Tax Strategies for Business Owners: A Year-Round Planning List

Most small business tax strategies fail on timing, not on knowledge. The election was available but the deadline passed; the plan could have been funded but was never adopted; the payment would have been deductible if it had cleared in December. This page is the calendar version of the tax planning strategies for small businesses that the rest of this blog explains one at a time. Each item is a sentence or two and a link. The deductions themselves are listed in small business tax deductions; the December checklist is in year-end tax planning.

First quarter: structure, elections and the owner's pay

• Confirm the entity. The choice between a sole proprietorship, an LLC taxed as a partnership, an S corporation and a C corporation drives self-employment tax, the QBI deduction and how you are paid. LLC vs S corp vs C corp is the comparison; an LLC that wants S status files Form 2553 no more than 2 months and 15 days after the start of the tax year the election is to take effect (Form 2553 instructions), covered in Form 2553.
• Set a reasonable salary before the first payroll. The IRS requires S corporation shareholder-employees to be paid reasonable compensation before non-wage distributions and can reclassify distributions as wages (IRS S corporation compensation page). The factors and the court cases are in S corp reasonable salary.
• Put the accountable plan in writing. Reimbursements for home office, mileage and phone stay out of wages only when the arrangement has a business connection, requires substantiation and requires the return of excess amounts (Treas. Reg. 1.62-2). Template and log: S corp accountable plan.
• Pick the estimated tax target. Paying 100% of last year's tax (110% if 2025 adjusted gross income was over $150,000) in four installments avoids the underpayment penalty regardless of this year's result (2026 Form 1040-ES). Details in estimated tax safe harbor.
• Make the PTET election where the state requires it early. New York takes the election online between January 1 and March 15 of the tax year; California elects on the return but requires a first payment by June 15; New Jersey's election is due with the original due date of its PTE-100 return, March 15 of the following year. State by state: PTET.

Second quarter: the returns that carry elections, and the credits

• File the R&D payroll election on the original return. A qualified small business (gross receipts under $5 million for the year and no gross receipts in any year before the 5-taxable-year period ending with that year) can elect to apply up to $500,000 of research credit against payroll tax, but only on a timely filed original return, extensions included (IRC 41(h)). An extension buys time; an amended return does not. The payroll credits service runs the eligibility check.
• Expense domestic research costs. Section 174A allows a deduction for domestic research or experimental expenditures paid or incurred in tax years beginning after December 31, 2024 (26 U.S.C. 174A), reversing the five-year amortization of 2022 to 2024. The transition choices are in section 174.
• Document Augusta rule meetings as they happen. Rental income from a home rented for fewer than 15 days in the year is excluded (IRC 280A(g)), but the corporation's deduction depends on fair rent and a real business purpose. Records that answer an examiner: the Augusta rule.
• Stop counting on WOTC for new hires. The work opportunity credit excludes wages of anyone who begins work after December 31, 2025 (IRC 51(c)(4)), and the IRS has retired the Form 8850 pre-screening request (IRS notice). The credits that remain are in payroll tax credits.

Third quarter: retirement plan design has a clock

• SIMPLE IRA by October 1. A SIMPLE IRA can be effective on any date from January 1 through October 1, unless the employer came into existence after October 1 (Publication 560).
• 401(k) before the deferrals start. To deduct contributions for a year, Publication 560 says the plan must be adopted by the last day of that year, and a safe harbor matching design carries a written notice requirement before the plan year (IRC 401(k)(12)(D)). A sole proprietor with no employees may adopt a 401(k) after year end by the filing deadline without extensions. The comparison of SEP, SIMPLE, solo 401(k), profit sharing and safe harbor designs, with the 2026 limits, is in retirement plans for business owners.
• Price a cash balance plan while there is time to adopt it. A defined benefit plan needs an actuary, a plan document and a funding schedule; the deduction can sit on top of a 401(k) within the combined limit in IRC 404(a)(7). How it works and who it fits: cash balance plan.
• Split the mileage log at July 1. The 2026 business rate is 72.5 cents per mile through June 30 and 76 cents from July 1 (Announcement 2026-11), so miles need dates.

