The CFO for Small BusinessHow small business profit lands on your personal taxes
You're looking for why your business's profit shows up on your own return, and why the bill can feel so big. Tax CFO Steven Palmieri has a plain way to put it. Most small businesses are pass-through, meaning the company doesn't pay the income tax itself. Steven and his team explain where the profit goes and what you can do about it before the year ends.
Ask where my profit lands
Profit flows to you
A sole proprietorship, a partnership, most LLCs and S corporations don't pay income tax as a business. Their profit flows through to the owners, and each owner reports their share on a personal return. This happens whether or not you took the money out. If the business earned $80,000 and you left it all in the account, the $80,000 is still yours to report.
That's the cause of most April surprises. You looked at the bank balance. The return looked at the profit.
Self-employment tax
Owners who work in their own business typically pay self-employment tax on top of income tax. The IRS sets the rate at 15.3 percent, made up of 12.4 percent for Social Security and 2.9 percent for Medicare. The Social Security part applies up to a yearly limit, which is $184,500 for 2026.
An S corporation changes which income is subject to this tax, since the owner's wage carries payroll taxes while the remaining profit generally doesn't. That's one reason the structure matters, and it's also why the owner's wage must be reasonable. We plan this with you and make no promise about what it will save.
A deduction worth knowing about
Owners of sole proprietorships, partnerships and S corporations can often claim the qualified business income deduction, which is up to 20 percent of qualified business income, subject to limits that depend on your income and kind of business, and the IRS has changed how the deduction is figured for tax years beginning after 2025. We check whether it applies to you when we plan the year.
Estimated taxes are how you pay during the year
Nobody withholds tax from business profit, so owners pay in installments. The IRS says individuals generally must pay if they expect to owe $1,000 or more when the return is filed. For someone on the calendar year, the four installments arrive between mid April and mid January, and Publication 509 lists them.
The question is how much each should be. A guess can leave you short or tie up money you need. We set each installment from the closed months so far, so the number has a reason.
Profit you keep in the business is still taxed
Many owners keep profit in the business for growth, for equipment or for a cushion. That's a sound choice. It's also taxed to the owner in the year it's earned. Planning for this means knowing, in the fall, how much tax the year's profit will produce, and deciding whether to buy, wait or set cash aside while those choices still exist.
What a CFO does here
The work is a monthly close, an estimate and a conversation. We tell you what the year's profit is on track to be, what that means on your return, and what you could do about it. No particular result is promised. There is a number in October instead of April. A Tax CFO for a small business describes the monthly rhythm.
Both sides. This page's subject is the clearest case of the two sides meeting, because a number on the company's books becomes a number on your own form. Your pay choices, covered in paying yourself from a small business, sit right in the middle.
Do you know what you will owe in April?
You will be talking to the Steven Palmieri practice.