How Much to Set Aside for Taxes in Your Business

<p>

One of the most common questions business owners ask is how much they should be setting aside for taxes. Many small business owners and contractors in New Jersey come to us feeling unsure, overwhelmed, or caught off guard by their tax bill because no one ever showed them how to plan for it throughout the year.

</p>

<p>

Once we walk them through a simple system, they typically feel more confident and more in control of their cash flow. You can use the same approach in your business to stay prepared and avoid last-minute stress.

</p>

<h2>1. Set aside a percentage of every payment you receive</h2>

<p>

A common starting point is between 15% and 30%, depending on your income level and business structure.

</p>

<p>

For example, if you bring in $8,000 in a month and set aside 20%, you would move $1,600 into your tax savings account right away. This habit helps prevent scrambling for a large lump sum when tax time arrives.

</p>

<h2>2. Review your financial reports monthly</h2>

<p>

Tracking your income and expenses regularly helps you adjust your tax savings as your business changes.

</p>

<p>

For instance, if your revenue usually averages $5,000 but jumps to $12,000 during a busy season, increasing your tax savings for that higher-income month gives you a stronger buffer. Reviewing reports such as your <a href="/bookkeeping-services">Profit & Loss and Cash Flow statements</a> each month gives you a clearer picture of what you can safely set aside.

</p>

<h2>3. Create a dedicated tax savings account</h2>

<p>

A separate account specifically for tax savings is one of the most effective ways to stay disciplined.

</p>

<p>

Many business owners admit that before opening a separate account, they accidentally spent money that was meant for taxes. Once the tax funds were separated from operating cash, it became much easier to stay consistent, organized, and prepared.

</p>

<h2>Why tax planning matters</h2>

<p>

Setting money aside for taxes isn’t just about compliance. It’s about creating stability, predictability, and peace of mind as you grow your business. When your tax money is already saved, you can make smarter decisions about hiring, investing, and expanding without fear of unexpected bills.

</p>

<p>

If you’d like support staying organized, keeping your books accurate, and preparing for tax season with confidence, <a href="/">Bergen Bookkeeper</a> is here to help. You can learn more about our <a href="/fractional-cfo-services">advisory services</a> or <a href="/contact">get in touch here</a> when you’re ready.

</p>

<h2>Frequently Asked Questions About Saving for Business Taxes</h2>

<dl>

 <dt><strong>Q: Is 20% always enough to save for taxes?</strong></dt>

 <dd>A: 20% is a general starting point, but your ideal percentage depends on your business structure, income level, and other financial factors. Some businesses need closer to 25%–30%.</dd>

 <dt><strong>Q: Should I save for taxes weekly or monthly?</strong></dt>

 <dd>A: Saving a percentage from every payment you receive is the safest method. This can be done weekly, bi-weekly, or monthly depending on your payment schedule.</dd>

 <dt><strong>Q: Do I need a separate savings account just for taxes?</strong></dt>

 <dd>A: Yes. A dedicated tax account prevents accidental spending and keeps your tax funds protected and clearly organized.</dd>

 <dt><strong>Q: Can my bookkeeper help me estimate quarterly taxes?</strong></dt>

 <dd>A: Absolutely. A qualified bookkeeper or CFO advisor can help you track trends and estimate tax obligations more accurately throughout the year.</dd>

</dl>

‍

‍

Photo by Jon Tyson on Unsplash