Why a monthly routine matters

Consistent monthly tax work prevents surprises at filing time and reduces penalties, interest, and audit risk. In my 15 years advising small businesses, owners who run brief monthly reviews avoid the most common failures: missed payroll deposits, unrecorded deductible expenses, and underpaid estimated taxes.

Monthly checklist (repeat every month)

  • Reconcile bank and credit-card accounts: match transactions, flag unknown items, and resolve discrepancies.
  • Record all sales and income by source (including 1099/gig income) and reconcile with bank deposits.
  • Categorize and attach receipts to transactions (digital photos or accounting software uploads).
  • Review payroll: confirm hours, tax withholdings, and that payroll tax deposits were made on schedule (Forms 941/944 as applicable).
  • Verify sales tax collection and filing status for each jurisdiction where you have nexus.
  • Estimate and set aside funds for quarterly estimated taxes; run a quick projection against prior tax liability and current income.
  • Track deductible expenses and capital purchases for depreciation schedules.
  • Log business mileage and other travel-related records.
  • Back up accounting files and export monthly reports (profit & loss, balance sheet, cash flow).
  • Note upcoming deadlines and necessary forms (1099 prep begins in January; adjust earlier if issuing payments).

Monthly calendar highlights and deadlines

  • Estimated tax checkpoints: though estimated tax payments are normally quarterly (April, June, September, January), check monthly balances to avoid underpayments (IRS, 2025: https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes).
  • Payroll deposits: frequency (semiweekly/monthly) depends on liability; missed deposits create penalties—confirm deposit dates every month.
  • Sales tax: many states require monthly returns for high-volume sellers—confirm each state’s schedule.

Practical tips to make it painless

  • Automate where possible: use accounting software to import bank feeds, attach receipts, and categorize transactions.
  • Create rules for recurring transactions to reduce manual entry and maintain consistency.
  • Use a separate tax-savings account and automatically transfer a percentage of revenue (common range: 20–30% for many small businesses, depending on tax status and profit margins).
  • Schedule a fixed monthly 60–90 minute block for the checklist so it becomes a habit.

Common mistakes to avoid

  • Combining business and personal accounts: mixing increases audit risk and complicates deductions.
  • Forgetting to reconcile: unreconciled accounts hide missed income or double-counted expenses.
  • Underestimating payroll and sales tax obligations: revenue growth can change deposit frequencies and nexus exposure.

When to escalate to a pro

  • Complex multi-state sales tax, significant payroll changes, an IRS notice, or unexpected declines/growth in revenue.
  • Year-end planning and tax optimization—consult a CPA for entity-level tax strategy, retirement plan deductions, and depreciation elections.

Useful internal resources

Frequently asked questions (brief)

  • What if I miss a payroll deposit? Address it immediately—deposit late and file corrected forms. Expect penalties; consult your payroll provider or CPA for voluntary disclosure options.
  • How much should I set aside each month for taxes? It depends on entity type, deductions, and withholding. Run a quarterly projection or follow a buffer percentage and adjust with professional advice.

Professional disclaimer

This entry is educational and does not replace personalized tax or legal advice. For advice tailored to your circumstances, consult a licensed CPA or tax attorney.

Authoritative sources