Morning: Small Business Tax Tips (New Haven)

August 28, 2026 • News

New Haven, Connecticut : Jose’s Tax Service : August 28, 2026

Small business owners in New Haven should review retirement plan contributions before the third quarter closes. A properly structured contribution may reduce taxable income, strengthen retirement savings, and improve year-round tax planning.

Two dates require immediate attention:

September 15, 2026: Third-quarter estimated tax payment deadline for many individuals, sole proprietors, partners, and S corporation shareholders.
October 15, 2026: Extended federal filing deadline for eligible calendar-year taxpayers who properly filed Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return.

The October deadline may also permit additional time to establish or fund certain retirement plans for the 2025 tax year. Rules differ by plan type. Contributions should be calculated before funds are transferred.

Important: An extension of time to file is not an extension of time to pay. Any 2025 balance due generally remained payable by April 15, 2026. Late payment may result in interest and penalties.

Review the Three Main Plan Options!

1. SEP IRA

A Simplified Employee Pension (SEP) plan permits an employer to make contributions to traditional or Roth SEP individual retirement arrangements (SEP-IRAs) established for eligible employees.

A SEP IRA may be appropriate for:

Sole proprietors and single-member limited liability companies (LLCs).
Businesses with variable annual cash flow.
Owners who want employer contributions without employee salary deferrals.
Businesses that want a relatively simple plan structure.

For 2025, total SEP contributions generally may not exceed the lesser of:

$70,000, or
25% of eligible compensation.

For 2026, the defined contribution limit increases to $72,000, and the compensation limit used in contribution calculations increases to $360,000.

A SEP contribution rate generally must be applied consistently to eligible employees. If contributions are made for the owner, contributions may also be required for eligible employees under the plan’s formula. Failure to account for employees can create compliance problems and may lead to additional tax exposure.

The IRS states that a SEP may be established as late as the due date of the business tax return, including extensions. Employer contributions must also be made by that deadline to be deductible for the applicable year.

For an eligible calendar-year taxpayer with a valid extension, 2025 SEP IRA contributions may generally be established and funded by October 15, 2026.

Review Form 5305-SEP, Simplified Employee Pension: Individual Retirement Accounts Contribution Agreement, or the financial institution’s approved plan document before proceeding.

2. SIMPLE IRA

A Savings Incentive Match Plan for Employees (SIMPLE IRA) is designed for smaller employers. It combines employee salary reduction contributions with required employer contributions.

A SIMPLE IRA may be appropriate when a business:

Has a small employee population.
Wants employees to contribute directly from compensation.
Can satisfy required matching or nonelective contribution rules.
Does not maintain another qualified retirement plan, subject to limited exceptions.

For 2026, the standard employee salary reduction limit is $17,000. The standard catch-up contribution for participants age 50 or older is $4,000.

A special higher limit may apply to certain SIMPLE plans under the SECURE 2.0 Act of 2022. Participants who attain age 60, 61, 62, or 63 during 2026 may also qualify for a higher SIMPLE plan catch-up limit. Confirm the applicable amount with the plan provider.

Employers generally must provide either:

A dollar-for-dollar matching contribution of up to 3% of compensation, or
A nonelective contribution of 2% of compensation for eligible employees.

A SIMPLE IRA plan generally must be established between January 1 and October 1 of the applicable year. Therefore, an owner considering a new 2026 SIMPLE IRA plan should act before the October 1 establishment deadline.

SIMPLE IRA salary reduction contributions must be deposited under specific timing rules. Employer matching or nonelective contributions may follow the federal income tax return deadline, including extensions. Payroll records should be reconciled before contributions are reported.

3. Solo 401(k)

A Solo 401(k), also called a one-participant 401(k), may serve a business owner with no common-law employees other than a spouse. It can permit two contribution categories:

Employee elective deferrals, made by the owner as an employee.
Employer profit-sharing contributions, made by the business.

For 2026, the elective deferral limit is $24,500. The standard age 50-plus catch-up contribution is $8,000. Participants who attain age 60, 61, 62, or 63 during 2026 may qualify for the special $11,250 catch-up limit.

The maximum combined employee and employer contributions under a defined contribution plan are generally limited to the lesser of:

100% of compensation, or
$72,000 for 2026, excluding catch-up contributions.

For 2025, the defined contribution annual additions limit was $70,000.

