2026 Year-End Tax Planning for Business Owners: What to Review Before December 31
For many business owners, tax planning begins when documents arrive in January or February.
By then, however, the year is already over.
Some of the most useful tax-planning decisions need to be considered before December 31. That makes November and December an important time to review where the business is likely to finish the year and whether any adjustments should be made before 2027 begins.
Here are several areas business owners should consider.
Project Your 2026 Business Income
Before making year-end decisions, you need a reasonable estimate of where the business will finish.
Review year-to-date financial statements and compare them with the prior year. Consider:
Revenue trends
Gross profit
Payroll and labor costs
Major operating expenses
Owner compensation
Equipment purchases
Unusual or one-time income and expenses
If the books are not current, getting them caught up should be the first step.
A tax projection based on incomplete financial information is only as reliable as the numbers behind it.
Review Estimated Tax Payments and Withholding
A significant increase in business profit can create a larger individual tax liability for owners of S corporations, partnerships and sole proprietorships.
The opposite may also be true if income declined during the year.
Reviewing projected income before year end allows you to compare expected tax with estimated payments and withholding already made.
This can help reduce unpleasant surprises when the return is prepared and may provide time to adjust payments or withholding when appropriate.
Review Retirement Plan Opportunities
Retirement plans can serve two purposes: helping owners and employees build long-term savings while also providing potential tax advantages.
For 2026, the employee elective-deferral limit for many 401(k) plans is $24,500, with additional catch-up contribution opportunities for eligible participants.
Business owners may also have options through SEP, SIMPLE, profit-sharing or other qualified retirement plans.
The appropriate plan depends on factors such as employee count, payroll, profitability, ownership structure and long-term objectives.
If establishing or modifying a retirement plan is being considered, year-end is the time to start that conversation.
Consider Planned Equipment and Capital Purchases
Businesses that are already planning equipment, technology, furniture, machinery or other qualifying purchases should consider whether completing those purchases before year end makes sense.
Current law allows a 100% additional first-year depreciation deduction for many types of eligible property under the applicable rules.
Tax treatment should never be the sole reason for making a purchase. Cash flow, financing, operational needs and return on investment matter more.
But when a purchase is already necessary, timing can influence the tax result.
Review S Corporation Shareholder Compensation
S corporation owners who perform services for their companies should review shareholder compensation before year end.
The IRS requires reasonable compensation to be paid to shareholder-employees for services provided before treating additional payments as non-wage distributions.
A year-end review should consider:
Salary paid during the year
Profitability of the company
Shareholder distributions
Duties and responsibilities
Time devoted to the business
Comparable compensation for similar work
This is much easier to address while payroll can still be processed than after W-2s and payroll filings have been completed.
Make Sure Owner Transactions Are Properly Recorded
One area that frequently creates unnecessary problems is the treatment of money moving between the owner and the business.
Before year end, review items such as:
Owner contributions
Shareholder or partner distributions
Personal expenses paid by the business
Business expenses paid personally
Shareholder loans
Reimbursements
Health-insurance payments
These transactions may have very different tax consequences depending on the entity structure and how they are documented.
Review Charitable Giving and Other Individual Planning
Business owners should also remember that business tax planning and personal tax planning are often connected.
Beginning in 2026, individuals who do not itemize may be able to deduct up to $1,000 of qualifying cash charitable contributions, or $2,000 for married couples filing jointly.
Retirement contributions, investment gains and losses, charitable giving, major asset sales and other personal transactions can all affect the overall tax picture.
That is why a useful year-end projection should look beyond the business return alone.
Use Year-End Planning to Prepare for 2027
A good year-end meeting should also look forward.
Questions worth considering include:
Is the current entity structure still appropriate?
Does the business have enough accounting and administrative capacity for expected growth?
Should compensation or retirement benefits change?
Are bookkeeping and payroll systems providing timely information?
Are major purchases or financing needs expected next year?
Is succession, acquisition or sale planning becoming relevant?
Tax planning works best when it is part of the business-planning process rather than something considered only when a return is due.
Plan While There Is Still Time
Once December 31 passes, many decisions affecting the 2026 tax year can no longer be changed.
That makes the final weeks of the year an ideal time to review financial results, projected taxes and the business decisions that may affect both 2026 and 2027.
BA Tax Pros works with business owners throughout Tulsa and the surrounding area on tax preparation, accounting, bookkeeping, payroll and proactive tax planning. If your business has experienced significant growth, changes in profitability, new ownership or other major developments during 2026, contact our office to discuss a year-end tax-planning review.
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