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4 Tax Mistakes New Business Partners Make in Their First Year—and How to Avoid Them

Becoming a partner in a business is an exciting milestone, but it also comes with tax responsibilities that catch many new partners off guard. The transition from employee to owner changes how income is taxed and how compliance works. Unfortunately, many first-year partners discover these differences only after facing unexpected tax bills or IRS issues. This month’s blog will help you understand the most common tax traps for new partners.

The “I’m Still an Employee” Trap

One of the biggest misconceptions new partners have is assuming their tax situation remains similar to when they were an employee. Once you become a partner, you are no longer treated as an employee for federal tax purposes—even if your role and workload feel the same.

Partners typically receive guaranteed payments or distributions, not W-2 wages. This means:

No automatic tax withholding
No employer-paid payroll taxes
Greater responsibility for estimating and paying taxes

The Self-Employment Tax Surprise

Many new partners are shocked to learn that partnership income is generally subject to self-employment tax, even if profits are left in the business. Unlike employees, partners pay both the employer and employee portions of Social Security and Medicare taxes. This can add a significant amount to your tax liability, especially in your first year when cash flow may still be stabilizing.

Related: Learn more about how to build a strong financial foundation for your business in its first year here.

Basis vs. Capital Confusion

Another common issue is misunderstanding the difference between capital accounts and tax basis. While these terms are often used interchangeably in conversation, they serve very different purposes for tax reporting.

Your tax basis determines:

How much loss can you deduct
Whether distributions are taxable
The tax impact when you sell your partnership interest

New partners who don’t track their basis correctly may deduct losses they’re not entitled to or face unexpected taxes on distributions they assumed were tax-free.

Missing the 83(b) Election

For partners receiving equity subject to vesting or restrictions, missing the 83(b) election can be a costly mistake. An 83(b) election allows you to recognize income at the time equity is granted rather than as it vests. If the business grows in value, failing to file this election within the required 30-day window can lead to significantly higher taxes later.

How to Avoid These Tax Traps

The common thread behind these mistakes is a lack of early tax planning. New partners benefit greatly from working with a CPA who understands partnership taxation and can guide them through:

Estimated tax payments
Self-employment tax planning
Basis tracking and documentation
Equity compensation and elections

Partnership Tax Planning in Mission, TX At MARIELA RUIZ, CPA, PLLC, we help new and existing business partners navigate the complexities of partnership taxation with clarity and confidence. Whether you’re joining a partnership or restructuring ownership in your Mission, TX business, we provide personalized guidance to help you avoid costly mistakes. Call (956) 997-0067 to schedule a consultation.

Estimated Tax Payment for 2025 – What Texans Should Know

December 2, 2025 / admin / 0 Comments

If you live in Texas and expect to owe income tax this year – perhaps because you have other income that doesn’t have tax automatically withheld – then quarterly estimated tax payments may apply to you. Since Texas doesn’t impose a state income tax on individuals, this pertains to your federal taxes. In this month’s blog, we’ll break down how estimated tax payments work in 2025 and why you should stay on top of them.

Who Needs to Make Estimated Payments?

You may be required to make quarterly estimated payments if:

You expect to owe at least $1,000 in federal income tax after subtracting withholding and credits.
You earn income that isn’t subject to withholding — for example: self-employment earnings, gig income, rental property income, dividends, interest, royalties, or other non-wage income.
Withholding and credits from other income sources are insufficient to cover your overall tax liability. Learn more here.

If that describes you, using the federal Form 1040‑ES can help you estimate what you owe. You can pay via online banking, mail, or the electronic IRS systems.

2025 Estimated Tax Payment Schedule

For most taxpayers, the 2025 payment deadlines are:


Jan 1 – Mar 31, 2025 – due date is on April 15, 2025
Apr 1 – May 31, 2025 – due date is on June 15, 2025
June 1 – Aug 31, 2025 – due date is on September 15, 2025
Sep 1 – Dec 31, 2025 – due date is on January 15, 2026

If one of these dates falls on a weekend or legal holiday, the payment is due the next business day.