The employee deferral and employer contribution rules are not identical. An employee deferral generally must be elected under the applicable plan and payroll requirements. Employer profit-sharing contributions may generally be made by the due date of the business return, including extensions.

For 2025, a validly extended calendar-year return may allow Solo 401(k) employer contributions through October 15, 2026, provided the plan satisfies its establishment and documentation requirements. Do not assume that the extension automatically permits a late employee deferral election. Confirm the timing with the plan administrator.

Apply the 2026 Contribution Limits Correctly!

Use the following figures as planning references:

Retirement plan rule	2026 amount
401(k) elective deferral limit	$24,500
Standard age 50-plus catch-up	$8,000
Special age 60–63 catch-up	$11,250
SIMPLE IRA salary reduction limit	$17,000
SIMPLE IRA standard catch-up	$4,000
Defined contribution annual additions limit	$72,000
SEP compensation limit	$360,000

For comparison, the 2025 defined contribution annual additions limit was $70,000. A business owner who participates in more than one defined contribution plan must aggregate contributions when applying the annual additions limit.

Calculate self-employed contributions carefully. For a sole proprietor or partner, compensation is generally based on net earnings from self-employment. The deduction for one-half of self-employment tax and the retirement contribution itself affect the calculation.

Use the worksheets in IRS Publication 560, Retirement Plans for Small Business, when applicable. Excess contributions may become nondeductible and may trigger excise tax or correction requirements.

Coordinate Retirement Contributions With the September 15 Deadline!

The third-quarter estimated tax deadline is September 15, 2026 for many calendar-year taxpayers. Sole proprietors, partners, and S corporation shareholders generally make these payments through their individual tax accounts.

Use Form 1040-ES, Estimated Tax for Individuals, to calculate the payment. Include current business income, deductions, credits, self-employment tax, and retirement contributions in the projection.

Follow these steps:

Update year-to-date bookkeeping. Reconcile bank accounts, credit cards, payroll, and business expenses.
Project full-year net income. Include seasonal revenue and known capital purchases.
Calculate eligible retirement contributions. Separate 2025 contributions from 2026 contributions.
Recalculate federal and Connecticut obligations. State estimated tax requirements may differ from federal requirements.
Submit the September 15 payment on time. Underpayment may result in a penalty, even if a refund is ultimately due.
Document the contribution decision. Retain plan documents, contribution confirmations, payroll records, and written elections.

A 2025 SEP IRA or Solo 401(k) employer contribution may reduce the 2025 tax liability. It does not automatically reduce the amount required for the September 15, 2026 Q3 estimated tax payment. Estimated payments should be recalculated separately.

Use October 15 as a Planning Deadline: Not a Last-Minute Deadline!

If a 2025 federal individual return was properly extended, use the additional time to complete the following actions:

Confirm Form 4868 was filed or accepted.
Review IRS Publication 560, Retirement Plans for Small Business.
Determine whether a SEP IRA or Solo 401(k) was established under the applicable rules.
Calculate the maximum deductible contribution.
Verify eligible employees and compensation.
Fund the contribution through the financial institution.
Designate the contribution for the 2025 tax year in writing.
Retain payment evidence with the business tax records.
Report the contribution on the correct return and schedule.

For a 2025 SEP IRA, October 15 may serve as the extended establishment and funding deadline for an eligible taxpayer. For a Solo 401(k), employer profit-sharing contributions may also be made by the extended filing deadline when the plan requirements are satisfied.

Do not use a personal Traditional IRA or Roth IRA contribution as a substitute for a SEP or Solo 401(k) employer contribution. Filing extensions generally do not extend the deadline for regular IRA contributions.

Obtain a Plan-Specific Review!

Retirement plan contributions require coordination among tax reporting, payroll, employee eligibility, cash flow, and plan administration. A contribution that is appropriate for one New Haven business may be unsuitable for another.

Jose’s Tax Service provides personalized tax preparation, tax planning, bookkeeping, and business support for New Haven small business owners and self-employed taxpayers. Appointments are available virtually and in person. Visit Jose’s Tax Service to request a consultation.

Review the official resources before taking action:

Practical reminder: Calendar September 15, 2026 for the Q3 estimated tax payment and October 15, 2026 for the extended 2025 filing and eligible retirement plan contribution deadline. Late payments, excess contributions, or incomplete plan documents can delay processing and may lead to penalties.

Category: Tax Planning | Tags: small business tax, New Haven business, deductions, tax strategy