The tax code for small business owners, on one page
The Internal Revenue Code decides how your business is taxed, what it can deduct and what a mistake costs. Here is a short cheat sheet with the 2026 numbers and links to our own guides.
Prepared by Prem Tax and Accounting Corp. Last checked against official sources on October 29, 2026.
The Internal Revenue Code is Title 26 of the U.S. Code, the tax law the IRS enforces. It sets how a small business is taxed and what mistakes cost. The Brass-Key Tax Pass boils it down. The sources list the official text.
- Pass-through owners report profit on their own returns; a C corporation pays 21%.
- Pass-through owners may deduct up to 20% of qualified business income (QBI), now permanent.
- 2026 Section 179 limit: $2,560,000. Bonus depreciation: 100% for qualifying property acquired after January 19, 2025 (40% if elected for the first year ending after that date).
- Forms 1099-NEC start at $2,000 for 2026 payments.
Who it covers
| Business form | Default treatment |
|---|---|
| Sole proprietor, one-owner LLC | On the owner's return |
| Multi-owner LLC | Partnership (Form 1065) |
| S corporation | Passes through; tests include 100 shareholders or fewer, one stock class |
| C corporation | Pays 21%; dividends taxed again |
The numbers
| Item | Amount | Year |
|---|---|---|
| 1099-NEC, most 1099-MISC | $2,000 or more (royalties $10, attorney proceeds $600) | Payments after 2025 |
| 1099-K | More than $20,000 and 200 transactions | 2026 |
| Late income tax return | Minimum $525 (or the tax if less), if over 60 days late | Due in 2026 |
| Late partnership or S corporation return | $255 per owner per month | Due in 2026 |
| Late or wrong 1099s and W-2s | $340 each, less if corrected by August 1 | Due in 2026 |
Source: IRS, Public Law 119-21
Our checklist
We call it the Brass-Key Tax Pass.
- Key 1, Form: confirm how the business is classified (startup tax planning).
- Key 2, Method: keep your accounting method consistent; changes need IRS consent.
- Key 3, Deductions: check 2026 limits before big purchases, and vehicle rules.
- Key 4, Paper: collect Form W-9s; 24% backup withholding applies without a taxpayer ID. Payroll: FICA.
- Key 5, Proof: keep records per the slide; see our compliance guide and tax calendar.
Mistakes people make
- Using the old $1,250,000 Section 179 limit for 2025; it is $2,500,000.
- Using $600 as the Form 1099-NEC threshold for 2026 payments.
- Giving a working S corporation owner little or no pay; the IRS expects reasonable pay.
When to call an attorney: forming an entity, an IRS fraud or criminal inquiry, or a request to extend the assessment period.
Common questions
Is the 20% QBI deduction permanent?
Yes. Public Law 119-21 made it permanent.
What is the Form 1099-NEC threshold for 2026?
$2,000 or more for payments after December 31, 2025, up from $600, indexed after 2026.
How long can the IRS assess more tax?
Generally 3 years after filing. It is 6 years if over 25% of gross income was left off, and unlimited for a missing or fraudulent return. Other cases exist.
Official sources
- Public Law 119-21 (July 4, 2025), U.S. Government Publishing Office
- IRS: Revenue Procedure 2025-32 (2026 inflation amounts)
- IRS: Revenue Procedure 2024-40 (penalty amounts for returns due in 2026)
- IRS: Instructions for Forms 1099-MISC and 1099-NEC
- IRS: How long should I keep records
Keep reading
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