Why Quarterly Payments Matter

For individuals with income that doesn’t have tax withheld — such as freelancers, contractors, landlords, or investors — quarterly estimated payments help spread the tax burden instead of facing a large bill at tax-filing time.

Additionally, regular estimated payments help avoid penalties. The federal system broadly expects either withholding + estimated payments to meet 90% of your current-year liability, or 100% of your previous year’s tax.

Related: Learn more about tax planning tips for Texas small businesses here.

What Happens If You Don’t Pay or Underpay

If you fail to make estimated payments or underpay, the federal government may impose an “underpayment penalty.” This is why it’s important to stay on top of your income projections and make payments promptly. For many Texans working freelance, contract, or gig-based jobs, quarterly payments can be a smart way to avoid tax-time surprises.

Related: Learn more about the difference between tax preparation and tax planning here.

Get Personalized Guidance and Accurate Calculations Today

Whether you’re self-employed, earning rental or investment income, or simply unsure if quarterly payments apply to you, MARIELA RUIZ, CPA, PLLC is here to help you plan with confidence. Start today by calling us (956) 997-0067 or visiting our website mruiz-cpa.com. Our team is ready to make your year-round tax planning simple, efficient, and stress-free.

Exit Strategy Planning: Preparing Your Business for Sale, Succession or Transition

November 13, 2025 / admin / 0 Comments

Deciding to move on from your business—whether through sale, succession, or transition—marks a major milestone. It’s not simply about handing over the keys; it’s about preparing your business to maximize value, ensure a smooth handoff, and minimize tax or operational surprises. In this blog, we’ll look at four key reasons why a thoughtful exit strategy matters.

1. Enhancing Business Value
The first reason to engage in exit strategy planning is to boost the marketability and underlying value of your business. Buyers or successor leaders want consistent earnings, clean financials, scalable systems, and minimal risk. By addressing weak spots—such as outdated bookkeeping, lack of documented processes, or client concentrations—you increase the appeal of the business. Our firm’s services in audits, reviews, compilations, and software implementation support this cleansing and positioning.

2. Tax and Financial Planning
A sale, transition, or succession can trigger significant tax events, including capital gains, depreciation recapture, gift or estate taxes, and stepped-up basis considerations. Without advance planning, you may leave substantial value on the table. Strategic tax planning—something our firm offers—ensures you evaluate entity structure, timing of the sale, asset allocation, reinvestment options, and other tax-efficient mechanisms.

3. Operational Readiness and Governance
Often businesses struggle in transition because internal operations, governance, and documentation aren’t ready. Buyers or successors expect transparent processes, reliable financial statements, clean records, defined roles, and internal controls. Ensuring your bookkeeping is accurate, payroll systems are solid, and key personnel are in place (or can be trained) reduces risk for stakeholders. The accounting and consulting services from our firm help here.

4. Succession or Buyer Identification
Knowing who will take over is as important as knowing when. Whether you are grooming a family member, selling to key employees, passing to management, or finding an outside buyer—each path has different preparations. A thoughtful strategy identifies possible successors or buyers early, aligns expectations, and plans for the handoff. This may involve developing a formal transition timeline, performance incentives, or backup leadership.

Partner with Experts for a Smooth and Successful Business Transition

Preparing your business for sale, succession, or transition is not a last-minute task—it’s a strategic process that affects value, taxes, and operations. and legacy. With the right preparation, you can leave your business stronger and better positioned for the next chapter. When you’re ready to build a robust exit strategy, partner with MARIELA RUIZ, CPA, PLLC. Visit mruiz-cpa.com or call (956) 997-0067 to schedule your consultation today.

Tax Planning Tips for Texas Small Businesses: What to Do Before Year-End

October 7, 2025 / admin / 0 Comments

When the year draws to a close, many Texas entrepreneurs find themselves scrambling to review their financials and minimize their tax liabilities. Tax planning isn’t just about filing on time. It’s also about making proactive decisions that can strengthen your business’s financial health. This month’s blog will help you prepare for year-end efficiently while identifying opportunities to save.

