S-Corp Year-End Tax Planning Checklist

Year-end tax planning for an S-corp owner is mostly payroll and paperwork with hard dates. Salary has to be fixed before the last payroll runs. A new 401(k) that takes employee deferrals generally has to be adopted by December 31. The fourth estimated payment is due January 15, 2027. Miss those dates and most of the levers for 2026 are gone.

This checklist gives your firm one dated list to run per S-corp client in the fourth quarter of 2026. Each item names three things: the rule behind it, the deadline, and the document the firm keeps in the file. That last part matters most. A year-end decision without a workpaper behind it is a decision the Reviewer can't check and nobody can defend later.

Every figure below is for the 2026 tax year and was checked against its source on September 23, 2026.

How to use this checklist

Run it twice per client. The first pass is in October, when you still have two or three payrolls and a full quarter to act. The second is a short closeout in mid-December, to confirm what actually happened.

Each item below is a blockquote with three lines. Rule is the requirement and its source. Deadline is the date that closes the item. Keep is the document that goes in the client file. Copy the blocks into your year-end workpaper or task list as they are.

The Q4 2026 S-corp year-end checklist

The items run roughly in date order. Most close by December 31, 2026. Two carry into 2027: employer retirement contributions in item 3 can be deposited up to the S corp's return due date, and the fourth estimate in item 7 is due January 15, 2027.

1. Officer salary true-up (October to November 2026)

Compare the officer's year-to-date W-2 wages with the salary support in the file. If wages are short, adjust the remaining payrolls now, not in the last week of December.

• Rule: Officer wages are subject to Social Security tax up to the 2026 wage base of $184,500 (SSA, October 24, 2025), and Medicare tax of 1.45% each on all wages with no cap, plus the 0.9% Additional Medicare Tax, which the employer withholds on an employee's wages above $200,000 for the year; the owner's own threshold depends on filing status (IRC §3101(b)(2)). The IRS says on its S corporation compensation page that an S-corp officer who performs services should receive reasonable compensation before taking distributions.
• Deadline: The last 2026 payroll run.
• Keep: The salary support (a reasonable compensation study or memo), the year-to-date payroll register, and a note of any change made to remaining payrolls.

For how firms build the salary support, see how to determine reasonable compensation for an S corp. For the split between wages and distributions, see S-corp salary vs. distribution.

2. Final officer payroll and 2%-shareholder health insurance (by December 31, 2026)

Health premiums the S corp paid for a 2% shareholder have to reach the W-2 through payroll. They're easy to miss if they were paid from the operating account.

• Rule: Premiums paid by the S corp for a 2% shareholder are included in W-2 Box 1 wages and excluded from Boxes 3 and 5 (not subject to Social Security or Medicare tax) when the conditions are met (IRS Notice 2008-1; IRC §1372).
• Deadline: Included in payroll before the 2026 payroll year closes.
• Keep: Premium statements for 2026, the payroll adjustment entry, and the payroll provider's confirmation that the amount is in Box 1.

The owner-payroll rules behind this item are covered in S-corp payroll requirements for owners.

3. Retirement funding (December 31, 2026 and March 15, 2027)

Employee deferrals come out of 2026 wages, so they have to run through 2026 payroll. Employer contributions have more time. The officer's salary sets the base for both, which is one more reason item 1 comes first.

• Rule: 2026 elective deferral limit $24,500; catch-up $8,000 at age 50 and over (total $32,500), or $11,250 at ages 60 to 63 in place of the $8,000 (total $35,750); annual additions capped at $72,000 under §415(c) (IRS Notice 2025-67). A new 401(k) that takes 2026 employee deferrals generally has to be adopted by December 31, 2026 for a calendar-year employer (SECURE / SECURE 2.0). A new plan for employer contributions only may be adopted after year-end, up to the S corp's 2026 return due date including extensions (IRC §401(b)(2)). Employer contributions are deductible for 2026 if deposited by the return due date including extensions (IRC §404(a)(6)).
• Deadline: December 31, 2026 for deferrals and new-plan adoption for deferrals. March 15, 2027 for employer deposits, or September 15, 2027 if the Form 1120-S is extended (Form 1120-S instructions).
• Keep: The signed plan adoption document, the owner's deferral election, payroll records showing the deferrals, and deposit confirmations for employer contributions.

4. Accountable plan reimbursements (December 2026)

Before year-end, confirm that 2026 owner expenses were substantiated and reimbursed through the accountable plan as they occurred. A December sweep of expenses from earlier in the year can fall outside the plan's timing rules and lose accountable-plan treatment. The plan rules themselves are covered in the accountable plan guide.

