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Industry tax guide

Small businesses tax and accounting

The core tax decisions every owner-run business makes, made on purpose.

Small Businesses business environment

Most small businesses are owned by one or a few people who run the business and pay its taxes on their personal returns. The same handful of decisions decides most of their tax bill year after year.

Entity choice and owner pay, the qualified business income deduction, retirement contributions and quarterly estimates are where planning pays off, and all of them depend on books that are current.

Compared with a general business

What makes taxes different for small businesses

Taxes pass through to owners

Most small businesses are LLCs, S corporations or sole proprietorships taxed on the owner's return.

Self-employment tax

Owners of LLCs and sole proprietorships pay 15.3% self-employment tax on profit up to the Social Security wage base.

Quarterly estimated taxes

Owners pay tax four times a year instead of through withholding.

Information returns

Payments of $2,000 or more to contractors in 2026 require Form 1099-NEC.

The rules in detail

Tax rules for small businesses

S-Corp election and reasonable salary

An S corporation pays its owner a W-2 salary and passes the remaining profit through without self-employment tax. The salary must be reasonable for the work done; setting it well is where most of the savings, and most of the audit risk, sits.

The 20% QBI deduction is permanent

Owners of pass-through businesses can deduct up to 20% of qualified business income. The 2025 tax law made it permanent, widened the phase-in range and added a $400 minimum deduction for owners with at least $1,000 of qualified income.

Estimated taxes and safe harbors

Owners pay tax through quarterly estimates. Paying 100% of last year's tax, or 110% if income was over $150,000, avoids the underpayment penalty even if this year's income is higher.

Planning moves

Ways to save tax in small businesses

  1. Elect S-Corp status when it pays

    A reasonable salary plus distributions reduces self-employment tax.

  2. Take the 20% QBI deduction

    Now permanent, with a $400 minimum for owners with at least $1,000 of qualified income.

  3. Fund a retirement plan

    A Solo 401(k) or SEP-IRA shelters income.

  4. Write off equipment

    Section 179 and 100% bonus depreciation.

  5. Deduct a home office and vehicle

    Documented business use of your home and car.

  6. Hire your children

    Wages to children under 18 in a sole proprietorship or parent-owned partnership avoid payroll taxes.

Working with OICPA

How we help

Service

Plan before year-end

Equipment, retirement contributions and income timing reviewed while there is still time to act.

Business Tax Planning
Service

Books that are always current

Monthly bookkeeping so every decision starts from real numbers.

Bookkeeping Services

Bookkeeping and reporting

The accounting behind the tax work

Small businesses win on speed and judgment, but tax and accounting complexity grows faster than headcount. We align bookkeeping, payroll touchpoints, and entity-level planning so owners can decide with numbers that match reality, not last quarter's spreadsheet.

Fragmented financial visibility

Revenue may be clear while margin, inventory, and contractor spend drift without a monthly close discipline. That gap shows up as surprise liabilities, missed deductions, and awkward lender conversations.

Owner comp and cash timing

Salary, distributions, and reinvestment tradeoffs are easy to mishandle when tax estimates are treated as an afterthought. Misalignment here often drives Q4 scrambling and avoidable penalties.

Scaling compliance without scaling overhead

Adding states, contractors, or a second entity changes filing posture quickly. Without a documented plan, businesses stack risk silently until an audit, sale, or financing event forces a cleanup.

What you can expect

  • Month-end financial package with reconciled balance sheet and trend commentary
  • Quarterly tax planning memo with estimate adjustments and cash timing notes
  • Annual filing roadmap that connects books to business and owner returns

Frequently asked questions

At what profit does an S-Corp make sense?

It depends on a reasonable salary for your role and your state, but the savings often start to outweigh the extra payroll and filing costs somewhere around $50,000 to $80,000 of profit. The calculator gives a first estimate.

Do I qualify for the QBI deduction?

Most pass-through owners do. Above the income threshold, specified service businesses lose it and other businesses face wage and property limits.

How much should my quarterly payments be?

Enough to meet the safe harbor: 100% of last year's tax, or 110% if your income was over $150,000, spread over four payments.

Related articles

References

  1. 26 U.S. Code § 199A: Qualified business incomeLegal Information Institute, Cornell Law School
  2. S corporation compensation and medical insurance issuesInternal Revenue Service
  3. Estimated taxesInternal Revenue Service

Rules reflect federal tax law as of November 2026.