Fourth quarter: cash out the door before December 31

• Place equipment in service, do not just order it. Section 179 allows up to $2,560,000 for tax years beginning in 2026 (Rev. Proc. 2025-32) and bonus depreciation is 100% for qualified property acquired after January 19, 2025 (IRC 168(k)), but both depend on the asset being placed in service, meaning ready and available for its use (Publication 946). The choice between them: section 179 and bonus depreciation; buildings and their components: cost segregation.
• Pay the PTET in the year you want the deduction. Notice 2020-75 allows the entity's deduction “for the taxable year in which the payment is made” (Notice 2020-75, section 3.02(2)). A payment that clears in January is next year's deduction.
• True up owner pay through payroll. Salary, bonus and the health insurance premiums of a more-than-2% shareholder all have to be on the W-2, which means through payroll before the last run of the year (IRS S corporation compensation page). See S corp health insurance and how to pay yourself from an S corp.
• Run the December checklist. Income and expense timing under your accounting method, charitable gifts, the January 15 estimate and the R&D records to capture are all in year-end tax planning, with dates in the business tax calendar.

The planning map on one table

Decisions with no quarter attached

• The QBI deduction is now permanent, and the thresholds moved. P.L. 119-21 struck the 2025 sunset from IRC 199A (26 U.S.C. 199A); the 2026 threshold is $403,500 on a joint return and $201,750 for other filers (Rev. Proc. 2025-32). Salary, W-2 wages and retirement contributions all move the number: the QBI deduction.
• Losses and interest carry rules of their own. A loss year raises the net operating loss carryforward and, for larger borrowers, the section 163(j) interest limitation: NOL carryforward and section 163(j).
• Open years can still be amended. A missed credit in a prior year is a refund claim, not a lost cause, within the refund window explained in how far back you can amend. That is the Credit Recovery half of BEG's tax planning service; Forward Tax Planning is this list, written down for your business and reviewed with your CPA.

Traps a planner should know in 2026

• The work opportunity credit does not apply to hires who begin work after December 31, 2025 (IRC 51(c)(4)).
• The individual SALT cap is $40,400 for 2026 but shrinks by 30% of modified adjusted gross income above $505,000, never below $10,000 (IRC 164(b)(7)). High earners are the ones the PTET election still helps.
• Section 179 cannot create a loss: the deduction is limited to taxable income from the active conduct of the business, with a carryforward (IRC 179(b)(3)). Bonus depreciation has no such limit.
• 2027 inflation-adjusted amounts (retirement limits, section 179, QBI thresholds) are not published. Plan 2027 on the 2026 figures and update when the IRS releases the notices.
• Records decide deductions for meals, travel and vehicles: IRC 274(d) requires adequate records of amount, time, place and business purpose (26 U.S.C. 274). A strategy without a log is an audit adjustment.

Sources: IRS, Instructions for Form 2553 (Rev. December 2020); IRS, S corporation compensation and medical insurance issues (reviewed March 3, 2026); 26 CFR 1.62-2, reimbursements and other expense allowance arrangements; 26 U.S.C. 280A, business use of home (280A(g)); IRS, 2026 Form 1040-ES, estimated tax for individuals; 26 U.S.C. 41, credit for increasing research activities (41(h)); 26 U.S.C. 174A, domestic research or experimental expenditures; 26 U.S.C. 51, work opportunity credit (51(c)(4)); IRS, Form 8850 is no longer in use (reviewed March 20, 2026); IRS, Publication 560 (2025), Retirement Plans for Small Business; IRS, Retirement plans FAQs regarding SEPs (reviewed August 1, 2026); IRS, Internal Revenue Bulletin 2026-29, Announcement 2026-11 (mileage rates from July 1, 2026); IRS, Notice 2020-75, entity-level state taxes; 26 U.S.C. 164, taxes (164(b)(7) SALT limitation amounts); 26 U.S.C. 179, election to expense certain depreciable business assets; 26 U.S.C. 168, accelerated cost recovery system (168(k)); IRS, Publication 946 (2025), How To Depreciate Property (placed in service); IRS, Rev. Proc. 2025-32, 2026 inflation adjustments; 26 U.S.C. 401, qualified plans (401(k)(12) safe harbor notice); 26 U.S.C. 199A, qualified business income; 26 U.S.C. 274, substantiation (274(d)); 26 U.S.C. 6511, limitations on credit or refund; IRS, About Form 5884, Work Opportunity Credit. Figures and rules checked against these sources on September 26, 2026. This is general information, not tax advice for your situation. Tax services are provided by licensed tax professionals under a separate engagement agreement. BEG does not provide tax advice.