• Rule: Reimbursements under an accountable plan need a business connection, substantiation, and return of any excess (Treas. Reg. §1.62-2(c)-(f)). Under the fixed-date safe harbor, the owner substantiates within 60 days and returns any excess within 120 days (Treas. Reg. §1.62-2(g)(2)(i)). When the rules are met, reimbursements aren't wages and don't go on the W-2 (Treas. Reg. §1.62-2(c)(4)). The 2026 business standard mileage rate is 72.5 cents a mile for January 1 to June 30 and 76 cents for July 1 to December 31 (IRS newsroom).
• Deadline: Each expense substantiated within 60 days of being paid or incurred under the fixed-date safe harbor; any open items reimbursed by December 31, 2026.
• Keep: The written accountable plan, the owner's expense reports, mileage logs split by the two 2026 rate periods, and the reimbursement entries.

5. Shareholder basis check (before any December distribution)

Roll each shareholder's stock and debt basis forward to the current date before anyone approves a year-end distribution or counts on a 2026 loss.

• Rule: Shareholder basis is adjusted each year for income, losses, and distributions (IRC §1367). Losses are limited to stock and debt basis (IRC §1366(d)), and for an S corp with no accumulated earnings and profits, distributions over stock basis are generally taxed as gain (IRC §1368). Form 7203 is the shareholder's basis schedule, filed with the 1040 when it's required.
• Deadline: Before the December distribution is approved.
• Keep: The basis schedule for each shareholder, prior-year Form 7203s, and shareholder loan documents.

6. Distributions (December 2026)

Distributions follow the salary decision, not the other way round. Approve them against the basis schedule from item 5 and in proportion to ownership.

• Rule: Distributions reduce basis, and for an S corp with no accumulated earnings and profits, any amount over stock basis is generally taxed as gain (IRC §1368). Salary is set first under item 1.
• Deadline: December 31, 2026 for anything the owner wants counted in 2026.
• Keep: The distribution ledger by shareholder, the owner's approval, and a tie-out to the basis schedule.

7. Fourth-quarter estimate and safe harbor (January 15, 2027)

This item and the employer retirement deposits in item 3 are the two that run past year-end. Work out the safe-harbor amount in December so the owner knows the January figure before the holidays.

• Rule: The owner avoids the underpayment penalty by paying the lesser of 90% of current-year tax or 100% of prior-year tax, or 110% if prior-year AGI was over $150,000 ($75,000 married filing separately) (IRC §6654(d)(1)). The 2026 installments are due April 15, June 15, and September 15, 2026, and January 15, 2027 (Form 1040-ES).
• Deadline: January 15, 2027.
• Keep: The prior-year return, the safe-harbor calculation, and confirmations for all four 2026 payments.

Illustrative example: one owner's December

Illustrative example. An S-corp owner is 52 years old. Prior-year AGI was $180,000 and prior-year total tax was $30,000.

• Retirement: at 52, the owner can defer $24,500 plus the $8,000 catch-up, for $32,500 of 2026 deferrals (IRS Notice 2025-67). That amount has to come out of 2026 payroll, so the deferral election goes to the payroll provider before the last December run.
• Estimated tax: prior-year AGI of $180,000 is over $150,000, so if the firm plans to the prior-year safe harbor, the figure is 110% (IRC §6654(d)(1)). 110% of $30,000 is $33,000, or four installments of $8,250. If the owner paid $8,250 on each of the April, June, and September dates ($24,750 so far), the January 15, 2027 payment is $33,000 minus $24,750, which is $8,250.

The firm keeps the deferral election, the payroll record, and the safe-harbor calculation in the file. Actual results vary based on income, industry, and state.

From checklist to a signed-off file

Each item above leaves one document. Put them together and you have the workpaper trail for the owner's year: the salary support, the payroll adjustments, the plan documents, the reimbursement records, the basis schedule, the distribution ledger, and the estimate calculation. The Reviewer signs off on that file, not on a conversation.

The salary support is where TracePrep works today. The Reasonable Compensation Study builds the officer salary figure with a source for every number, in workpapers the firm owns, and the Reviewer signs off on it. See how a Study is built. TracePrep is building a tax-planning workflow for the rest of the plan; it's in development. For the full plan deliverable these items feed, see the S-corp tax planning memo.

Conclusion

Year-end work for an S-corp owner comes down to seven dated items and the document each one leaves. Run the list in October, close it in December, and only the January estimate and any employer retirement deposits due by the return date carry into 2027.

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Figures and rules on this page are as of September 23, 2026, from the sources cited inline. Not tax advice: limits change each year, and the right answer for any owner depends on their facts.

TracePrep is a software product from TracePrep Inc., not a CPA firm. This content is operator experience for educational purposes; it is not tax advice and has not been reviewed by a licensed CPA. Consult a qualified tax professional for guidance on your specific situation. Source citations in TracePrep workpapers support audit defense but do not guarantee IRS outcomes.