Introduction
With the IRS and California AG offices sharpening their focus, preparing a solid 2025 tax strategy is more critical than ever. This checklist guides LA business owners through simple, effective steps to reduce tax liability, increase savings, and stay compliant.
1. Consider an S‑Corp Election to Cut Taxes
- Why it matters: By electing S‑Corp status, owners can take a reasonable W‑2 salary and receive the rest as distributions—only the salary is subject to payroll taxes.
- Typical savings: Owners making $200K can save $5K–$10K annually by reducing self-employment tax.
- Next steps: Work with your CPA to file Form 2553 by March 15 for the 2025 tax year.
2. Leverage Section 179 & Bonus Depreciation
- 2025 limit: Deduct up to $1,260,000 in qualifying tangible assets.
- Example: Buying a $50K delivery van could yield a full deduction, lowering both income and taxable profits.
- Tip: Combine this with QBI strategies to further amplify savings.
3. Maximize Retirement Contributions
- Solo 401(k): Up to $66,000 total contributions in 2025—great for self-employed business owners.
- SEP IRA: Simpler and useful for S‑Corps and partnerships—up to 25% of net self-employment income.
- Why it matters: Retirement contributions reduce taxable income while helping build long-term wealth.
4. Keep Recordkeeping Audit-Ready
- Go digital: Use cloud platforms (QuickBooks, Xero) with receipt capture and bank sync.
- Standard system: Categorize via FAA (Fixed Asset, Accountable, Allowable).
- What to retain: Payroll ledgers, 1099-Ks, receipts, past returns (last 3–7 years).
- Red flags to avoid: Cash expenses without receipts, late filings, and mismatched revenues.
5. Estimated Tax Dates & Safe‑Harbor Planning
- Deadlines: April 15, June 15, Sept 15, Jan 15 (2026).
- Avoid penalties: Pay 90% of current-year tax or 100% (110% if AGI >$150K) of last year’s liability.
- Practical tip: Project income and set calendar reminders for installments.
Conclusion
By optimizing your entity structure, leveraging equipment write-offs, growing retirement, and staying audit-safe, you can significantly reduce your 2025 tax liability.
Ready to act? Schedule a free consultation with Prudential Tax Advisory Group today to turn this checklist into real savings.
