Avoiding Early-Year Tax Traps: How to Keep More of Your Money in 2024

Every year, business owners tell themselves this is the year they’ll be more proactive about taxes. Then February rolls around, tax deadlines loom, and suddenly, it’s a mad dash to gather receipts, reconcile accounts, and make sense of what happened financially over the past year.

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By now, the new year excitement has settled, and tax reality is setting in. If you’re already scrambling, you’re not alone. But the truth is, the decisions you make in February and March can still impact your tax bill—this year and next.

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Let’s break down some of the most common early-year tax traps and how to avoid them before they cost you money.

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1. Underestimating Your Tax Liability for Q4 and Beyond

If you’re self-employed or run a business, the IRS expects you to pay quarterly estimated taxes throughout 2023. The final payment for last year was due January 15th, 2024—but missing it doesn’t just mean playing catch-up. It means potential penalties and an increased tax burden.A common mistake business owners make? Assuming their estimated payments covered everything. If your revenue spiked in Q4, you may owe more than you anticipated.Solution: Before filing your return, check if you underpaid in 2023 and make a catch-up payment now to reduce penalties. Then, set a strategy for 2024. Work with your CPA to adjust estimated tax payments to better match your income fluctuations.

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2. Rushing to File Without Maximizing Deductions

Filing early sounds like a good idea—until you realize you left thousands of dollars in deductions on the table. Many business owners make the mistake of rushing to file just to get it over with, missing critical deductions that could lower their tax liability. The biggest missed deductions?

• Home office expenses (many self-employed individuals don’t claim the full amount)
• Business mileage (especially for hybrid workers who split time between home and an office)
• Depreciation on assets (such as equipment or vehicles purchased last year)

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Solution: Before you file, go line-by-line through your expenses (or better yet, work with a tax professional) to ensure you’re not overpaying. The IRS allows amended returns, but wouldn’t you rather get it right the first time?

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3. Not Adjusting Your Business Structure for 2024

How your business is structured—whether it’s a sole proprietorship, LLC, S-Corp, or C-Corp—determines how much you pay in taxes. Yet many entrepreneurs choose an entity once and never revisit it, even as their business grows.For example:

• If you’re still a sole proprietor, you could be overpaying in self-employment taxes.
• If you recently started hiring, an S-Corp election could reduce payroll tax liability.
• If your business is growing internationally, you may need a different structure for compliance.

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Solution: Before tax season is over, review your business structure with a CPA to see if switching would reduce your tax burden for 2024. The earlier in the year you make changes, the How to Avoid Tax Mistakes Before Next YearHere’s how to get ahead of tax planning before next year’s deadlines roll around:

• Schedule a mid-year tax check-in: Don’t wait until next January—meet with your CPA in June or July to adjust strategies based on real-time income.
• Use automated bookkeeping tools: If you don’t have QuickBooks, Xero, or an AI-powered accounting tool, now’s the time to implement one.
• Separate personal and business expenses: The IRS loves auditing commingled finances. If you don’t have a dedicated business bank account and credit card, fix that today.
• Build a tax reserve account: Stop treating tax bills like a surprise—set aside 20-30% of your income into a separate account for estimated payments.

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Tax season isn’t just about filing—it’s about optimizing. The smartest business owners use tax planning as a year-round strategy, not just something to deal with in April.

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Conclusion

If you’re already regretting your tax decisions from last year, don’t panic—there’s still time to course-correct. While January may have been the time to set the tone, February and March are when tax strategy really matters.The key? Don’t rush to file, don’t ignore missed deadlines, and don’t assume your business structure is set in stone. Instead, take a proactive approach, leverage the right deductions, and work with a tax professional to ensure you’re not leaving money on the table. Smart tax planning isn’t about reacting—it’s about strategizing. Make 2024 the year you take control of your taxes before they take control of you.

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Sources

‍IRS

J.P. Morgan

‍Forbes