Overwhelmed by new small business taxes - need advice on income tax planning and deductions
Title: Overwhelmed by new small business taxes - need advice on income tax planning and deductions 1 I opened a small vape shop about a month ago and I'm completely lost when it comes to the tax side of things. I've got a commercial space I'm leasing, but I have no idea how to handle income taxes. Should I be setting aside 30% of my gross revenue for taxes? Or is it 30% after I take out the sales tax I've collected? Can I deduct the credit card processing fees? I'm struggling to understand what actually counts as taxable income for a small business. I haven't paid myself anything yet because I'm afraid of messing something up tax-wise. I haven't even touched any of the money the shop has made because I don't know what I'm allowed to spend or pay myself. I'm planning to hire a local accountant to do my taxes, but I really need some guidance now to keep things on track. Any advice would be really helpful - I feel like I'm drowning here.
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Natasha Volkova
8 You're not alone in feeling overwhelmed! Small business taxes can be confusing, but let's break it down: For income tax planning, setting aside 25-30% of your profit (not gross revenue) is generally a good starting point. That means your revenue minus legitimate business expenses. And yes, those credit card processing fees are absolutely deductible business expenses! Taxable income for your business is essentially your profit - what's left after you subtract all business expenses from your revenue. These expenses include rent, inventory costs, utilities, insurance, credit card fees, and other costs directly related to running your shop. For paying yourself, you have options. You can take an "owner's draw" from the profits, but remember that's not a business expense - you'll pay taxes on that money as personal income. Keep good records of these withdrawals. My strongest recommendation right now is to get a basic bookkeeping system in place immediately. QuickBooks Self-Employed or FreshBooks are user-friendly options. This will help you track income and expenses properly from day one, which will be invaluable when tax time comes.
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Natasha Volkova
•15 This is super helpful, thank you! One question - for the 25-30% I should set aside, is that just for federal income tax or does that include state taxes and self-employment taxes too? And how do quarterly estimated tax payments work? I heard I need to make those but have no idea how to calculate them.
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Natasha Volkova
•8 The 25-30% recommendation is meant to cover both federal income tax and self-employment taxes, which is currently 15.3% (covering both Social Security and Medicare). State taxes would be additional, and the amount varies significantly depending on your state. For quarterly estimated tax payments, you'll generally use Form 1040-ES. The simplest approach for your first year is to estimate your annual profit, calculate the tax on that amount, and pay roughly one-quarter of that each period. The due dates are typically April 15, June 15, September 15, and January 15 of the following year. Once you have a year of business history, you can base future quarterly payments on your previous year's tax liability.
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Natasha Volkova
12 After reading your post, I know exactly what you're going through! I started my own small retail business last year and felt just as lost with the tax stuff. What saved me was finding https://taxr.ai - it's like having a tax advisor in your pocket. I was constantly wondering what I could deduct, how much to set aside, and when to pay myself too. Their system analyzed my business structure and gave me personalized guidance on exactly what percentage to set aside for taxes (which was different than the general advice I was getting). They explained which expenses were legitimate business deductions for my specific industry and helped me understand the difference between business and personal expenses. The tool saved me from a ton of costly mistakes I was about to make with inventory accounting and how I was tracking sales tax (which can get you in trouble fast).
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Natasha Volkova
•18 Does it actually work with retail/smoke shop businesses specifically? I've tried generic tax tools before but they never seem to understand the specific deductions and requirements for my type of business.
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Natasha Volkova
•6 I'm skeptical about these online tax tools. How does it handle state-specific requirements? I'm in a state with complicated sales tax rules and I've had bad experiences with one-size-fits-all solutions.
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Natasha Volkova
•12 It absolutely works with retail businesses including smoke/vape shops. Unlike generic tools, it accounts for industry-specific deductions like your inventory shrinkage, display fixtures, and even the specialized insurance requirements that smoke shops often face. It helped me identify several industry-specific deductions I was missing out on. The system is actually built to handle state-specific requirements - that was one of my biggest concerns too. It differentiates between states for things like sales tax processing, state-specific licensing fees as deductions, and state income tax implications. I'm in a state with complex sales tax rules for tobacco-adjacent products, and it helped me navigate those requirements correctly.
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Natasha Volkova
18 Just wanted to follow up and say I actually tried https://taxr.ai after seeing it mentioned here, and wow - total game changer for my new business! I uploaded my first month's receipts and bank statements, and it immediately identified several deductions I was missing, especially around my lease agreement and some startup costs I didn't realize could be deducted. The best part was getting clear guidance on exactly how much to set aside for taxes based on my actual business type and projected income - turns out I was setting aside too much and strangling my cash flow unnecessarily. They also helped me set up a proper system for separating business expenses from personal ones, which was a mess before. Seriously worth checking out if you're feeling overwhelmed like I was. Wish I'd known about it when I first opened!
