Q4 Tax Planning: 10 Moves to Make Before December 31

· RKube Services

Ten year-end tax moves for small business owners before December 31, 2026: current books, S corp salary, retirement plans, equipment timing, estimates and more.

There are 86 days left in 2026. For a small business owner, that's the window where tax planning still changes the number. After December 31, most of what's left is reporting what already happened.

The moves below are the ones we see owners miss most. Some save tax this year. Some keep you out of trouble in January, when 1099s and W-2s are due and nobody has time to fix the books. None of them are exotic. They just have a deadline, and the deadline is the end of the year.

One note before the list: rules changed a lot for 2025 and 2026 after the federal tax law passed in July 2025. If you planned last year off an old checklist, some of it is out of date. We flag the changes where they matter.

1. Get the books current first

Every other move on this list depends on knowing your numbers. If your books are three months behind, you can't tell whether you're on track for a profit of $40,000 or $140,000, and those two years call for very different decisions.

Before November, do the basics:

  • Reconcile every bank and credit card account through September 30.
  • Categorize the uncategorized transactions. The "Ask My Accountant" bucket counts.
  • Run a year-to-date profit and loss, then project the last three months from your usual run rate.

That projected profit is the number you plan against. It doesn't have to be perfect. It has to be close.

2. Decide on equipment purchases with the real rules

Buying a truck, a laptop fleet or shop equipment in December is a classic year-end move. The 2025 law made it more attractive. 100% bonus depreciation came back permanently for qualifying property acquired after January 19, 2025, and the Section 179 expensing limit went up to $2.5 million, indexed for inflation after 2025.

Two cautions keep this honest:

  1. The equipment has to be placed in service by December 31. Ordered isn't enough. A truck sitting at the dealer in January doesn't count for 2026.
  2. A deduction only saves tax at your rate. Spending $50,000 to save maybe $12,000 is a bad trade if you didn't need the equipment.

Buy what the business needs, and time it well. Don't buy to chase a deduction.

3. Use the cash-method timing levers

Most small businesses keep their tax books on the cash method. That gives you some control over which year income and expenses land in.

  • Pay deductible bills you already owe before December 31: supplies, contractor invoices, software renewals.
  • If it fits your cash flow, you can prepay some expenses. Under the 12-month rule, a prepayment that covers no more than 12 months (and doesn't run past the end of next year) can usually be deducted when paid.
  • Holding December invoices until January can push income into next year. Money that's already available to you, like a check sitting in your drawer, still counts this year. You can't dodge it by not depositing it.

Timing works best when you expect a lower rate next year. If 2027 looks bigger, you may want the opposite: pull income into 2026.

4. Set your S corp salary before the last payroll

If your business is an S corporation, the owner-employees need a reasonable salary paid through payroll. The IRS looks hard at S corps that pay distributions with little or no wages.

Q4 is when to check it. Look at year-to-date wages against what the role would pay an outside hire, and adjust the remaining payroll runs. Fixing it in December is easy. Fixing it after a notice is not.

Two related year-end items for S corp owners who hold more than 2%:

  • Health insurance the company paid for you has to be added to your W-2 wages. Tell your payroll provider before the final run so the W-2 is right the first time.
  • If you pay business costs personally (home office, phone, mileage), reimburse yourself under a written accountable plan before December 31. Those reimbursements are deductible to the company and not income to you, as long as they're documented.

5. Fund retirement accounts while you still can

Retirement contributions are one of the few deductions that also build your own savings. The 2026 limits are higher than last year's:

  • 401(k) employee deferrals: $24,500, plus a catch-up of $8,000 at age 50 or older (a higher catch-up applies at ages 60 to 63).
  • IRA contributions: $7,500, plus a $1,100 catch-up at 50 or older.

The deadlines differ by plan, and this is where people get caught. For an existing 401(k), salary deferrals have to come out of 2026 pay, so the election needs to be in place before your last paycheck of the year. A SEP IRA can be opened and funded up to the due date of your return, including extensions. A new solo 401(k) has more flexible rules than it used to, but the details depend on how you're set up. Ask before December, not after.

6. Collect W-9s now, and note the new 1099 threshold

Starting with payments made in 2026, the reporting threshold for Forms 1099-NEC and 1099-MISC went from $600 to $2,000. It'll be adjusted for inflation after this year.

