What Business Owners Need to Do Before Tax Season Starts

Tax season starts today. The IRS opens e-filing for business returns on January 13, 2026, which means now is the time to get your business organized if you haven’t already.

Preparing early doesn’t just make tax filing smoother. It gives you time to identify potential issues, gather missing documents, and have meaningful conversations with your tax professional about tax-saving strategies. Waiting until the last minute means rushed preparation, missed deductions, and unnecessary stress.

Here’s your pre-season checklist to get your business tax-ready before the filing rush begins.

1. Update Your Bookkeeping

This is priority number one. Your bookkeeper or tax preparer can’t prepare accurate returns if your books aren’t current.

What this means:

All income recorded and properly categorized
All business expenses entered and categorized correctly
Bank accounts and credit cards reconciled through December 31
Any outstanding transactions from 2025 resolved

QuickBooks best practices:

Reconcile bank and credit card accounts monthly (at minimum)
Review your Profit & Loss and Balance Sheet regularly for oddities
Use consistent category names (don’t create duplicates like “Office Supplies” and “Office Expense”)
Use class tracking if you have multiple business lines or locations
Run bank feeds daily or weekly to catch transactions in real time
Don’t forget depreciation if you’re on the accrual basis!

Common categorization mistakes to watch for:

Personal expenses coded as business expenses
Business loan payments categorized entirely as expenses (only interest is deductible)
Large equipment purchases expensed instead of capitalized as assets
Mixing up similar categories (meals vs entertainment, repairs vs improvements)

If your books are months behind, catching up now prevents a last-minute rush. Many bookkeepers and tax preparers are less busy in December and early January, making it easier to schedule catch-up work before the filing deadline pressure hits.

2. Review Your Financial Reports

Once your bookkeeping is current, review your financial reports to make sure they make sense. This is the “sanity check” step that catches errors before they become tax return problems.

Pull and review these reports:

Profit & Loss Statement (January 1 - December 31, 2025):

Does your revenue match what you expected based on sales?
Are expense categories in line with prior years?
Any unusually large expenses that need explanation or documentation?
Does net income seem reasonable given your business activity?

Balance Sheet (as of December 31, 2025):

Do asset balances make sense (cash, accounts receivable, inventory, equipment)?
Are liability balances accurate (loans, credit cards, accounts payable)?
Is owner’s equity in line with what you’d expect?

Warning signs to investigate:

Negative cash balance (may indicate personal/business mixing or reconciliation errors)
Accounts receivable that includes very old invoices (write-offs needed?)
Inventory value that doesn’t match physical count
Loan balances that don’t match lender statements
Credit card balances that seem off

If something looks wrong, it probably is. Fix it now rather than trying to explain it to your tax preparer or the IRS later.

3. Confirm Contractor and Employee Information

If you paid contractors or employees in 2025, you need to issue 1099-NEC forms (for contractors) and W-2 forms (for employees) by January 31, 2026.

For contractors (1099-NEC requirements):

Paid $600 or more during 2025 for services
Not incorporated (though there are exceptions)
You should have a completed W-9 form on file

Steps to take now:

Pull a report of all contractor payments for 2025
Verify you have current W-9 forms with accurate addresses and tax IDs
If missing W-9s, request them now (contractors are more responsive in January than late February)
Confirm total payments match your records
Note: Many payment processors (PayPal, Venmo for Business, etc.) may issue 1099-Ks to your contractors directly

For employees (W-2 requirements):

Review year-end payroll reports
Confirm wages, federal withholding, state withholding, Social Security, and Medicare amounts are accurate
Verify employee addresses are current (W-2s get mailed)
Ensure any fringe benefits, retirement contributions, or other W-2 items are correctly reported

Missing or incorrect information now means:

Penalties for late or incorrect filing
Angry contractors or employees
IRS matching discrepancies that trigger notices later

The January 31 deadline comes fast. Don’t wait until late January to discover you’re missing a contractor’s Social Security number or correct address.

4. Separate Personal and Business Expenses

One of the most common bookkeeping issues for small businesses is mixing personal and business transactions. Now is the time to clean this up before tax filing.

Review your business accounts for:

Personal purchases on the business credit card
Business purchases on personal cards
Owner draws coded as business expenses
Personal vehicle use included in business mileage
Personal meals or entertainment coded as business expenses

How to handle personal expenses in business accounts:

Reclassify personal transactions as “Owner Draw” or “Shareholder Distribution” (depending on entity type)
Document any legitimate business use for items that appear personal
If you use business funds for personal expenses regularly, set up proper owner draw procedures going forward

Why this matters:

Audit risk: IRS audits often focus on personal vs business expense separation
Accurate records: Your Profit & Loss should reflect true business activity
Tax deductions: Only business expenses are deductible; claiming personal expenses is tax fraud
Entity compliance: Mixing personal and business funds can pierce corporate liability protection

If you regularly use your business account for personal expenses (or vice versa), consider establishing a monthly or quarterly owner draw instead. This creates cleaner records and better separation.

5. Organize Your Documents

Even with good bookkeeping, you need supporting documentation for tax filing and potential audits.

