Year-End Tax Prep Checklist for Small Businesses (2026)
Lock in 2026 tax savings in the last quarter. This checklist has 21 tasks from planning in October to filing prep in January.
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October-November: Planning Phase
5 tasks · Set the foundation for year-end savings
Review year-to-date P&L and estimate annual income
Pull your profit & loss statement through the current month. Project revenue and expenses for the remainder of the year so you have a realistic estimate of taxable income. This number drives every other decision on this list.
Calculate estimated tax remaining
Compare what you've paid in quarterly estimated taxes against your projected liability. Penalties are calculated separately for each payment period. An extra payment by January 15, 2027 reduces the shortfall but may not remove a penalty for an earlier underpaid installment. The quarterly tax schedule lists the payment dates.
Identify deduction opportunities before December 31
Look for expenses you can legitimately accelerate into this tax year. Common opportunities include prepaying rent, stocking up on supplies, or making charitable contributions. Every dollar of deductions reduces your taxable income.
Review retirement contribution room (SEP-IRA, Solo 401(k))
SEP-IRAs allow contributions up to 25% of employee compensation, or about 20% of net self-employment income for owners (calculated after the deduction for half of self-employment tax), with a 2026 maximum of $72,000. Solo 401(k) plans allow employee deferrals of $24,500 for 2026. Catch-up adds $8,000 at age 50 and over, or $11,250 at ages 60 to 63. Employer contributions bring the total to $72,000 before catch-up. Retirement contributions reduce taxable income. Source: IRS 2026 retirement limits.
Evaluate S-Corp election for next year
Net self-employment income that consistently exceeds $50,000-$60,000 may make an S-Corp election worth modeling. It can reduce self-employment tax. To take effect January 1, 2027, file Form 2553 by March 15, 2027. Start the analysis now so you can act in January.
December: Action Items
8 tasks · Execute your tax-saving strategies before the deadline
Prepay expenses that are deductible this year
Cash-method businesses generally deduct expenses in the year they pay them, but a prepaid expense is generally deductible only in the year it applies to, unless the 12-month rule is met. Under that rule, the benefit must end by the earlier of 12 months after it begins or the end of the tax year after the year of payment. An annual insurance premium or software subscription may qualify. Confirm the timing with your tax preparer before December 31.
Make retirement contributions
Solo 401(k) employee deferrals must be elected by December 31. The contributions can generally be funded by your tax return filing deadline, including extensions. SEP-IRA contributions can also wait until that deadline. Contributing before year-end gets your money working sooner. First-year plans have extra rules, so check IRS Publication 560.
Purchase needed equipment (Section 179)
Section 179 lets you deduct the full cost of qualifying equipment and software in the year you place it in service instead of depreciating it over time. The equipment must be purchased and placed in service by December 31, and the deduction is limited to your business income. The 2026 limit is $2,560,000. It phases out once you place more than $4,090,000 of property in service. Source: IRS Rev. Proc. 2025-32.
Send invoices or defer income strategically
Delay invoices until January to move income into next year if you expect a lower bracket then. Accelerate collections now if next year looks higher. Cash-basis taxpayers recognize income when received.
Review accounts receivable aging
Identify overdue invoices and make a final collection push. Document the write-off for uncollectible debts. Accrual-method bad debt deductions require proof that the debt is worthless.
Reconcile all bank accounts through November
Ensure every bank and credit card account is reconciled through at least November 30. This catches missing transactions, duplicate entries, and categorization errors before year-end close. December reconciliation can happen in early January.
Organize receipts and documentation
Gather and digitize all paper receipts. Match receipts to transactions in your books. The IRS requires documentation for all business deductions. Missing receipts now become audit risk later.
Schedule your CPA meeting
Book a year-end planning meeting with your tax preparer before the holiday rush. A 30-minute call in mid-December can surface last-minute strategies. Waiting until February means you've missed the window for most year-end moves.
January: Filing Prep
8 tasks · Close the books and prepare for filing
Collect all 1099s received
Clients generally send a 1099-NEC for payments of $2,000 or more made in 2026. Card processors, payment apps and marketplaces may send a Form 1099-K instead. A card processor reports payment card transactions on Form 1099-K. The more-than-$20,000 and more-than-200-transactions threshold applies only to third party network transactions, such as payment apps and marketplaces. Compare each form against your income records and follow up on missing ones. Report all income whether or not you receive a 1099.
Send 1099-NECs to contractors (due February 1, 2027)
File Form 1099-NEC with the IRS and send a copy to each contractor you paid $2,000 or more in 2026 by Monday, February 1, 2027 (January 31 falls on a Sunday). Payments made by credit or debit card, or through a third party settlement organization such as a payment app or marketplace network, are reported on Form 1099-K by the processor, not on your 1099-NEC, even when no 1099-K is issued. Direct bank transfers, and transfer services that are not third party settlement organizations, still count toward the 1099-NEC. The 1099 filing checklist has the penalties and filing steps.
Gather W-2s
S-Corp owners who pay themselves a salary, and anyone with W-2 employment income, should collect these forms. Employers must issue W-2s for 2026 by February 1, 2027. You need these to reconcile total income on your return.
Finalize December books
Reconcile all December bank and credit card statements. Post any year-end adjusting entries. Review the full-year P&L and balance sheet for accuracy. Lock the prior year after finalizing so no accidental changes occur.
Generate year-end financial statements
Produce your final Profit & Loss statement, Balance Sheet, and Cash Flow Statement for the full year. These are the foundation for your tax return and provide the numbers your CPA needs.
Compile deduction documentation
Create a summary of all deductions by category: office expenses, travel, meals (50% deductible), insurance, professional services, etc. Attach supporting receipts and records. The cleaner your documentation, the faster and cheaper your tax prep.
Calculate home office deduction
Measure your dedicated office space and calculate total home expenses (mortgage interest or rent, utilities, insurance, repairs). Mortgage principal is not deductible. The simplified method allows $5 per square foot up to 300 sq ft ($1,500 max). The regular method uses actual expenses prorated by square footage.
Tally vehicle mileage
Total your business miles for the year from your mileage log. The 2026 standard mileage rate is 72.5 cents per mile for January 1 to June 30 and 76 cents per mile for July 1 to December 31 (IRS standard mileage rates). Compare the standard rate against actual vehicle expenses to determine which method gives you a larger deduction.
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Key Deadlines to Remember
Related Guides
Tax Deduction Checklist
100+ deductions organized by category with IRS form references.
Quarterly Tax Schedule
All deadlines, worksheets, and safe harbor rules.
SE Tax Calculator
Calculate your self-employment tax liability instantly.
1099 Filing Checklist
Who to 1099, thresholds, and step-by-step filing.
Plan the next tax deadlines
See the quarterly tax schedule and the 1099 filing checklist.
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