The Fourth Quarter Checkup Every Small Business Owner Needs

There is a particular quiet that settles over a business in November. The summer push is behind you, the holiday rush may be ahead, and somewhere in the middle sits a stack of questions you have been politely ignoring since September. How much did the business keep this year? What do you owe, and when? Did you spend on the right things? Most of us avoid those questions because they feel big, but each one shrinks once you sit down with it for an hour.

Think of this as a checkup rather than an audit. You are not looking for what went wrong. You are taking your business's pulse while there are still seven weeks left in the year to act on what you find. The steps below go in order, because each one feeds the next, and you can do one per week between now and the middle of January.

Start with three numbers

Before you decide anything about taxes or purchases, you need a clear picture of your money. The nonprofit mentoring group SCORE says there are three financial documents every owner needs to keep up with: a profit and loss statement, a balance sheet, and a cash flow statement. The profit and loss statement, often called a P&L, adds up what came in and subtracts what went out over a stretch of time. The balance sheet is a snapshot of what the business owns and owes on a single day. The cash flow statement is the simplest of the three, since in its basic form it is beginning cash, plus money in, minus money out, which equals ending cash.

Here is how to pull them together if you have never done it. First, match your bookkeeping to your bank. The U.S. Small Business Administration lists bank reconciliation among the basics of managing business finances, and it means checking that every deposit and withdrawal on your bank statement appears in your records. Second, set your bookkeeping software or spreadsheet to run a P&L from January 1 through October 31. Third, run the same report for last year and put the two side by side. Look at three things only: total sales, total expenses, and what is left over.

Now make a rough guess about the rest of the year. Write down the sales you expect in November and December, subtract the expenses you already know are coming, and add that to your October number. This is your projected profit for the year, and it does not need to be exact. A business can show a healthy profit on paper while the bank account feels thin, because money may be sitting in unpaid invoices or tied up in inventory you bought for the holidays. Keep that gap in mind, because every step below depends on knowing both the profit number and the cash you really have.

Settle your estimated taxes

If you work for yourself, or your business passes its profit through to your personal return, nobody withholds tax from your income as you go. The IRS expects you to send it in four installments through the year. The final payment for 2026 is due January 15, 2027, and it covers income from September 1 through December 31. If your business is taxed as a C corporation, your date comes sooner, because the fourth installment is due December 15 for corporations. Your state may also have its own estimated tax dates, so check your state revenue department's website.

The easiest way to size your payment is the prior year method. H&R Block explains that you generally avoid an underpayment penalty by paying the lower of 90 percent of this year's tax or 100 percent of last year's tax, and that the last year figure rises to 110 percent if your adjusted gross income on last year's return was over $150,000. To use it, pull out your 2025 return and find the line labeled total tax, which a tax preparation firm called Dimov Tax identifies as line 24 on the prior return. Multiply that number by 100 percent or 110 percent depending on your income, then divide by four. That is what each installment should have been. Add up what you have already paid this year, and the difference tells you the least you need to send in January.

Two details save people from surprises. If you owe less than $1,000 when you file, Credit Karma notes that you are generally protected from the penalty. And paying a large fourth installment does not erase earlier late ones, since Dimov Tax warns that late payments in the first three quarters can still be penalized even when the last one covers the total. If this was a stronger year than you expected, KRDO reports that owners often use the fourth quarter to true up their total, which is a fair way to describe sending in more than the minimum. You can pay online through IRS Direct Pay at irs.gov, and putting the date on your calendar a week early costs nothing.

Count your contractors before January does

Did you pay a freelancer, a bookkeeper, a designer, or a virtual assistant this year? If so, you may owe them a tax form. For payments made after December 31, 2025, the reporting threshold for Form 1099-NEC rose from $600 to $2,000, following a change in the One Big Beautiful Bill Act. The threshold counts what you paid one person across the whole calendar year, so three $800 invoices to the same designer add up to $2,400 and trigger a form.

The steps are simple but they reward doing early. Make a list of everyone you paid for services this year and add up each person's total by the date money left your account, not the invoice date. An invoice paid in January 2026 counts as a 2026 payment, even if it was written in December. Payments you made by credit card are generally left off your 1099-NEC, because the card company reports those, so check that before you count them. Then make sure you hold a signed Form W-9 from every contractor over the threshold, which gives you their legal name and tax identification number. If a contractor refuses to provide one, Tax1099 explains that you are expected to withhold 24 percent as backup withholding.