Understanding the Importance of Year-End Tax Planning

Effective tax planning ensures that your business doesn’t pay more than necessary while remaining compliant with state and federal tax laws. Texas small businesses, although spared from state income tax, must still manage federal obligations, payroll taxes, and local requirements. Reviewing your books early allows you to adjust income, defer expenses, and take advantage of deductions before the deadline hits.

Related: Learn more about the difference between tax preparation and tax planning here.

Smart Strategies to Optimize Your Tax Position

By implementing smart tax strategies now, you can better control how your income and expenses impact your final tax bill. Working with a certified public accountant (CPA) helps identify specific deductions and credits applicable to your industry. For example, business owners can consider accelerating certain purchases or contributions to retirement accounts. You can also review your depreciation schedules to ensure assets are accurately recorded.

Year-End Checklist for Texas Small Businesses

Before the calendar turns, make sure to review these essential tax planning tasks:

Reconcile accounts: Ensure all transactions are correctly categorized and your books match your bank statements.
Evaluate deductions: Consider expenses like equipment, mileage, and home office use that may qualify for deductions.
Confirm Texas franchise tax status: Determine if your business meets the “no tax due” threshold (approx. $2.47 million) or if you still need to file an information report.

Review payroll and 1099 forms: Verify employee and contractor information before submission.
Plan for estimated taxes: Make final quarterly payments to avoid underpayment penalties.
Consult a professional: A local CPA can provide personalized insights into Texas-specific tax benefits.

Related: learn more about tips for managing expenses as a small business owner here.

Let Us Simplify Your Year-End Tax Planning

Don’t wait until the last minute—strategic tax planning can make a significant difference in your bottom line. MARIELA RUIZ, CPA, PLLC is ready to help Texas small businesses navigate complex tax laws and prepare for success. Visit mruiz-cpa.com or call (956) 997-0067 to schedule your year-end consultation and take control of your financial future.

Bookkeeping for Real Estate Investors: Tax Deductions & Loan Pitfalls

September 5, 2025 / admin / 0 Comments

Investing in real estate can be profitable, but it comes with financial challenges. From understanding tax deductions to avoiding loan mistakes, investors need organized records to make smart decisions. In this blog, we’ll explore the importance of tax deductions for real estate investors, common loan pitfalls they encounter, and how proper bookkeeping can provide effective solutions.

Maximizing Tax Deductions for Real Estate Investors
Tax deductions help real estate investors lower taxable income and enhance cash flow. Common deductions include mortgage interest, property taxes, depreciation, insurance, and repairs or maintenance. Travel expenses related to property management may also qualify, provided they meet IRS guidelines. Accurate record-keeping is essential to avoid missing these valuable deductions and to ensure compliance with IRS regulations.

Loan Pitfalls Faced by Real Estate Investors
Financing is essential for building a real estate portfolio, but loan pitfalls can erode profits. Investors often encounter challenges such as high interest rates, unfavorable loan terms, or prepayment penalties. Mismanagement of loan payments and underestimating variable interest rates may result in serious setbacks. Without proper financial oversight, these issues are hard to anticipate and avoid.

How Bookkeeping Helps Avoid Financial Mistakes
Bookkeeping provides clarity and control over both tax and loan-related challenges. By maintaining accurate financial records, investors can monitor cash flow, assess debt obligations, and plan for upcoming payments.

Detailed bookkeeping also highlights red flags such as rising interest costs, inconsistent income streams, or underperforming properties. With organized data, investors are better equipped to negotiate favorable loan terms, budget effectively, and stay ahead of potential risks.

Bookkeeping Solutions for Real Estate Success
Beyond organization, bookkeeping solutions can transform how investors approach their financial strategy. Automated bookkeeping systems track income and expenses in real time, while professional bookkeeping services ensure accuracy and compliance. With regular financial reports, investors gain a clear picture of profitability and can make informed decisions about property acquisitions, sales, and refinancing. A proactive bookkeeping strategy not only safeguards against errors but also positions investors for sustainable growth.

