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Year-End Tax Moves for Small Business Owners

Four questions come up before December 31: whether equipment will count for this year, whether a retirement plan can still be opened, what an S corporation should run through payroll, and whether estimated tax paid so far is enough. Planning is a discussion of your numbers, not a promise of a particular tax result. Blackpoint CPA is Central Florida-based, serving clients statewide and remotely. This applies to owners in Orlando and across Central Florida. The dates below are for a calendar-year business. How we scope the work is on our small business page.

The equipment has to be in service

Ordering a truck, a computer system, or a machine in late December does not, by itself, create a 2026 deduction. The asset has to be placed in service in 2026. The IRS treats property as placed in service when it is ready and available for its assigned use, whether or not you have started using it. An item that is ordered in December and is not delivered and ready until January is not a 2026 deduction. Publication 946 is the IRS guide for that test.

Section 179 lets you elect to expense qualifying property. For tax years beginning in 2026, that deduction cannot exceed $2,560,000, and it is reduced dollar for dollar when section 179 property placed in service during the year costs more than $4,090,000. Revenue Procedure 2025-32 and the "What's New for 2026" section of Publication 946 state those amounts. For certain SUVs, the cost that may be taken into account cannot exceed $32,000. Publication 946 defines which vehicles that covers. The deduction also cannot exceed taxable income from the active conduct of a trade or business.

Qualified property acquired after January 19, 2025 can also qualify for a permanent 100 percent additional first-year depreciation deduction. The IRS described that rule on January 14, 2026, in news release IR-2026-06 and Notice 2026-11. The acquisition date, the placed-in-service date, and the kind of property all matter, and you can elect out. Bring the invoice and the date the asset was ready for use. We line those facts up with the IRS rules. A purchase order is not, by itself, a deduction.

Retirement plan deadlines are not all December 31

The plan type decides the clock. A SEP can be set up as late as the due date of the business return, including extensions, and the contribution has to be deposited by that same date. The IRS SEP FAQ says that if you miss the unextended due date and you did not get an extension, you cannot deduct the contribution on that year's return. For 2026, the contribution for each person cannot exceed the lesser of 25 percent of compensation or $72,000. A self-employed owner's own contribution uses a special calculation in Publication 560. It is not profit multiplied by 25 percent. Dollar limits are on the IRS cost-of-living adjustment page.

A 401(k) generally has to be adopted by the last day of the tax year. Publication 560 describes one exception: for 2023 and later years, a sole proprietor with no employees can adopt a new 401(k) after year-end if the plan is adopted by the filing deadline determined without extensions, and the first-year elective deferrals are paid to the plan by that same deadline. The IRS issue snapshot on contributions paid after year-end says retroactive elective deferrals are not generally allowed outside that case. Employer profit-sharing or matching contributions can often be paid by the return due date, including extensions, when the plan was adopted in time.

A SIMPLE IRA has a shorter window. If you have not maintained one before, Publication 560 says you can set it up with an effective date from January 1 through October 1. For 2026, that date is October 1. A new employer that starts after October 1 can set the plan up as soon as it is administratively feasible. If you had a SIMPLE IRA before, a new one can be effective only on January 1. The 2026 salary-reduction limit is $17,000, plus a catch-up contribution when the age rules apply.

For a 401(k) in 2026, the elective deferral limit is $24,500. The catch-up is $8,000 at age 50 or older, or $11,250 if you turn 60, 61, 62, or 63 in 2026. The defined-contribution limit is $72,000 before catch-up. Those are the 2026 figures on the IRS cost-of-living page. An S corporation shareholder's deferral is based on W-2 wages. A distribution is not wages.

S corporation wages are a facts question

An S corporation must pay reasonable compensation to a shareholder-employee for services to the corporation before non-wage distributions are made to that person. The instructions for Form 1120-S say that distributions and other payments to a corporate officer must be treated as wages to the extent the amounts are reasonable compensation for services rendered. The IRS can reclassify a distribution as wages, and wages are subject to employment taxes. The IRS explains this on its page about S corporation compensation and medical insurance.

There is no dollar formula in the tax code. The IRS lists training, duties, time spent, dividend history, pay of other employees, bonuses, what comparable businesses pay, any compensation agreement, and any formula. Reasonable compensation will not exceed what the shareholder received, directly or indirectly. An officer who performs services is an employee. An officer who performs no services, or only minor services, and is not entitled to pay, is not. We look at the work and at wages versus distributions. We do not hand you a target salary, and we do not promise the IRS will accept a particular wage.

Estimated tax still due for 2026

Owners of pass-through businesses generally pay federal income tax on the profit through withholding and estimated tax, not through the business return itself. That includes a sole proprietor, a partner, and an S corporation shareholder. A C corporation is its own taxpayer. Its estimated-tax dates come from the instructions for the corporate return, not from the individual dates below.

Form 1040-ES for 2026 says you generally must pay estimated tax if you expect to owe at least $1,000 after withholding and refundable credits, and those amounts will be less than the smaller of 90 percent of your 2026 tax or 100 percent of your 2025 tax. The 2025 return has to cover 12 months. If 2025 adjusted gross income was more than $150,000 — more than $75,000 if your 2026 filing status is married filing separately — use 110 percent of the 2025 tax instead of 100 percent. Farming and fishing income uses a different percentage. If you were a U.S. citizen or resident for all of 2025 and owed no tax for that full year, you do not have to pay estimated tax for 2026.

The 2026 dates on Form 1040-ES are April 15, June 15, September 15, and January 15, 2027. You can skip the January 15, 2027 payment if you file the 2026 return by February 1, 2027 and pay the balance due. September 15 has passed. The payment still ahead is January 15. We do not promise that a penalty will be removed.

What to bring to the conversation

A useful conversation uses records. Bring these if you have them:

• Year-to-date profit and loss, and what you still expect to collect and spend before December 31.
• Invoices and in-service dates for equipment you have bought or expect to buy.
• Any retirement plan document you already have, and whether anyone other than you works in the business.
• Year-to-date W-2 wages and shareholder distributions, if the business is an S corporation.
• Confirmations of the estimated payments already made for 2026.

We will tell you which deadline still applies. The answer depends on the records. Our small business page describes the tax and payroll work this sits next to.

The Blackpoint CPA Team — Winter Garden, FL.