Year-End Tax Planning Checklist for Small Businesses (2026)

Year-end tax planning for a small business comes down to one question: what has to happen before December 31, and what can still be done in January to April? Get that split right and you stop rushing purchases, contributions and invoices that never needed a December deadline. This checklist covers US federal rules for the 2026 tax year, for sole proprietors, single-member LLCs and other small businesses that file on a calendar year. It uses figures from IRS.gov and walks through one business's numbers from start to finish.

Last reviewed: October 27, 2026. Figures are US federal amounts for tax year 2026 from IRS.gov as of that date. State taxes, fiscal-year businesses and non-US rules are not covered. This is general information, not tax advice; confirm your own position with a tax professional or the IRS.

Which year-end moves are due December 31, and which can wait?

Five things are generally locked on December 31 for a calendar-year business. These are cash-method income and expense timing, equipment placed in service, charitable gifts, and any year-end election your retirement plan provider requires. Most of the rest has a 2027 deadline. The table below is the order to work through, and each row links to the IRS source.

The rest of this guide works through those rows in order. If you also need to close out your billing for the year, the end-of-year invoicing checklist covers cutoffs, open estimates and records.

What are the key IRS numbers for the 2026 tax year?

These are the 2026 amounts that most often matter at year-end. Each is labelled with its tax year, because blog posts (including earlier versions of this one) often carry figures from older years.

For how these figures changed from 2025, see tax rate changes for 2026. Wider rate context for self-employed people is in the self-employment tax guide.

Step 1: Project your 2026 profit before December starts

Every later decision depends on one number: your expected 2026 net profit. Without it you can't tell whether to accelerate or defer income, how much you can put into a retirement plan, or whether your estimated payments are enough. Start the projection in early November so there's still time to act.

Worked example (hypothetical). Maya is a single sole proprietor who runs a web design business. She has no employees, uses the cash method and files on a calendar year.

• Net profit from January to November 2026: $98,000.
• December: three open invoices for $6,000, $5,000 and $3,000 (Invoices A, B and C), and about $2,000 of expected December expenses.
• If all three invoices are paid in December, her projected 2026 net profit is $98,000 + $14,000 − $2,000 = $110,000.

Self-employment tax applies to 92.35% of net earnings at a 15.3% rate (IRS Topic 554). On $110,000 that is $110,000 × 0.9235 × 0.153 = $15,542.51. The employer-equivalent half, $7,771.25, is deductible when figuring adjusted gross income. These two figures feed the retirement and estimated-tax steps below.

Step 2: Decide which tax year your December invoices belong to

When an invoice counts depends on your accounting method, not on the invoice date. If you use the cash method, income counts in the year it's received or made available to you without restriction. If you use the accrual method, it counts when you've earned the right to it and the amount is fixed, whether or not the client has paid (Publication 538). For a cash-method freelancer, then, the date that matters is the date the money arrives, not the invoice date.

That gives cash-method businesses a legitimate lever, along with two limits:

• The lever. If you finish work on December 18 and invoice on January 4, a January payment is 2027 income. If you invoice on December 1 with net 15 terms and the client pays on December 16, it's 2026 income.
• Limit 1: you can't hold checks. Publication 538 states that you can't hold checks or postpone taking possession of similar property from one tax year to the next. A check that arrives on December 30 is 2026 income even if you deposit it in January.
• Limit 2: deferring is a timing decision, not a saving. It moves tax to next year. It only lowers the total if your 2027 rate will be lower.

Worked example, continued. Maya's Invoice C is $3,000. If she sends it in January instead of December, roughly this much federal tax moves from 2026 to 2027:

This ignores the qualified business income deduction, which would reduce the income tax figure. If Maya expects 2027 to be a bigger year, deferral costs her money, because the same $3,000 would then be taxed at a higher rate. If she's planning a sabbatical in 2027, deferral may help. Either way it's a decision to make with a preparer who can see both years.

