7 Tax Mistakes Costing Business Owners Thousands, According to Pam Jordan

In this episode of Pivot to Profit, Pam Jordan breaks down seven common tax mistakes that quietly cost business owners thousands of dollars every year. Her core message is simple: most entrepreneurs are not overpaying because they lack effort. They are overpaying because they lack proactive tax strategy.

Drawing from Pivot Business Group’s work helping clients save millions in taxes, Jordan explains that tax planning should never be treated as a once-a-year event. Instead, it should be an ongoing part of running a profitable business.

One of the biggest mistakes she sees is choosing the wrong business entity type. Many owners assume that forming an LLC is enough, but Jordan explains that legal structure and tax structure are not the same. The right setup depends on long-term goals, profitability, ownership, investors, and exit plans. In many cases, growing businesses benefit from having multiple entities rather than relying on a single structure.

She also highlights the mistake of using after-tax dollars first. Rather than earning income, paying taxes, and then investing what is left, Jordan encourages business owners to explore legal pre-tax strategies that can support both tax reduction and wealth building.

Another major issue is waiting until tax season to start thinking about tax savings. By March or April, most of the best opportunities for the prior year are already gone. Jordan stresses that proactive quarterly planning creates more options and fewer surprises.

The episode also covers overlooked foundational strategies like the Augusta Rule and the Accountable Plan, both of which can create meaningful tax savings when used correctly. Just as important, Jordan warns that poor bookkeeping can block smart tax planning altogether. Without current, accurate numbers, business owners cannot make confident decisions.

She also addresses the risks of mixing personal and business finances, which can create bookkeeping problems, increase audit exposure, and distort profitability.

Finally, Jordan explains the difference between a tax professional and a tax strategist. A tax preparer may keep a business compliant, but a tax strategist helps align tax decisions with larger wealth-building goals.

For business owners looking to reduce their tax bill, improve cash flow, and keep more of what they earn, this episode offers a clear reminder: it is not just about how much money comes in. It is about how much stays.

EPISODE TRANSCRIPT

Pam Jordan (00:01.39)

Hello and welcome to today's episode of Pivot to Profit. I'm your host, Pam Jordan, and today I'm gonna be talking about the seven tax mistakes that are costing business owners thousands of dollars. Because here's what it comes down to. Most business owners aren't paying, overpaying on taxes because they don't know enough. Unfortunately, it's because they don't have the right partner to help them understand what they're seeing. There's lots of social media gurus out there do this strategy.

right off your dog, this purse is fine, all those things. But it really comes down to understanding what strategies actually work for you or in alignment with your goals. And that's what I'm gonna talk about today. So at our company, Pivot Business Group, we help hundreds of business owners save millions in dollars in taxes. Last year alone, we saved $13 million in taxes. And that's $13 million that stayed in business owners' pockets and in businesses.

and in investment accounts rather than going and paying someone's tax bill. And unfortunately, there's just too many business owners that are making these common mistakes. So the first one is choosing the wrong entity type. And we see this far too often. And it's not just people who are starting out. We deal with clients in multiple seven figures in revenue and they have the wrong entity type. So what it comes down to is

There is two things that you need to be aware of. There is your legal business structure, and then there's your tax structure. Your legal structure is with the state in which you register your business. The tax structure is how the IRS treats you and sees you. So whether you're a sole proprietor, an S-Corp, a corporation, a C-Corp, a partnership, a GLPOP, all of the letters, you need to understand which one you are and which one's beneficial for you tax-wise, what sort of asset protection you have.

Because each one brings something different to the table. many times people come to us and like, well, what entity type should I have? And the answer is it depends because it depends on what your goals. It depends on if you're going to get outside investment, if you're going to exit, if you have investors or people that want to be part of your company, they're outside of the United States, then there's certain entity structures that don't work for you. So a lot of people just start out as a sole proprietor. And what

Pam Jordan (02:24.556)

that does is it means you can hang your shingle and say, am in business and start making transactions and servicing clients. And that's totally fine. But as you're growing, you really need to look at what your goals are and make some changes to that structure. So opening an LLC, or having a partnership, or an S-Corp, or a C-Corp, each one of those have their own purposes. As we work with clients, we find it's typically a combination.

