Have I paid myself a reasonable salary for 2026?
If you work in your S corp and take money out, the IRS expects you to pay yourself reasonable compensation through payroll before taking distributions. Check your year to date wages now, while there is still time to run another payroll before December 31.
There is no safe percentage. The question is what the business would pay someone else to do your job. Write down how you got your number and keep it with your records. Our post on reasonable S corp salary walks through the factors.
Salary also drives other numbers. Your 401(k) employer contribution is based on W-2 wages, so a salary that is too low can shrink your retirement savings too.
Are my health insurance premiums on my W-2?
If you own more than 2 percent of an S corp and the company pays or reimburses your health insurance premiums, those premiums need to be included in your W-2 wages in Box 1. They are generally not subject to Social Security and Medicare tax. Done right, this lets you take the self employed health insurance deduction on your personal return.
This is one of the most commonly missed S corp steps. Tell your payroll provider the total premiums for the year before the final payroll so they can add them to your W-2. If it is missed, fixing it after the fact means corrected forms and extra work.
Do my 401(k) deferrals need to happen by December 31?
Yes. As an S corp owner, your employee deferrals come out of your W-2 wages through payroll, so they have to be withheld from a paycheck paid by December 31. The newer rule that lets sole proprietors open a plan after year end does not cover S corp employee deferrals.
The employer contribution is more flexible and can generally be made by the company's tax return due date, including extensions. See our post on the Solo 401(k) deadline for the details.
Have I been reimbursed for business expenses I paid personally?
If you pay business costs personally, such as a home office, mileage in your own car or your cell phone, your S corp can reimburse you tax free under an accountable plan. You need a written plan, receipts or a mileage log, and timely reimbursement. Clean this up before the year closes.
Reimbursements under an accountable plan are deductible to the company and not taxable to you. Paid without the plan and the paperwork, the same money can end up treated as wages or distributions.
Which forms are due in January?
For 2026 payroll, Forms W-2 and W-3, the fourth quarter Form 941, the annual Form 940 and Forms 1099-NEC are all due February 1, 2027, because January 31 falls on a Sunday. Starting with payments made in 2026, a 1099-NEC is required for anyone you paid $2,000 or more for services, up from $600.
The hard part of 1099s is never the form. It is chasing a taxpayer ID from someone you have not talked to since summer. Collect W-9s from your contractors now.
Your personal fourth quarter estimated tax payment for 2026 is due January 15, 2027. If your distributions were bigger than planned, that payment may need to be bigger too.
Next step
Year end payroll is part of the quarterly planning we do with S corp owners, so salary, health insurance and retirement are set before the last paycheck. See our tax planning services, or book a free discovery call to talk through your situation.
Frequently asked questions
When is my last chance to change my 2026 S corp salary?
Your last payroll date of 2026. Wages count in the year they are paid, so any extra salary has to be paid through payroll by December 31.
Do I pay Social Security tax on my S corp health insurance premiums?
Generally no. For a more than 2 percent shareholder, premiums paid by the S corp are included in Box 1 wages but are generally not subject to Social Security and Medicare tax when paid under a plan for employees.
What is the 1099-NEC threshold for 2026?
For payments made in 2026, you generally file a 1099-NEC for each contractor you paid $2,000 or more for services. Forms are due February 1, 2027.
Can I make my 401(k) deferral after December 31?
Not as an S corp owner. Employee deferrals must come out of a paycheck paid by December 31. The employer contribution can generally be made by the company's return due date, including extensions.