Gather and organize:

Receipts and invoices:

Major equipment or vehicle purchases
Significant expenses that may need documentation (travel, large vendor payments)
Any expenses the IRS commonly questions (home office, vehicle, meals and entertainment)
Charitable contributions (if your business made donations)

Payroll records:

Year-end payroll reports
Quarterly payroll tax filings (Form 941)
State unemployment and workers comp filings
Retirement plan contributions (401(k), SEP-IRA, SIMPLE IRA)

Tax notices and correspondence:

IRS notices or letters received in 2025
State tax notices
Estimated tax payment confirmations
Extension filings from prior years if still relevant

Other important documents:

Loan documents for business debt
Lease agreements (equipment, vehicles, real estate)
Insurance policies (business liability, vehicle, property)
Any contracts or agreements signed in 2025

Digital organization tips:

Scan paper receipts and store digitally (paper fades)
Use consistent file naming: “2025-12-15_Office_Depot_Supplies.pdf”
Organize by category or month in cloud storage (Google Drive, Dropbox, OneDrive)
Back up everything (multiple locations)
QuickBooks and similar software allow receipt attachment directly to transactions

The IRS can audit returns up to three years after filing (six years in some cases). Organized records make audits far less stressful. Even if your tax preparer doesn’t ask for it, it’s your responsibility to save the receipts.

6. Review Last Year’s Tax Return

Your 2024 tax return holds valuable information for preparing your 2025 return. Reviewing it now helps you avoid repeating mistakes and identify items to track.

What to look for:

Carryforward items:

Net operating losses (NOLs) being carried forward
Unused business credits
Depreciation schedules for equipment and vehicles
Section 179 or bonus depreciation elections
Basis adjustments for partnerships or S corporations

Estimated payment requirements:

If you owed tax in 2024, you likely owe estimated payments for 2025 (quarterly deadlines)
Calculate safe harbor requirements to avoid underpayment penalties
Adjust 2026 estimated payments based on 2025 income changes

Tax planning opportunities:

Deductions you missed that you could claim this year
Strategies that worked well (or didn’t)
Entity structure questions (is LLC/S-Corp/C-Corp still optimal?)
Retirement plan contributions you could increase

Common issues to avoid repeating:

Late estimated payment penalties
Missed depreciation deductions
Incorrect entity classification
Overlooked tax credits (R&D credit, work opportunity credit, etc.)

If you worked with a tax professional last year, review their notes or engagement letter for recommendations they made for 2025. Now is the time to implement those suggestions.

7. Check In with Your Tax Professional or Bookkeeper

Early January is the perfect time for a planning call with your tax professional or bookkeeper, before the filing season chaos begins.

Benefits of an early planning call:

Identify missing information or documents before the deadline crunch
Discuss tax-saving strategies that may still be implementable (retirement contributions, equipment purchases, etc.)
Estimate your tax liability so there are no surprises
Plan for estimated payments for 2026
Get on the calendar early (tax professionals book up quickly)

Questions to ask:

What documents do you still need from me?
Based on what you see, what will my tax liability look like?
Are there any deductions or credits I should be claiming?
Should I be making any changes to my business structure or processes?
What are my 2026 estimated payment requirements?
When should I expect my return to be ready?

If you don’t have a bookkeeper or tax professional:

This might be the year to consider professional help, especially if:

Your business is growing and bookkeeping is taking significant time
You’re not confident your books are accurate
You’ve experienced major business changes (new entity, employees, multi-state operations)
You want strategic tax planning, not just compliance filing

Professional bookkeeping services can:

Keep your books current and accurate throughout the year
Reconcile accounts and catch errors in real time
Prepare financial reports for decision-making
Ensure you’re ready for tax filing without last-minute scrambling
Integrate seamlessly with tax preparation

Many business owners find that professional bookkeeping pays for itself through time savings, accurate records, and better tax outcomes. The key is finding someone who understands your industry and business model.

The Bottom Line

Tax season preparation isn’t just about filing on time. It’s about having accurate records, avoiding costly mistakes, and positioning your business for tax savings.

The checklist:

✅ Update bookkeeping (income, expenses, reconciliations)
✅ Review financial reports (P&L, balance sheet sanity check)
✅ Confirm contractor and employee information (1099s, W-2s)
✅ Separate personal and business expenses
✅ Organize documents (receipts, payroll, tax notices)
✅ Review last year’s return (carryforwards, lessons learned)
✅ Check in with tax professional or bookkeeper (early planning call)

Why preparing now matters:

Catch and fix errors before they become tax return problems
Identify tax-saving opportunities while there’s still time to act
Avoid last-minute stress and rushed preparation
Get on your tax professional’s schedule before they’re overwhelmed
Start the year with clean, accurate books

The businesses that prepare early are the ones that file accurately, pay the right amount of tax (not more), and start the new year with confidence. The businesses that wait until March are the ones dealing with extensions, penalties, and unnecessary tax bills.

Which one will you be?

Need Help Getting Organized?

At JCT Tax Solutions, I provide both bookkeeping and tax preparation services for small businesses. Whether you need help catching up your books, preparing your tax return, or both, I’m here to make the process smoother.

Bookkeeping services:

Monthly bookkeeping and reconciliation
Financial report preparation
QuickBooks setup and training
Cleanup and catch-up for businesses behind on their books

Tax preparation services:

Business tax return preparation (Schedule C, partnerships, S-corps, C-corps)
Strategic tax planning to minimize liability
Multi-state filing for businesses operating across state lines
Year-round support, not just during filing season

Working with a professional who handles both your bookkeeping and tax preparation means better coordination, fewer surprises, and confident compliance. Your tax preparer should understand your books, and your bookkeeper should understand tax implications.

Ready to prepare for tax season the right way? Contact JCT Tax Solutions to discuss your bookkeeping and tax preparation needs. Let’s get your business organized and ready for filing season.

Disclaimer: This blog post provides general information about business tax preparation and should not be construed as tax advice for your specific situation. Tax laws and regulations are subject to change. For personalized tax and bookkeeping advice, please consult with a qualified tax professional.