Taxes & Compliance

The guide

Income tax, by entity

A sole proprietor or single-member LLC reports on Schedule C with the personal return, due April 15. An S corporation files Form 1120-S and a partnership files Form 1065, both due March 15, and each owner gets a K-1 for the personal return.

Owners who expect to owe more than about $1,000 pay estimated taxes four times a year: April 15, June 15, September 15 and January 15. The amounts come from your preparer; the discipline of setting the money aside monthly comes from you.

Payroll taxes

Wages carry federal withholding, Social Security and Medicare (7.65% from the employee and 7.65% from the employer), federal unemployment (Form 940, yearly) and state unemployment. Deposits go in on a monthly or semiweekly schedule the IRS assigns; Form 941 reports each quarter by the last day of the following month.

W-2s go to employees and the Social Security Administration by January 31. A payroll provider handles the mechanics; the bookkeeper makes sure every deposit and filing actually happened and is posted in the right month.

Sales tax

If you sell taxable goods or services, you register with your state, collect the tax on each sale, and remit it on the state's schedule, often monthly around the 20th, sometimes quarterly for small filers. Which services are taxable, and whether a contractor charges tax on materials, labor or both, varies by state.

Selling into other states can create a collection obligation there too. The rule that never varies: sales tax you collected is never your money.

1099s

Contractors you paid $2,000 or more during the year for services get a 1099-NEC by January 31 (the threshold rose from $600 for payments made in 2026, with inflation adjustments after). The paperwork that makes January easy is a W-9 collected before the first payment.

Paying a worker as a contractor who is really an employee is the most expensive classification mistake a small business makes; the payroll topic covers the test.

Penalties, and the two habits that avoid them

Late filing, late payment and late deposits each carry their own penalty and interest, and they compound. Two habits prevent nearly all of them: a tax set-aside account funded every month, and one calendar with every due date on it.

When a due date falls on a weekend or federal holiday it moves to the next business day.

What to keep, and for how long

Keep the records behind a return for at least three years after filing, seven for anything involving bad debt or worthless securities, and employment tax records four years after the tax is due or paid. Digital copies count.

The month folder from the monthly close is the simplest system there is.