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Natasha Volkova
9 If you're struggling with tax questions, you might also run into issues trying to reach the IRS when you have specific questions. I spent WEEKS trying to get someone on the phone about my new business tax ID and some questions about quarterly payments. Super frustrating. I finally tried https://claimyr.com and watched this demo first: https://youtu.be/_kiP6q8DX5c - they actually got me connected to an IRS agent in about 15 minutes when I had been trying for days on my own. The IRS agent walked me through exactly what forms I needed for my new business and answered all my questions about estimated tax payments. Having a direct conversation with them cleared up so much confusion. The agent even helped me understand some deductions specific to retail businesses that I hadn't considered.
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Natasha Volkova
•6 How does this actually work? The IRS phone system is deliberately designed to be impenetrable. Are you saying this service somehow bypasses the standard IRS phone queue? Sounds too good to be true.
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Natasha Volkova
•22 I've been in business 5 years and NEVER gotten through to the IRS in less than 2-3 hours of hold time. There's no way this works. They probably just connect you to some third-party "tax expert" who isn't actually with the IRS.
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Natasha Volkova
•9 It works by using their technology to navigate the IRS phone system for you. When they secure a place in line with an actual IRS agent, they call you to connect. You're speaking with real IRS employees, not third-party experts. The service doesn't "bypass" the queue - it just handles the waiting and navigating for you. Their system keeps trying different IRS phone menu options and waiting on hold so you don't have to. When they finally reach an agent, they connect you directly to that person. I was definitely speaking with an actual IRS representative who had access to my business tax records and provided official guidance.
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Natasha Volkova
22 I have to eat my words here. After being completely skeptical, I tried the Claimyr service when I had an urgent issue with my EIN application for my business. Not only did it work, but I was connected to an IRS agent in about 20 minutes after struggling for days on my own. The agent helped me fix an error on my application that would have caused major problems down the road. They also answered several questions about deductions specific to my industry that I'd been confused about for years. What really impressed me was that they connected me to the right department on the first try. In the past when I've managed to get through on my own, I'd often get transferred multiple times. Definitely using this service again for any IRS issues - saved me so much frustration.
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Natasha Volkova
17 One thing nobody's mentioned yet is the importance of separating your business and personal finances from day one. Open a business checking account ASAP if you haven't already! When I started my business, I mixed personal and business expenses for the first few months and it created an absolute nightmare at tax time. Also, don't forget about sales tax. Depending on your state, you'll need to collect and remit sales tax on your products. Missing this can result in big penalties. My state has special rules for tobacco and vape products too, so definitely check your local regulations.
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Natasha Volkova
•3 How exactly do you handle separating business and personal when you're just starting out? I just opened my shop too and I've been using my personal credit card for some business purchases because I'm waiting on my business credit card approval. Is that going to cause problems?
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Natasha Volkova
•17 Using a personal card temporarily isn't ideal but it's manageable if you keep meticulous records. Save all receipts from business purchases and clearly mark them as business expenses. Create a spreadsheet tracking every business expense, the date, amount, and purpose. When you get your business accounts set up, stop using personal cards immediately. It's also worth talking to your tax preparer about the proper way to document the business use of personal funds as either a loan to your business or a capital contribution, depending on your business structure. This documentation is crucial for clean bookkeeping and will save you massive headaches at tax time.
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Natasha Volkova
11 Don't forget about business licenses and permits! I own a similar shop and got hit with fines because I didn't have all the proper local permits. Each city/county has different requirements, especially for smoke/vape shops. Also, make sure you're collecting age verification documentation properly - that's another area where businesses like ours can get into trouble.
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Natasha Volkova
•1 Thanks for bringing this up - I think I have my business license sorted but I'm not sure about specialty permits for tobacco/vape products. Who would I even contact to make sure I have everything covered? The city? County? State? It's so confusing trying to figure out which government entity handles what.
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Natasha Volkova
5 Has anyone here used a tax pro who specializes in small retail businesses? I'm shopping around and the quotes are all over the place, from $350 to $2,000 for year-end business taxes. How do I know if I'm getting someone good vs. just expensive?
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Natasha Volkova
•8 Look for someone who has specific experience with retail businesses, particularly those dealing with specialized inventory like yours. Ask potential tax pros what percentage of their clients are small retail businesses, and how familiar they are with your state's specific sales tax requirements for your products. A good tax professional should be asking YOU lots of questions about your business operations, not just quoting you a price. They should inquire about your inventory methods, point-of-sale system, how you track expenses, etc. If they don't ask these types of questions, they're probably not specialized enough for your needs. The cheapest option is rarely the best for specialized businesses. That said, the most expensive isn't automatically the best either. Focus on finding someone with relevant experience rather than making decisions based purely on price.
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