Tackling Taxes With Confidence: A Q&A With CPA Keila Hill-Trawick

Managing your business finances can be stressful any time of year, but tax season can add an extra layer of money anxiety. If you’re struggling with tax season, you’re not alone: 42% of Square sellers surveyed do not feel confident in their understanding of tax rules and processes. This year, as many businesses recover from pandemic closures, bank failures, and weather damage caused by winter storms, taxes can feel like an even heavier burden.

To help you navigate taxes with confidence, we spoke with two small-business experts about how you can overcome money anxiety throughout the entire year. First, Keila Hill-Trawick, CPA and owner of small business tax firm, Little Fish Accounting, answers top tax questions from the Square community. Then, Aja Evans, licensed mental health counselor, shares advice on how to overcome the feeling that you’re just not good at money.

A Q&A with small business CPA Keila Hill-Trawick

What are your top tax tips for business owners?

1. Get organized. Much of the tax stress I see from business owners comes from not knowing where to find the information being requested. Save all tax documents to your preferred document storage portal as soon as you receive them.
2. Ask questions. Remember: The burden of responsibility for the tax return lies with the taxpayer, not the tax preparer. Make sure you truly understand where the numbers are coming from and what they mean, and ask what you don’t understand to help mitigate any issues down the line.
3. Take advantage of extensions. If you’re not ready by the tax deadline, you don’t have to rush. Taxpayers qualify for a free six-month extension. Doing so helps give some breathing room during what can already be an anxious time of year. Remember, though, that an extension allows more time to file, not more time to pay. Any taxes owed can still accrue penalties and interest while the IRS waits for the return to be submitted, so don’t automatically wait until the updated deadline to file.

What’s the biggest tax mistake business owners make?
When people ask the best way to lower their tax burden, I often say it’s accurate bookkeeping. For many entrepreneurs, the focus becomes submitting information on time rather than taking time to confirm that the information supplied is complete and accurate. Taking care to categorize appropriately throughout the year helps alleviate some of the stress of knowing whether the numbers are correct going into tax season. 

Should I really keep my business receipts in a shoe box?
While tax preparers generally will not require receipts for tax filing, in the event of an IRS audit, the Feds will want to see documentation for all expenses over $75. Best practice is just to save receipts for all expenses as they come in, and label by the type (i.e., Software) or the period (i.e., March 2023), and include the date and description. No need to keep paper copies in a shoe box! It’s completely acceptable to digitize your receipts — just make sure to name the file something you can easily identify if you need to search for it later. And while online receipts are acceptable, bank and credit card statements generally are not, so make sure you save the appropriate documentation for record-keeping purposes.

What counts as a business expense for taxes?
In order for an expense to be considered deductible, it must be both ordinary and necessary. Ordinary means that it’s typical in your industry — peers who do the same type of work will incur similar expenses. Necessary means that it is helpful and appropriate to do the job, but not necessarily indispensable. These requirements explain why all business owners can’t necessarily deduct the same expenses. 

How do I pay the least amount in taxes?
Here’s the cheat code: There is no cheat code 🙁 The reality is, the most common way to reduce tax due is to spend money on deductible expenses — as in, those that are ordinary and necessary for your business. But the thing to remember is that spending for these investments is not a dollar-for-dollar tax deduction. In other words, for every $100 spent on a deductible expense, most business owners will save about $20–$25. Think about it like buying something on sale — you could get a $100 value for three-quarters of the price … or you could just spend the $25 on taxes.

Keila Hill-Trawick is the founder and CEO of Little Fish Accounting, a boutique CPA firm dedicated to serving micro businesses through accounting and tax support. Based out of Washington, D.C. by way of Atlanta, GA, Little Fish serves clients nationwide. 

Fifty percent of Square sellers do their taxes themselves, with no professional tax help.

How to challenge your feelings of financial inadequacy

A common emotion people experience when they are going through stressful situations related to finances, like preparing taxes, is feeling inadequate — as if they aren’t the right person for the job. Some may call it Imposter Syndrome or experience it as a result of negative self talk. These feelings are far from the truth. 

Start paying attention to when you find yourself downplaying your capabilities. What’s going on around you? What brought on that emotion? Challenge those thoughts by thinking back to one of your proudest money moments in your business. How did you get to that point? How much have you already overcome financially? Remember, you are always capable, even if it takes you time to learn or find a solution. Repeat these steps whenever you find yourself going down the path of negativity. 

Aja Evans is a licensed mental health counselor who specializes in financial therapy. She owns and operates a private practice in New York City.

Put your tax savings on autopilot.

According to Square survey data, nearly half of Square sellers across all business sizes have a dedicated savings account for their business taxes.With Square Savings, you can automatically set aside a percentage of your daily sales in a dedicated tax folder so you’ll have funds ready for quarterly taxes, payroll taxes, income taxes — however you file.