Small Business Tax Compliance & Planning Guide

Monthly workflow

• Reconcile bank/credit cards, categorize transactions.
• Review P&L and cash flow; set aside tax funds.
• Check sales/use tax obligations.

Quarterly tasks

• Pay estimated income taxes.
• File quarterly payroll returns if applicable.
• Re‑forecast profit and adjust estimates.

Year‑end wrap‑up

• Inventory counts and depreciation schedule updates.
• Issue W‑2s/1099s, verify vendor W‑9s.
• Prepay expenses or delay income as appropriate.

Tools & reminders

Use cloud accounting, task managers, and calendar reminders; automate bank feeds and receipt capture.

When estimates are required

If you expect to owe beyond withholding and credits, you likely need to make quarterly estimated tax payments.

Safe harbor rules

• Pay at least a percentage of last year’s tax liability or a portion of current‑year tax to avoid penalties.
• Higher thresholds can apply at higher incomes.

How to calculate

1. Project income, deductions, and credits.
2. Compute estimated tax and divide by four.
3. Adjust during the year as results change.

How and where to pay

Use electronic payment portals for federal and state estimated taxes. Keep confirmations for your records.

Quarterly calendar

Mark due dates on a recurring calendar and set reminders to avoid penalties.

What to keep

• Invoices, receipts, bank statements, payroll reports.
• Contracts, leases, corporate documents.
• Mileage logs and travel agendas.

How long to keep records

Retention periods vary by document type; longer for property and payroll records.

Digital workflows

Use OCR receipt capture, cloud storage, and role‑based access. Maintain immutable backups.

Audit readiness checklist

• Bank recs current; source docs attached to transactions.
• Clear business purpose notes for larger expenses.
• Policies for reimbursements and approvals.

Classification tests

Review behavioral and financial control, and the nature of the relationship, to classify correctly.

Tax and payroll implications

Employees require withholding, employer payroll taxes, and benefits; contractors receive gross payment and 1099 reporting.

Contracts & controls

Written agreements, deliverables, and independence indicators support contractor status when appropriate.

Risks & corrections

Misclassification can trigger back taxes, penalties, and interest. Consider voluntary classification settlement options if needed.

Who requires a 1099

Generally, payees who are non‑employees and not corporations, over the annual threshold, need a 1099. Always request a W‑9 up front.

Which forms: 1099‑NEC vs 1099‑MISC

• 1099‑NEC: Nonemployee compensation.
• 1099‑MISC: Rents, prizes, other payments.

Deadlines & penalties

Provide copies to recipients and file with the IRS by statutory dates to avoid tiered penalties.

Tools & workflows

Collect W‑9s at onboarding, track vendor totals, and e‑file through approved platforms.

Nexus: physical & economic

Employees, inventory, warehouses, or sales thresholds can create tax obligations in a state.

Apportionment basics

Many states use formulas based on sales, payroll, and property to apportion income across states.

Sales & use tax

Different product and service categories are taxed differently; marketplace facilitators may collect on your behalf.

Filing considerations

Register before collecting, file on schedule, and reconcile marketplace reports with your books.

Audit types

• Correspondence audits
• Office audits
• Field audits

Timeline & process

Audits begin with a notice outlining issues and deadlines. Respond promptly and track all submissions.

Documents requested

Bank statements, receipts, mileage logs, payroll records, and ledgers are common. Provide organized, complete copies.

How to respond

Designate a point person or representative, answer specifically, and keep a communication log. Consider professional representation.

When to amend

Correct material errors, missed elections, or late K‑1 items. Consider whether an accounting method change is more appropriate.

Forms & filing

Use the appropriate amended return form (e.g., 1120X for C‑Corps, amended 1065 for partnerships) with explanations and schedules.

State considerations

Many states require separate amended filings and adjustments to prior‑year carryforwards.

Owners & basis

Amended entity returns may require owners to file amended personal returns; track basis and capital accounts carefully.