S Corporation owners who are already paying themselves through payroll can often start with 15% of deposits, depending on their specific tax situation. S Corporations are harder to judge if the owner has a W-2 due to the 70-30 rule (take W-2 income worth 70% of your total distributions), but ultimately, if an owner has W-2 income results in less tax owed.
While these percentages are not a substitute for accurate bookkeeping and tax planning, they can help prevent the unpleasant surprise of a large tax bill when returns are prepared. The best approach is to move these funds into a separate savings account as money comes in. Once your books are current, your accountant can calculate a more precise tax estimate and adjust the percentage accordingly.
Saving too much for taxes creates a cushion. Saving too little can create stress. A simple habit of setting aside a percentage of every deposit can make tax season much easier and help keep your business finances on track year-round.
How Can I Show Profit, But Have No Funds In The Bank?
May 2026 Newsletter
In short, showing net profit with little to no cash in the bank is likely to be the result of cash flow issues or overgrowth.
Cash flow:
Distributions to yourself, funds tied up in accounts receivable, possibly funds from loans claimed as income or really anything that lowers your bank balance, but not your net income. Owners who struggle to understand this concept are the same owners who struggle to read financial statements and make sense of them (aka the question: how does this sheet of paper help me understand my company?). This is where we can come in and can help bridge understanding gaps.
Overgrowth/hypergrowth:
Growing is not bad; growing rapidly, however, can kill your cash flow and crush your business from a lack of capital. Overgrowth is considered 75%-149% increase in your assets and liabilities, hypergrowth is considered 150%+. Grossly simplified, rapid growth brought on by loans used to increase profitability or used to consolidate debts for better rates can be a good thing, to an extent. You want to keep your loans and asset purchases reasonable and scale with the size of your company. A good rule of thumb, only borrow when the new debt clearly improves the company’s long-term financial position more than it strains short-term cash flow. In general, if you cannot cover 3 months of normal "fixed" operational expenses (rents, utilities, loan pmts - monthly expenses that are unlikely to significantly change) then taking on additional debts or unnecessary asset purchases is not advisable.
Example: you borrow 150k to buy a tractor; this represents a 150% increase to your liabilities; the next year or two, after such a purchase, you should try to keep your new asset/loan acquisitions limited to 15-30k (15-30% growth) in order to bring your 3-year average growth down to 60-70%.
Hopefully this helps better visualize cash flow as it can be difficult as an owner to show net income, but have no cash. Remember, only borrow when the new debt clearly improves the company’s long-term financial position more than it strains short-term cash flow. Expand your business in measured phases; if you make major asset purchases in one year, then use the following year to stabilize cash flow before investing again.
What IRS Notices Should Never Be Ignored
Apr. 2026 Newsletter
Some IRS notices are informational or minor in nature, whereas other can quickly escalate to liens, levies, penalties, audits, or enforced collection actions if ignored. You should treat all IRS correspondence seriously, but these are ones you should never ignore:
CP14 or other collection and balance notices – if you do not respond to these you can incur further penalties and interest and eventually escalated notices.
CP501, 503, 504 – or other escalating notices
These are more service notices. Reminding you of balances due, urgent follow-up information, and notices before levy, lien, or account seizures.
Letter 1058 – Final notice of intent to levy
This is one of the most serious IRS collection notices.
The IRS is formally notifying you that it intends to:
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Levy bank accounts
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Garnish wages
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Seize assets
You generally have only 30 days to request a Collection Due Process hearing.
Ignoring this notice can result in enforced collections without further warning.
This is one of the most serious IRS collection notices.
The IRS is formally notifying you that it intends to:
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Levy bank accounts
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Garnish wages
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Seize assets
You generally have only 30 days to request a Collection Due Process hearing.
Ignoring this notice can result in enforced collections without further warning.
Certified mail from the IRS
Any IRS correspondence received via certified mail deserves immediate attention, particularly:
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Levy notices
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Audit notices
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Appeals deadlines
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Summonses
Certified mail often indicates legally significant deadlines are running.
Generally, you should especially avoid ignoring notices that mention:
“Final Notice”
“Intent to Levy”
“Lien”
“Examination”
“Audit”
“Immediate Response Required”
“Collection Due Process Rights”
“Failure to Respond”
Best practice when receiving an IRS notice:
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Verify the tax year involved
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Compare the notice to the filed return
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Review deadlines carefully
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Respond in writing when appropriate
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Keep copies of all correspondence
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Contact a qualified tax professional if uncertain
Many IRS problems become manageable when addressed early, but substantially more difficult and expensive once deadlines are missed or collections begin.
Difference Between Bookkeeping And Accounting
Mar. 2026 Newsletter
A bookkeeper can often provide a basic Profit & Loss statement; however, they may not have the experience or technical knowledge necessary to properly handle tax-to-book adjustments, depreciation schedules, asset additions and disposals, depreciation recapture, and other complex year-end accounting transactions.