Most successful clients have more than one company. I myself have multiple business entities set up and they're not all the same type. So it's important to understand what's the best asset protection and tax strategy. Because the answer is you probably need more than one company if you're gonna be doing multiple six, multiple seven and up figures in revenue annually. Because different entity types will help you.

Right now we have a client that came to us and their partnership and they're doing just under five million. And then they're just taking distributions. And so by implementing each one of them having an S-Corp, the two partners opening a personal S-Corp, we were able to save them six figures in taxes in 2025, just by changing their entity type and implementing some low hanging tax strategies because

Otherwise, everything from the partnership was just going straight to their personal tax returns and they were then getting huge tax bills. Again, six figure tax bills because of the revenue in the business and the profitability of the business. So the answer is to what business type should I have? The answer is it depends, but most likely there's huge opportunity for you to do a restructure so that you can play different tax games.

And these are of course all legal and above board, but just having an LLC isn't the answer for most people. It's having multiple businesses with different structures open up more tax strategies for you. But most people that come into our business and do our analysis, their entity is the lowest hanging fruit that we see of them overpaying on taxes. It's just having the wrong legal and tax structure with their business. So mistake number two.

Pam Jordan (04:49.278)

using after-tax dollars first. Far too often, most business owners are earning money, paying taxes on it, and then figuring out what to do with what's left. But the wealthiest business owners do the opposite. They use pre-tax strategies first, things like retirement, HSAs, and other planning tools, and then pay their taxes and use that money for investing.

So it's really important to understand the dollar that you're spending. Is this a pre-tax dollar or an after-tax dollar? Because there's plenty of legal ways to use your funds from your business for business purposes, for wealth building tools, for legacy wealth, and not having to use after-tax dollars. Recently we had a client come in work with us. She has a very profitable company. She's a consultant, executive coach.

doing multiple seven figures in revenue. And she was taking profit distributions and then making investments rather than changing her entity structure and passing money through entities and using pre-tax dollars for those investments. And so by making some changes, we were able to save her tens of thousands of dollars and then open up other strategies as well. So it's really important as a business owners, as you're swiping your card and using money,

think is this a pre-tax dollar or an after-tax dollar? Because far too often business owners are using after-tax dollars when they could be using pre-tax dollars for everyday expenses and especially wealth building tools. Mistake number three is waiting until tax time. And this is where I have to get on my soapbox that there's eight, March and April are too late.

If you come and talk to a tax strategist, not a tax professional, and I'll explain the difference, but if you come and talk to a tax strategist in March and April and say, I wanna save on taxes for last year, there's a little bit that can be done, but it's too late. We talk with our clients on a quarterly basis in a proactive manner to help them understand what's going on. We had a call today with a client. We went over the strategies for the year. We went over their budget, their projections.

Pam Jordan (07:04.768)

and we anticipate their tax bill for 2026 and it's Q1 of 2026. So we are very proactive and they have some aspirations this year. So we plug those into the model so that we could be intentional about how much money we need to set aside for taxes, but more importantly for the tax strategies that we're going to be implementing. So it's very important that you don't ignore tax season. Look, two things in life, death and taxes are coming for you.

So it's important that you don't wait till March and April and say, no, I should do something. Yes, at that point, you're just got to pay the IRS. And unfortunately, money is going to leave your business at tax time. And it's your choice whether the money leaves your business and goes to tax strategy that build wealth and put more money into your pocket, or the money is going to leave your wallet to go to the IRS. One way the other, money is going to leave if you're a profitable business and you need to be proactive and thinking ahead of time.

to make sure. this isn't what I'm not, I'm not saying December 30th, go buy a truck because it's over 6,000 pounds and you can write it off. What I'm saying is be intentional about your strategies throughout the year and work with a tax professional and a CFO so you know where your year is going to end up. So there's no surprises. So in January, you can be running strategies. Q2, add another strategy because you're more profitable than you expected. Q3, make that investment that you want to.

into a wealth building vehicle, Q4 turn on an advanced strategies because it was a banger year and instead of paying $75,000 to the IRS, you want to put that $75,000 into an advanced strategy. There's so much that can be done if you're being proactive. If you're not proactive when it comes to taxes, the money is going to leave your bank account and it's going to go to the IRS instead of coming to you and helping you build your own wealth. So do not wait till tax time. Mistake number four is ignoring basic strategies.

