Bookkeeping, Recordkeeping & Tax Compliance Guide

Prepared by MAS LLC

Tax Advisory & Small Business Services Updated 2026

Introduction

Maintaining accurate, timely financial records is critical for tax compliance, business decision-making, and audit preparedness. This guide outlines the essential tasks every small business owner should complete on a weekly, monthly, quarterly, and annual basis.

Following these procedures will minimize your tax liability, reduce audit risk, maximize deduction substantiation, and ensure timely filing with the IRS and state agencies. Tasks are organized by frequency and, where applicable, differentiated by entity type.

Most importantly, these steps will keep both you, your bookkeeper, and/or our team sane. Your CPA’s sanity is important to your health.

Entity Type Quick Reference

Different business structures have different compliance requirements. Identify your entity type below:

Entity Type	Common Examples	Key Characteristics
Sole Proprietor	Freelancers, single-member LLCs (default)	Schedule C on Form 1040; self-employment tax EASIEST COMPLIANCE
Partnership	Multi-member LLCs, general/limited partnerships (if you have more than one LLC member you DEFAULT to partnership)	Form 1065; K-1s issued to partners COMPLEX NO DIY
S Corporation	Corporations or LLCs with S election	Form 1120-S; mandatory W-2 for owner-employees COMPLEX NO DIY
C Corporation	Traditional corporations, some LLCs with election	Form 1120; qualified COMPLEX NO DIY

Weekly Tasks

Consistent weekly maintenance prevents backlogs and ensures expenses are properly documented while details are fresh in your memory.

1. Import Bank Transactions

• Action: Log into your accounting software (QuickBooks, Xero, Wave, etc.) and import or sync all bank and credit card transactions from the past week.
• Why it matters: Weekly imports prevent transaction backlogs and ensure nothing is missed. Waiting until month-end often results in forgotten transactions and incorrect categorizations.
• Best practice: Set a recurring calendar reminder for the same day each week (e.g., every Monday morning).

2. Categorize and Add Memos to All Transactions

Proper categorization and documentation is essential for maximizing deductions and surviving an IRS audit. The IRS scrutinizes certain expense categories more heavily than others.

High-Audit Risk Expenses Requiring Detailed Memos

For the following expense types, add a memo to EVERY transaction with the required information:

Meals & Entertainment (50% deductible) RECORD THESE IN GROSS (tax software calculates the 50%)

• Who: Name(s) and business relationship of attendee(s)
• Where: Restaurant/venue name and location
• Business purpose: Specific topic discussed or business objective
• Example memo: “Lunch with John Smith (ABC Corp procurement manager) to discuss Q2 supply contract renewal”

Travel Expenses

• Where: City/destination of travel
• Business purpose: Client meeting, conference, site visit, etc.
• Duration: Dates of travel if multi-day
• Example memo: “Flight to Chicago for client site inspection at XYZ Manufacturing, 3/15-3/17”

Vehicle/Mileage

• Where: Destination address or client name
• Business purpose: Specific business reason for trip
• Starting point: Note if not from principal place of business
• Example memo: “Drive to client ABC Corp (123 Main St) for quarterly review meeting”

Home Office Expenses

• Document the percentage of home used exclusively for business
• Keep records of total home square footage vs. office space

Professional Development & Subscriptions

• Note specific business relevance
• Example: “Annual software subscription for project management – used for all client projects”

Standard Expense Categories (Lower Audit Risk)

These still require accurate categorization but do not require detailed memos:

• Office supplies and equipment
• Utilities (business location)
• Insurance premiums
• Professional services (legal, accounting)
• Bank and merchant fees
• Advertising and marketing

3. Update Mileage Log

• Action: Record all business mileage for the week in your mileage tracking app or log.
• Required information: Date, starting location, destination, business purpose, and miles driven.
• IRS requirement: The IRS requires contemporaneous records. A log created at year-end from memory will not survive an audit.
• Recommended apps: MileIQ, Everlance, TripLog, or a simple spreadsheet updated weekly.
• 2024 Standard Mileage Rate: 67 cents per mile for business use.

Weekly Task Checklist

• Bank transactions imported and synced
• All transactions categorized
• Memos added to meals, travel, and high-audit expenses
• Mileage log updated with all business trips
• Receipts photographed/uploaded for expenses over $75

Monthly Tasks

Monthly procedures ensure your books stay clean, reconciled, and audit-ready. Complete these tasks within the first 10 days of the following month.