Protect Your Investments with Expert Support
Tax deductions and loan management are key to real estate investment success. Organized bookkeeping ensures investors claim all deductions, avoid financial pitfalls, and make smarter decisions. If you’re a real estate investor looking to streamline your finances, MARIELA RUIZ, CPA, PLLC is here to help. Visit mruiz-cpa.com today to learn how expert bookkeeping and tax solutions can support your investment success.

Understanding Resale Certificate Rejections and How to Prevent Them

August 4, 2025 / admin / 0 Comments

Navigating Texas taxes can be overwhelming for businesses, especially when it comes to understanding resale and exemption certificates. These documents are essential for claiming tax exemptions on qualifying purchases. However, despite their legal standing, many Texas business owners face denied certificates during audits. In this month’s blog, we will explore the most common reasons resale and exemption certificates are rejected.

What Are Resale and Exemption Certificates?

In Texas, resale certificates allow businesses to purchase items tax-free if they’re reselling them. Exemption certificates apply to specific purchases, such as those made by nonprofits or government entities. Although both are legitimate tax-saving tools under Texas Comptroller guidelines, their misuse or mismanagement often leads to issues during an audit.

Auditors primarily aim to verify compliance with tax laws, and that’s where many businesses fall short. Whether it’s incomplete documentation or incorrect usage, these small missteps can raise red flags.

Related: learn more about whether manual or automated bookkeeping is right for you here.

Common Reasons Texas Resale & Exemption Certificates Are Denied

Even well-intentioned businesses can find themselves in trouble if they don’t follow protocol. Auditors in Texas are meticulous when verifying exemption claims, and they frequently deny certificates based on these common issues:

Improperly filled-out certificates: Leaving out key fields like tax ID numbers or signatures makes the document invalid.
Wrong certificate type used: Using a resale certificate when an exemption certificate is required – or vice versa – will lead to rejection.
Failure to prove resale intent: If there’s no documentation or the product clearly wasn’t resold, expect the exemption to be denied.
Outdated certificates: Certificates must be current and updated regularly.
Missing backup documentation: Sales invoices, purchase orders, or proof of resale should always accompany certificates.

Related: Learn more about why a bookkeeper is a must for your small business here.

How to Protect Your Business:

Ensure certificates are complete, accurate, and obtained before audit begins. Keep detailed records—and if in doubt, seek a compliance review.

Related: learn more about the difference between tax planning and tax preparation here.

Let MARIELA RUIZ, CPA, PLLC Help You

Don’t let avoidable mistakes cost your business time and money. Our team specializes in Texas tax compliance and audit preparation. Whether you need a quick review or full-scale assistance, we’re here to help you stay ahead of the curve. Contact mruiz-cpa.com today at (956) 997-0067 to schedule a consultation and ensure your resale and exemption certificates are audit-ready.

Minimizing Self-Employment Taxes: A Guide for Texas Entrepreneurs

July 10, 2025 / admin / 0 Comments

If you are self-employed in Texas, understanding self-employment (SE) tax is vital. Because you pay both the employee and employer portions, managing this tax burden can significantly affect your profit margin. That’s why every Texas entrepreneur should consider strategies to minimize SE tax legally. In this blog, we will share four practical, IRS-approved tips for reducing your tax exposure.

Tip 1: Take the SE tax deduction. You are allowed to deduct the employer‑equivalent portion of your SE tax on Form 1040, reducing your adjusted gross income and your income tax liability. While it does not reduce the tax you pay directly, it lowers taxable income. Be sure to report it correctly on Schedule 1 of your return.

Tip 2: Maximize legitimate business expenses. Net earnings from self-employment drive the tax calculation, so lowering that figure through ordinary and necessary deductions, such as home office costs, mileage or vehicle use, and health insurance premiums, can substantially reduce your SE tax base. Texas self-employed individuals can also deduct health insurance premiums paid for themselves and qualifying dependents.

Tip 3: Elect S‑Corporation status. By forming an LLC or corporation and making an S‑Corp election, you can pay yourself a “reasonable salary” subject to payroll taxes while leaving the remainder of the profit as distributions, which are not subject to SE tax. This structure can dramatically reduce your SE tax bill, but make sure your salary reflects IRS guidelines to stay compliant. Failing to pay a “reasonable salary” can trigger IRS audits or penalties.

