Why do growing businesses lose money to taxes even when revenue is rising? How can growing businesses avoid common tax mistakes that drain momentum and cash flow? What shifts in tax planning help growing businesses turn taxes into a strategic advantage instead of a year-end stressor?
This post breaks down the five most damaging tax mistakes growing businesses make—mistakes that don’t come from poor operations, but from reactive accounting and fear-based decision-making. Instead of relying on deductions that don’t create real ROI or tying up cash just to reduce taxable income, the article explains why growing businesses need proactive planning, strategic salaries, intentional spending, and a forward-looking financial mindset. By shifting the focus from compliance to clarity, founders learn how to keep cash moving, increase reinvestment power, and strengthen long-term growth.
The blog also shows how strategic travel planning, better documentation, and year-round preparation allow growing businesses to stop scrambling in November and start leading with confidence. Rather than acting like historians, financial partners should function as navigators—helping growing businesses forecast, invest wisely, and align their tax decisions with their broader growth plan. With the right structure, tax strategy becomes a lever for expansion, healthier margins, and long-term control.
Most business owners don’t lose money in taxes because they’re bad at business.
They lose money because of reactive accounting. For years, I’ve watched accountants work like historians. They record what happened instead of helping business owners steer toward what’s coming. And when you’re trying to grow, that mindset hurts more than it helps.
Business development needs something different. It requires a forward-looking approach, where taxes aren’t just a bill; they’re part of the growth engine. Because the truth is, a business doesn’t scale on loopholes. It scales on strategy.
Tax planning isn’t about last-minute tricks in December and crossing your fingers in April. It’s about using money intentionally, keeping cash moving, and making smart decisions each quarter.
I want to walk you through the five biggest tax mistakes I see growing businesses make, the ones that quietly kill momentum and drain your cash. More importantly, I’ll show you how to avoid them.
1. Paying Yourself Too Much as an S-Corp
One of the most common mistakes business owners make is overpaying themselves as an S-Corp.
Let me break this down.
Once your salary crosses the Federal Insurance Contributions Act (FICA) limit, every extra dollar you pay yourself is taxed more heavily and unnecessarily. Most owners think that if they pay themselves more, the IRS will leave them alone, but the truth is the opposite. Paying yourself too much actually increases your tax exposure. And every extra dollar taken out in payroll is a dollar you can’t reinvest into the business.
Here’s the simple rule: pay yourself a reasonable, documented salary, and keep the rest in distributions where taxes are lighter.
Think of it this way. Your salary covers your living, and your distributions fund your freedom. When you get this right, you gain two things: tax efficiency and reinvestment power. And if your accountant isn’t helping you figure out what a reasonable salary looks like for your industry, that’s a sign they’re focused on compliance, not strategy.
With growing businesses, owners don’t realize that a “reasonable salary” isn’t a fixed number; it’s a defensible one. It’s based on industry standards, job responsibilities, and what someone else in your position would earn. But it also leaves room for strategy. A good CFO balances compliance and opportunity. But a great CFO shows you how to design your salary so it aligns with your growth plan, instead of fighting against it.
I’ve sat with founders who were struggling with their tax bills because they didn’t know what one change could do for them. However, once we rebalanced their distributions, it freed up their capital, which was then invested in new hires, systems, and momentum. That’s the power of paying yourself intentionally.
2. Chasing Deductions That Don’t Move the Needle
This is a really big one. I’ve seen many owners get excited about deductions because everyone loves a good write-off. But here’s the problem that most don’t realize: not all deductions are good deductions. While there are some deductions that save you a few dollars today, they end up costing you thousands in long-term growth. I call them “unuseful deductions.” They look clever on paper, but they don’t do a thing for your bottom line.
A business owner once told me, “Well, at least it’s a deduction,” after buying an item that had nothing to do with their growth plan. Sure, they saved a few hundred in taxes, but that same money could’ve funded something much more important to their business.
A real tax strategy asks a simple question: “Does this deduction move the business forward?”
Instead of chasing discounts, focus on leveraged plays, expenses that create return on investment (ROI).
Examples of productive, growth-aligned deductions:
- Hiring a contractor that frees you up to sell more
- Investing in software that increases efficiency
- Attending a conference that leads to partnerships
- Upgrading equipment that reduces delivery time
- Taking a training that helps you raise prices confidently
The goal isn’t to beat the IRS; the goal is to use tax strategy to fuel growth, not distract from it. If your deductions don’t lead to more profit, more capacity, or more opportunity, they’re not deductions, they’re delays.
Here’s the truth no one tells you: with growing businesses, owners often chase deductions out of fear, and not strategy. The fear of paying too much. The fear of missing out on something other businesses seem to be doing. But fear-based decisions rarely produce financial strength. Strategic deductions, the kind tied to revenue, retention, or expansion, give you leverage, not clutter. That’s the difference between chasing deductions and using them as tools.
3. Tying Up Cash Flow in the Name of Tax Savings
This can hurt businesses more than anything else on the list. Some accountants encourage owners to prepay expenses at year’s end, such as rent, software, and contractors, in the name of reducing taxable income. But they don’t always explain the cost.
Sure, you’ll save a little in taxes. But you’ll also strangle your business’s ability to grow. Cash is the oxygen of a business. When you lock it up just to chase a deduction, you suffocate your business growth.
Here’s what can happen when cash gets tied up:
- You delay hiring key roles
- You pause marketing when you should be pushing
- You say “not yet” to opportunities you should be capturing
- You keep the business small without realizing it
The math doesn’t lie. Preserving cash flow is more valuable than a small tax savings.