You guys, there are thousands of tax strategies out there for business owners. It is a gold mine for you to legally keep more money into your pocket, build wealth, have an impact in your community, and not have to give the money to the IRS. But if you're ignoring these basic strategies, you are overpaying. And we see this time and time again. When clients come to us and we do our analysis, at a minimum, minimum, we can find $7,000 in tax savings.

Pam Jordan (09:31.682)

just on these a couple strategies because it adds up so well. I've done a whole podcast on the full process of how to implement the Augusta Rule and the Accountable Plan. So we'll link those in the show notes, but so, so easy. So the one that we love because it's, and it's become kind of trendy on the social media posting, but it's the Augusta Rule. This was created in the seventies and this is where you can rent your primary residence to your business up.

to 14 days a year for business use and get paid money tax free. So you have a business meeting, you have a photo shoot, you have a client appreciation at your primary residence. I don't care if you own lease rent. I don't care if it's an apartment condo mansion, whatever it is rent. Use your personal primary residence for business use. Invoice your business for the use of it. The business pays you back.

For easy math, say the rate in your area is $1,000 to rent a conference center or an Airbnb of similar size to your house. That $1,000 leaves your business is a business expense and that $1,000 comes into your pocket tax free. And so many people are ignoring this because they don't even know about it. I've had conversations with tax professionals and had to explain this to them and they literally said, my gosh, why did I not know all of my clients could have been using this? Yes.

So the Augusta rule is up to 14 days, more than 14 days, and then you have to pay taxes on it and it's considered earned income. But 14 days or less, that's tax-free money into your pocket. So $14,000 into your pocket, tax-free, $14,000 reduces your business income, can save you, depending on your tax bracket, three to $4,000 a year. And this is a strategy that you can use year over year. So the Augusta rule is one of our favorites.

If you have an investment property, great. There's other strategies for that. If you have multiple businesses, one thing to understand is the Augusta rule rolls to your personal return. So it's 14 days overall. So it's not 14 days per business. So, and if you have a business partner, the best practice is kind of just split the days. So if you're 50-50 in your business, seven days goes to your partner, you get seven days and we go from there. Easily documented.

Pam Jordan (11:56.864)

easy to track, you need minutes, you've got to have an invoice. The money actually has to move you guys. You can't just put it on paper. Money actually has to move from your business to your personal account, but that's tax free money. So move the money. Another one that we love is the accountable plan. Cause far too often as business owners, our lifestyle and the money that we spend for our lifestyle is benefiting the business. So these can be things like our home office, our cell phone, our car, our wellness program, travel meals, all those things.

that benefit the business, we're swiping our personal credit card for it. So if you have a S corporation or S election with the IRS, the IRS, not your state. So the IRS thinks you're having an S election, you can set up an accountable plan because the accountable plan has to run through payroll. And if you're a sole proprietor, you can't be on payroll. So you can reimburse yourself for those lifestyle expenses that benefit your business.

And we have a tracker that we give our clients that they fill out on a monthly basis, they reimburse themselves. And we've got some clients where it's a couple hundred bucks a month and we have some clients where it's a couple thousand a month because they're expensing their home office, their travel, all those things. And it's a great way to get more tax-free money into your pocket because that money leaves the business as a dollar for dollar expense and goes into your pocket tax-free. And these are low-hanging fruit.

So easily with the accountable planning and the Guster rule, you can save 10 to $20,000 a year, just getting more money into your pocket, depending on the rate of where you live. On the low end, it's still 6,000 in tax savings. We have some clients that on the high end, it's over $40,000 in tax savings every year for them. And both of these strategies you can use year over year. So do not forget these low hanging fruit foundational strategies. These are not complicated. All right.

Mistake number five, and this is a hard one, but it's bad accounting and not knowing your numbers. If you do not know where your numbers are financially, you can't implement tax strategy. We had someone that came to us, they had another accountant that was helping them. were on the service provider doing just under 2 million in revenue. And we started to go through our process and we realized that their bookkeeping was six months behind.