Tip 4: Contribute to retirement plans like a SEP‑IRA or Solo 401(k). Contributions reduce your taxable income, and some retirement plans are self-employed specific. For example, you may contribute up to ~25% of net earnings to a SEP‑IRA or, if eligible, a Solo 401(k)—both lowering your adjusted gross income and reducing your SE tax base. Texas entrepreneurs benefit from this above-the-line deduction regardless of itemizing status.

In Summary

Texas entrepreneurs can legally reduce their SE tax by using the SE tax deduction, maximizing business expense write-offs, electing S‑Corp status, and contributing to self-employed retirement plans under IRS rules. To ensure these strategies are implemented correctly, contact MARIELA RUIZ, CPA, PLLC in Mission, TX. Visit mruiz‑cpa.com for expert guidance and personalized tax planning.

Manual vs. Automated Bookkeeping: Which One Is Right for You?

June 2, 2025 / admin / 0 Comments

For many business owners, managing finances is both essential and overwhelming. One major decision involves choosing between manual and automated bookkeeping. While both methods aim to keep your books in order, they differ in efficiency, accuracy, and long-term sustainability. Understanding their pros and cons will help you determine the right fit for your business and maximize your financial endeavors.

Manual Bookkeeping

This is the traditional method that involves recording transactions by hand using ledgers, spreadsheets, or paper journals. This process is familiar and often cheaper at the start. It appeals to small businesses with limited budgets or simple accounting needs. However, this method comes with notable drawbacks. It is time-consuming and prone to human error. Mistakes in manual data entry can result in costly discrepancies. As your business grows, handling more transactions manually becomes inefficient and risky. Manual bookkeeping also lacks built-in real-time access to financial data, which can delay decision-making and reporting.

Related: Learn more about why every small business needs a bookkeeper here.

Automated Bookkeeping

In contrast, automated bookkeeping leverages software to handle tasks such as data entry, reporting, and reconciliation. These systems reduce human error by calculating totals and syncing data in real time. Businesses benefit from improved accuracy and faster processing. Cloud-based platforms allow users to access financial records anytime, from anywhere, which enhances collaboration and decision-making. Automated bookkeeping also supports scalability, making it ideal for businesses planning to grow or facing complex accounting needs.

Automation is not without cost. It requires an upfront investment in software and possibly staff training. Yet, the long-term savings in time and reduced errors often outweigh the initial expenses. For those concerned about compliance, many automated solutions include features to help meet tax and reporting regulations, adding another layer of value.

Conclusion

Ultimately, the best bookkeeping method depends on your business size, complexity, and future goals. Small operations may find manual bookkeeping sufficient for a finite duration. However, companies looking to scale or streamline should strongly consider automation for its long-term advantages. Taking the time to assess your current needs and future direction will guide you toward the smartest financial management decision. If you’re interested in optimizing your business’ finances, consider hiring a professional bookkeeper service from us today. Contact us at (956) 997-0067 or visit our website http://www.mruiz-cpa.com for more information.

Maximize Your EV Tax Savings with IRC 45W Commercial Credits in Texas

May 5, 2025 / admin / 0 Comments

If you’re a business owner in McAllen, Mission, Palmhurst, or Edinburg, TX, there’s never been a better time to invest in electric vehicles (EVs). Thanks to the Inflation Reduction Act and the IRC 45W Commercial Clean Vehicle Credit, you could be leaving money on the table if you don’t take advantage of this generous federal tax incentive. In this month’s blog, we’ll explore more about IRC 45W Commercial Credits.

What Is IRC 45W?

The IRC Section 45W Commercial Clean Vehicle Credit is part of the broader initiative to accelerate the adoption of clean transportation. Businesses can now claim up to $7,500 for light-duty EVs and up to $40,000 for medium- and heavy-duty EVs, per vehicle. This credit applies to new vehicles purchased for business use after January 1, 2023. That’s not just chump change – it could translate into thousands in tax savings when upgrading a company fleet or starting a new one.