Accrual-method businesses can't shift income this way. Their December 2026 work is 2026 income once it's billable. For them, the year-end job is making sure every December job is invoiced, so revenue isn't understated.

Step 3: Check your estimated tax position before January 15

The fourth 2026 estimated payment is due January 15, 2027. The other three were due April 15, June 15 and September 15, 2026 (Publication 505, 2026). You generally must make estimated payments if you expect to owe $1,000 or more when you file (IRS estimated taxes).

To avoid an underpayment penalty, your 2026 payments generally need to reach the smaller of:

• 90% of your 2026 tax, or
• 100% of the tax on your 2025 return. This becomes 110% if your 2025 adjusted gross income was more than $150,000, or more than $75,000 if you are married filing separately in 2026.

Publication 505 also says you can skip the January payment if you file your 2026 return by January 31, 2027 and pay the full balance with it.

Worked example, continued. Maya's 2025 return showed $21,000 of total tax, and her 2025 AGI was $98,000, which is under the $150,000 line. Her prior-year safe harbor is therefore $21,000, or $5,250 a quarter. She paid $5,250 in April, June and September, so she owes one more $5,250 payment by January 15, 2027. That keeps her inside the safe harbor even if her 2026 tax turns out higher than $21,000.

What if she misses the January payment? The penalty works like interest. At the 7% underpayment rate in force for October to December 2026, paying $5,250 ninety days late (on April 15, 2027) costs roughly $5,250 × 7% × 90 ÷ 365 = about $91. The real figure depends on the rates the IRS sets for 2027 and on daily compounding, so treat this as an estimate. It's small, but it's avoidable. Quarterly tax payments walks through how to size each voucher.

Step 4: Which retirement contributions can still be made after December 31?

More than most checklists suggest. The common advice to max out your retirement plan by December 31 is only partly true:

• SEP-IRA. You can contribute up to the due date of your return, including extensions (Publication 560). It's a 2027 decision, not a December one. For a self-employed person, the maximum works out to 20% of net earnings after the deductible half of self-employment tax, not the 25% quoted for employees. It's capped at $72,000 for 2026.
• Solo 401(k). For 2023 and later, a sole proprietor with no employees can adopt a new 401(k) after year-end, as long as it's adopted by the filing deadline (without extensions), according to Publication 560. If you already have a plan, ask your provider when your 2026 elective-deferral election has to be made. Plan documents and providers set their own cutoffs.
• HSA. If you have qualifying high-deductible health coverage, 2026 contributions ($4,400 self-only, $8,750 family) can generally be made until your April 2027 filing due date (Publication 969).

Worked example, continued. Maya's maximum contributions on $110,000 of net profit:

The earlier version of this article said a $69,000 solo 401(k) contribution was possible on $150,000 of profit. That was the 2024 cap, applied without the self-employed calculation. For most sole proprietors the real limit is set by the formula, not by the headline cap. Contributing the maximum only makes sense if you have the cash: the money is locked up for years. Retirement planning for freelancers compares the plan types in more detail.

Step 5: Buy equipment only if it's in service by December 31

Buying an asset doesn't earn the deduction. The asset has to be placed in service, meaning ready and available for its intended use, in 2026 (Publication 946). A machine bought on December 30 but installed in January is a 2027 asset.

For 2026, three routes cover most small-business purchases:

1. De minimis safe harbor. Without an applicable financial statement, you can elect to deduct items costing up to $2,500 per invoice or item. You make the election with a statement attached to your timely filed return (IRS tangible property regulations). This covers most laptops, phones and office furniture.
2. Section 179. You can expense up to $2,560,000 of qualifying property in 2026, with the limit reduced once purchases exceed $4,090,000 (Rev. Proc. 2025-32).
3. Bonus depreciation. For qualified property acquired after January 19, 2025, bonus depreciation is 100% and permanent (IRS). The old "60% in 2025" figure in many posts no longer applies.

