Tax Problems in 2023: What Small Business Owners Need to Know

If you run a small business, 2025 is shaping up to be a year filled with tax changes, challenges, and tough decisions. Many of the tax breaks introduced in recent years are set to expire, while new rules are creating confusion for business owners across the country. The IRS is also stepping up audits and reviewing past claims like the Employee Retention Credit, making compliance more important than ever. On top of that, potential reforms and political debates are keeping business taxes in the spotlight, adding to the uncertainty.

With so much going on, it’s easy to feel overwhelmed. But you don’t have to navigate these changes alone. In this blog, we’ll break down the most important tax issues you need to know in 2025—using simple language and clear tips. From deductions at risk to IRS red flags and planning opportunities, you’ll learn what to watch out for and how to take smart steps to protect your business. Let’s get into it.

1. The 20% Pass-Through Deduction Might Expire

Back in 2017, the government gave small business owners a helpful tax break. It was called the Qualified Business Income (QBI) deduction. It lets people who own LLCs, S-corps, and other pass-through businesses deduct 20% of their income before paying taxes.

That deduction is set to end after 2025, unless Congress decides to keep it. If it goes away:

• Business owners could see higher taxes, especially those who make a lot of money.
• A business making $150,000 could owe thousands more in taxes each year.
• You may need to rethink your business setup to lower your tax bill.

What to do: Watch the news and talk to a tax expert. Global FPO can help you decide if changing your business type now can save you money later.

2. IRS Audits Are on the Rise

The IRS got more funding recently. That means it’s hiring more people and doing more audits, especially on small businesses.

They’re looking closely at:

• People who don’t report all their income.
• Businesses that take large deductions.
• Companies that pay workers as “contractors” instead of employees.

If you’re picked for an audit, the IRS may ask for:

• Income statements
• Receipts
• Proof of deductions
• Payroll records

What to do: Keep good records all year. Save receipts, use bookkeeping software, and consider hiring a professional bookkeeper.

3. Employee Retention Credit (ERC) Claims Under Review

The Employee Retention Credit (ERC) was a pandemic-era program that gave money to businesses that kept employees during COVID-19.

Now in 2025, the IRS is checking to see if businesses claimed the credit by mistake. If they think you took the ERC when you shouldn’t have, they might ask for the money back—plus penalties.

What to do: If you filed for the ERC, talk to a tax advisor. Make sure your claim was correct. If not, you may be able to fix it before the IRS contacts you.

4. Excess Business Loss Limits Are Still in Place

The IRS doesn’t let business owners deduct unlimited losses anymore.

In 2025, these limits are:

• $313,000 for single filers
• $626,000 for married couples

That means if your business loses more than this, you can’t deduct all of it right away. You’ll have to carry it forward to future years.

What to do: If you’re expecting a big loss this year, plan carefully. You may want to spread your expenses or delay some purchases.

5. Big Decisions Ahead on Tax Law

Many parts of the 2017 tax cuts are set to expire after 2025. That includes:

• The 20% QBI deduction
• Bonus depreciation (which lets you deduct equipment costs fast)
• Lower individual tax rates

If these laws expire, taxes will go up for many businesses. Congress may extend them—or not. That creates a lot of uncertainty for business owners.

What to do: Stay updated. Talk to an accountant about how to prepare for different scenarios. You might want to make big purchases or investments before these rules change.

6. Equipment Deductions Might Shrink

Right now, you can write off big equipment costs quickly using:

• Section 179 (up to around $1.25 million)
• Bonus depreciation (100% in the first year)

These deductions help reduce your tax bill when you buy new tools, vehicles, or machines.

But in the next few years, bonus depreciation will start to phase out. That means you’ll only be able to deduct part of the cost each year.

What to do: If you need new equipment, buy it before these tax breaks shrink. Global FPO can help you time these purchases right.

7. Payroll Taxes Are Getting More Complex

As tax laws change, payroll rules are changing too. Some of the key issues include:

• How much to withhold for Social Security and Medicare
• Changes to state and local tax (SALT) limits
• New state-level rules for contractors and employees

If you don’t calculate payroll taxes correctly, the IRS can charge heavy penalties.

What to do: Use reliable payroll software or work with a professional. Double-check how you classify workers. An employee misclassified as a contractor is a red flag for the IRS.

8. Fewer Tax Credits for Green Energy

Some businesses—like those in solar, wind, or electric vehicle industries—used to get special green energy tax credits.

Now, some of those credits are being reduced or removed, especially under new government proposals.

This change could mean:

• Higher costs for equipment
• Less incentive to go green
• Lower refunds for qualifying companies

What to do: If you’re in a green sector, talk to a tax advisor soon. You may still qualify for remaining credits in 2025, but only if you act quickly.

9. State and Local Tax (SALT) Deduction Still Capped

If you live in a high-tax state like New York or California, you may be affected by the $10,000 cap on deducting state and local taxes (SALT).

This cap, introduced in 2017, is still in place. It means you can’t deduct more than $10,000 of state income or property tax on your federal return.

What to do: Consider forming a pass-through entity (PTE) that allows you to work around the SALT cap in some states. Global FPO can help you decide if that’s the right move.

10. Small Business Owners Need to Be Extra Careful

With all these changes, it's easy to make mistakes. Some of the biggest problems businesses face include:

• Filing the wrong tax forms
• Missing deadlines for estimated taxes
• Forgetting to issue 1099s to contractors
• Mixing personal and business expenses
• Using outdated tax laws

What to do: Don’t try to do it all alone. The tax system is too complex in 2025. A professional tax advisor, like the team at Global FPO, can help you avoid errors and save money.

Prepare for Tax Changes with Global FPO

Navigating taxes in 2025 is not something business owners should try to handle alone. With major tax breaks possibly ending, tighter IRS scrutiny, and shifting rules around deductions, credits, and payroll, the risk of costly mistakes is higher than ever. The best way to stay protected is to plan ahead, stay informed, and get professional support that’s tailored to your business needs.

Global FPO understands the unique challenges small businesses face, especially in times of tax uncertainty. Our team can help you organize your financial records, identify opportunities to save on taxes, and make sure your business remains compliant with the latest rules. Whether you’re concerned about losing deductions, facing an audit, or simply want to make smarter financial decisions, we’re here to help you every step of the way. Don’t wait for tax problems to grow—take control now with expert guidance from Global FPO.

FAQs About Tax Problems in 2025

1. Will the 20% pass-through deduction really go away?

Yes—unless Congress extends it, this deduction will end after 2025. This means small business taxes may increase.

2. How do I know if I’ll be audited?

There’s no way to be sure, but if you report very little income, take lots of deductions, or pay contractors instead of employees, you may be at higher risk.

3. Can I still take the Employee Retention Credit (ERC)?

No, but the IRS is still reviewing claims made in the past. If you claimed it incorrectly, you might have to repay it.

4. What is bonus depreciation and how is it changing?

Bonus depreciation lets you deduct 100% of a new equipment cost. But it will start to drop after 2025 unless extended by Congress.

5. Is it better to be an S-corp or an LLC in 2025?