Topical Guides: Tax Planning, Recordkeeping, and Decisions

Most small businesses use the cash method because it is simpler and gives more timing flexibility.

The line between a hobby and a for-profit business matters more than ever after the TCJA eliminated hobby-expense deductions — and the IRS uses a nine-factor t…

Most small-business audits today are correspondence audits — letter-only examinations that ask for documentation of one or two specific Schedule C lines and ne…

Schedule C filers are statistically more likely to face IRS examination than W-2 wage earners — and a handful of return characteristics correlate with much hig…

Most IRS correspondence is automated, time-sensitive, and resolved with a written response — not a phone call.

IRS audits range from a single-issue letter audit to a comprehensive in-person examination. Preparation makes the difference.

When you owe more tax than you can pay, the IRS offers payment plans, partial-pay agreements, and (for narrow cases) offers in compromise.

A handful of refundable credits — earned income tax credit, premium tax credit, and the saver's credit (nonrefundable but underused) — can substantially reduce…

Cryptocurrency activity is reported on Schedule C only when it rises to the level of a trade or business — most casual investors report gains and losses on For…

The "BAR test" — Betterment, Adaptation, Restoration — distinguishes deductible repairs from capitalizable improvements and is the rubric the IRS applies durin…

The tangible property regulations finalized in 2013 govern when an expenditure on tangible property must be capitalized rather than expensed — and they apply t…

The de minimis safe-harbor election lets a taxpayer expense — rather than capitalize and depreciate — tangible property under a per-item dollar threshold, simp…

Entity choice affects taxes, liability, complexity, and exit options. The right choice changes as the business grows.

A single-member LLC offers liability protection without changing your tax filing — but it costs money and adds compliance.

A single-member LLC is a "disregarded entity" for federal tax purposes — meaning the LLC and the sole prop file exactly the same Schedule C with exactly the sa…

Hiring a spouse as a W-2 employee can unlock additional retirement contributions, fringe-benefit deductions, and HSA participation — but only if the work is le…

How a small-business owner takes money out depends entirely on the entity — owner draws for sole props and single-member LLCs, guaranteed payments for partners…

S-corp owner-employees must take "reasonable compensation" through W-2 wages before distributions to avoid IRS reclassification and back payroll taxes.

Electing S-corporation status saves self-employment tax on profits beyond a "reasonable" owner salary — but only after profit clears a threshold large enough t…

Quarterly estimated tax payments can be made through EFTPS (Electronic Federal Tax Payment System) or IRS Direct Pay — each with different setup requirements,…

The estimated-tax safe harbor lets you avoid the underpayment penalty by paying at least 100% (or 110% for higher earners) of last year's tax liability through…

Self-employed taxpayers pay federal income tax and SE tax in four quarterly installments throughout the year.

A calendar of federal tax deadlines small-business owners need to know.

An extension extends the time to file, not the time to pay. Misunderstanding this leads to penalties.

Form 1040-X amends a previously filed individual return; entity returns use 1120-X, 1065 with amended Schedule K-1s, or 1120-S amended.

A spouse-employee structure can convert family medical expenses into business deductions through a Section 105 HRA.

A common S-corp tax-planning idea — paying the owner rent for the home office — runs into Section 280A and is rarely beneficial.

Form 1099-K reporting thresholds have moved repeatedly in recent years as the IRS has phased in implementation of the lower thresholds added by the American Re…

Not every business payment requires a 1099. Knowing the exceptions saves administrative effort and avoids unnecessary filings.

A Schedule C net operating loss can offset up to 80% of taxable income in carryforward years and is no longer eligible for carryback — a meaningful change from…

The passive activity rules of Section 469 limit the use of losses from activities in which the taxpayer does not materially participate — a key distinction for…

Most small businesses choose the cash method — recognizing income when received and expense when paid — but inventory-heavy businesses sometimes need the accru…

A cell phone used substantially for business is fully deductible on Schedule C in proportion to business use — and an employer-provided phone with substantial…

Realistic allocation methods for cell phone and internet shared between business and personal use.

When you hire your first employee, payroll obligations begin: federal and state withholding, FICA, FUTA, state unemployment, and quarterly returns.

Owners and "responsible persons" can be personally liable for unpaid employee withholding under Section 6672.

Q1 is the heaviest tax-deadline quarter of the year — bringing 1099-NEC issuance (January 31), Q4 estimates (January 15), state and federal information-return…

Q2 is dominated by Form 1040 filing on April 15 and the awkwardly-timed Q2 estimated tax payment due June 15 — only two months later.

Q3 is the planning-heavy quarter — new-vehicle purchase decisions, mid-year retirement-contribution updates, and the September 15 estimated tax payment all sit…

Q4 is when most defensive year-end tax planning gets done — accelerating expense, deferring income, funding retirement plans, and confirming the W-9s you will…

A focused year-end checklist closes out the tax year cleanly — collecting W-9s, paying retirement contributions, accelerating or deferring expense, and confirm…

The QBI aggregation election lets a taxpayer combine multiple commonly owned trades or businesses for purposes of the wage and unadjusted-basis-immediately-aft…

The Section 199A qualified business income deduction phases out for specified service trades and businesses (SSTBs) above a taxable-income threshold that adjus…

A specified service trade or business — health, law, accounting, consulting, performing arts, athletics, financial services, brokerage, investing — loses the Q…

Picking bookkeeping software is the single most consequential operational decision a new sole prop will make in its first year — it shapes recordkeeping habits…

Credit card rewards earned on business spending are generally treated as a price reduction rather than taxable income — but the rule has important exceptions w…

A trade or business that pays an unincorporated contractor $600 or more during the year must issue Form 1099-NEC by January 31.

