December 31 closes a lot of things for good. Not all of them look like tax deadlines from the outside, which is part of why they catch people off guard.

For Washington service businesses, there are seven decisions that close on that date: some are hard cutoffs where the option disappears after December 31, and some are softer deadlines where you can technically act in January but at a higher cost. Here is the list, in rough order of how urgently each one tends to need attention.

S-Corp Owners: W-2 Compensation Before the Year Ends

If your business is taxed as an S-corp and you have been performing services for it, the IRS requires you to draw a reasonable salary as a W-2 employee of the company. That salary has to be processed through payroll before December 31. It is not something you can go back and add in January.

What counts as reasonable depends on your role, your industry, and what your business actually earned this year. This is not a number you should pick at random. For clients who have not set their compensation by October, we typically work through it then because payroll takes a few days to process and corrections require an extra step.

If you have been taking mostly owner distributions without consistent W-2 wages this year, you need to run payroll before the year ends. The right amount is a question worth answering with professional help before you do it, not after.

The S-corp structure can reduce what you owe in self-employment taxes at the right income level, but only when the owner compensation piece is handled correctly. If you are still weighing whether the structure makes sense for your business at all, we have a breakdown of when the switch from an LLC actually pays.

Pull W-9s From Every Contractor You Paid in 2026

The 1099-NEC threshold changed for payments made after December 31, 2025. The new threshold is $2,000. If you paid any individual contractor or unincorporated vendor $2,000 or more during 2026, you are required to file a 1099-NEC for them by February 1, 2027 (January 31 falls on a Sunday).

The practical task right now is straightforward. Pull your contractor payments for the year, find anyone who crossed the $2,000 mark, and confirm you have a completed W-9 on file for each one. If you have never asked some of them for one, ask now. Getting that information in November takes a few emails. Getting it in January, after the holiday week and the rush to close out, takes longer and sometimes fails entirely.

Corporations are generally exempt from the 1099 requirement. The ones to watch are sole proprietors and LLCs taxed as sole proprietors or partnerships.

Q4 Estimated Tax Payment: Due January 15, 2027

The fourth quarter estimated tax payment for 2026 is due January 15, 2027. This covers income you earned from September 1 through December 31.

If your income came in higher than expected in Q4, specifically higher than the amount you built your earlier estimated payments around, this payment matters more than the previous ones. It is your last chance to get current on your 2026 liability before the filing deadline. Missing it, or underestimating it, means a penalty on top of the balance due.

The calculation requires three things: your year-to-date income and deductions through the end of Q4, what you have already paid in estimated taxes for 2026, and a reasonable estimate of your effective rate based on your business structure. If your books are not current, none of those inputs are reliable.

For businesses already running monthly accounting, this is usually a quick update. For businesses running behind on the books, that is the first task.

WA B&O: Confirm Your Classification Is Right

Washington B&O is a tax on the gross income of your business activity, and the classification of that activity determines your rate. Service businesses generally fall under Service and Other Activities. Contractors are classified as either Retailing or Wholesaling: the distinction turns on whether the work is performed for a consumer (Retailing) or for a general contractor who gives you a reseller permit (Wholesaling). Filing under the wrong classification creates exposure that compounds over time.

If the nature of your work changed in 2026, you added a service line, or you are simply not sure your current classification is correct, the year-end is a reasonable time to check it. We have a detailed guide covering the most common B&O mistakes for Washington service businesses, including the classification errors that come up most often and the city B&O layer that applies to businesses working in Seattle, Tacoma, Bellevue, and several other cities.

For the year-end itself: confirm that any quarterly B&O filings covering the period through September 30 have been submitted. The Q4 period closes December 31 and is typically due in late January. The year-end task is making sure the Q3 period is closed cleanly and your records are in order for Q4.

Equipment: In Service by December 31

If you have been considering a business equipment purchase, there is a hard timing rule: the asset has to be placed in service by December 31, 2026 to qualify for the 2026 tax year. That means delivered and in actual use, not just ordered and sitting in a warehouse or on a truck.