Pam Jordan (14:22.464)

And so unfortunately the tax strategy that they needed, we couldn't provide until we got their books current. So we had to do the, we call catch up accounting or renovation just so that we could look at the numbers and figure out, okay, this is where you actually are. Here's where we were forecasting you to be. Here's what we can implement. But far too often the quality of the bookkeeping is so bad. You have messy books, outdated financials, nothing's reconciled.

You don't even know if you have a tax problem or not. We have a different client came in. She's a practitioner med spa and her numbers were real bad. And unfortunately she paid someone who she thought was a good bookkeeper to do her books. And so we looked under the hood and realized, no, I'm super sorry you spent all that money, but these books are not good. And so she wanted to know tax wise, can I do this? Can I do that? I want to make this investment. Can I put this into my retirement? And the answer is, we don't know.

because your numbers are so bad. So it is very important to have current and accurate record keeping so that you know where your numbers are. So you can be proactive with your tax strategist and be able to know, do I have the cash to implement the Augusta Rule? Do I have the cash for the Accountable Plan? Can I put kids on payroll or can I make that investment for that real estate purchase? If you don't have financials, you can't be able to take advantage of those opportunities. And if it's after the year is...

closed and you're having a conversation with your tax professional, not a tax strategist in Q1 and you don't have numbers, no one knows what you need. So it's very important that you have strong bookkeeping so that you can be proactive when it comes to taxes. Because literally we see clients come to us early in the year and we just had one, she's got a $50,000 tax bill and she's like, what do I do? Make it go away. And then we look at her books and they're a huge disaster. And it's like,

We got to fix it before I can tell you what to do. So then we just have to file an extension for her, tell her to make estimated taxes or tax payment just so that she doesn't get penalties and interest because we don't even know what we're dealing with. So it's such a mess if you don't have real time record keeping. Real time record keeping gives you options. Not having your numbers together closes the door on options. Okay, let's move to mistake number six that founders are making when it comes to overpaying on taxes.

Pam Jordan (16:48.002)

And that is mixing personal and business finances together. Look, you guys, you need to have a separation between your business and your personal expenses. Your business is not your personal piggy bank. Running, I have seen jet skis, dogs, girlfriends, all kinds of things run through the business that are actually personal expenses. The IRS does not appreciate that. If they ever come knocking on your door, it's not.

not going to be a good day. So it's very important that you understand what is a true business expense and what is a personal expense and use personal money. So this will reduce your risk of audit and limit your your liability if something happens. Because if you start using personal cards and business cards and personal bank accounts and business bank accounts in there, it's all mingled in. It's called piercing the corporate veil and the IRS will just have a field day.

So make sure that you separate the two. Because sometimes what I've seen is businesses come to us and their business accounts and personal accounts are all together in their books and their credit cards are all intermingled. And so we see all these expenses and we're like, okay, great. You had a good year, but profitability is only about 5%. So tax bill's X. And then we really look under the hood and realize, crap, that $10,000 a month that was being spent on the credit cards.

aren't actually business expenses, so we have to take those out. You now have a $130,000 net income and a $35,000 tax bill. So if you're mixing the two and you have personal expenses in your books, you're gonna overstate your expenses and therefore underpay on taxes and the IRS comes knocking, they're not gonna be happy. So make sure that you separate and we see this mistake all the time.

You need to keep your business money business and your personal money personal. And it just have a clean set of books, clear boundaries. I've had one business owner where we actually had to put like a, was a piece of red duct tape on one of his credit cards and a green duct tape on the other. So he knew not to use the red one. Like this one is just for personal. Don't use it for business. Cause he was so used to just grabbing one and swiping it. So we had to color code it just to help him.

Pam Jordan (19:08.952)

but do not mix your personal money with your business money. Have it separate, have it clean, and you will not overpay or underpay on taxes, and the IRS will not have a field day with you. All right, mistake number seven, and this one is so, so big, and I've referenced to it this whole time, but there is a significant difference between a tax professional and a tax strategist. A tax professional is someone who keeps you compliant with the IRS.