Worked example, continued. Maya buys a $2,400 laptop that arrives and is set up on December 29. That falls within the de minimis amount and is in service in 2026. She also orders a $900 monitor on December 28, but it's delivered on January 6, so it's a 2027 purchase. Buying equipment you don't need, just to get a deduction, still costs you money: a $2,400 deduction at roughly a 35% combined marginal rate saves about $840 in tax, so you're still $1,560 out of pocket.

Step 6: Clean up receivables, because cash-basis bad debts aren't deductible

Year-end is when owners look at old unpaid invoices and ask whether they can write them off. If you use the cash method, you generally can't take a bad-debt deduction for unpaid fees, because that income was never reported in the first place (IRS Topic 453). A business bad debt is deductible only if the amount was already included in gross income, which is the accrual-method situation.

So for a cash-basis freelancer, the year-end receivables job is collection, not deduction:

• Chase invoices that are still collectible before December 31. See how to handle unpaid invoices.
• Cancel or credit invoices you've agreed not to collect, so your records match reality. A credit note shows the reduction on the record. The bad debt entry explains the accrual-side treatment.
• Note any client disputes in writing while the details are fresh.

Step 7: Collect W-9s now for 2026 Forms 1099-NEC

For payments made in 2026, a business generally files Form 1099-NEC for each nonemployee paid $2,000 or more for services. That's up from $600 for earlier years. The recipient gets a copy and the IRS gets one by January 31 (Instructions for Forms 1099-MISC and 1099-NEC, rev. 12/2026). The step that slips is collecting each contractor's taxpayer identification number on Form W-9. Ask for it in December, not the last week of January.

If you're the contractor, the $2,000 threshold changes which forms you'll receive, not what you owe. Income below the threshold is still taxable, so reconcile your own invoices and payment records rather than relying on the 1099s that arrive. Subcontractor invoicing covers the paperwork on both sides.

Is it too late to change your business structure for 2027?

No. An existing business that wants S corporation tax treatment from January 1, 2027 can file Form 2553 any time during 2026 or by March 15, 2027, which is 2 months and 15 days into the year (Instructions for Form 2553). The earlier version of this article gave January 15. That date was wrong.

Whether an S corporation saves money depends on paying yourself a reasonable salary, payroll costs and state rules. There's no profit level at which it automatically pays off, so run the numbers with a preparer before you file.

Charitable gifts and the new 2026 deduction for non-itemizers

Starting with tax year 2026, people who take the standard deduction can deduct up to $1,000 of cash gifts to qualifying charities, or $2,000 for married couples filing jointly. Gifts to donor-advised funds don't qualify (IRS). With a $16,100 standard deduction for single filers, many sole proprietors don't itemize, so this is the rule that applies to them. Gifts must be made by December 31, 2026 to count for 2026.

What year-end planning can't do for you

Checklists make every move sound like a saving. These are the limits that marketing copy leaves out:

• Deferring income doesn't erase tax. As Step 2 showed, it moves roughly $1,000 of tax on a $3,000 invoice into 2027. That's useful only if your 2027 rate is lower or you need the cash flow.
• A deduction is not free money. Spending $1 to save 25 to 40 cents in tax leaves you 60 to 75 cents poorer unless you needed the purchase anyway.
• You can't manufacture timing. Holding checks, backdating invoices or recording expenses you haven't paid don't work under the cash method, and they create problems in an audit.
• This is federal and calendar-year only. State income tax, fiscal-year businesses, partnerships, C corporations and anyone outside the US need different rules. UK sole traders, for example, work to a tax year that runs from 6 April to 5 April.
• Old guides are out of date. IRS Publication 535 (Business Expenses) was discontinued after its 2022 revision (IRS). For current guidance on deducting business expenses, use Publication 334. The same applies to blog figures: always check the tax year a number refers to.

