Year-end tax checklist for Pennsylvania small businesses: what to do before December 31, 2026

Most of the tax you will owe for 2026 is already decided by how the year has gone. What is still open is timing: what you buy, pay, and contribute before December 31, and how ready you are for the filing deadlines that follow. Here is the checklist we work through with clients every November and December.

1. Get the books current through November

Every decision below depends on knowing your actual profit for the year. Reconcile your bank and credit card accounts through the end of November and run a profit and loss statement. If the books are months behind, catching them up is the first step, not the last.

2. Estimate your 2026 tax before you spend

With a reliable profit number, estimate what you will owe. That tells you whether a year-end purchase or contribution is worth making, and whether your estimated payments have kept pace. The fourth-quarter federal and Pennsylvania estimated payments for 2026 are due Friday, January 15, 2027.

3. Time equipment purchases carefully

• 100% bonus depreciation is permanent. For qualifying property acquired and placed in service after January 19, 2025, the full cost can generally be deducted in the first year.
• Section 179 is higher for 2026. The expensing limit is $2,560,000, and it begins to phase out once total equipment purchases pass $4,090,000.
• It has to be in service by December 31. Equipment that is ordered but not delivered and set up by year-end generally counts for 2027, not 2026.
• Pennsylvania does not follow every federal depreciation rule. The state deduction can be smaller than the federal one, so check both before you buy something for the tax break.

A deduction is never a reason on its own to buy something you do not need. A $40,000 truck that saves you $10,000 in tax still costs you $30,000.

4. Fund retirement accounts

• 401(k) deferrals: up to $24,500 for 2026, plus an $8,000 catch-up if you are 50 or older.
• SIMPLE IRA deferrals: up to $17,000 for most plans.
• Total contributions to a defined contribution plan: up to $72,000 per person, counting both employee and employer amounts.

Some plans, and some kinds of contributions, have to be in place or run through payroll before December 31. If you want a new plan for 2026, raise it now, not in March.

5. S-Corporation owners: check payroll before the last pay run

• Reasonable salary. If you work in your S-Corporation, make sure you have paid yourself a reasonable salary through payroll this year before taking distributions.
• Health insurance. If the company pays health insurance premiums for an owner with more than 2% of the shares, those premiums have to be added to the owner's W-2 wages. They are generally not subject to Social Security and Medicare tax, but they do belong in Box 1.

6. Pull together your mileage

The IRS raised the business mileage rate partway through 2026. Miles driven January 1 through June 30 use 72.5 cents per mile, and miles driven July 1 through December 31 use 76 cents. Either way, the deduction depends on a log that shows dates, miles, and business purpose. Reconstructing a year of driving in April is hard. Finishing a log in December is not.

7. Consider the timing of income and expenses

If your business reports on a cash basis, paying December bills before year-end moves the deduction into 2026, and invoicing a late-December job in January moves the income into 2027. This only makes sense when you expect a similar or higher tax rate next year, and it should never strain your cash. Both are worth a quick look against your 2027 plans.

8. Get ready for 1099s and W-2s

• 1099s. For payments made in 2026, most 1099-NEC and 1099-MISC forms are required only at $2,000 or more per payee. Collect any missing W-9s now. Our article on the new $2,000 1099 threshold covers the exceptions.
• W-2s. Confirm every employee's address and Social Security number before the last payroll of the year. W-2s for 2026 are due to employees and the Social Security Administration by Monday, February 1, 2027, because January 31 falls on a Sunday.

9. Put 2027 on the calendar

Pennsylvania begins dissolving business entities that skip their annual report starting with the reports due in 2027. LLC reports are due September 30 and corporation reports June 30. If you are not sure your 2025 and 2026 reports were filed, check now. We will cover the details in an upcoming article.

None of these steps takes long on its own. Together, they are the difference between planning your taxes and finding out what they are in April.