Related: Learn more about how to build a strong financial foundation for your business in its first year here.

Who Qualifies?

If your business uses vehicles for deliveries, maintenance, fieldwork, or logistics, you’re likely eligible. That includes industries like HVAC, landscaping, plumbing, or last-mile delivery – big sectors in South Texas. One key point: the vehicle must be used primarily in the U.S. and not for personal use.

According to the Department of Energy, eligible EVs must be made by qualified manufacturers and meet battery capacity requirements.

How Texas Businesses Can Benefit

Let’s say your delivery company in Mission, TX purchases three electric vans. If they each qualify for the $7,500 credit, that’s $22,500 shaved off your federal tax bill—no small potatoes. Even better, Texas may offer additional grants or incentives through the Texas Commission on Environmental Quality (TCEQ) for certain clean fleet upgrades, meaning your savings could stack up fast.

Don’t Go It Alone, Rely on MARIELA RUIZ, CPA, PLLC

Tax laws are as clear as mud for most people. If you’re unsure how to apply the IRC 45W credit, our qualified CPA and tax consultant team in Mission, TX knows the ropes and is here to help. Visit mruiz-cpa.com or call us at (956) 997-0067 to find out how we can help you cash in on the savings. Don’t miss out on this opportunity to future-proof your fleet!

How to Build a Strong Financial Foundation for Your Business in Its First Year

April 8, 2025 / admin / 0 Comments

Starting a new business is exciting, but it also comes with a host of responsibilities, especially when it comes to managing your finances. The first year is crucial for establishing a foundation for long-term success. Laying a strong financial foundation early can help you make smarter decisions, stay compliant with tax laws, and avoid costly mistakes that can derail your growth. In this blog, we’ll explore the key steps you should take in your first year to build a financially sound business.

1. Separate Personal and Business Finances
One of the first financial steps every entrepreneur should take is opening a separate business bank account. Keeping personal and business finances separate not only helps you stay organized but also simplifies tax preparation and financial tracking. It’s essential to establish your business as a separate legal entity, such as an LLC or corporation, and obtain an Employer Identification Number. This will allow you to properly manage business income, expenses, and deductions without confusion.

2. Create a Detailed Budget and Financial Plan
Budgeting is essential in your first year because it gives you a clear picture of how your money is being spent and what your revenue goals need to be. A good financial plan includes start-up costs, monthly operational expenses, projected income, and a cash flow forecast. Having a well-thought-out budget helps you stay focused on your financial goals and prepares you to pivot quickly if things don’t go as expected.

3. Track Every Dollar and Monitor Cash Flow
Accurate bookkeeping is vital from day one. Use accounting software or work with a professional to track all income and expenses. This allows you to monitor cash flow, spot trends, and make informed decisions. Many businesses fail because they run out of cash—not necessarily because they aren’t profitable. Keeping a close eye on your financial records ensures you can cover expenses and plan for investments as your business grows.

4. Stay Compliant and Plan for Taxes Early
Tax planning should never be an afterthought. From estimated quarterly taxes to payroll and sales tax obligations, staying compliant can save you from penalties and interest down the road. Be sure to understand your federal, state, and local tax requirements. Working with a CPA can be a game-changer here—they can help you identify deductions, prepare filings correctly, and ensure you’re not overpaying or underpaying taxes.

Build Smart. Grow Strong. Partner with MARIELA RUIZ, CPA, PLLC
Starting a business is a big step, but building a solid financial foundation is what will keep it standing tall. From separating finances to tax planning and compliance, taking proactive financial steps in your first year pays off in the long run. MARIELA RUIZ, CPA, PLLC is here to guide you through every financial milestone. With expert accounting, tax, and advisory services tailored to small businesses, we’re committed to helping your business succeed from day one. Visit mruiz-cpa.com today and take the first step toward financial clarity and confidence.

MARIELA RUIZ, CPA, PLLC

Helping Individuals and Businesses Financially Thrive.