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How the Internal Revenue Code Shapes a Year-Round Tax Plan
Title 26 of the U.S. Code, the Internal Revenue Code, is the federal tax law behind most choices on this site, and the IRS enforces it. It governs the tax treatment of each business type, what can be written off and when returns are due. Our yearly checklist, the Mulberry-Row Tax Calendar Pass, is below. The text is at law.cornell.edu.
The short version
- A flat 21 percent applies to C corporations. Owners that are not corporations may deduct up to 20 percent of qualified business income, and that deduction is now permanent.
- For 2026 the Section 179 limit is $2,560,000, and 100 percent bonus depreciation applies to qualifying property acquired after January 19, 2025.
- For payments made after 2025, Form 1099-NEC starts at $2,000.
Who it covers
| Business form | Default treatment | Note |
|---|---|---|
| Sole proprietor, one-owner LLC | Owner's return | Individual owners pay self-employment tax |
| Multi-owner LLC | Partnership | LLCs may elect corporate tax on Form 8832 |
| State-law corporation | C corporation | S status needs eligibility and Form 2553 |
The numbers
| Item | Amount | Year |
|---|---|---|
| Section 179 phase-out starts | $4,090,000 | 2026 |
| QBI taxable-income threshold | $201,750 single; $403,500 joint | 2026 |
Source: Public Law 119-21 and IRS Revenue Procedures
We found no general 2027 inflation figures from the IRS as of October 29, 2026.
The Mulberry-Row Tax Calendar Pass
- January: list how each entity is taxed and when each return is due.
- Spring: if an S election is planned, count the 2 months and 15 days.
- Summer: confirm a working S corporation owner draws reasonable wages, as the IRS expects.
- Fall: line up planned equipment purchases against the Section 179 figures.
- Year end: collect Forms W-9; without a taxpayer ID, 24 percent backup withholding can apply.
What it means for year-round planners
- Entity choice is where the Code bites first; see choosing a business structure.
- Timing is a tax tool: see year-round planning and the compliance calendar.
- Retirement plans and benefits live in the same Code: owner retirement plans.
Mistakes people make
- Calling a state LLC an S corporation without a timely Form 2553.
- Relying on the old $1,250,000 Section 179 figure for 2025 (it is $2,500,000) or $600 as the 1099-NEC level for 2026 payments.
- Discarding records at 3 years when 6 or 4 may apply.
Forming or restructuring an entity, or any IRS fraud inquiry, is a question for an attorney.
Common questions
Is an LLC automatically taxed as an S corporation?
No. A one-owner domestic LLC is disregarded and a multi-owner one is a partnership unless it elects otherwise. For S status, a timely Form 2553 is needed. An eligible LLC that files it does not also have to file Form 8832.
How high is the Section 179 limit for 2026?
Per Revenue Procedure 2025-32, the limit is $2,560,000 for tax years that begin in 2026.
How long should small businesses keep tax records?
The IRS says 3 years in general, at least 4 years for employment tax records, and 6 years when more than 25 percent of gross income may have been left out.