That cuts the number of forms some businesses have to file. It doesn't remove the need to track who you paid. Do this in October or November:

  • Pull a report of every vendor paid this year, by total.
  • Flag anyone at or near $2,000 who isn't a corporation.
  • Request a W-9 from each one now, while they still answer email.

1099-NEC forms are due to recipients and to the IRS by February 1, 2027 (January 31 falls on a Sunday). Chasing a missing taxpayer ID in late January is the most stressful part of the year for a lot of owners. You can avoid it entirely.

7. Clean up receivables and inventory

If you're on the accrual method, invoices you'll never collect are income you've already been taxed on. Review your aging report. Debts that are truly uncollectible, where you've made real attempts to collect, can be written off as bad debt before year-end.

Cash-method businesses don't get a bad debt deduction for unpaid invoices, because the income was never counted. The review still matters for your real numbers.

If you hold inventory, plan a count as close to December 31 as you can. Your cost of goods sold depends on the ending number. Write down damaged or obsolete stock based on what you find, and keep the count sheets.

8. Fix your mileage and vehicle records

Vehicle deductions get challenged because the records are thin. If you use the standard mileage rate, you need a log: date, destination, business purpose, miles. A guess written in March of next year isn't a log.

Use Q4 to rebuild the year while it's still fresh. Calendar entries, invoices and phone location history can help you reconstruct trips. Then start a simple app or spreadsheet so 2027 is easier.

Write down the odometer reading on December 31 too. It's one number that answers a question your preparer will ask.

9. Check your estimated payments

If you don't have enough withheld, you're expected to pay tax through the year. The fourth federal estimated payment for 2026 is due January 15, 2027. North Carolina's fourth installment is due the same day.

Run a quick projection using your year-to-date profit. If you've underpaid, you can usually avoid the penalty by meeting a safe harbor: paying at least 100% of last year's total tax (110% if your adjusted gross income was over $150,000), spread across the four due dates.

If you're an employee as well as a business owner, there's another route. Extra withholding from a W-2 job in December is treated as if it were paid evenly through the year. That can patch an earlier shortfall that a late estimated payment can't.

10. Look at the new rules that affect your return

A few items from the 2025 federal law change year-end planning for 2026 specifically:

  • The state and local tax deduction cap is $40,400 for 2026, up from $10,000 before 2025. It phases down for higher incomes. If you itemize, timing your state estimate or property tax payment may matter again.
  • The 20% qualified business income deduction for pass-through owners was made permanent. Your wages, entity type and type of business still affect how much you get.
  • Starting in 2026, people who don't itemize can deduct up to $1,000 of cash gifts to charity ($2,000 if married filing jointly). Itemizers now face a small floor of 0.5% of income before charitable gifts count.
  • Employers who pay tips or overtime have new reporting duties tied to the new employee deductions for tips and overtime. Make sure your payroll provider is ready before January W-2s.

For North Carolina, the personal income tax rate is 3.99% for 2026, and the corporate rate keeps stepping down. If your LLC or S corp might make the North Carolina pass-through entity tax election, run the numbers with your preparer before year-end, since it changes where the state tax is deducted.

A simple Q4 calendar

If the list feels long, spread it out:

  • October: books current through September, YTD profit and loss, projection, W-9 requests.
  • November: S corp salary check, equipment decisions, retirement deferral changes, accountable plan reimbursements.
  • Early December: pay or prepay bills, decide on December invoicing, charitable gifts.
  • December 31: inventory count, odometer reading, last payroll with W-2 adjustments.
  • January 15: fourth estimated payments, federal and NC.
  • February 1 (January 31 is a Sunday): 1099-NEC and W-2 deadline.

Where RKube fits

We're a bookkeeping, tax prep and payroll firm based in North Carolina, working with small businesses across the US. In Q4 we get clients' books current, build the year-end projection, run the last payrolls with the right W-2 adjustments and collect W-9s so January filings go out on time. We don't represent anyone before the IRS.

If your books are behind and you want a clear year-end number before December, start with a free 30-day bookkeeping trial and a short scoping call. Call (984) 234-7030 or visit rkubeservices.com.

This article is general information, not tax or legal advice. Limits and rules above are for tax year 2026 and can change. Talk with a qualified tax professional about your situation before acting.

More articles · Call (984) 234-7030