How your invoicing records support year-end planning

Most of the steps above need two kinds of record: the date each invoice was issued and the date each payment arrived. If you invoice with InvoiceQuickly, here is what it gives you and what you'll still need from elsewhere:

• Available on every plan: every invoice has an issue date and a due date. You can record full or partial payments manually (bank transfer, cash, check, card or other) with the payment date, so the remaining balance stays accurate.
• On Pro ($9 a month): if you connect your own Stripe or PayPal account, a payment made through a payment link is recorded automatically when the provider confirms it. You can also issue credit notes against an invoice and export your invoices to CSV for your preparer. Pro reports cover a date range you pick (up to 366 days, so calendar 2026 works): invoiced and outstanding amounts, payments by payment date, and expenses by category, per currency.
• What it doesn't do: on Free, the dashboard shows all-time totals (revenue received, outstanding, invoice count and clients), not a 2026-only report. The CSV export has no amount-paid or balance column. Check any income total against your bank, Stripe or PayPal records. InvoiceQuickly doesn't track mileage or depreciation, and it produces no P&L or tax return. Expenses are on Pro; a reviewed, one-way export of selected invoices to QuickBooks Online or Xero is on Business ($19 a month). Each invoice takes one tax rate.

If you send invoices from a self-employed invoice template, the same rule applies: keep the payment dates somewhere you can total by tax year. For a full list of what each invoice should show, see what to include on an invoice. If you're changing your numbering for the new year, read invoice numbering systems first. VAT-registered sellers outside the US should check the VAT invoicing guide as well. If you're new to formal billing, how to invoice for the first time covers the basics. More tax guides are in the taxes hub and on the blog.

Frequently asked questions

What is the deadline for year-end tax moves in 2026?

For a calendar-year business, December 31, 2026 is the deadline for cash-method income and expense timing, putting equipment into service and charitable gifts. Many other moves have 2027 deadlines. The fourth estimated payment is due January 15, 2027, Forms 1099-NEC are due January 31, an S corporation election for 2027 is due by March 15, 2027, and SEP-IRA contributions can be made up to your filing deadline, including extensions.

Can I send my December invoices in January to lower my 2026 taxes?

If you use the cash method, a payment you receive in 2027 is 2027 income, so invoicing in January legitimately moves that income to next year. You can't hold a check that arrives in December, because it counts when you receive it. Deferral only moves tax to the following year. On a $3,000 invoice it shifts roughly $1,000 of federal tax at a 22% rate, so it only lowers your total if your 2027 rate will be lower.

What is the safe harbor for 2026 estimated taxes?

You generally avoid an underpayment penalty if your 2026 withholding and estimated payments reach the smaller of 90% of your 2026 tax or 100% of the tax on your 2025 return. The second figure rises to 110% if your 2025 adjusted gross income was over $150,000 ($75,000 if married filing separately). The last 2026 payment is due January 15, 2027.

Do I have to fund my solo 401(k) or SEP-IRA by December 31?

Not always. SEP-IRA contributions for 2026 can be made up to your return's due date, including extensions. A sole proprietor with no employees can adopt a new solo 401(k) after year-end, as long as it's adopted by the filing deadline without extensions. If you already have a solo 401(k), check your provider's deadline for the 2026 elective-deferral election.

How much equipment can a small business deduct for 2026?

The 2026 Section 179 limit is $2,560,000, reduced once qualifying purchases exceed $4,090,000. Bonus depreciation is 100% for qualified property acquired after January 19, 2025. Items costing up to $2,500 each can be deducted under the de minimis safe harbor election. In every case, the asset must be placed in service in 2026, not just paid for.

Do I need to send 1099s for 2026?

If your business paid a nonemployee $2,000 or more for services during 2026, you generally file Form 1099-NEC and give the recipient a copy by January 31. For earlier years the threshold was $600. Collect a Form W-9 from each contractor before year-end so you have their taxpayer identification number ready.