Morning: Small Business Tax Tips (New Haven): Retirement Plans Before December 31, The Year-End Deduction New Haven Business Owners Should Lock In Now

NEW HAVEN, Connecticut, Jose’s Tax Service, October 5, 2026

October is the correct time to review your 2026 retirement plan strategy. Small business owners and self-employed professionals may still have time to establish a plan, make deductible contributions, and improve year-end tax positioning.

The correct plan depends on your entity type, employee count, payroll structure, compensation, and cash flow. Do not wait until December 31 to begin the process. Plan documents, payroll elections, employee notices, and financial institution processing may require additional time.

This guide covers the principal options for New Haven business owners:

1. Solo 401(k)
2. SEP-IRA
3. SIMPLE IRA
4. Connecticut’s MyCTSavings requirements
5. Federal filing and documentation steps

Tax rules are fact-specific. Use this article as a planning checklist, then confirm the final contribution amount with your tax professional and plan administrator.

Start With the 2026 Contribution Limits!

The Internal Revenue Service (IRS) has announced higher retirement plan limits for 2026. The limits below apply before considering plan-specific restrictions, compensation, and eligibility rules.

The 2026 compensation limit used for many employer contribution calculations is $360,000. The overall Solo 401(k) annual additions limit is generally the lesser of 100% of compensation or $72,000, excluding catch-up contributions.

Review the IRS announcement for the 2026 limits and IRS Publication 560, Retirement Plans for Small Business.

1. Evaluate a Solo 401(k) Before December 31!

A Solo 401(k), also called a one-participant 401(k), may be suitable for a self-employed individual or business owner with no common-law employees other than a spouse.

It provides two contribution roles:

• Employee elective deferral: Up to $24,500 for 2026.
• Employer contribution: A profit-sharing contribution based on eligible compensation.
• Combined limit: Generally up to $72,000 before catch-up contributions.

If you are age 50 or older, the plan may permit an additional $8,000 catch-up contribution. If you attain age 60, 61, 62, or 63 during 2026, the higher catch-up limit may be $11,250.

Follow these Solo 401(k) steps:

1. Confirm employee eligibility. Do not use a Solo 401(k) without reviewing the rules if your business has employees.
2. Confirm your business compensation. A sole proprietor generally uses adjusted net earnings from self-employment. An S corporation generally uses W-2 wages, not shareholder distributions, for contribution calculations.
3. Adopt a written plan. For the safest year-end strategy, complete the plan establishment process by December 31, 2026.
4. Set your deferral election. Document the amount or percentage you intend to defer from 2026 compensation.
5. Calculate the employer contribution. Use the applicable IRS calculation. Self-employed individuals must use the worksheets in Publication 560.
6. Deposit contributions through the plan provider. Obtain written confirmation of the contribution year.
7. Review filing requirements. A one-participant plan may require Form 5500-EZ or Form 5500-SF when plan assets exceed applicable thresholds.

The plan document and business structure control the deadline. Late action can eliminate a salary-deferral opportunity or delay the deduction.

2. Consider a SEP-IRA for Simpler Employer Contributions!

A SEP-IRA may be appropriate when you want a straightforward employer-funded retirement plan. The employer contributes to SEP-IRAs established for eligible employees.

For 2026, contributions generally cannot exceed the lesser of:

• 25% of eligible compensation, or
• $72,000 per participant.

For a self-employed individual, the effective contribution rate is generally lower than 25% because of the calculation method for net earnings from self-employment. Use the worksheets in Publication 560. Do not estimate the deductible amount by simply multiplying Schedule C profit by 25%.

Complete these SEP-IRA steps:

1. Review employee eligibility. A SEP generally must cover eligible employees under the plan’s participation rules.
2. Adopt a written agreement. You may use Form 5305-SEP, Simplified Employee Pension. Individual Retirement Accounts Contribution Agreement, if permitted by your circumstances.
3. Give required information to eligible employees.
4. Establish each required SEP-IRA.
5. Calculate contributions under a nondiscriminatory formula.
6. Fund the accounts by the due date of the employer’s federal income tax return, including extensions.

A SEP-IRA may generally be established and funded after December 31 for the prior tax year. However, delaying the decision can create payroll, documentation, and cash-flow problems. A SEP-IRA also may not be appropriate if you want employee salary deferrals or if you maintain another qualified retirement plan.

The employer contribution for employees is generally deductible as a business expense. A sole proprietor or partner generally reports the deduction for personal contributions on Form 1040 Schedule 1, line 16, subject to the applicable instructions and limits.