1. Download and Archive Bank & Credit Card Statements

• Action: Download PDF statements for ALL business bank accounts and credit cards.
• Storage: Upload to your permanent file system (cloud storage organized by year/month, or your accounting software if it has document storage).
• Naming convention: Use consistent naming: “2024-03_Bank_Chase_Checking.pdf”
• Retention period: Keep all statements for a minimum of 7 years (IRS statute of limitations for substantial understatement is 6 years; state requirements may vary). Remember that audits typically occur 2-3 years later. If you have not saved pdfs of bank statements you must order them from the bank and they charge per statement.

2. Reconcile All Accounts in Accounting Software

• Action: Complete bank reconciliation for every account in your accounting software.
• Process: Match your accounting software ending balance to your bank statement ending balance as of the last day of the month.
• Red flags to investigate: Duplicate transactions, missing deposits, uncleared checks over 90 days, unexplained adjustments.
• Delegation note: If you have a bookkeeper, they should complete reconciliation. You should still review and approve.
• NO RENEGADE JOURNAL ENTRIES—just because QBO lets you make the balancing entry does not mean it makes sense.

3. Review and Verify Transaction Categorizations

• Action: Review the month’s transactions for accuracy.
• Common errors to catch: Personal expenses coded as business, incorrect expense categories, missing vendor names, duplicate entries.
• If using a bookkeeper: Request a monthly categorization report and spot-check 10–15 transactions for accuracy.

4. Upload Statements to Accounting Software

• Action: If your accounting software supports document attachment (QuickBooks Online, Xero), upload monthly statements directly to the corresponding reconciliation record.
• Benefit: Creates a single source of truth and simplifies year-end preparation.

5. Review Balance Sheet for Irregular Balances

• Action: Run a Balance Sheet report and review for anomalies.

Items to verify:

• Bank balances match reconciled amounts
• Accounts receivable balances are accurate (no old invoices that were paid)
• Accounts payable balances reflect actual outstanding bills
• Loan balances match lender statements
• Credit card balances match statements
• No negative balances in asset accounts
• Equity/retained earnings changes are explainable

6. Process Payroll (If Applicable)

Payroll requirements vary by entity type:

Entity Type	Payroll Requirement
Sole Proprietor	No payroll for owner; draw from business account. Employees require payroll. YOU CANNOT RUN PAYROLL ON YOURSELF
Partnership	Partners receive guaranteed payments or distributions, not W-2 wages. Employees require payroll. YOU CANNOT RUN PAYROLL ON YOURSELF
S Corporation	MANDATORY: Owner-employees MUST receive reasonable W-2 compensation (if profitable). This is heavily audited by IRS.
C Corporation	Owner-employees typically receive W-2 wages. Required for any employee.

• Payroll deadlines: Varies by pay frequency. Semi-monthly and bi-weekly are most common. Set calendar reminders 3 days before each payroll deadline.
• Payroll tax deposits: Due dates depend on deposit schedule (monthly or semi-weekly) based on total tax liability. Most small businesses are monthly depositors.

Monthly Task Checklist

• Bank statements downloaded and archived
• Credit card statements downloaded and archived
• All accounts reconciled in accounting software
• Transaction categorizations reviewed
• Statements uploaded to accounting software
• Balance sheet reviewed for anomalies
• Payroll processed (if applicable)
• Payroll taxes deposited on time

Quarterly Tasks

Quarterly procedures ensure you stay current on estimated taxes and maintain clean financials for planning purposes.

1. Prepare and Submit Financials for Quarterly Tax Estimates

• Action: If you work with MAS LLC for quarterly estimated tax calculations, send your cleaned and reconciled financial statements (Profit & Loss and Balance Sheet) at least 2 weeks before each quarterly deadline. We have maintained limited space for some monthly recurring clients using our bookkeeping staff. If you are one of these clients, this is covered!

Quarterly Estimated Tax Deadlines

Add these dates permanently to your calendar:

Quarter	Period Covered	Payment Due
Q1	January 1 – March 31	April 15
Q2	April 1 – May 31	June 15
Q3	June 1 – August 31	September 15
Q4	September 1 – December 31	January 15 (following year)

• Send financials to MAS LLC by: April 1, June 1, September 1, and January 1 (2 weeks before each deadline).
• Who must pay estimates: Generally required if you expect to owe $1,000 or more in tax after subtracting withholding and credits.