Bookkeeping is the aspect of accounting most business owners are familiar with. It primarily involves recording transactions into the financial reporting system, ensuring each transaction contains the proper date, amount, payee or vendor information, and account classification. A bookkeeper will also typically reconcile bank and credit card accounts to help ensure the financial data is complete, accurate, and consistent.
An accountant, however, provides a deeper level of financial analysis and reporting. Accountants often serve as both financial managers and strategic advisors for a business. Their role typically extends far beyond bookkeeping and tax preparation. Depending on the size and complexity of the company.
Accounting goes beyond simply entering transactions; it involves understanding, interpreting, adjusting, and ensuring the accuracy of financial records. Accountants deal with financial statements preparation and analysis, tax planning/compliance, budgeting/forecasting, cash flow management questions, payroll oversight and compliance, asset depreciation management, loan/financing assistance, audit and notice support, compliance and regulatory operational guidance, financial cleanup/reconstruction work, and strategic planning. Accountants also can help when creating/maintaining internal controls, fraud prevention and catching, and general business consulting and operational guidance. A strong accountant does not simply record numbers; they help interpret what those numbers mean and how financial decisions today may affect the business in the future.
Ultimately, accountants are typically responsible for the final review of the books and records, ensuring data integrity and accuracy, verifying proper financial classifications and reporting, confirming that W-2 and 1099 reporting is accurate for tax preparation purposes, and helping ensure the company’s financial records are compliant, reliable, and decision-ready.
Can You Take Bonus Depreciation In Arkansas?
Feb. 2026 Newsletter
In short, no.
As of 2026, Arkansas still generally does not conform to federal bonus depreciation rules under IRC §168(k). Arkansas continues to require an addback of federal bonus depreciation and instead allows regular Arkansas depreciation over time.
So, for 2026, the typical Arkansas treatment is still:
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Federal return:
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100% bonus depreciation allowed on qualifying assets
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Arkansas return:
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Add back the federal bonus depreciation deduction
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Recompute depreciation using Arkansas-approved methods/lives
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Deduct Arkansas depreciation over future years instead
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Example:
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Equipment purchased for $100,000 in 2026
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Federal:
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Potentially deduct full $100,000 immediately with bonus depreciation
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Arkansas:
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Add back the bonus amount
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Depreciate normally for Arkansas purposes over the applicable MACRS life
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Arkansas generally does conform much more closely to §179 expensing than to bonus depreciation, which is why many Arkansas tax planners prefer maximizing §179 first before relying on federal bonus depreciation.
For federal purposes, 100% bonus depreciation was restored for qualifying property placed in service after January 19, 2025, under the new federal law changes.
However, Arkansas has historically decoupled from federal bonus depreciation, and a 2025 Arkansas bill (HB1501) that would have brought Arkansas into conformity with federal bonus depreciation rules failed in committee.
New Changes To Your 2026 Tax Returns
Jan. 2026 Newsletter
Here are the major 2026 changes most relevant to individuals, business owners, and tax planning (be aware that the IRS has not yet issued a 2026 tax return for preparers to review and prepare for the season. All information is based on IRS released information):
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Individual taxes brackets no longer set to rise at the end of the TCJA 2025 tax sunset, so taxes should remain consistent 25’-26’.
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Higher standard deductions
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Single $16,100
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MFJ $32,200
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HOH $24,150
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Child tax credit increased to $2,200 per qualifying child.
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Non-itemized filers may now deduct charitable contributions above the line.
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$1,000 Single/HOH/MFS
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$2,000 MFJ
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QBI deduction made permanent and income phase-in ranges increased.
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Payroll reporting changes for overtime, qualified tips, and compliance tracking for businesses (this year your W-2 should provide you with your qualified overtime and tips, unlike in 2025 where many prepares needed your paystub to do this).
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1099 Reporting threshold changes from $600 to $2,000 (thank goodness!)
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100% Bonus depreciation restored. What does this mean?
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Vehicles and other capitalized assets, not typically allowed to section 179, can now be taken with 100% bonus deprecation instead.
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This allows you to obtain the benefit of reducing your taxable income through increased depreciation expenses without the previous constraints of regular depreciation limiting our ability to reduce your income.
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6k Senior deduction for those who qualify is still active for 2026.
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IRS no longer accepts paper checks for payments or refunds.
Tax brackets not jumping back to their original rates help low-income earners heavily this year; TCJA rates were slated to go back to their original rates in 2026 (so the 12% bracket would have become 15%, the 22% bracket would have become 25%, the 24% bracket would have become 28%, etc.); this alongside the increase to the child tax credit and higher standard deduction rates helped people within the $0-$201,775 ($211,401 MFJ) more than any other tax bracket range.
In summary, many changes have been made for the 2026 tax year. Although not a lot of help was provided for small business owners’ businesses, there were many changes to personal and low-income tax returns for the year.