The deadline to send the forms to your contractors and the IRS is January 31, but because that date falls on a Sunday in 2027, the due date moves to Monday, February 1. Late filing penalties start at $60 per form and climb to $340 per form depending on how late you are, according to the same source. Collecting W-9s in November, while your contractors are still easy to reach, will feel very different from chasing them in the last week of January.

Plan your purchases with a calendar, not a feeling

Year end sales emails have a way of making every purchase look like a tax strategy. A deduction is not a refund of what you spent, though. It lowers the income you pay tax on, so you get back only a slice of the cost. One year end planning guide puts it plainly, saying a deduction alone is not a reason to buy something the business does not need, but that a December delivery versus a January one can move the deduction into a different tax year.

If you already planned to buy a laptop, a camera, a commercial oven, or a piece of software, the timing matters. Two rules let a business deduct the cost of equipment in the year it is bought instead of spreading it over many years. 100% bonus depreciation was made permanent for qualifying property acquired after January 19, 2025, and the Section 179 limit was raised to $2.5 million, which one source puts at $2.56 million for 2026 after the inflation adjustment. Those amounts are far above what most small businesses spend. The part that matters to you is that the equipment generally needs to be in use by December 31, so an order that ships in January will not count for 2026.

There is also some relief if you worried about a deadline. The 20 percent deduction for qualified business income, which many sole proprietors, partners, and S corporation owners claim, was made permanent, so it is not expiring at the end of this year. Make a list of what you planned to buy for 2027, mark each item as needed or wanted, and move only the needed ones into December.

Pay your future self

Retirement contributions are one of the few year end moves that lower your taxes and build something you keep. 1-800Accountant notes that money placed in a qualifying retirement account reduces your taxable income for the year. If you work alone, the two common choices are a SEP IRA and a solo 401(k). A SEP IRA is the simpler of the two, and according to Collective, contributions for 2026 can be made as late as April 15, 2027, or October 15 with an extension. A solo 401(k) allows more, and Collective lists December 31, 2026 as the date for the employee portion.

For 2026, the employee deferral limit is $24,500, and the combined limit for employee and employer contributions is $72,000. Those are ceilings, and nobody expects a young business to reach them. The employer side is based on a share of your compensation, which the same source puts at 25 percent, so your actual limit depends on how much you earn. Opening an account takes anywhere from a few days to a few weeks depending on the provider, so if you want a solo 401(k) in place for 2026, start the application now.

Do this step after the first one, not before. A contribution only helps if you can spare the cash, and your projected profit and your bank balance will tell you how much that is. Even a modest amount, set aside on purpose, is a better habit than leaving the decision to April.

Clear the paperwork

This part is the least exciting and the one that prevents the most trouble. Look up your state's annual report or renewal due date for your business entity on your Secretary of State website, since many states set it in the first half of the year. Check when your business license, professional license, and insurance policies renew, and put each date in your calendar. Save a copy of your books and bank statements somewhere other than your computer, such as a cloud folder or an external drive.

Gather your receipts and mileage records for the year while you still remember what each one was for. A receipt from March that says only "supplies" is hard to explain in April, but one labeled the same week you bought it takes seconds. If you have a CPA or an enrolled agent, December is the time to send them your projected profit and ask what they would change. A single conversation now costs less than a rushed one in March.

Write next year's first page

Once the checkup is done, you will have a few numbers in front of you that most owners never see all at once: your projected profit, your tax payment, your contractor list, and your retirement plan. Use them. Pick one number to raise in 2027, whether that is sales, profit, or the cash you keep in reserve, and write it where you will see it.

Then set up the dates. Put December 15 on the calendar if you run a C corporation, December 31 for equipment and retirement moves, January 15 for your final estimated payment, February 1 for 1099-NEC forms, and April 15 for a SEP IRA contribution. Add a reminder for early April to start the first quarter of 2027 with a plan rather than a scramble. An hour a week for the next few weeks is enough to get through all of it.