The tax plan every $300K founder should have in writing

Most business owners hear from their accountant once a year, in the spring, about a year that is already over. By then the numbers are history. The return can report them accurately, but it can’t change them.

A tax plan works the other way. It looks at the year ahead, estimates what you will owe, and lays out the decisions that can lower that number while there is still time to make them. Once your business clears $300K, the gap between those two approaches is rarely small.

Why your tax plan needs to be written down

A plan that lives in a conversation is easy to forget and impossible to measure. A written tax plan gives you three things a verbal one can’t:

• A number to hold the year against. You know what you expect to owe and can see early if you are drifting.
• A record of your reasoning. Salary decisions and entity choices are easier to defend when the rationale is documented at the time you made them.
• A calendar of decisions. Every move in the plan is tied to a date, so nothing quietly expires.

What a tax plan for business owners should include

Every plan is different, but these seven parts belong in nearly every one.

1. Your entity structure

Start with how the business is set up: sole proprietor, LLC, S-corp, or multiple entities. The plan should confirm that the structure still fits your profit and your goals. If you are considering an S-corp election, note the deadline. Generally, Form 2553 must be filed no more than two months and 15 days after the start of the tax year the election is meant to take effect.¹

2. How you pay yourself

If you own an S-corp and work in the business, you must pay yourself reasonable compensation before taking distributions, and the IRS has the authority to reclassify distributions as wages when salary is too low.² There is no approved ratio. The popular “60/40 split” is a rule of thumb, not an IRS standard. Reasonable compensation depends on your duties, experience, hours, and what comparable businesses pay for similar work.

The trade-off matters because wages carry Social Security and Medicare tax, a combined 15.3% split between employer and employee, with the Social Security portion applying up to the annual wage base ($184,500 in 2026).³ Your plan should state your salary, how it was determined, and when it will be reviewed.

3. A projection of what you will owe

The heart of the plan is a projection: expected revenue, expenses, salary, and the resulting federal and state tax. It should be rerun at least twice a year, once at mid-year and again in the fourth quarter, when there is still time to act on what it shows.

4. Your quarterly estimated payments

Business owners generally pay tax through quarterly estimates. You can typically avoid the federal underpayment penalty by paying at least 90% of the current year’s tax or 100% of the prior year’s tax. If your prior-year adjusted gross income was over $150,000, that prior-year figure rises to 110%.⁴ Your plan should name the method you are using and the dollar amount due each quarter.

5. A retirement contribution strategy

Retirement plans are one of the most effective ways to move money from “taxable this year” to “building wealth.” For 2026, employees can defer up to $24,500 into a 401(k), and total employee plus employer contributions can reach $72,000, with higher limits for owners 50 and older.⁵ The right plan type depends on your entity, your payroll, and whether you have employees, so the plan should name the account, the target contribution, and the date it must be funded.

6. Planned major purchases

Equipment, vehicles, and build-outs can often be deducted faster than you might expect. The 2025 tax law made 100% bonus depreciation permanent for qualifying property acquired after January 19, 2025, and raised the Section 179 expensing limit to $2.5 million.⁶ Faster isn’t always better, though. The plan should decide when a purchase happens and how it is deducted, based on this year’s income and next year’s.

7. Family and household strategies

Hiring family members, accountable plans for home office and vehicle costs, and health insurance treatment can all belong in a plan, but the rules depend heavily on your entity. For example, the payroll-tax exemption for children under 18 working for a parent applies to sole proprietorships and certain partnerships, not to S-corps.⁷ These are exactly the details a written plan should spell out.

The planning calendar

A plan is only as good as its timing. These are the federal dates most plans are built around for the 2026 tax year.

Dates that fall on a weekend or holiday move to the next business day. State deadlines vary.

A plan vs. a filing

A tax return is a report. It is required, and it should be accurate, but it describes decisions that have already been made. A plan is where those decisions get made on purpose. The owners who keep more of what they earn usually have both: a plan that sets the year in motion, and a return that matches it.

How to start your plan this quarter

1. Get your books current. Every projection is only as good as the numbers underneath it.
2. Pull last year’s return. Your prior-year tax and AGI set your safe-harbor target.
3. Review your salary. Document how you arrived at it and whether it still fits your role.
4. Run a projection. Estimate this year’s profit and tax before Q4, not after.
5. Put every move on a calendar. If a strategy doesn’t have a date, it isn’t in the plan yet.

Frequently asked questions

What should a tax plan for a business owner include?

At minimum: your entity structure, how you pay yourself (salary and distributions if you are an S-corp), a projection of what you will owe, a quarterly estimated payment schedule, a retirement contribution strategy, planned major purchases, and a calendar of the deadlines each move depends on.

How often should a business owner update her tax plan?

Review it at least quarterly, and run full projections at mid-year and again before year-end, when there is still time to act. Update it any time your income, entity, or family situation changes significantly.

Is there a set ratio for S-corp salary versus distributions?

No. The IRS does not endorse a percentage split such as 60/40. Reasonable compensation is based on facts and circumstances, including your duties, training, time spent, and what comparable businesses pay for similar services.

How do I avoid an estimated tax penalty when my income is growing?

You can generally avoid the federal underpayment penalty by paying at least 90% of this year’s tax or 100% of last year’s tax through withholding and estimates. If last year’s adjusted gross income was over $150,000, the prior-year figure is 110%.

When is the best time to start tax planning?

Before the year starts, or as early in the year as possible. Many of the most valuable moves, like setting your salary, establishing certain retirement plans, and timing equipment purchases, must happen before December 31.

Sources

1. IRS, Instructions for Form 2553, Election by a Small Business Corporation
2. IRS, S Corporation Compensation and Medical Insurance Issues
3. Social Security Administration, Contribution and Benefit Base
4. IRS, Estimated Taxes, and Form 1040-ES
5. IRS, 401(k) limit increases to $24,500 for 2026 (IR-2025-111)
6. IRS, One, Big, Beautiful Bill provisions; Iowa State University Center for Agricultural Law and Taxation, One Big Beautiful Bill Act Implements Significant Tax Package
7. IRS, Family Help

This article is for educational purposes only and is not tax, legal, or investment advice. Tax rules change and depend on your specific facts. Talk with a qualified professional before acting on anything here.