The S-Corp Owner’s Year-End Checklist: What to Do Before December 31

1Make Sure Your Salary Is Running Through Payroll

The IRS expects an owner who works in the business to be paid reasonable wages through payroll. So the first check is simple: has your salary actually run through payroll this year, and does it still line up with what the business has earned? If profit has climbed since you set your number, year-end is the time to revisit it, ideally while there are still pay periods left to adjust rather than in one scramble. Our posts on salary vs. owner’s draw and how the IRS decides what’s reasonable walk through how to land on a number you can defend.

Timing matters here too. W-2 wages are generally reported for the year they are paid, so your last payroll date is a real deadline. We cover processing cutoffs in 5 things to do with your payroll before December 31.

2Compare Your Distributions to Your Basis

Salary and distributions look like one decision, but they follow different rules. The second one depends on basis, and basis is the number most S-corp owners are not tracking.

While you are in there, confirm that distributions follow ownership percentages if you have more than one shareholder, and that the books keep salary, distributions, and any shareholder loans in separate places. When those get blended together, the tax return is harder to prepare and harder to defend.

3Report Owner Health Insurance Correctly

If your S-corp pays health insurance premiums for you as a more-than-2% shareholder, those premiums have to be handled in a specific way. They are included in your W-2 wages in Box 1, though they are not subject to Social Security or Medicare tax. That reporting is what lets you claim the self-employed health insurance deduction on your personal return, assuming you meet the other requirements.

Miss it, and you can lose a deduction you were entitled to. This is far easier to correct with your payroll provider before your final payroll of the year than after the W-2s have gone out.

4Get Your Estimated Taxes in Order

On the federal side, if you owe tax on your share of the S-corp’s profit beyond what payroll withholding covers, your fourth estimated payment for 2026 is due January 15, 2027. Our guide to the IRS safe harbor rule explains how to size your payments so you avoid an underpayment penalty.

California adds a layer of its own. The state taxes S-corps too, with an annual tax of the greater of 1.5% of net income or $800, and estimated payments due on the 15th of the 4th, 6th, 9th, and 12th months of the tax year. For a calendar-year S-corp, that makes December 15 a date worth knowing. If your S-corp is based here in El Dorado County – whether that is Placerville, Cameron Park, or El Dorado Hills- or anywhere else in the state, it applies to you.

5Clean Up the Books Before Your Preparer Sees Them

Everything above gets easier when the books are accurate. Before the year closes, work through these:

• Reconcile every account through year-end, including bank, credit card, and any loan accounts.
• Code owner transactions correctly, so salary, distributions, shareholder loans, and expense reimbursements are not sitting in the wrong accounts.
• Document any shareholder loans to or from the business, since they affect basis and need a paper trail.
• Collect W-9s and review vendor payments. For payments made in 2026, a 1099 is required at $2,000, with forms due February 1, 2027. Our 1099 filing guide covers the rest.

Our free Clean Books Checklist covers the bookkeeping side, and if you would rather have a professional check the numbers, our tax preparation team can do it before anything is filed.