The most useful year-end tax work is simple: get your books current, plan equipment purchases before December 31, check contractor details for Form 1099-NEC, and plan your last estimated tax payment.
1. Bring your books up to date
Reconcile every account through November, then finish December in early January.
- Separate personal and business spending
- Identify invoices that are truly uncollectible
- Count inventory on December 31 if you hold stock
Writing off an invoice in your books does not automatically create a tax deduction. An accrual-basis business may generally deduct an unpaid customer invoice if the amount was previously included in income and the debt becomes wholly or partly worthless.
For a partially worthless debt, the deductible amount is generally limited to the amount charged off on the books during the tax year. A cash-basis business generally cannot deduct unpaid invoices that were never included in taxable income.
Behind on your books? Our bookkeeping services cover catch-up and cleanup work in QuickBooks Online and Xero.
2. Plan equipment purchases and depreciation before December 31
For depreciation deductions such as Section 179 and bonus depreciation, qualifying equipment generally must be placed in service by December 31. It must be ready and available for its intended business use.
| Rule | 2026 amount | What it means |
|---|---|---|
| Section 179 expensing | Up to $2,560,000 | Deduct qualifying equipment in year one; the limit shrinks once the total cost of Section 179 property placed in service exceeds $4,090,000 |
| Bonus depreciation | 100% | Generally available for qualifying property acquired and placed in service after January 19, 2025 |
| De minimis safe harbor | $2,500 per invoice or item ($5,000 with an applicable financial statement) | Expense small purchases instead of depreciating them |
Section 179 is also limited to your business taxable income. It cannot create or increase a loss, but the unused amount can carry forward.
The de minimis safe harbor is an annual election: a statement attached to your timely filed original return, including extensions. A consistent expensing policy must be in place on the first day of the year. It must be in writing only if you have an applicable financial statement.
3. Collect W-9s and prepare for Form 1099-NEC
For payments made in 2026, the Form 1099-NEC threshold is $2,000, up from $600. Payments to corporations are generally exempt, but attorney fees are still reported on Form 1099-NEC. Medical and healthcare payments of $2,000 or more are generally reported on Form 1099-MISC, even when paid to an incorporated provider, subject to applicable exceptions.
- Total your 2026 payments to each contractor
- Request Form W-9 from U.S. contractors who do not have a taxpayer ID on file. For foreign contractors, collect the appropriate Form W-8 or other applicable documentation and review any withholding and reporting requirements separately.
You may also need a Form 1099-NEC for a smaller payment if you withheld federal income tax under the backup withholding rules.
Form 1099-NEC is due to recipients and the IRS by Monday, February 1, 2027, because January 31 falls on a Sunday.
4. Plan your fourth-quarter estimated tax payment
The final 2026 estimated tax payment for individuals is due Friday, January 15, 2027. You can skip it if you file your 2026 Form 1040 or 1040-SR and pay the full balance by Monday, February 1, 2027 (IRS Publication 505).
This exception does not remove penalties for underpaying earlier installments.
5. Review retirement contributions
Eligible pre-tax contributions can lower your current taxable income; Roth contributions do not.
- 401(k): employee elective deferrals up to $24,500 for 2026, plus an $8,000 catch-up at age 50 or older ($11,250 at ages 60 to 63). Employer contributions count toward a $72,000 overall limit, not including catch-ups.
- SEP-IRA: up to the lesser of 25% of eligible compensation or $72,000. Self-employed owners use a special calculation based on net earnings from self-employment.
- Traditional and Roth IRA: up to $7,500 combined, plus a $1,100 catch-up at age 50 or older. Income limits can restrict Roth contributions and the deduction for traditional IRA contributions.
A SEP-IRA can generally be established and funded by your tax return's due date, including extensions. Traditional and Roth IRA contributions for 2026 can generally be made by April 15, 2027, without an extension. 401(k) deadlines differ for employee deferrals and employer contributions. A special first-year rule also applies to certain sole proprietors with no employees. Check your plan's requirements before year-end.
6. Check where you stand for the QBI deduction
Eligible owners of sole proprietorships, partnerships and S corporations may deduct up to 20% of qualified business income (QBI). For 2026, additional limitations begin to phase in above $201,750 of taxable income before the QBI deduction for most taxpayers ($403,500 for married couples filing jointly and $201,775 for married individuals filing separately). These limitations generally apply in full above $276,750, $553,500, and $276,775, respectively.
Specified service businesses, including accounting and some consulting, lose the deduction gradually across that range and get none above it. Other businesses can face limits based on wages paid and business property.
New for 2026: eligible taxpayers may qualify for a minimum QBI deduction of $400 if their aggregate qualified business income from all active qualified trades or businesses in which they materially participate is at least $1,000, subject to applicable rules. If you are near these income thresholds, review your projected income before year-end.
7. Foreign-owned LLC? Check whether Form 5472 applies
A U.S. single-member LLC wholly owned by a foreign person and treated as a disregarded entity (no corporate election) generally must file Form 5472 with a pro forma Form 1120 for any year it has reportable transactions with its foreign owner or another foreign related party.
Reportable transactions include capital contributions, distributions, other payments between the LLC and its foreign owner, and amounts paid or received to form, acquire or dissolve the LLC. Having no business income does not remove the requirement, so keep records of these transactions all year.
Our Form 5472 service handles current and missed years.
Your year-end dates at a glance
| Task | Date |
|---|---|
| Place equipment in service | Thursday, December 31, 2026 |
| Year-end inventory count | Thursday, December 31, 2026 |
| Fourth-quarter estimated tax (2026) | Friday, January 15, 2027 |
| Form 1099-NEC to contractors and the IRS | Monday, February 1, 2027 |
Get your year-end done with one team
Check your dates with our free tax deadline finder. Ready to file? Our U.S. tax preparation team prepares 1040, 1065, 1120-S and 1120 returns, with a three-level review on every return and a written quote before any work begins.
Sources
- Depreciation: Rev. Proc. 2025-32 (2026 Section 179 limits), IRS guidance on 100% bonus depreciation (Notice 2026-11), Publication 946, Tangible property regulations (de minimis safe harbor)
- Bad debts: IRS Topic No. 453, Bad Debt Deduction
- Form 1099-NEC: Instructions for Forms 1099-MISC and 1099-NEC
- Estimated tax: Publication 505, 2026 Form 1040-ES
- Retirement limits: IRS 2026 401(k) and IRA limits, COLA increases for retirement plan limits, SEP contribution limits, SEP FAQs, Publication 590-A, Publication 560
- QBI deduction: Rev. Proc. 2025-32 (2026 QBI thresholds and minimum deduction), Publication 505
- Form 5472: Form 5472, Instructions for Form 5472
General information, not tax advice for your situation. Rules and amounts can change; we confirm the details before any filing.