End of Year Checklist for Business Owners

4 minutes ago

4 min read

From Bob Jennings at TaxSpeaker. Check out more at taxspeaker.com

As the year closes, there are several things we need you to do now rather than in the spring, because they cannot be reconstructed later.

The most important one is new this year. If any of your employees received tips or were paid overtime in 2026, their Forms W-2 must separately report those amounts, using new codes. Please read the payroll section below first – even if an outside service runs your payroll.

Payroll: tips and overtime must be reported on 2026 W-2s

Under the tax law enacted in July 2025 (the One Big Beautiful Bill Act), your employees may deduct up to $25,000 of qualified tips and up to $12,500 of qualified overtime ($25,000 on a joint return), subject to income limits, on their personal returns for 2025 through 2028. The amounts they deduct come from the W-2 you give them, so they will notice if the figures are missing or wrong. Nothing changes in how you pay or withhold: tips and overtime remain fully subject to income tax withholding and to Social Security and Medicare tax for both you and the employee. What changes is what you must track and report.

Points that are easy to get wrong

Only FLSA overtime counts. That means hours over 40 in a workweek for non-exempt employees. Daily overtime required only by state law, double time, holiday or weekend premiums paid under company policy or a union contract, and anything paid to salaried exempt employees are left out of code TT.
The premium is figured on the FLSA “regular rate.” That rate generally includes shift differentials and nondiscretionary bonuses, not just the base hourly wage.
Cash tips exist on paper only if employees report them. Charged tips come from your card processing, but cash tips come only from employee reports. Employees who receive $20 or more in tips in a month must report them to you by the 10th of the following month (Form 4070 or your electronic equivalent). Enforce it.
Payroll services report only what you give them. If tips or overtime premium are lumped into regular wages during the year, they cannot be pulled back out in January.

What to do before December 31

Ask your payroll provider, in writing, to confirm that your 2026 W-2s will report codes TP and TT in Box 12 and the occupation code in Box 14b.
Assign a Treasury Tipped Occupation Code to every employee who receives tips.
Confirm that cash tips, charged tips and mandatory service charges are recorded separately every pay period.
Confirm that the overtime premium is recorded separately, and that only FLSA-required overtime is included.
Run a year-to-date report of tips, overtime premium and occupation code by employee, and review it now. An error found in December is fixed with a payroll adjustment; one found after W-2s go out means a corrected Form W-2c for every affected employee.
Complete the tips and overtime checklist on the last page and return it with your year end information.

Restaurants and bars, and – beginning in 2025 – barbershops, salons, and nail, esthetics and spa businesses, may also claim a credit for much of the employer Social Security and Medicare tax paid on employees’ tips. The same tip records that support the W-2 support that credit.

Other payroll items

If you hired anyone this year, make sure you obtained completed Forms I-9 and W-4 before the first paycheck. If you contributed to employees’ Trump accounts (permitted beginning July 4, 2026), those contributions are also reported in Box 12, using code TA. Forms W-2 are due to employees and to the Social Security Administration by February 1, 2027 (January 31 falls on a Sunday).

Contractors and Forms 1099

For payments made in 2026, the Form 1099-NEC and 1099-MISC reporting threshold rises from $600 to $2,000. Please make sure you have a signed Form W-9 on file for every contractor you paid $2,000 or more, and get any missing ones now, while the contractor still wants to hear from you. Forms 1099-NEC are also due February 1, 2027.

Equipment and loans

Equipment purchases and financing continue to receive close attention. Before we can depreciate an asset, you must own it and it must be placed in service – delivered, installed and ready for use – by December 31. A deposit on equipment that arrives in January does not count this year. The title, delivery and loan paperwork proves both, so it matters as much as the payment. Please give us copies of the invoice and the loan or lease documents for anything you acquired this year.

This is worth doing carefully, because the write-off available is substantial. For 2026 the Section 179 expensing limit is $2,560,000, phasing out once total qualifying purchases pass $4,090,000 ($32,000 for heavy SUVs). Separately, 100% bonus depreciation is now permanent for property acquired after January 19, 2025. What we can claim depends on the acquisition date and the placed-in-service date, both of which come from the documents – which is why we ask for them.

Inventory

Please physically count your inventory at year end, keep the count sheets, and give us the total cost of inventory on hand at December 31, 2026. Do not include consignment goods you are holding for someone else. In an examination you must be able to produce the physical count sheets, so the count itself is not optional and an estimate will not do.

Corporate records

Corporate minutes must be maintained annually. We do not maintain them for you – they are kept by the officers of the corporation. S and C corporations are required to maintain minutes; an LLC generally is not.