Running your own business might seem like the dream—flexible hours, no boss, and the freedom to do things your way. But the part no one brags about on social media? Taxes. Not just the ones you expect, like income tax or sales tax, but the ones that hit harder because you didn’t even know they existed. It doesn’t matter if you’re running a vintage resale Instagram account, a local bakery, or a small landscaping crew out of your truck—once you start making money, the IRS starts paying attention.
Understanding taxes as a small business owner isn’t just about following the rules. It’s about protecting what you’ve built. Because one missed form, one forgotten deduction, or one misclassified employee can turn into a nightmare. And while it’s tempting to bury your head in your laptop and hope it all goes away, your business will thank you for facing it head-on.
You Might Be a Business and Not Even Know It
One of the easiest ways for taxes to sneak up on you is by not realizing you even have a business. If you’re selling handmade candles on weekends or freelancing between jobs, you’re probably considered self-employed in the eyes of the IRS. That means you owe self-employment tax, which includes Social Security and Medicare—on top of your income tax.
And those friendly payment platforms that send you money when customers swipe their cards or hit “buy now”? They’re required to report those earnings to the government once you hit a certain threshold. So even if you thought your hustle was too small to count, the IRS probably doesn’t agree.
This is where keeping records starts to matter. You need a system that works for you, even if it’s as basic as a Google Sheet and a shoebox of receipts. The IRS doesn’t care how fancy your bookkeeping is—they just care that you can show where your money came from, where it went, and why.
Inventory, Write-Offs, and Why Your Garage Might Cost You at Tax Time
If you sell physical products—whether you’re shipping from your kitchen table or stocking shelves in a small shop—you’ve probably spent a lot on supplies. Maybe it’s ingredients, maybe it’s packaging, or maybe you’ve got an entire room filled with boxes ready to go. But all those costs don’t automatically count as deductions the moment you spend the money.
That’s where inventory comes into play. The IRS treats physical products differently from services. If you buy a lot of stock in December but don’t sell it until the spring, you can’t just deduct all those costs right away. You have to track what you actually sold and match it with what it cost to make or buy. That means understanding business inventory—what you have on hand, what’s been sold, and what’s just sitting there waiting for the next sale.
It can get complicated fast, especially when things move slowly or unexpectedly. Maybe a product doesn’t sell like you hoped. Maybe you had to throw out a batch of spoiled ingredients. These are not just business decisions; they have tax consequences. Getting good at tracking inventory isn’t just about running lean—it’s about not paying more than you should when tax season rolls around.
When Cannabis Cash Meets IRS Rules: Why This Deduction Matters More Than You Think
If your business has anything to do with cannabis—growing, processing, or selling—you already know that taxes hit differently. You might be raking in solid sales and still struggling to stay profitable, and that’s often because of how deductions work. Most businesses can write off all sorts of ordinary expenses—rent, salaries, marketing, and utilities. But cannabis businesses? Not so fast.
That’s where 280E for growers changes the game. While this tax code section often gets framed as a limitation, there’s a powerful upside hidden inside it. Growers can still deduct the cost of goods sold—things like seeds, nutrients, soil, and the direct costs of cultivation. That means if you structure your business correctly, and document those costs well, you can protect your profits better than most dispensary owners can. It’s not about getting around the rules—it’s about knowing exactly where the opportunities still exist and leaning into them. This deduction might not get you a parade, but it can mean the difference between barely scraping by and actually reinvesting in your grow operation.
The IRS Isn’t Always the Problem—Sometimes It’s Your Own Structure
You’ve probably heard friends talk about forming an LLC, or switching to an S corp, or maybe staying as a sole proprietor. While some people jump into new structures to sound more legit or protect their personal assets, others make changes because they heard it might save them money on taxes. And honestly? It might. But it could also backfire if you don’t understand the trade-offs.
S corps can reduce how much you pay in self-employment taxes—but only if you’re paying yourself a reasonable salary and taking the rest as a distribution. Otherwise, the IRS can penalize you. LLCs might give you liability protection, but they don’t automatically change how your business is taxed. What looks like a smart move on paper might actually cost you more if it means extra paperwork, more expensive tax prep, or new compliance headaches.
Your business structure should grow with your business. What made sense when you were just starting might not make sense now that you’ve got regular clients or employees. And changing it too late—or too soon—can be just as messy.
When to Bring in Help (Even If It Hurts to Spend the Money)
There’s a point where doing it all yourself stops being the scrappy thing to do and starts becoming risky. If you’ve got more than a few clients, if you’re dealing with employees or contractors, or if your books are starting to look more like a confusing puzzle than a business tool, it’s probably time to bring in some help.
That might mean hiring a tax pro just for the end of the year. Or maybe it’s finding a monthly bookkeeper who helps you stay organized before everything turns to chaos. Either way, getting help isn’t a sign of weakness. It’s the same reason you’d go to a mechanic instead of rebuilding your car’s engine in your driveway. Expertise matters—especially when the IRS is involved.
The Bottom Line
Running a small business doesn’t mean you need to become a tax expert overnight. But it does mean you need to care enough to stay ahead of what could bite you later. When you understand where the money’s going, what you’re allowed to deduct, and how to play smart within the rules, you don’t just survive—you build something that lasts.