This is why I teach clients to look at cash velocity, which is how fast money moves through the business and multiplies. A dollar used to hire a salesperson or boost marketing often creates far more ROI than a dollar used to prepay expenses.
The tax code rewards people who use money intentionally, not fearfully.
The biggest misunderstanding that I think business owners have is that cash flow isn’t just a financial metric; it’s also a growth indicator. Slow cash flow means slow decision-making. Slow decision-making leads to missed opportunities. When you tie up cash to feel better at tax time, you’re taking oxygen away from the parts of your business that actually move revenue.
4. Not Being Intentional with Business Travel
Most business owners either underreport or misreport their travel expenses. And believe it or not, both will cost you money. Business travel is one of the most powerful and legitimate tax tools when it’s planned correctly. I often see two major mistakes made.
Mistake #1: Not planning ahead
Travel becomes deductible when there is a clear business purpose, not just a receipt in hand.
If you’re already going somewhere, add:
- A client meeting
- A site visit
- A partnership lunch
- A conference
- A sales call
Now the trip works for you and for the IRS.
Mistake #2: Poor documentation
Owners often miss deductions because they never documented:
- Who they met
- What they discussed
- Why the meeting mattered
- Where it supported the business
Here’s a simple truth:
A properly planned trip can turn something you were already going to do personally into a smart tax-aligned decision. You’re not bending rules, you’re aligning your life and business with intention.
When you start planning travel with purpose, two things happen:
- You get better deductions
- You get better use out of your time
This is where strategy meets lifestyle.
I’ve seen business owners travel to the same city three times a year, meeting clients each time, but failing to document anything. They lost thousands in legitimate deductions simply because the “why” wasn’t written down anywhere. Meanwhile, a different client documented a single three-day trip, which included meetings, planning sessions, and site visits, and the IRS approved it without question. The difference wasn’t the travel; it was the intention.
With growing businesses, travel becomes incredibly powerful when you build it into your calendar instead of squeezing it in after you’ve already booked the trip. That alignment turns your personal calendar into a business asset, something most people never consider.
5. Waiting Too Long to Plan
Now, this is the biggest mistake of all, and it is very common with growing businesses.
Most business owners start tax planning in November. That’s not planning, that’s damage control. By Q4, most of the levers you should have pulled months ago are already gone. Tax planning is a year-round sport. It requires rhythm, reviews, adjustments, and clarity.
When clients start early Q1 or Q2, here’s the benefit:
- They forecast opportunities instead of reacting to emergencies
- They allocate resources strategically
- They adjust salaries, distributions, and expenses in real time
- They make smarter investments
- They catch issues before they become expensive
When clients start a plan in November, here’s what happens:
- They rush
- They overspend
- They panic
- They tie up cash unnecessarily
- They leave money on the table
- They walk into the new year completely blind
A proactive tax plan isn’t about loopholes. It’s about leadership. And this is where the mindset shift happens. When owners plan early, they stop using the phrase “I hope” and start using the words “I know.” When you understand the numbers, the year stops happening to you, and you start directing it.
One of the hardest conversations I have with founders is explaining that November planning can’t compensate for a year of inaction; it’s just not possible. They expect a miracle, but what they end up getting is a Band-Aid. But when we start in Q1, it’s a different story. Suddenly, they understand their cash cycle. They shape their payroll strategy. They make decisions with breathing room. And the difference in results is staggering.
If you want a tax strategy to work for you, it has to be proactive, not reactive.
You’re Not Losing Money in Taxes Because You’re Bad at Business
Let me bring this full circle using a message I’ve shared before. You’re not losing money in taxes because you’re bad at business. You’re losing money because most accountants work like historians.
Companies don’t need historians when growing businesses. They need navigators. They need a strategy. They need clarity. They need someone who thinks ahead, not someone who reports behind. A fractional CFO doesn’t just file reports. They connect your tax strategy to your growth strategy, where every dollar saved has a job, and every decision has a purpose. That’s why the best financial partners aren’t just compliance-focused. They’re future-focused. They help you stay ahead of problems instead of having to clean them up afterward.
Tax strategy should become a tool for forecasting, planning, and momentum, not looked at as a seasonal chore. When you pair solid financial systems with proactive planning, the whole business feels lighter. You stop bracing for tax season and start using it to your advantage.
Growth Requires Strategy, Not Guessing
A strong tax strategy isn’t about loopholes. It’s about leverage. It’s about keeping your cash moving instead of locking it up. It’s about making decisions that fuel growth, not fear. It’s about building a business with clarity, not chaos.
The five mistakes we covered today:
- Paying yourself too much as an S-Corp
- Chasing deductions that don’t move the needle
- Tying up cash flow for small tax wins
- Planning business travel
- Waiting too long to plan for the future
With growing businesses, these mistakes aren’t only tax issues; they’re also growth issues. When you fix them, your business doesn’t just become more tax-efficient. It becomes healthier, stronger, faster, and clearer. Because businesses don’t scale on guesses, they scale on guidance. And the right guidance turns taxes from a burden into a lever.
The truth is, intentional tax planning gives you something every founder is secretly chasing, which is control. Not control in the sense of micromanaging every detail, but control over direction, cash flow, and future decisions. It gives you space to dream again, space to build, and space to lead the company the way you always imagined. When you stop reacting and start planning, everything changes.