Section 179 allows eligible businesses to deduct the cost of qualifying property in the year it is placed in service rather than depreciating it over multiple years. The practical effect is a larger deduction up front. The eligible property types and applicable limits depend on your situation and are worth reviewing with an accountant before you commit to a significant purchase, since the calculation changes based on your business structure and total equipment purchases for the year.

One thing worth saying directly: this is not a reason to buy something you do not need. It is a reason to think about timing if you were already planning a purchase for early 2027 and your 2026 taxable income is running higher than expected. Buy first because it makes sense for the business, then optimize the timing if you can.

Retirement Plan Contributions and Setup

Contribution and setup deadlines for retirement plans vary by plan type and by how your business is taxed. A SEP-IRA operates by different rules than a solo 401(k), and an S-corp owner has different deadlines than a sole proprietor operating as an LLC. Some plans allow contributions until your tax return due date including extensions. Others require the plan to be established, not just funded, by December 31.

If you have not set up a retirement plan yet and you want to reduce your 2026 taxable income with one, the plan establishment deadline is the binding constraint for some plan types. That window is narrowing. A brief conversation now is better than a rushed decision in January.

Get the Books Current

None of the above calculations work if your books are behind.

You cannot calculate a reasonable Q4 estimated payment without knowing your year-to-date income and deductions. You cannot verify your B&O liability without knowing your Q4 gross receipts. You cannot assess whether your S-corp compensation arrangement is defensible without knowing what your business actually earned this year.

If your books are current through September, you can make the decisions on this list with reasonable confidence. Through October is better. If they are behind by more than 60 days, getting them current is task one, and the rest of this checklist follows.

This is one of the more practical arguments for monthly bookkeeping: when November comes around, you are doing a quick review rather than a scramble.

Who Should Move Fast

If 2026 was materially different from 2025, the urgency on each of these items is higher. A large Q4 contract, a new employee added mid-year, a business entity change earlier this year. Any of those changes at least one of the calculations above.

If 2026 was roughly similar to 2025 and you are already on a regular accounting schedule, you are probably in decent shape. This list is a check, not a warning.

We work with service businesses across Washington on year-end planning and ongoing accounting. If you want to work through these items with someone before December, our tax and advisory services are set up for exactly this. The scope, pricing, and what ongoing accounting includes are on our pricing page.

Questions owners ask about this

When is the Q4 2026 estimated tax payment due?

The fourth quarter estimated tax payment for 2026 is due January 15, 2027. It covers income earned from September through December. If your Q4 income came in higher than you planned for, this payment is your last chance to get current on your 2026 tax before filing and avoid an underpayment penalty.

What is the 1099-NEC threshold for 2026?

For payments made after December 31, 2025, the 1099-NEC filing threshold is $2,000. If you paid any individual contractor or unincorporated vendor $2,000 or more during 2026, you need to file a 1099-NEC for them by February 1, 2027 (January 31 falls on a Sunday). The practical step now is collecting W-9s from anyone who crossed that threshold during the year.

Does my S-corp need to pay me a W-2 salary before December 31?

Yes, if you performed services for the business. The IRS requires S-corp owners to draw reasonable compensation through payroll, and that W-2 salary must be processed before the year ends. What counts as reasonable depends on your role, your industry, and your business income. This is worth reviewing before December, not in January when it is too late to run additional payroll.

What equipment qualifies for Section 179 in 2026?

Equipment, machinery, software, and certain other depreciable business property placed in service by December 31, 2026 may qualify for immediate expensing under Section 179. The asset has to be delivered and in actual use by that date, not just ordered. Eligible property types and applicable limits depend on your situation and are worth reviewing before you commit to a large purchase.

What year-end B&O tasks apply to Washington service businesses?

Washington B&O is filed on a schedule tied to your annual tax liability. At year-end the main tasks are confirming your business activity classification is still correct (the wrong classification changes your rate) and verifying that any quarterly filings covering July through September are submitted. For businesses working in multiple cities, city B&O adds another layer.