What every business owner needs to know about taxes before leaving a 9–5
Quitting your job to run your business full-time comes with freedom, flexibility — and new tax responsibilities. When you’re no longer getting a W-2 paycheck with automatic withholdings, the burden of planning, saving, and paying taxes shifts entirely to you.
The good news? With the right systems in place, you can stay ahead of taxes and avoid surprises. Here's exactly how to prepare for the tax impact of going full-time in your business.
Understand the Tax Shift
When you work a traditional job, your employer withholds income tax, Social Security, and Medicare from each paycheck. When you're self-employed, you're responsible for paying those taxes yourself — and they're often higher than you expect.
Here’s what you’ll owe:
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Income tax: based on your total income and tax bracket
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Self-employment tax: covers Social Security and Medicare, currently 15.3% of net earnings
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State and local taxes: depending on your location
You’ll also likely need to make quarterly estimated tax payments to the IRS to avoid penalties.
Calculate Your Real Tax Rate
A common mistake is setting aside too little for taxes. While the exact amount depends on your income level and deductions, a safe starting point is:
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25–30% of net income for taxes (federal, state, and self-employment combined)
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Adjust based on your CPA’s recommendations
If you earn $8,000/month in net business income, set aside around $2,000–$2,400 for taxes each month.
Inside The Small Business Planner, you’ll find simple worksheets to help you track and allocate your tax savings automatically.
Set Up a Dedicated Tax Account
Open a separate business bank account just for taxes. Each time your business gets paid, transfer your tax percentage into this account immediately.
For example:
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Income: $5,000
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Transfer 30% ($1,500) to your Tax Account
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Transfer the rest into your Owner Pay and Expenses accounts
This habit makes tax season a non-event — because the money is already there when it’s time to pay.
Learn About Quarterly Taxes
Once you’re earning consistently, you’ll likely need to make quarterly estimated tax payments. These are due:
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April 15
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June 15
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September 15
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January 15 (of the following year)
You’ll pay the IRS based on estimated income and self-employment tax. Your accountant or bookkeeper can help calculate the exact amounts — and your tax account will already be funded.
Know When to Consider an S Corp
As your income grows, switching from a sole proprietorship or LLC to an S Corp may offer tax advantages — particularly around reducing self-employment tax on a portion of your income.
S Corps require you to run payroll and pay yourself a “reasonable salary,” which means more complexity but often less tax liability.
Talk to your CPA when your net income consistently exceeds $50K–$75K/year. The Small Business Planner includes a decision-making guide and list of questions to ask your advisor.
Track Income and Expenses Year-Round
The best way to stay tax-ready is to stay financially organized all year — not just at tax time. Use your planner to:
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Track monthly profit and loss
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Forecast income
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Review tax savings progress
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Check in with your CPA quarterly
When you’re proactive with your numbers, you’ll avoid last-minute stress and make smarter decisions with confidence.
Final Takeaway
The tax impact of going full-time in your business doesn’t have to be scary — it just needs structure. By setting aside money regularly, using dedicated accounts, and understanding your new responsibilities, you can stay ahead of taxes while building the business and life you want.
The Small Business Planner helps you create a money system that supports your salary, savings, and taxes — from day one.
Explore The Small Business Planner now → https://smallbusinessplanner.com/products/planner