It’s not unusual to feel a flood of relief as soon as tax season subsides, especially if you’re a business owner.
After weeks spent pulling documents, reviewing expenses, answering CPA questions and finding cash for a final payment, you’ll probably feel like closing the folder immediately and not thinking about taxes for another year.
But that pause can be expensive.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more – straight to your e-mail.
Profit and prosper with the best of expert advice – straight to your e-mail.
Q2 is one of the few points in the year when the return is recent enough to teach you something, and the calendar still gives you time to align. The IRS expects taxes to be paid as income is earned, not just when a return is filed.
For many business owners, that means staying current through withholding or estimated payments.
For individuals, sole proprietors, partners and S corporation shareholders, it’s when you generally need to make estimated payments if you expect to owe at least $1,000 at filing.
What often gets called tax planning is, in practice, more like tax reporting in advance. Now is the time to make sure you don’t fall into that trap.
Model the tax impact before major decisions
Most large tax outcomes begin when a business owner hires, buys, sells, restructures, takes on a partner or changes how income flows through the company.
A decision can look profitable in the operating model and still create a tax position that weakens the economics.
For instance, a new senior hire may bring growth, but the full cost includes payroll taxes and mandated government benefits, which will definitely bring changes to cash flow.
Similarly, a major equipment purchase may qualify for depreciation benefits, so timing and income level matter.
Q2 gives owners time to run those numbers before the decision is locked. As a CPA, I’d recommend leveraging that time because fixing tax problems later can be slow and costly.
For context, during fiscal 2025, the IRS processed about 1.6 million business amended returns and took an average of more than 13 months to process them.
It’s always best to involve a tax adviser before making any move. Ask your CPA to show the after-tax effect of the decision, or the estimated cash needed to support it, or anything that would affect the result, such as deadlines.
The goal is not to nitpick every small purchase or watch every action round the clock. It is to identify which decisions can materially change taxable income, deductions, credits, entity treatment or estimated payments before you commit.
Use last year’s bill as a diagnostic for this year
A higher tax bill can feel like you’re finally growing your business. And in some cases, it is. When revenue rises, the owner’s income often rises with it, and so do taxes.
But that bigger payment is not always just a sign of success. It can point to a structure that no longer fits, or planning that may have started too late.
Q2 is the right time to review what drove those numbers while the return is still fresh.
- Look at the categories that changed most from the prior year
- Review whether revenue growth reduced deductions or moved income into a higher tax bracket
- Confirm whether personal and business expenses were clearly separated
Small-business tax surprises often stem from one or more of these.
The purpose of this review is to spot the opportunities you missed so you can course correct quickly and get ahead of any patterns that are likely to repeat this year.
- If revenue grew, is it likely to grow again, and what bracket will that put you in?
- If a deduction was missed, what needs to change in the books before December?
- Does your entity structure still serve you?
These are the questions you should be asking now.
For high-earning business owners, key opportunities may involve retirement plan design, cost segregation for real estate, R&D credits, Qualified Small Business Stock (QSBS) treatment, entity optimization or charitable giving with appreciated assets.
At Gelt, we can never emphasize enough that these strategies require proactive planning rather than a return-preparation mindset.
In a nutshell, check whether the bill increased because the business performed better, or because the tax plan failed to keep up with the business. Those are two very different problems.
Decide whether your CPA relationship has kept pace
Early-stage business owners often just need a CPA to file for them with accuracy and keep them compliant. But as income grows, that level of support may no longer be enough.
Sadly, that gap is common. In fact, reports say 90% of business clients are interested in advisory or consulting services from their accountant, but more than half say they are not fully using their adviser’s full range of services.
This is another reason why Q2 is a practical time to assess the relationship, because both sides have more room to think. Ask whether your CPA specializes in clients with your income type, entity structure, industry and long-term goals.
Think about whether they meet with you quarterly, explain your effective tax rate, flag deadlines in advance and help model major financial events before they happen.
Ensure their scope of work is clear, so you know what is included and what is not.
Make Q2 the start of next tax season
The tax return you filed in April should become the first milestone for the rest of the year. If the bill was higher than expected, Q2 is the time to understand what happened and what the rest of your year might look like.
Look at the income that changed, the deductions that were missed, the estimated payments that fell short, and the business decisions that created tax consequences no one modeled in advance. That review gives you a wider view for the next eight months.
From there, update your income projection, adjust estimated payments before the next deadline, review whether your entity structure still fits your revenue and bring your CPA into decisions such as hiring, equipment purchases, real estate transactions, partner changes or compensation planning before they are finalized.
Waiting until Q4 leaves less room to act. Q2 gives business owners the time to correct what caused last year’s bill and make tax planning part of the decisions that shape this year’s growth.
