Tax planning is not a December event. The businesses that consistently pay the lowest legal tax rate treat planning as a year-round discipline — revisiting entity structure, owner compensation, retirement contributions, and capital expenditures every quarter. This 2026 checklist walks through the moves our CPAs review with clients before year-end.
1. Confirm your entity is still the right one
An LLC taxed as a sole proprietorship that crossed $80–$120K in net profit is often leaving five figures on the table by not electing S-corporation status. Conversely, founders raising venture capital almost always need a C-corp. Revisit the math annually — payroll tax savings, reasonable compensation requirements, and state-level pass-through entity taxes (PTET) all change the answer.
2. Maximize the Qualified Business Income (QBI) deduction
The 20% QBI deduction under §199A remains one of the highest-leverage provisions for pass-through owners. Above the income thresholds, specified service trades (SSTBs) phase out, but planning around W-2 wages, qualified property, and aggregation elections can preserve the deduction.
3. Time bonus depreciation and §179 purchases
Bonus depreciation continues its phase-down. Coordinate fixed-asset purchases with §179 expensing, cost segregation studies on real property, and state conformity — several states decouple from federal bonus rules, creating a deferred state liability if you don't model it.
4. Claim the R&D credit you're probably already earning
Software development, process improvement, and product engineering routinely qualify under the four-part test. With §174 capitalization still in force, an R&D credit study is now table stakes — it offsets the cash impact of mandatory amortization for many startups and engineering-heavy SMBs.
5. Fund the right retirement plan
- Solo 401(k): up to $70,000 in 2026 for owner-only businesses
- SEP-IRA: simple, but no employee deferral
- Cash balance plan: $200K+ deductions for high-earning professionals over 45
- Safe-harbor 401(k): avoids ADP/ACP testing once you have W-2 staff
6. Clean up the books before year-end
Reconcile every bank, credit-card, loan, and merchant account. Reclassify owner draws vs. payroll. Capitalize and depreciate fixed assets correctly. A clean trial balance is the difference between a 2-hour return and a 20-hour audit-bait return.
7. Document, document, document
Accountable plans, mileage logs, home office substantiation, 1099 vendor W-9s on file, board minutes for owner compensation — the IRS does not lose audits on math, it wins them on missing documentation.
Want a CPA to run this checklist against your actual books? Schedule a complimentary 30-minute tax planning review.
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