This is like a tax accountant, a CPA, someone that makes sure your taxes are done. They are important. We need to make sure the taxes are done. But they are not being proactive. They do not understand your goals. They are not telling you where to put your money. If you have a tax professional, what you're going to hear is, you had a great year. Congratulations.

Which account do you want me to have the IRS debit for your tax bill? And you're scratching your head and you're like, what? I don't understand. So they're also gonna say, well, just go prepay some invoices or don't bill those clients at year end or go buy that truck. That's what a tax professional, they're coming in in the ninth hour and trying to come up with some ideas. They're not helping you build wealth. They're not helping you reduce your taxes.

A tax strategist is someone who has had training and understand the tax code. These can be CPAs or enrolled agents or just certified tax strategists, but these are people that understand your goals and are proactively helping you. So a huge mistake that I see is business owners assuming they're tax professional is helping them save on taxes and grow their wealth when they're not. They're just here to help you make sure you pay your taxes. A tax strategist, yes, make sure you're compliant and make sure your tax return is filed.

But more importantly, they're here to make sure that you're only paying what you need to pay. And as much as possible is going into your pocket tax free. And as much as possible is going into investment vehicles that is going to build wealth for you and your family. So it's very important to figure out who you have helping you. And if you just have a tax preparer and they're saying congratulations, which account do you want me to draft for the IRS? It's time to get a tax strategist so that you have someone truly on your side.

Pam Jordan (21:32.718)

helping you navigate the complexity. And when you are early in your business and you don't have a big tax bill, you got to pay the IRS three grand. Okay, great. A tax professional is fine. But as you're growing in your business and your profitability is increasing, you need to have a true tax strategist that understands your entity type, that understands what strategies to implement for you so that you're not overpaying. Because like I said earlier, if you're a profitable business, money's going to leave your account. It's either going to go to the IRS,

because you have a tax bill or it's going to go towards a tax strategy that brings wealth to you and reduces your taxes. And if you have a tax professional, it's just gonna go to the IRS. If you have a tax strategist, you have options. So it is very important that you understand which one you have and uplevel to a tax strategist as you are upleveling your revenue and your profitability of your business. We recently had a client, it's a...

family, first and second generation father, son situation, multiple millions. unfortunately, they just had a traditional CPA helping them. their tax bill was just under $300,000 year over year. And they're like, we just don't know what to do. And we came in, restructured their entity, looked at some investments for them, looked at some wealth building tools, and actually helped the son get a refund.

where he had been paying $300,000 a year, year over year. And just by changing, you know, making some tweaks in the business, the entity type, implementing strategies, he was able to get a refund where in prior years he'd been paying hundreds of thousands of dollars every year. So it is very important as business owners to understand the difference between a tax professional and a tax strategist. So let's recap the seven tax mistakes that we see business owners making that are costing them thousands in taxes.

First, wrong entity type. Second, using after-tax dollars when they could be using before-tax dollars. Third, waiting until tax time to think about taxes. Four, ignoring basic strategies, like the Augusta Rule, the Accountable Plan. Five is having bad financials. If you don't have good books, you don't know what tax strategies you need. Six, mixing personal and business expenses. And seven, not having a true tax partner to help.

Pam Jordan (23:59.542)

you navigate all of what's available. And what's important to understand is tax code changes every year. So just because last year you did something and it worked doesn't mean it's not gonna, that it's available this year. And rates change. So last year you could only pay your child X amount, but in 2026 the rate went up. Do you know what that is? It's important to have a tax strategist to help you navigate those changes and what's allowable this year and what's not allowable and what numbers change over time.

So if you're entrepreneur founder who is sitting here and it's tax time and you're scratching your head and saying, I don't know what to do. I know I'm gonna overpay. We would love to help you. Just go to pamjordan.com, book a call with my team. We'd love to help entrepreneurs navigate and fix these seven common tax mistakes and so many more. Like I said, when we do our analysis, we help profitable business find a minimum of $7,000 in tax savings. And we would love to provide that value to you.

Just go to pamjordan.com and book a call with my team. That's all for today and these seven big tax mistakes that we see. Remember that it's not what you make that matters, it's what you keep.