Quick overview

Starting a small business creates immediate tax obligations. Use this checklist to prioritize registrations, tracking, and payment deadlines so you don’t face avoidable fines, late interest, or missed deductions. The guidance below reflects IRS and SBA rules current through 2025 and includes practical steps I use with clients as a financial advisor.

Why this checklist matters (short)

Missing an early requirement — an Employer Identification Number (EIN), payroll setup, or state sales-tax registration — often causes cascading problems: delayed payroll, lost deductions, or state penalties. This checklist turns tax compliance into a step‑by‑step process.

First 30 days: registrations and structure

  • Apply for an EIN (if required). Most businesses need an Employer Identification Number to hire employees, open a business bank account, or file federal tax returns for business entities. Applying online at the IRS website is free and immediate for most applicants; see IRS guidance on taxpayer IDs (IRS, Small Business and Self-Employed Tax Center). For sole proprietors with no employees, an EIN is optional but recommended to protect your SSN. For more on tax ID options see our Taxpayer Identification Numbers page.

  • Choose and legally register your business structure. The entity you select (sole proprietor, partnership, LLC, S or C corporation) affects federal tax forms, self-employment taxes, payroll withholding, and state filings. Forming an LLC or electing S-corp status can change how you pay self‑employment tax and how salary vs. distributions are taxed.

  • Register with state and local tax authorities. Sales tax, use tax, employer withholding, and state-specific business tax registrations often must happen before you make taxable sales or hire employees. State rules vary — check your state tax department and local business licensing office.

Practical tip: Document the dates you filed registrations and save confirmation receipts in a dedicated folder (digital + backup). I have seen clients avoid audit headaches simply by keeping registration screenshots and confirmation emails.

First 90 days: accounting and bank setup

  • Open a separate business bank account and get a business credit card. Commingling personal and business funds complicates bookkeeping and can weaken liability protection for LLCs or corporations.

  • Choose accounting software and set up a chart of accounts. Start simple: revenue, cost of goods sold, operating expenses (rent, utilities, payroll), owner’s draws, and depreciation. Link your business bank and credit-card accounts to reduce manual data entry.

  • Implement a recordkeeping system for receipts and mileage. For deductions such as vehicle use or travel, contemporaneous logs and scanned receipts are essential. The IRS accepts electronic records if they are accurate and readable (see IRS recordkeeping guidance).

Professional note: I advise clients to automate receipt capture (mobile app uploads) plus weekly reconciliation. Small time investments early save hours and money during tax season.

Quarterly tasks: payroll and estimated taxes

  • Determine payroll requirements. If you have employees, you must withhold federal income tax, Social Security, and Medicare, and remit employer payroll taxes on a schedule determined by the IRS and your deposit frequency. Register for state employer accounts and unemployment tax (SUTA) as needed.

  • Calculate and pay quarterly estimated taxes if your business expects to owe federal income tax of $1,000 or more (after withholding). Estimated payments apply to sole proprietors, partners, and S‑corporation shareholders who don’t have sufficient withholding. The usual deadlines are April, June, September, and January (see IRS Publication 505 and our guide to Estimated Taxes). Missing or underpaying estimated taxes can trigger an underpayment penalty; consider safe-harbor rules to avoid that penalty.

  • File required payroll tax returns. Forms like 941 (quarterly) or 944 (annual, for eligible small employers) and state equivalents must be filed on time. Confirm deposit schedules with the IRS Electronic Federal Tax Payment System (EFTPS).

Practical example: I worked with a new consulting firm that underestimated estimated taxes in year one and faced an underpayment penalty; we fixed it mid-year by increasing quarterly payments and documenting income projections.

Annual and year‑end tasks

  • Prepare and file annual returns for the entity type (Schedule C for single-member LLCs taxed as sole proprietors, Form 1120 for C corps, Form 1120‑S for S corps, Form 1065 for partnerships). If you’re unsure which applies, consult a CPA.

  • Issue information returns. If you hire contractors, prepare and file Form 1099‑NEC for payments of $600 or more (check thresholds and exceptions). If you have employees, prepare W‑2s and file with the SSA by year-end deadlines.

  • Reconcile books and run year‑end financial statements. Run a profit‑and‑loss, balance sheet, and cash‑flow summary. Reconcile bank and credit-card accounts and verify asset depreciation schedules.

  • Review deductible expenses and credits. Common first‑year deductions: startup costs (you may elect to deduct up to a limit in the first year and amortize the remainder), business supplies, business-use-of-home (see simplified vs. regular methods below), vehicle expenses, and qualified start‑up expenses. Also evaluate tax credits (e.g., employer credits for required paid leave or small-employer WC credits) that may apply.

Specific deduction considerations: home office and vehicle

  • Home office deduction: If you use a part of your home exclusively and regularly for business, you may qualify. The IRS allows a simplified method (per-square-foot) or the regular method (actual expenses prorated). Keep floor‑plan notes and expense records. For detailed rules see our Home Office Deduction article and IRS guidance.

  • Vehicle and mileage: Choose between actual-expense vs. standard mileage rates. Keep a contemporaneous log showing date, business purpose, miles driven, and odometer readings.

Tip from practice: When clients start with home-based operations, I document the space, compute both methods, and choose the one that maximizes after‑tax cash flow while retaining records for audit defense.

Common mistakes and how to avoid them

  • Assuming federal compliance covers state obligations. State sales tax and employer rules are separate; register early.
  • Mixing personal and business finances. Keep separate accounts and avoid owner personal expenses on business cards.
  • Failing to set aside money for taxes. Treat a portion of revenue (commonly 20–30% depending on margins and state taxes) as ‘tax savings’ in a separate account.
  • Not tracking payroll responsibilities. Misclassifying workers (employee vs. contractor) creates audit risk and back-tax liabilities.

Audit readiness and record retention

  • Keep business records for at least three years from the date you file the return; certain situations require up to seven years. Maintain receipts, bank statements, payroll documentation, and electronic backups. The IRS provides recordkeeping timelines and examples.

  • Create an audit folder with registration confirmations, EIN issuance, and corporate formation documents (operating agreement, bylaws, state filings).

When to hire help

  • Hire a CPA or enrolled agent if your revenue, payroll, or number of transactions grows quickly, or if you plan an S‑corp election or complex deductions. A good adviser helps you choose safe‑harbor strategies for estimated taxes, catch missed deductions, and represent you if questions arise.

In my practice I typically recommend a CPA for businesses that expect to earn more than $75,000 in gross revenue in year one or that will hire employees within 12 months. That threshold is situational — smaller operations with complex inventory also benefit from professional help.

Useful resources and authoritative guidance

Internal FinHelp reading: see our articles on Taxpayer Identification Numbers Explained (for details on EIN, SSN, ITIN) and Estimated Taxes (for how to calculate quarterly payments). Also review Home Office Deduction rules for documentation and method choice.

Final checklist (concise)

  • Obtain EIN (if needed)
  • Register business entity with state
  • Register for state sales and payroll taxes
  • Open business bank account and credit card
  • Set up accounting software and receipt capture
  • Decide payroll schedule and vendor (payroll provider or in‑house)
  • Calculate and make quarterly estimated tax payments
  • Track mileage, home office, and receipts for deductions
  • Issue 1099s/W‑2s and file required returns
  • Reconcile books and consult a CPA before year‑end tax planning

Professional disclaimer

This article is educational and general in nature, not personalized tax advice. For decisions tied to your business structure, state tax obligations, or complex deductions, consult a qualified CPA or tax attorney familiar with current 2025 tax rules.

If you want, I can convert this checklist into a printable one or a spreadsheet that you can use to track deadlines and documents during your first year.