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Tax season made easy: a year-round checklist for small business owners

While many Americans only think about taxes during spring, a business owner’s tax obligations never take a break. Staying on top of them year-round is essential to avoiding penalties, maximizing deductions, and minimizing the anxiety of leaving them on the back burner.

“If you don’t do your taxes correctly, that can set you up for a lot of pain going into the future. If you miss something on your taxes, if you do a calculation incorrectly, or you don’t report everything correctly, then you’re potentially looking at penalties and interest as well as the dreaded IRS audit,” warned Holland King, head of tax credit compliance at nationwide payroll company Gusto.

According to Holland, the IRS estimates small business owners incur an average penalty of $845 every year. He reassures businesses that with robust tax planning, they can not only avoid penalties but even save money. Above all, businesses can earn something you can’t put a price on: peace of mind.

Read on to learn from Holland and Gusto’s Senior Payroll Compliance Officer Shelly Abril on what to include in your tax checklist to stay ahead this (and every) fiscal year.

1. Timing and ongoing maintenance

Holland: “With businesses, [taxes are] a year-round requirement and really need to become part of the natural rhythm of your business. There are items that you have to take care of almost on a monthly basis, depending on your type of business.”

  • Stay on top of your basic business taxes. This includes income tax, self-employment tax if you’re a solopreneur, payroll taxes, sales tax if you’re selling a product, and excise tax for specific goods, services, or activities. While it might sound overwhelming, keep reading to find easier ways to stay organized.
  • Create a calendar for tax filing dates. Holland recommends business owners create a tax filing calendar so you don’t miss a deadline and get penalized. Not only can such a calendar help owners avoid penalties, it can also hold you accountable to staying on top of your tax credit documentation, thus saving your business money and a tax-induced headache.
  • Handle employee withholdings and payroll taxes. When you hire more employees, you become responsible for withholding and paying their income taxes throughout the year. “I don’t know that all business owners realize that’s part of their responsibility once they start hiring, but you’re taking on the obligation of paying the employee, calculating how much they owe, registering with the different taxing authorities across the United States as an employer who’s going to be handling income taxes for their employees, and then withholding and paying those taxes on a regular schedule to each of the taxing authorities that you’re in,” Shelly explained. Many business owners don’t realize just how big of a responsibility hiring is until after the fact. Gusto provides extensive payroll support for businesses navigating this, handling payroll tax filings, deductions, and deposits on behalf of 400,000 growing businesses in America.

2. Compliance and government notices

“Don’t wait until you’re overwhelmed,” Shelly said. “It’s not uncommon when new clients come to us looking for help with payroll and ask, ‘Can you help me with my back taxes, my late taxes, or my late tax returns?’ And unfortunately, at that point, there’s already penalties attached to those. So my recommendation is if you can do it and stay on top of it, that’s great.”

  • Take care of employee W-2s and contractor 1099-NECs. In addition to withholdings and payroll taxes, Shelly said you need to provide your employees tax documents by the end of the year so they can file their income taxes. Employees receive a W-2, while contractors get a 1099-NEC. “It’s a change of thinking of how you operate and how you plan and organize your time because it does become more than the annual obligation at the end of the year,” Shelly explained. In other words, while hiring is crucial for scaling a business, owners must also factor in the ongoing financial responsibilities that come with adding employees.
  • Stay alert for government notices. “You may get a notice that a tax rate has changed for 2025. You may get a notice that you have to pay either less often or more often than you did in the prior year. So this is a great time to be monitoring your mail to make sure you’re aware of those changes when they happen. Because if you don’t, even though you’ve done all these great things throughout 2024, you would kind of get off on the wrong foot for 2025,” Shelly said. Consider adding this to your weekly to-do list to ensure no important updates fall through the cracks.

3. Organization and software tools

Holland: “Making [documentation] a year-round exercise is going to make [taxes] so much easier and so much less of a headache. Setting up the processes, whether it is captured within software that you use on a day-to-day basis or a folder that, as you’re going through researching a new product, you throw everything into that folder and then you’re able to hand it off to either your taxpayer or a professional you’re using to capture those or help assist with those.”

  • Keep documents organized physically or digitally. There are two types of softwares Holland recommends for staying organized. The first is a solid bookkeeping software to help you document deductions, expenses, income, and timely payments. Some examples include Zero or FreshBooks. The second software is for document retention, which can come in handy for many instances. For example, if you’re hoping to maximize the R&D Tax Credit, you’ll need to organize emails and documents related to product development. Software like Slack, Teams, or Google Chat can help automate that process by archiving and organizing R&D-related discussions for easy documentation.
  • Leverage paycheck calculators and estimators. “If a business is looking to potentially hire some employees in their next year and they’re wondering what type of financial obligation that is, there are some paycheck calculators and estimators out there that are free to use,” Shelly advised. Gusto has an hourly paycheck calculator that helps owners determine withholdings and calculate take-home pay for hourly employees.
  • Maintain a detailed profit and loss system. Whether it’s on paper or your computer, accurately capturing and categorizing your profits and losses for the year is critical for filing your income taxes. “As a business owner and as a business entity, [income tax filing] is going to be really driven by your profit and loss statement. So keeping up with that throughout the year, making sure that your books and records are up to date and accurately ties in very, very closely to how much you’re going to end up paying at the end of the year for your income taxes,” said Holland. He noted many small business audits stem from poor profit and loss systems that fail to present business expenses as required by the IRS or Department of Revenue.

4. Professional support and relationships

  • Nurture relationships with your tax preparer, bookkeeper, or accountant. Most owners want to focus on running the business rather than the numbers, and that’s okay. Holland and Shelly encourage business owners to hire financial advisors to stay organized, stress-free, and focused on key priorities. “I would obviously recommend having a trusted partner that you can go to to ask questions—whether this is your tax preparer that you are talking to throughout the year, making sure that you’re on top of those estimated payments—or a good bookkeeper to help not only keep you on top of the expenses and profit and loss statements, but also make sure that you’re capturing and categorizing everything correctly,” Holland said.
  • Consider partnerships with tax professionals. If you know you’re not the numbers person, check out Gusto’s partner directory, which helps business owners find experienced accountants and bookkeepers based on industry and location. Businesses can also search based on the primary services they need (e.g., auditing, bookkeeping, financial planning, tax preparation).

These lessons come from an episode of Behind the Review, Yelp & Entrepreneur Media’s weekly podcast. Listen below to hear from Shelly and Holland on a deep dive into the different types of business taxes and tax credits you might qualify for, or visit the show homepage to learn about the show and find more episodes.