2. Estimated Tax Requirements by Entity Type

Entity Type	Estimated Tax Obligations
Sole Proprietor	Individual estimated taxes (Form 1040-ES) Self-employment tax (15.3% on net earnings) State estimated taxes if applicable ESTIMATED INCOME TAXES MANDATORY
Partnership	Partnership itself generally does not pay federal income tax Partners pay estimated taxes on their K-1 income via personal 1040-ES Some states require partnership-level tax payments ESTIMATED INCOME TAXES MANDATORY
S Corporation	S Corp does not pay federal income tax at entity level Shareholders pay estimated taxes on K-1 income via personal 1040-ES W-2 withholding may reduce/eliminate need for estimates Some states require entity-level S Corp tax ESTIMATED INCOME TAXES MANDATORY
C Corporation	Corporation pays estimated taxes quarterly (Form 1120-W) Due dates: 4/15, 6/15, 9/15, 12/15 Shareholder-employees may owe personal estimates on dividends ESTIMATED INCOME TAXES MANDATORY

Article if you would like to read about your taxpayer duty to pay estimated income taxes: Estimated Income Taxes: What They Are, When They Are Due, and How to Stay in the Safe Harbor

3. Quarterly Payroll Tax Filings (If You Have Employees)

• Form 941: Employer’s Quarterly Federal Tax Return. Due by the end of the month following the quarter (April 30, July 31, October 31, January 31).
• State quarterly filings: Most states require quarterly wage reports and unemployment tax filings. Deadlines vary by state.
• If using a payroll service: Verify that your service files these forms on your behalf and confirm each quarter.
• PLEASE do not file payroll by yourself. There are many affordable options and, along with sales tax, not paying sales or payroll taxes is considered the theft of trust funds and can “pierce the corporate veil.” Services cost anywhere from $30-$300/month (depending on # of employees) to handle all filings.

4. Review Year-to-Date Financial Performance

• Action: Run a Profit & Loss comparison (current quarter vs. same quarter last year, and YTD vs. prior year YTD).
• Review for: Revenue trends, expense anomalies, margin changes, budget variances.
• Tax planning opportunity: Q3 is critical for year-end tax planning. If income is significantly higher than expected, contact MAS LLC to discuss strategies.

Quarterly Task Checklist

• All monthly tasks completed for the quarter
• Financial statements cleaned and reconciled
• Financials sent to MAS LLC (if using for estimates)
• Quarterly estimated taxes paid by deadline
• Form 941 filed (if applicable)
• State payroll reports filed (if applicable)
• Year-to-date performance reviewed

Annual Tasks

Year-end procedures ensure compliance and set the stage for efficient tax preparation.

1. Year-End Close Procedures

• Complete all monthly reconciliations through December 31
• Review and write off any uncollectible receivables
• Verify all fixed asset additions and disposals are recorded
• Reconcile all intercompany accounts (if applicable)
• Review prepaid expenses and accruals
• Verify inventory counts and valuations (if applicable)

2. 1099 Information Return Preparation

• Who needs a 1099-NEC: Any unincorporated vendor (individual, partnership, LLC taxed as partnership) paid $600 or more for services.
• Deadline: 1099s must be issued to recipients and filed with IRS by January 31.
• W-9 collection: Collect W-9 forms from all vendors before making first payment. This is critical for accurate 1099 preparation.
• Exceptions: Corporations (Inc., Corp.) generally exempt. Payments for goods (not services) exempt. Payments via credit card exempt (merchant reports these).

3. W-2 Preparation (If You Have Employees)

• Deadline: W-2s must be provided to employees and filed with SSA by January 31.
• S Corp owners: Remember that your W-2 must reflect reasonable compensation for services performed.

4. Gather Tax Documents for MAS LLC

To ensure timely and accurate return preparation, provide the following to MAS LLC:

• Final Profit & Loss statement for the year
• Final Balance Sheet as of December 31
• General Ledger detail (or access to accounting software)
• All bank and credit card statements (if not already on file)
• Loan statements showing year-end balances and interest paid
• Fixed asset schedule with any additions or disposals
• Mileage log summary
• Home office calculation (if applicable)
• 1099s received from clients
• Health insurance premium statements (Form 1095-A if Marketplace)
• Retirement plan contribution records

Annual Task Checklist

• December reconciliations completed
• W-9s collected from all vendors
• 1099-NECs prepared and filed by January 31
• W-2s prepared and filed by January 31 (if applicable)
• Tax documents gathered and submitted to MAS LLC
• Prior year returns reviewed for carryforward items

Comprehensive Tax Due Dates by Entity Type

The following table summarizes key federal tax deadlines. State deadlines may differ; consult MAS LLC for state-specific requirements.

Annual Return Filing Deadlines

Entity Type	Form	Due Date	Extended Due Date
Sole Proprietor	Schedule C (1040)	April 15	October 15
Partnership	Form 1065	March 15	September 15
S Corporation	Form 1120-S	March 15	September 15
C Corporation	Form 1120	April 15*	October 15*

*C Corporation deadlines are for calendar-year corporations. Fiscal year corporations have different deadlines.

