Small business tax planning, before the year closes.

1. Choose how the business is taxed. By default, an LLC with one owner files on Schedule C with your personal return, and every dollar of profit pays Social Security and Medicare tax as self-employment tax. Electing S corp status changes that: you pay yourself a salary, and only the salary carries those taxes. The election usually fits once profit is steady and well above what your job would pay at another company. You file it on Form 2553, no more than 2 months and 15 days into the year it takes effect. For a calendar-year company that's March 15.

2. Set your owner salary. Once you're an S corp, pick a salary that fits the work you do and run it through payroll from the first month. Every $10,000 of salary carries about $1,530 of Social Security and Medicare tax, half paid by the company and half withheld from your check. Profit above the salary can come out as distributions without those two taxes. We help you set a figure you can back up with what similar work pays.

3. Pick a retirement plan early, and fund it as you go. A business with no employees other than the owner and a spouse can use a Solo 401(k). In 2026 you can put in up to $24,500 of your own pay, $8,000 more at age 50 or older, and an S corp can add up to 25 percent of your salary. The total can't go over $72,000 before catch-up amounts. A SEP IRA is simpler, and you can open and fund it as late as your business return's due date, extensions included.

4. Plan around the QBI deduction. Many owners of sole proprietorships, partnerships and S corporations can deduct up to 20 percent of their qualified business income. Your S corp salary doesn't count toward it, so a higher salary means a smaller deduction. Above an income level the IRS sets each year, more limits apply, especially to service businesses. That's why we set the salary, the retirement deposit and the QBI deduction together.

5. Pay estimated taxes on the four dates. The four payments are due April 15, June 15 and September 15 of the tax year, then January 15 of the next. You stay clear of the underpayment penalty if you pay the smaller of 90 percent of this year's tax or 100 percent of last year's. Owners whose adjusted gross income topped $150,000 last year use 110 percent of last year's tax. Federal income tax withheld from an S corp paycheck counts toward the total.

6. Set up an accountable plan. If your company is an S corp or a C corp and you pay business costs out of your own pocket, an accountable plan lets the company pay you back. The cost has to be for the business, you report it with records within a reasonable time, and you return anything you were paid beyond the cost. When those rules are met, the payment isn't wages, so it carries no payroll tax, and the company deducts it.

7. Hire family for real work. In a sole proprietorship, or a partnership owned only by a child's parents, pay to a child under 18 carries no Social Security or Medicare tax, and pay to a child under 21 carries no federal unemployment tax. A corporation, including an S corp, pays those taxes on a child's wages like anyone else's. Either way, fair pay for real work is a business deduction, and a child can use the standard deduction against it.

8. Time income and purchases near year end. Equipment the business needs, bought and in use by December 31, can often be deducted in full this year. The IRS says the 100 percent first-year deduction is permanent for qualified property acquired after January 19, 2025, and the Section 179 limit is $2,500,000 for 2025, with yearly inflation increases after that. If you use the cash method, a real business bill you pay in December counts this year. Buy only what the business needs, because a deduction never covers the whole cost.

Here's an example with made-up numbers. A consultant runs a one-owner LLC, files single, has no other income, and expects $130,000 of profit in 2026 before paying herself. Left on Schedule C, about $18,370 of that profit would go to self-employment tax.

Once the LLC files as an S corp, she draws a $65,000 salary through payroll. Social Security and Medicare on that wage come to $9,945, roughly $8,425 below the Schedule C figure. Payroll fees, a separate S corp return and a smaller QBI deduction take back part of that, and we price those with her before she files.

Her salary also opens a Solo 401(k): $24,500 deferred from her paychecks, and $16,250 from the company, which is 25 percent of the wage. Putting away $40,750 trims her federal taxable income by about $37,500 once the QBI change is counted. All of that sits in her 22 percent bracket, so she keeps roughly $8,250 of federal income tax this year, and pays tax on the money when she withdraws it in retirement.

The full example, with how she covers her estimates, an accountable plan and a December equipment purchase, is on the worked tax planning example. Your numbers will be different. On the call, we run the same steps with yours.

January to March. Pick your salary for the year and get the first payroll running. Pick the retirement plan and how much of each paycheck goes in. Set up the accountable plan. If you want S corp status for this year, file Form 2553 by March 15.

April 15. File your personal return or an extension, pay the first estimate for this year, and make any IRA deposit for last year.

May and June. Compare the first months of the year with the plan. If profit is running higher or lower, change the June 15 estimate, the salary or the retirement deposits now, while there are months left to spread the change.

September and October. Pay the September 15 estimate. Then forecast the year to December 31 and pick the year-end moves: equipment you need, bills to pay, and what's left to put in the retirement plan through payroll.

December 31. Payroll deferrals into a 401(k), equipment placed in service, and most timing moves have to be done by this date.

After the year ends. The fourth estimate is due January 15. A SEP IRA can still be opened and funded up to the business return's due date, including extensions. Then the plan for the new year starts.

Steven Palmieri looks at last year's return and your numbers so far this year with you. You hear which of the eight moves fit your business, which ones you already use, and which ones still count this year.

You leave with the next two or three steps and the dates they're due. If you want help after that, you see the price first, as a monthly retainer or a fixed-fee project. Most owners on a retainer get the books, the plan and the return from the same practice.

Bring last year's return if you have it, and access to your books. A rough idea of this year's profit is enough to start. If the books are behind, we can help you catch them up so the plan uses real numbers.

Is my business big enough for tax planning? Most owners can use some of these moves at any size, such as a retirement plan, on-time estimates and the QBI deduction. The S corp election usually waits until profit is steady. Tax planning for a small business walks through which moves fit at which size.

Is it too late to plan this year? Rarely. Equipment, retirement deposits through payroll and timing moves can still be made until December 31, and a SEP IRA can be funded after that. The page on year-end tax moves lists what still counts.

Do I need a company first? No. Sole owners use most of these moves too. If a company would help, we talk through which kind and when to form it.

How is this different from my tax preparer? A preparer files what already happened. We plan the year with you before it ends and keep your books current so the plan uses real numbers. If you like your preparer, we can work alongside them.