The ultimate guide to avoiding tax season stress and staying one step ahead
Paying taxes as a small business owner doesn’t have to be a nightmare.
But for most people, it is—because they don’t plan for it.
You work hard all year, only to get hit with a tax bill you weren’t expecting. Or worse, you fall behind and feel like you’ll never catch up.
If that’s you, take a deep breath.
You don’t need to be a CPA to stay tax-compliant and financially sane. You just need a system.
This guide will walk you through:
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How small business taxes work (in plain language)
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What accounts and tools to set up
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How much to save—and when
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What to track so you’re never caught off guard again
Step 1: Understand How You're Taxed
Your tax obligations depend on how your business is structured.
Sole Proprietors & Single-Member LLCs
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Report income on Schedule C (attached to your personal tax return)
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Pay federal income tax and self-employment tax (~15.3%)
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Must file and pay quarterly estimated taxes
S Corporations
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Pay yourself a W-2 salary (which includes automatic tax withholding)
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File a separate business return
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Still owe taxes on any profits or distributions beyond your salary
Partnerships or Multi-Member LLCs
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File a partnership return (Form 1065)
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Income flows through to partners, who pay taxes personally
No matter your entity type, one thing is true:
The IRS expects you to plan ahead—not catch up later.
→ Read: Quarterly Taxes 101: What You Need to Know
Step 2: Open a Dedicated Tax Account
This is non-negotiable.
Set up a separate bank account—call it “Business Taxes.”
Every time you get paid, transfer a percentage of your income into this account and do not touch it.
Typical savings ranges:
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15–20% if you’re earning under $50k/year
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25–30% if you’re earning $50–100k
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30–35%+ for six-figure businesses or those with limited deductions
Not sure what your number is?
Ask your accountant for a “safe estimate”—and aim high until you know more.
→ Read: What Percentage of Your Revenue Should Go to Taxes?
Step 3: Build a Monthly Tax Routine
You don’t need to obsess over taxes every day. But you should check in regularly.
Each month:
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Total your income
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Apply your tax percentage
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Transfer that amount into your tax savings account
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Log the activity in your planner or accounting software
This routine creates peace of mind—and eliminates the April panic spiral.
Inside The Small Business Planner, you’ll find a Monthly Financial Review system designed to help you do exactly this.
Step 4: Use Tools That Help (Not Hurt)
You don’t need complex accounting software to stay on top of taxes.
Start simple:
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Banking: Use a system like Relay or Bluevine to automate transfers
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Bookkeeping: Try Wave, QuickBooks, or even a spreadsheet
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Planner: Track income, transfers, and goals with The Small Business Planner
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Professional support: Work with a bookkeeper and CPA who explain things clearly
The goal isn’t to get fancy—it’s to get consistent visibility into your money.
→ Read: The Financial Tools Every New Business Owner Should Use
Step 5: File & Pay Quarterly Estimated Taxes
If you expect to owe at least $1,000 in taxes for the year, the IRS wants you to pay as you go.
Due dates:
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Q1: April 15
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Q2: June 15
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Q3: September 15
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Q4: January 15 (of the next year)
Each payment is based on your estimated net income for that period.
Your bookkeeper or accountant can calculate this—or use the IRS Form 1040-ES instructions if you’re doing it solo.
Missed payments? Don’t panic. You can catch up, but interest and penalties may apply.
→ Read: What to Do If You’re Behind on Taxes
Step 6: Plan for Profit, Not Just Compliance
Tax planning shouldn’t just be about survival. It should be part of your profit strategy.
When you:
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Build tax savings into every dollar you earn
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Create a system that keeps you on track
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Know your numbers in advance
… you can make smarter decisions about hiring, investing, and scaling—without being blindsided by tax bills later.
→ Read: Why Most Business Owners Miss Their Tax Goals (and How to Fix It)
Step 7: Avoid These Common Mistakes
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Waiting until tax time to start saving
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Spending money that was never yours (hello, tax debt)
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Relying entirely on software without understanding your numbers
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Skipping quarterly payments because “you’ll figure it out later”
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Not asking your accountant enough questions
You don’t have to know everything—but you do have to stay engaged.
Final Takeaway: Don’t Let Taxes Be a Surprise
Taxes aren’t the enemy. They’re a part of doing business—and with the right plan, they don’t have to be scary.
Inside The Small Business Planner, you’ll find:
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Systems to save for taxes automatically
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Monthly review templates to track your income and obligations
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Tools to help you create financial clarity—without spreadsheets or stress
Explore The Small Business Planner →
Explore the Full Tax Planning Series
This post is part of our Small Business Taxes & Avoiding Surprises series: