How To Avoid Tax Surprises
For many family business owners, tax surprises can feel like an inevitable part of running a business. But the truth is, they’re avoidable—if you take the right approach. Understanding how to manage your income and taxes effectively can save you from scrambling for cash when it’s time to settle up with the Tax Office.
Why Employees Sleep Easy
It all comes down to this simple formula: Earn it > Pay Tax > Spend it.
Employees rarely face unexpected tax bills because their employers handle the hard part—tax is withheld from their paycheck before it even hits their bank account. This leaves them with after-tax money to spend and no need to worry about unexpected bills at year-end.
Family business owners, on the other hand, often fall into the opposite trap:
Earn it > Spend it > Try to find the money for the tax later.
Why It’s Harder For Business Owners
Running a business is complex. You need to stay on top of:
- Depreciation rates
- Tax brackets
- Accrual vs. cash accounting
- Inventory levels
- Work-in-progress
And, of course, the day-to-day demands of your business. It’s easy for tax planning to fall by the wayside when you’re focused on immediate needs.
Unfortunately, this approach often leads to a tax surprise—leaving you scrambling to find funds when the bill arrives.
How To Break The Cycle
If you want to avoid nasty tax shocks, it’s time to rethink your approach. Here’s where to start:
- Adopt a Forward-Looking Mindset
Work with an accountant who focuses on what’s ahead, not just cleaning up after the fact. A proactive accountant will help you anticipate challenges and plan for them, so you’re not caught off guard. - Change How You Think About Tax
Paying tax as you go might feel new or uncomfortable, but it’s the most effective way to stay ahead. Think of it as a natural part of managing your finances—like employees do. - Stick to the Right Formula
Follow the golden rule: Earn it > Pay Tax > Spend it. Prioritize paying taxes upfront so you can spend confidently without worrying about where the money will come from later.
The Bottom Line
Tax surprises don’t have to be part of your story. With the right planning and support, you can break the cycle, stay ahead of your obligations, and enjoy greater financial peace of mind.
At Blackburn ‘Prior, we help business owners manage the tricky intersection of income, cash flow, and tax obligations. If you’re ready to take control of your finances and avoid future tax shocks, get in touch. We’re here to help you make smarter decisions for your business and your life.
You can’t get a tax surprise this way:
Think about the people you know with jobs.
They almost never have a tax bill (and if they do its a one-off random things like taking a second job).
They sleep easy because their employer withholds the tax out of their pay and gives the employees the after-tax money.
You’ll ALWAYS get a tax surprise this way:
It’s a LOT harder for family business owners.
You need to be across depreciation rates, tax rates, accrual v cash concepts, inventory levels, work-in-progress… and your own business, of course.
Where to start?
Find yourself an Accountant who thinks about what’s in front of you not what’s in the rear-view mirror. But — fair warning — you may need to make a mind-shift too, about paying some tax as you go even if it feels new or different.
