Tax planning, not just tax paying

Book the meeting in October or November, while there's still time to act. Bring year-to-date books, last year's return and a list of big purchases you're considering. Ask your tax pro about:

• Setup and owner pay. An S corporation election changes how owner pay is taxed, but there's no single best structure. Owner-employees must take reasonable wages before distributions, and the IRS can reclassify distributions as wages. Form 2553 is due within 2 months and 15 days after the start of the tax year it covers, or any time during the year before.
• Retirement plans and credits. Employers with 100 or fewer employees can get a credit for startup costs for 3 years, capped each year at the greater of $500 or the lesser of $250 per eligible non-highly-paid employee and $5,000. There's $500 a year for 3 years for automatic enrollment, plus a credit of up to $1,000 per employee for employer contributions that steps down after year two and is smaller for employers with more than 50 employees.
• The qualified business income (QBI) deduction. Up to 20% of qualified business income, made permanent by the 2025 law. For 2026, people with at least $1,000 of qualified income from an active business get at least a $400 deduction.
• Records. Receipts, mileage logs, payroll records and job records, kept all year.

For 2026, Section 179 lets a business expense up to $2,560,000 of equipment, phasing out above $4,090,000, and bonus depreciation is a permanent 100% for property acquired after January 19, 2025. Your tax pro can help you time a purchase you already need.

Example (made-up numbers): Ray thinks about buying a $40,000 used truck in December "for the write-off." At a made-up combined tax rate of 30%, expensing it saves about $40,000 × 0.30 = $12,000 in tax this year. He still spends $40,000, so the truck costs him about $28,000 after tax. If the business needed the truck, the timing helped. If it didn't, he spent $28,000 to save $12,000. Expensing it now also leaves no deduction for later years and can lower the profit a lender sees on this year's return (B102.3). If he finances it, the loan still has to pass all five Borrowing Rules.

If the business pays employees back for using their own vehicles or phones for work, an accountable plan keeps those payments from counting as wages. The plan must require three things: the expenses are for the business, the employee backs them up within a reasonable time, and any extra money comes back within a reasonable time. Paid that way, reimbursements aren't subject to income, Social Security, Medicare or federal unemployment taxes. Payments under a plan that skips those rules are wages.

Mileage paid at the IRS business rate counts as backed up for the amount, as long as the miles and the business reason are logged. For 2026 the rate is 72.5 cents a mile from January 1 to June 30 and 76 cents from July 1 to December 31. A phone the business provides mainly for business reasons is a tax-free working condition benefit. Ask your tax pro how these rules apply to you as an owner.

• Internal Revenue Service: Retirement plans startup costs tax credit
• Internal Revenue Service: Qualified business income deduction
• Internal Revenue Service: Dirty Dozen tax scams for 2026
• America's SBDC: Find Your SBDC for free business consulting