Estimated Tax Payment Deadlines

Tax Type	Forms	Due Dates
Individual Estimated Tax (Sole Prop, Partners, S Corp shareholders)	Form 1040-ES	4/15, 6/15, 9/15, 1/15
Corporate Estimated Tax (C Corps)	Form 1120-W	4/15, 6/15, 9/15, 12/15

Payroll Tax Deadlines

Form/Requirement	Frequency	Due Date
Form 941 (Quarterly Payroll)	Quarterly	4/30, 7/31, 10/31, 1/31
Payroll Tax Deposits	Monthly/Semi-weekly	15th of following month (monthly); varies (semi-weekly)
Form 940 (FUTA)	Annual	January 31
W-2s to Employees & SSA	Annual	January 31
W-3 Transmittal to SSA	Annual	January 31

Information Return Deadlines

Form	Purpose	Due Date
1099-NEC	Nonemployee compensation	January 31 (to recipient & IRS)
1099-MISC	Rents, royalties, other income	January 31 (recipient); February 28/March 31 (IRS paper/e-file)
1099-K	Payment card/third-party network	January 31
K-1 (Schedule K-1)	Partner/shareholder income allocation	March 15 (with partnership/S Corp return)

Entity-Specific Requirements Summary

Sole Proprietors (Schedule C)

• Self-employment tax (15.3%) applies to net earnings—there is an SSA cap on earnings at $184,500 for 2026.
• No payroll required for owner; take owner draws
• Must pay quarterly estimated taxes if owing $1,000+
• File Schedule C with personal Form 1040 by April 15
• Can contribute to SEP-IRA, SIMPLE IRA, or Solo 401(k)
• Mileage and home office deductions commonly available

Partnerships (Form 1065)

• Partnership is a pass-through entity; does not pay federal income tax
• Must file Form 1065 by March 15 (penalty for late filing)
• Issue K-1s to all partners by March 15
• Partners pay self-employment tax on their distributive share (for general partners)
• Guaranteed payments are reported separately on K-1
• Each partner responsible for their own quarterly estimates

S Corporations (Form 1120-S)

• CRITICAL: Owner-employees MUST take reasonable W-2 compensation, if profitable. The IRS actively audits S Corps paying shareholders only through distributions.
• Pass-through entity; income flows to shareholders via K-1
• Must file Form 1120-S by March 15
• W-2 wages reduce self-employment tax exposure (FICA paid only on wages, not distributions)
• Shareholders pay estimated taxes on K-1 income above W-2 wages
• Maintains corporate formalities: meeting minutes, separate bank account, etc.
• Health insurance premiums for >2% shareholders must be included in W-2

C Corporations (Form 1120)

• Corporation pays its own income tax (current rate: 21% flat)
• Potential for double taxation: corporate tax + shareholder tax on dividends
• QSBS exclusion may eliminate capital gains tax on qualified stock sale (consult MAS LLC)
• Must file Form 1120 by April 15 (calendar year)
• Corporate estimated taxes due 4/15, 6/15, 9/15, 12/15
• Accumulated earnings tax may apply if retaining excess earnings
• More flexibility in choosing fiscal year-end

Best Practices and Audit Protection Tips

Documentation Standards

• Keep all records for at least 7 years (IRS can audit 6 years for substantial understatement; some states have longer periods)
• Store digital copies of all receipts over $75; digital records are acceptable to IRS
• Maintain contemporaneous records (recorded at or near the time of the transaction)
• Separate business and personal expenses completely; commingling is a red flag

Common Audit Triggers to Avoid

• Excessive meals and entertainment relative to revenue
• High vehicle deductions without contemporaneous mileage log
• Home office deduction without exclusive use documentation
• Cash-intensive businesses without clear documentation
• S Corp shareholders with low or no W-2 wages
• Large charitable deductions relative to income
• Round numbers on returns (suggests estimation, not actual records)

Calendar Management

Set the following recurring reminders in your calendar system:

• Weekly: Transaction import day (suggest Monday)
• Monthly: Reconciliation deadline (by 10th of following month)
• Quarterly: Financials to MAS LLC (April 1, June 1, Sept 1, Jan 1)
• Quarterly: Estimated tax payments (April 15, June 15, Sept 15, Jan 15)
• Annual: 1099 deadline (January 31)
• Annual: Tax document submission to MAS LLC (February 15 recommended)

When to Contact MAS LLC

• Before making major purchases or sales of business assets
• When considering entity type changes (e.g., converting LLC to S Corp)
• If you receive any IRS or state tax correspondence
• When adding partners, shareholders, or significant investors
• For retirement plan setup or contribution strategy
• AT LEAST Q3 of each year for proactive year-end tax planning
• Before any large charitable contributions

This document is for informational purposes only and does not constitute tax or legal advice. Tax laws change frequently; always consult with MAS LLC for advice specific to your situation.