Navigating Taxes in 2026: The Impact of Trump’s Tax Plan and Common Mistakes

The beginning of the year marks the beginning of the dreaded year-end tax time for small businesses. Calculating year-end taxes may have become even more confusing for small business owners in 2026, after the passage of the One Big Beautiful Bill Act (OBBBA) in July 2025. The law provided some benefits, but small business owners and their accountants need to be extra careful in how they can claim deductions.

In this article, we’ve compiled common tax mistakes small businesses make every year as well as changes to the tax code as a result of the One Big Beautiful Bill Act to be aware of. Filing mistakes most likely will result in penalties and interest, so it’s extra important to know changes to the rules beforehand.

What Tax Rules Have Changed in 2026?

Small business owners and their accountants need to be aware of the most recent changes made to the tax code. Despite the public controversy surrounding the OBBBA, the Act may benefit small businesses in 2026 in several ways.

• The OBBBA made the 20% Qualified Business Income Deduction permanent. This applies to sole proprietors, S corporations and partnerships, which make the vast majority of small businesses in the U.S.

• Small businesses can permanently expense the full cost of eligible new and used equipment, machinery, and software from the year they were placed in service (if acquired after January 19, 2025). There was a fear that the this tax advantage was going to sunset in 2025, but the OBBBA makes this deduction permanent.

• The amount that small businesses can write off for qualifying property was increased to $2.5 million, with a phase out threshold starting at $4 million. This benefits small businesses that own the property on which they operate.

• Small businesses can now fully deduct the cost of domestic research and experimentation (R&E). They were previously allowed to amortize and deduct those costs over five years. Small businesses with average annual gross receipts under $31 million can retroactively apply this change to expenses incurred since 2022 by filing amended returns.

• Small businesses with under $25 million in annual revenue are permanently allowed to use simpler cash accounting methods rather than accrual accounting. Cash accounting allows businesses to report their actual revenue, while accrual accounting, which is more complex, allows business to report future revenue (such as invoices before they are actually paid) on their books. This rule simplifies accounting for small businesses that heavily rely on immediate cash transactions, such as an independent grocer or a dry-cleaning store.

The OBBBA also:

• Increases the maximum child tax credit for eligible small businesses to $600,000 annually, covering 50% of qualified expenses.

• Increases employer payments of up to $5,250 annually toward an employee's student loans, which remain permanently excluded from the employee's gross income and from wages for employment tax purposes.

What are the Most Common Tax Mistakes by Small Businesses?

Every small business is unique, but there are some common tax mistakes that many small business owners make. These mistakes can lead to audits and late payments fees and cause major headaches for accountants. These are some of the most common tax mistakes that small business owners should steer clear of. Avoiding these mistakes usually involves diligent record keeping and the discipline to check your books on a weekly or daily basis, but that’s better than getting penalized or audited by the URS.

(Note to Achula/Surbhi - can you make these Xs red? Thanks)

• Not separating personal and business finances can be an easy mistake to make, especially if you own a pass-through business or are a sole proprietor. However, it’s a mistake that’s easily avoidable. Small business owners can do this by creating separate business checking and savings accounts, as well as getting a business credit card. Have the discipline to only record business expenses in these accounts and help small businesses report income properly.

• Poor recordkeeping due to a lack of discipline. It’s crucial that you save every receipt from every expense during each quarter and for the year so you don’t misreport your actual income. Cash heavy businesses that deal with a lot of receipts may want to spend money on financial software to automatically keep track of every transaction, as poor recordkeeping can lead to lower refunds, missed deductions and small business to leave money on the table.

• Missing tax and payment deadlines. For most small businesses, taxes are due on both a quarterly and annual basis, but still, many small business owners end up missing deadlines. The best way to avoid this is to set reminders or circle the due dates on your calendars to avoid wasting money on late fees. Also, get started on preparing your taxes early, and maintain good recordkeeping so that you’re easily ready for tax time.

• Misclassifying workers. Employers sometimes misclassify a worker as a contract (1099) employee or freelancer when they fit the classification as a fulltime employee. Doing this can lead to serious penalties, including having to pay back taxes for Social Security and Medicare, as well as benefits. Small business owners that may not be sure how to classify their employees should take the simple test from the IRS to make sure how to classify their employees.

• Wrongfully claiming deductions and credits. It’s crucial that small business owners work closely with their accountants to properly identify appropriate deductions and credits that you can take for their businesses. This mistake can lead to severe penalties and even potential criminal liability.

• Not setting enough cash aside for payroll taxes. This is a common mistake among many small business owners who end up underestimating payroll taxes or not keeping up with required changes to Social Security and Medicare taxes.

• Not properly assessing value of equipment and property. Small business owners sometimes forget section 179 of the tax code may allow them to deduct the depreciation of any expensive equipment or property that they may own. Even if small business owners are still in the midst of paying off loans for equipment and property, they may be able to still take certain deductions if they depreciate in value. still take certain deductions if they depreciate in value.

• Using accounting software instead of hiring an accountant. Filing taxes using only accounting software may be a good idea if you’re already an expert on taxes, but in most cases, small business accounting can be quite complicated. This is especially true during times of political change when tax codes are revised or changed. Consulting with an experienced and informed accountant or other tax professional is usually essential, as that accountant should be aware of changes to the tax code and ensure that the correct deductions are being identified and that tax payments are not missed.

Stay on Top of Taxes Early

Staying on top of recent changes to the tax code, making sure you know which deductions you can take and correctly classifying your expenses and deductions are some of the things small business owners can do to make sure they file their taxes properly in order to get maximum deductions and avoid missed payments. The most important action small business owners can take is to hire an experienced accountant to avoid penalties and audits later on.

1. Should I hire an accountant?

Small business taxes are often quite complex, and changes to the tax code due to the passage of the One Big Beautiful Bill have made them even more so this year. It may be beneficial to hire a well-informed and experienced accountant to help your business navigate the complexities of tax filing this year.

2. How will the passage of the OBBBA affect my taxes this year?

The One Big Beautiful Bill Act affects small business taxes in many ways this year. The biggest change is that it makes the 20% QBI deduction permanent.  Furthermore, for tax years starting in 2026, the OBBBA introduced a new minimum deduction of $400 for taxpayers with at least $1,000 of active business income, regardless of other limitations.

3. What are some of the most common tax mistakes that should be avoided?

Getting deductions wrong and misclassifying your employees are some of the most costly tax mistakes you can make. There are others that are important, but these mistakes can lead to large penalties and in the worst cases, criminal liability.

4. Can I still write off the cost of equipment depreciation?

The law restored 100% bonus depreciation for qualifying equipment and software acquired and placed in service after January 19, 2025. This may allow you to deduct the entire cost in year one rather than depreciating it over several years.

5. When should I start thinking about year-end taxes?

As a small business owner, your should start worrying about year-end taxes as soon as the year ends. Carefully go over your annual financials with an accountant to determine which deductions you can legally take and ensure that your expenses and employees are properly classified.