IRS Guide for Small Business Owners and Employers

This section is for owners whose business is more than a Schedule C on a personal return. That includes partnerships and multi-member LLCs, S corporations, C corporations, and any business, including a sole proprietorship, that has employees on payroll. You have more IRS accounts to manage: the business's own return, payroll tax returns and deposits, and information returns for the people you pay. You also have more ways to get a notice. The good news is that most business tax trouble falls into a few patterns, and nearly all of it is easier to fix early.

If you work alone and file Schedule C, start with our self-employed guide instead.

Business returns: who files what, and when

Form 7004 gives most entities an automatic six-month extension to file, but not to pay (IRS Publication 509). Partnerships and S corporations usually don't pay income tax themselves. Their profit passes through to the owners' personal returns, so a late K-1 can hold up every owner's Form 1040. Corporations generally must make estimated tax payments if they expect to owe $500 or more (IRS estimated taxes page).

Payroll taxes: the rules that cause the most trouble

When you pay employees, you withhold federal income tax and the employee's share of Social Security and Medicare tax. You add the employer's share and deposit it all with the U.S. Treasury. For 2026, Social Security tax is 6.2% each for employer and employee on wages up to $184,500. Medicare tax is 1.45% each with no cap. You must also withhold an additional 0.9% Medicare tax on an employee's wages above $200,000, with no employer match (IRS Publication 15, 2026).

Which deposit schedule you're on. Your schedule for a calendar year depends on the taxes you reported on Form 941 during a "lookback period" running from July 1 to June 30 of earlier years.

• $50,000 or less in the lookback period: you're a monthly depositor. Deposit each month's taxes by the 15th of the next month.
• More than $50,000: you're a semiweekly depositor. Taxes on wages paid Wednesday, Thursday or Friday are due the next Wednesday. Taxes on wages paid Saturday through Tuesday are due the next Friday.
• $100,000 next-day rule: if you pile up $100,000 or more in taxes on any day, deposit by the next business day, whatever your schedule.
• Small amounts: if your total liability for the quarter (or the prior quarter) is under $2,500, and you didn't trigger the next-day rule, you can generally pay with a timely filed Form 941 instead of depositing.

New employers are monthly depositors in their first calendar year. Deposits are made electronically, through EFTPS or, for many businesses, through the IRS Business Tax Account.

Quarterly and annual returns. Form 941 is due the last day of the month after each quarter: April 30, July 31, Oct. 31 and Jan. 31. Form 940 for federal unemployment (FUTA) tax and Forms W-2 for employees are due Jan. 31. When a date falls on a weekend or legal holiday, it moves to the next business day.

The Trust Fund Recovery Penalty

The income tax and employee Social Security and Medicare tax you withhold are called "trust fund" taxes, because you hold them in trust for your employees. If they aren't deposited and the IRS can't collect them from the business, it can assess the Trust Fund Recovery Penalty (TFRP) against people personally. The penalty equals 100% of the unpaid trust fund tax (IRS Publication 15, 2026).

It can reach any "responsible person" who acted "willfully." A responsible person is anyone with the duty or power to collect, account for or pay the taxes, such as an officer, partner, bookkeeper or anyone who signs checks. Willfully means the person knew the taxes weren't being paid, or recklessly ignored the risk, and still let other bills be paid first. Paying rent or suppliers instead of the IRS during a cash crunch is the classic way owners end up personally liable.

If payroll taxes are already behind, file every Form 941 on time even if you can't pay. Make current deposits first, and get professional help quickly. See what to do if you can't pay and IRS payment plans.

The calculator below estimates late-filing and late-payment penalties and interest on a balance.

Information returns: 1099s at a new threshold

For payments made in 2026, a business generally files Form 1099-NEC for anyone it paid $2,000 or more for services in the course of business. Most Form 1099-MISC categories, such as rents and other income, also moved to $2,000. For 2025 and earlier, the threshold was $600. Some attorney payments still use $600. The IRS says the $2,000 amount may be adjusted for inflation starting in 2027 (Instructions for Forms 1099-MISC and 1099-NEC, Rev. December 2026). The 2026 Forms 1099-NEC are due to recipients and the IRS by Monday, Feb. 1, 2027.

FIRE is retiring. The IRS's FIRE e-file system accepts information returns only until Nov. 19, 2026, at 3 p.m. ET. Tax year 2026 information returns must be e-filed through IRIS. Its free Taxpayer Portal takes up to 100 returns at a time (IRS, IR-2026-99).

Collect a Form W-9 from every contractor before you pay. If a payee's name and taxpayer ID number don't match IRS records, you'll get a CP2100 or CP2100A telling you to begin backup withholding.

Your EIN and Business Tax Account

Your Employer Identification Number (EIN) is free from the IRS, and a CP575 confirms it. As of August 2026, eligible business owners can download a copy of the CP575 in the IRS Business Tax Account to show a bank instead of Letter 147C. The account also lets you view digital notices, make and schedule payments, see payment plan details and pull transcripts (IRS, IR-2026-87). Report a new business address or responsible party on Form 8822-B.

Notices businesses get most often

• CP161: a request for payment of a balance on a business account.
• CP504 and LT11: notices of intent to levy. The LT11 gives you the right to a Collection Due Process (CDP) hearing, where an independent IRS Appeals officer reviews the case before a levy.
• CP90: a final notice of intent to levy that can reach federal payments, which matters if you contract with the government.
• Letter 3172: a federal tax lien was filed against the business or owner.
• CP2100: a backup withholding notice for payees with mismatched ID numbers.
• CP575: your new EIN.

Common problems and where to start

Late filing or deposit penalties. The IRS's Automatic Exemption from Penalty starts with 2026 quarterly returns, such as Form 941, and 2025 annual returns, including Forms 1065 and 1120. If the business has a clean record for the prior three years (or 12 straight quarters), failure-to-file, failure-to-pay and failure-to-deposit penalties aren't assessed. Businesses whose deposit penalties were waived four or more times in that period don't qualify (IRS administrative penalty relief page). Otherwise, see IRS penalty relief.

A lien or levy. See federal tax liens, IRS levies and CDP hearings.

An audit. See IRS audits.

Representation. A CPA, enrolled agent or tax attorney can act for the business with Form 2848. See choosing a tax professional. If IRS problems threaten the business and normal channels fail, the Taxpayer Advocate Service may help.

IRSV.com is an independent guide and is not affiliated with the IRS. This page is general information, not tax or legal advice. Rules change; confirm details on IRS.gov or with a tax professional. Found an error? Tell us.