3. Review the SIMPLE IRA Deadline Immediately!

A SIMPLE IRA can provide employee salary deferrals and mandatory employer contributions. It is generally designed for businesses with 100 or fewer employees that do not maintain another qualified retirement plan.

The 2026 employee salary-reduction limit is $17,000. A higher limit of $18,100 may apply to certain eligible small employers under SECURE 2.0 provisions.

The 2026 catch-up limits are:

• $4,000 for participants age 50 or older.
• $5,250 for participants ages 60–63, if the plan permits the enhanced catch-up.

The employer generally chooses one of two contribution formulas:

• Matching contribution: Dollar-for-dollar matching up to 3% of compensation.
• Nonelective contribution: 2% of compensation for each eligible employee, even if the employee does not defer income.

A SIMPLE IRA plan generally must be established between January 1 and October 1 for a calendar year. For most existing employers, the October 1, 2026 deadline has passed. A new employer that came into existence after October 1 may have a later administrative establishment deadline.

For 2027 planning, mark the employee election period. It generally runs from November 2 through December 31, 2026.

Follow the SIMPLE IRA deposit rules:

1. Use Form 5304-SIMPLE or Form 5305-SIMPLE, depending on the financial institution arrangement.
2. Provide the required annual employee notice.
3. Set up an IRA for each eligible employee.
4. Deposit employee salary reductions within 30 days after the end of the month in which the wages would otherwise have been paid.
5. Deposit employer matching or nonelective contributions by the employer’s federal return due date, including extensions.
6. Review Form W-2 reporting and payroll records.

Late deposits may lead to correction requirements, penalties, or employee notification obligations.

4. Address Connecticut’s MyCTSavings Requirement!

Connecticut’s MyCTSavings program applies to many private employers that do not offer a qualified employer-sponsored retirement plan.

A business may be covered when it:

• Has five or more Connecticut employees.
• Had at least five employees earning $5,000 or more in prior-year wages.
• Meets the applicable employee-count test as of October 1 of the prior year.
• Does not offer a qualifying retirement plan.

An employer that offers a qualified plan may be exempt from facilitating MyCTSavings. The exemption generally must still be certified through the MyCTSavings employer portal.

For newly eligible employers in 2026, the registration or exemption deadline was August 31, 2026. That date has passed. If your business received a notice and has not acted, register or certify the exemption immediately through the official MyCTSavings employer resources.

Do not assume that an owner-only retirement arrangement satisfies the requirement for employees. A SEP-IRA or SIMPLE IRA may need to be offered to eligible workers under its participation rules. Review the plan structure before certifying an exemption.

Failure to register or certify may lead to enforcement activity and penalties. Keep confirmation of your submission with your payroll and tax records.

5. Complete the Federal Filing Review!

Retirement contributions affect more than one tax form. Complete the following review before filing:

1. Reconcile business income and expenses. Use current bookkeeping records.
2. Confirm the business entity. Sole proprietorship, partnership, S corporation, and C corporation rules differ.
3. Calculate eligible compensation. Do not use shareholder distributions as S corporation retirement-plan compensation.
4. Review Form 1040 Schedule 1. Self-employed owners and partners generally report allowable personal plan deductions on line 16.
5. Review Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs). This publication contains IRA contribution, deduction, rollover, and excess-contribution rules.
6. Check Form 8880, Credit for Qualified Retirement Savings Contributions. Eligible taxpayers may claim the Saver’s Credit on qualifying contributions. For 2026, the maximum AGI thresholds for receiving any credit are generally $80,500 for married filing jointly, $60,375 for head of household, and $40,250 for other filing statuses.
7. Maintain records. Keep plan documents, contribution confirmations, employee notices, payroll reports, and calculations.
8. Coordinate federal and Connecticut filings. A federal deduction does not automatically create an identical state tax result.

Lock In Your Year-End Strategy Now!

Use October to make the decision. Use November to complete plan documents, payroll instructions, and employee notices. Use December to verify deposits and contribution-year designations.

Jose’s Tax Service provides year-round tax planning, bookkeeping support, federal and Connecticut filing assistance, virtual appointments, in-person appointments, and same-day availability when scheduling permits. Clients may receive personalized planning support with $0 upfront payment under the firm’s stated service terms.

Review Jose’s Tax Planning resources or visit Jose’s Tax Service to schedule a consultation.

Reminder: Retirement plan deductions are limited by compensation, plan terms, entity structure, employee coverage rules, and contribution deadlines. Excess contributions may require correction and may lead to penalties or additional taxes. Confirm the applicable rules before transferring funds.

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