Tax season hits different in 2026. New IRS rules. Changed depreciation schedules. Higher stakes for non-compliance.
This checklist eliminates guesswork. Follow the phases. Document everything. Stay compliant.
Phase 1: Core Documents
Gather these first:
Prior Year Tax Return (2025)
- Carryover losses
- Depreciation schedules
- Ending balance sheet
Business Identifiers
- EIN confirmation letter
- State tax ID numbers
- Local tax account numbers
Beneficial Ownership Information (BOI)
- FinCEN filing confirmation
- Ownership structure documentation
- Updated beneficial owner records
Missing BOI filings trigger daily penalties. Verify compliance now.
Personal Information (If Sole Proprietor)
- Social Security numbers
- Dependent information
- Spouse details for joint returns
Phase 2: Income Records
Document every dollar earned:
1099 Forms
- 1099-NEC from clients ($600+ threshold)
- 1099-MISC for other income
- 1099-K from payment processors
Direct Revenue
- Bank statements showing deposits
- Sales records and invoices
- Customer payment logs
- Cash receipts
Additional Income
- Rent received on business property
- Interest from business accounts
- Awards or prizes
- Legal settlements
Deductions from Income
- Returns issued to customers
- Allowances granted
- Bad debt write-offs
Phase 3: Expense Documentation
Every expense reduces taxable profit. Organize by category.
Cost of Goods Sold (COGS)
- Beginning inventory (must match 2025 ending)
- Purchase receipts for resale items
- Manufacturing materials
- Ending inventory count (December 31, 2025)
Operating Expenses
Track these monthly:
- Rent and lease payments
- Utilities (electric, water, gas, internet, phone)
- Office supplies
- Insurance premiums
- Legal and professional fees
- Marketing and advertising costs
- Bank fees and merchant processing
- Business licenses and permits
Business Meals & Travel
- Meals directly related to business (50% deductible)
- Lodging receipts
- Airfare and ground transportation
- Conference and seminar fees
Choose your vehicle deduction method:
- Standard mileage rate: Log miles, dates, business purpose
- Actual expense method: All vehicle costs, maintenance, gas
Home Office
Required measurements:
- Square footage of dedicated office space
- Total home square footage
- Mortgage interest or monthly rent
- Percentage of utilities attributable to office
- Homeowners insurance allocation
Space must be used exclusively and regularly for business.
Asset Purchases
Critical for 2026: Assets placed in service after January 19, 2025 qualify for 100% bonus depreciation under new OBBBA rules.
Document:
- Purchase invoices for equipment
- Computers and software
- Furniture and fixtures
- Vehicles used for business
- Machinery and tools
- Date placed in service
Retirement Contributions
Maximum deductions available:
SEP IRA:
- 25% of employee compensation
- 20% for self-employed individuals
SIMPLE IRA or Solo 401(k):
- Employee deferrals
- Employer matching contributions
- Combined limit: $69,000 for 2026
Repairs vs. Improvements
Distinguish carefully:
- Repairs: Deduct immediately (maintains current condition)
- Improvements: Depreciate over time (adds value or extends life)
Phase 4: Payroll Documentation
Required if you have employees:
Federal Forms
- W-2 for each employee
- W-3 transmittal to Social Security Administration
- Form 940 (FUTA unemployment tax)
- Form 941 or 944 (quarterly/annual withholding)
Payment Records
- Payroll tax deposits
- Federal withholding payments
- State unemployment contributions
- Payment confirmation receipts
Employee Benefits
- Health insurance premiums paid
- Retirement plan contributions for employees
- Other fringe benefit costs
Late payroll tax deposits trigger immediate penalties. Verify all payments cleared on time.
2026 Compliance Updates
Enhanced Depreciation
OBBBA rules changed the game. Assets acquired after January 19, 2025 qualify for 100% first-year bonus depreciation.
This applies to:
- Machinery and equipment
- Business vehicles
- Computers and technology
- Furniture and fixtures
QBI Deduction Remains Permanent
Section 199A provides 20% deduction on qualified business income for:
- Sole proprietorships
- Partnerships
- S corporations
- LLCs
Phase-out thresholds:
- Single filers: $201,775
- Married filing jointly: $403,550
Calculate carefully. Phase-out reduces deduction percentage as income rises.
Business Interest Limitation
Current rules remain through 2029. Interest deduction limited to 30% of adjusted taxable income calculated on EBITDA basis.
Document all business interest expenses. Carryforward limitations apply.
1099 Reporting Changes
Threshold remains $600. Payment app providers must issue 1099-K for transactions exceeding this amount.
Cross-reference all 1099-K forms with your income records. Discrepancies trigger IRS matching notices.
Estimated Tax Payments
Track quarterly payments made:
- Form 1040-ES vouchers
- Electronic payment confirmations
- State estimated tax payments
- Payment dates and amounts
Underpayment penalties apply if quarterly payments fall short. Safe harbor: 100% of prior year tax (110% if AGI exceeds $150,000).
Record Retention
Keep these documents for specified periods:
3 Years Minimum
- Tax returns
- Income statements
- Expense receipts
- Bank statements
7 Years Recommended
- Asset purchase records
- Depreciation schedules
- Payroll records
- Forms W-2 and 1099
Indefinite
- Business formation documents
- Property purchase records
- Stock and ownership records
Free Checklist Download
Access the complete 2026 tax preparation checklist at mcgservicellc.com.
Printable PDF includes:
- Month-by-month preparation timeline
- Category-specific expense tracker
- Document organization system
- Deadline reminders
Next Steps
Organize documents now. Waiting until April creates unnecessary stress and missed deductions.
Schedule quarterly reviews. Catch issues early. Adjust estimated payments as needed.
Consult a tax professional for complex situations. Business structure changes, significant asset purchases, or multi-state operations require expert guidance.
Need help staying compliant? MCG Service specializes in small business tax planning and IRS compliance. We navigate the 2026 changes so you don't have to.
Start your checklist today. Tax season doesn't wait.