Year-end tax planning is most effective when business owners begin before December. By reviewing projected income, major purchases, payroll, retirement contributions, and owner compensation now, you preserve more options and reduce the chance of an unpleasant surprise at filing time.
For small businesses in Northern Virginia and Washington, DC, 2026 planning also requires attention to recent federal tax changes and the interaction between business and individual returns. The right strategy depends on your entity type, cash flow, growth plans, and long-term goals—not simply on finding the largest possible deduction.
What changed for small businesses in 2026?
Several provisions now affect 2026 decisions. The qualified business income deduction was made permanent for qualifying businesses. Certain eligible property acquired after January 19, 2025 may qualify for 100% bonus depreciation, and the Section 179 expensing limit was increased and is indexed after 2025. The federal information-reporting threshold for certain business payments also increased to $2,000 for payments made after 2025.
These changes may create opportunities, but eligibility and timing rules matter. The IRS Working Families Tax Cuts overview and the IRS Tax Guide for Small Business provide current federal guidance. A planning calculation should be completed before committing to a transaction solely for tax reasons.
Seven year-end planning moves to review
1. Update your full-year income forecast
Start with year-to-date financial statements and build a realistic projection through December 31. Include signed contracts, expected collections, payroll, owner compensation, planned purchases, and unusual expenses. Compare the forecast with prior-year results and estimated tax payments already made.
A current projection helps answer the most important planning questions: whether estimated payments should change, whether cash should be reserved for taxes, and whether income or deductions can be timed responsibly.
2. Evaluate equipment and technology purchases
If the business needs computers, machinery, furniture, software, or other qualifying property, review the purchase and placed-in-service dates before year-end. Bonus depreciation or Section 179 may allow accelerated deductions, but immediate expensing is not automatically the best answer.
Consider expected future income, financing, state treatment, and the possibility of depreciation recapture. Buy assets because they support the business; then determine the most useful tax treatment.
3. Review retirement-plan opportunities
Retirement plans can help owners and employees build long-term savings while potentially reducing current taxable income. Depending on the business, options may include a SEP IRA, SIMPLE IRA, 401(k), profit-sharing plan, or cash-balance plan.
For 2026, the IRS lists a $24,500 elective-deferral limit for 401(k), 403(b), and most 457 plans, subject to applicable catch-up rules. The overall contribution limit for defined-contribution plans is $72,000, excluding catch-up contributions. See the current IRS retirement-plan limits. Plan establishment and contribution deadlines vary, so review the options early.
4. Revisit owner compensation and distributions
S corporation shareholders who work in the business generally need reasonable compensation before taking distributions. Partnerships and C corporations follow different rules. Review wages, guaranteed payments, distributions, shareholder loans, health-insurance treatment, and retirement contributions together rather than as separate year-end transactions.
5. Clean up the books before planning
Tax projections are only as reliable as the underlying accounting records. Reconcile bank and credit-card accounts, review accounts receivable and payable, identify owner transactions, confirm loan balances, examine fixed assets, and investigate unusual or uncategorized items.
Clean books also make it easier to identify obsolete inventory, uncollectible receivables, duplicate expenses, and capital purchases that may have been recorded incorrectly.
6. Check payroll and contractor reporting
Confirm that employee names, Social Security numbers, addresses, taxable benefits, retirement contributions, and withholding records are accurate before Forms W-2 are prepared. Review contractor files for completed Forms W-9 and determine which payments require information reporting.
Beginning with reportable payments made after 2025, the federal threshold for certain information returns increased to $2,000. Different rules and exceptions still apply, so do not assume that every contractor payment falls under the same threshold.
7. Coordinate federal, Virginia, and DC planning
A federal deduction may receive different treatment on a Virginia or District of Columbia return. Businesses operating across jurisdictions may also face income-tax, franchise-tax, sales-tax, payroll, or local registration obligations. Review where employees work, where services are performed, and where customers are located before year-end.
A practical 2026 year-end checklist
- Reconcile all cash, credit-card, payroll, loan, and equity accounts.
- Prepare a full-year profit-and-loss and balance-sheet forecast.
- Compare projected tax with federal and state estimated payments.
- Review owner wages, distributions, loans, and benefits.
- Identify equipment that must be placed in service before year-end.
- Evaluate retirement-plan design and contribution deadlines.
- Collect missing Forms W-9 and verify employee information.
- Review inventory, receivables, payables, and fixed assets.
- Document significant transactions and business purpose.
- Schedule a planning meeting before December decisions become irreversible.
When should you start?
The best time is when your year-end forecast is reliable but you still have time to act. For many businesses, that means beginning in the third quarter and completing a second review in November or early December. Waiting until tax preparation season usually limits planning to reporting decisions that have already been made.
Build a year-end plan with Reckenen
Reckenen provides proactive business tax planning and preparation for companies in Northern Virginia and Washington, DC, with advisory support available nationwide. We help owners translate accurate financial information into practical decisions about tax, cash flow, compensation, and growth.
This article is for general informational purposes only and is not tax, legal, or investment advice. Tax outcomes depend on individual facts and applicable federal, state, and local law. Consult a qualified professional before acting.