A defensible mileage record requires date, odometer readings, business purpose, and destination — and modern GPS-based apps satisfy all four with passive track…

A spreadsheet may be enough for very small businesses. Most growing freelancers benefit from accounting software.

The IRS requires you to keep records that support items on your return for as long as those items can be questioned — usually three years, but six in cases of…

Good records help you monitor business progress, file accurate returns, and survive an audit with less stress.

Reconcile gross receipts on Schedule C to the totals on 1099-K, 1099-NEC, and bank deposits to avoid IRS underreporter notices.

Opening a separate business checking account is the single highest-leverage operational change a sole proprietor can make — even though no law requires it for…

A separate business checking account — even for a sole proprietor without an LLC — is the single most important recordkeeping decision.

A SEP-IRA can be funded as late as the extended due date of the income tax return — meaning a sole prop who files Form 4868 has until October 15 to make the co…

Three popular self-employed retirement options. The right choice depends on income, employees, and contribution preferences.

Both SEP-IRA and solo 401(k) let a self-employed individual contribute up to a six-figure annual limit — but the solo 401(k) almost always allows a larger cont…

A health savings account is the only triple-tax-advantaged vehicle in the Internal Revenue Code — pre-tax in, tax-free growth, and tax-free out for qualified m…

A Roth solo 401(k) lets a self-employed individual make Roth contributions up to the much higher 401(k) salary-deferral limit — far more than the IRA Roth cont…

A 30-minute orientation for new freelancers on the tax responsibilities they're assuming.

Gig drivers and shoppers are independent contractors who file Schedule C and pay self-employment tax.

Self-employment doubles the FICA burden but unlocks deductions and retirement contributions unavailable to W-2 workers.

A side gig is a Schedule C business, not a hobby — but only if you treat it like one.

Section 248 (corporations) and Section 709 (partnerships) provide a parallel deduction-and-amortization regime for organizational costs — separate from the Sec…

Section 195 lets a new business deduct up to $5,000 of startup costs in the year operations begin and amortize the remainder over 180 months — provided total s…

E-commerce sellers, remote consultants, and multi-state employers face a patchwork of state tax obligations.

A self-employed consultant or contractor who works remotely for clients across state lines may create income-tax nexus in those states — triggering filing obli…

After the Supreme Court's 2018 Wayfair decision, states may require remote sellers to collect sales tax based on economic nexus — sales-volume or transaction-c…

State tax obligations vary widely. Income tax, franchise tax, sales tax, and local business taxes all require attention.

Missed deductions, unfiled returns, missed elections, and unreported income — most prior-year mistakes have a remediation path.

A donation to a 501(c)(3) is a personal deduction; a sponsorship that promotes your business is a Schedule C advertising expense.

A $1,000 deduction reduces tax by your marginal rate ($220 at 22%); a $1,000 credit reduces tax by $1,000.

Review business performance and tax position every quarter to avoid year-end surprises.

Both let you front-load depreciation; the right choice depends on income, state conformity, and planning horizon.

Income-stacking, retirement contributions, and entity structure can preserve or increase the 20% QBI deduction.

A high-leverage list of the most valuable tax-saving strategies for self-employed taxpayers.

Cash-basis taxpayers can shift taxable income between years by timing invoicing, payments, and bonus issuance.

Most tax questions can be researched in 30 minutes using free IRS resources before calling a professional.

Commuting between home and a regular workplace is never deductible — but trips between job sites, between a home office and client locations, and between two b…

Smartphone mileage trackers (MileIQ, Stride, Hurdlr, QuickBooks Self-Employed) automate the contemporaneous recordkeeping required by Section 274(d).

Buy vs lease, standard vs actual, heavy vs light, and personal vs business titling — each fork has tax implications.

A worker comparing a contractor offer to a W-2 offer should account for self-employment tax, lost benefits, and self-funded retirement.

Misclassifying workers exposes you to back payroll taxes, FUTA, state unemployment, and personal liability. The IRS common-law test is fact-specific.

An accountable plan lets an S-corp reimburse a shareholder-employee for business expenses — including home-office costs — on a tax-free basis, recovering the d…

Hiring a 1099 contractor is much simpler than hiring an employee — but the W-9-collection and 1099-NEC-issuance steps are non-optional and carry real penalties…

Hiring your first W-2 employee triggers federal payroll-tax registration, state-unemployment registration, workers'-comp coverage, new-hire reporting, and the…

Modern small-business payroll services have collapsed the friction of hiring a first employee from a multi-hundred-dollar accountant engagement to a $40-per-mo…