7 Mistakes You're Making with Your Mid-Year Tax Review (and How to Fix Them)

It’s July. The sun is out, the summer Fridays are in full swing, and the last thing you probably want to think about is the IRS. But here’s the cold, hard truth: if you wait until December to look at your 2026 tax strategy, you’ve already lost.

At SJ Accounting Services LLC, we see it every year. Business owners hitting that $1M or $5M revenue mark start feeling the "success tax" bite. You’re working harder, but your take-home pay isn't moving the needle because your tax bill is ballooning.

Mid-year is the "sweet spot." It’s late enough that we have real data from the first two quarters, but early enough that we can actually do something about it. If you’re just coasting through July without a review, you’re likely making one of these seven expensive mistakes.

1. Using Last Year’s "Safe Harbor" as a Security Blanket

Most business owners and high-net-worth individuals rely on the "Safe Harbor" rule to avoid underpayment penalties. You pay 100% (or 110% if your AGI was over $150k) of last year’s tax, and you’re "safe," right?

Technically, yes, you won't get a penalty. But if your business is having a breakout year in 2026, you might be setting yourself up for a massive, six-figure surprise in April. We’ve seen clients get "safe" from penalties but still owe $200,000 they didn't budget for because they didn't adjust their estimates to reflect this year's growth.

How to fix it: Don't just look backward. We help our clients run a "Bridge Projection" in July. We look at your YTD profit, project the rest of the year, and adjust those Q3 and Q4 estimates now. It’s much easier to pay a bit more now than to scramble for cash next Spring. Check out our tax planning services to see how we handle these projections.

2. Ignoring the New $2,000 1099 Threshold

This is a big one for 2026. For years, the magic number for 1099s was $600. Then there was the back-and-forth with the $600 third-party app rule. For 2026, the federal reporting threshold has shifted to $2,000.

You might think, "Great, less paperwork!" But wait. If you’ve stopped collecting W-9s from your smaller contractors because you think they won't hit the $2,000 mark, you’re playing a dangerous game. If they do hit that mark by November and you don't have their info, you're stuck chasing them down during the holidays, or worse, facing IRS penalties for missing info.

How to fix it: Stick to the "W-9 First" rule. Don't pay a single dollar to a new vendor or contractor until you have their W-9 on file. It’s actually kind of ridiculous how many businesses let this slide. Our Virtual Controller team makes sure this is automated so you never have to think about it.

3. Missing Out on the 72.5 Cent Mileage Rate

For 2026, the IRS standard mileage rate has jumped to 72.5 cents per mile. If you’re a business owner or high-net-worth professional who drives for business, this is a massive deduction, if you actually track it.

The mistake we see? "I'll just estimate it at the end of the year." Don't do this. The IRS has gotten incredibly aggressive with "reconstructed" logs. If you don't have a contemporaneous log (meaning you tracked it as it happened), they can throw the whole deduction out. At 72.5 cents, a 10,000-mile year is a $7,250 deduction. Would you just throw $7,000 in the trash?

How to fix it: Use an app like MileIQ or QuickBooks Self-Employed. It runs in the background. At your mid-year review, we check your logs to make sure you aren't accidentally "double-dipping", trying to take the standard mileage and deducting your actual gas and repairs. It’s one or the other, and we’ll tell you which one saves you more.

4. Getting Bonus Depreciation Wrong in 2026

Bonus depreciation rules have been a rollercoaster lately. For 2026, the rules around acquisition and "placed-in-service" dates are more technical than ever. We’ve seen business owners buy a $100,000 piece of equipment in June, thinking they’ll get a 100% write-off, only to find out they don't qualify because of how the asset was financed or when it actually started being used in the business.

How to fix it: Before you make any major purchase over $2,500, send us a quick email. We can look at the 2026 rules (including the specific provisions from the latest legislation) and tell you exactly how it will affect your bottom line. We’re all about a proactive, solution-oriented approach, not cleaning up messes in January.

5. Keeping an Outdated Entity Structure

Is your business still an LLC being taxed as a Sole Proprietorship? If you’re clearing $100,000+ in profit, you’re likely overpaying on self-employment taxes by thousands. Or maybe you’re an S-Corp, but your income has surged to $2M and the QBI (Qualified Business Income) deduction phase-outs are starting to hurt you.

It's actually kind of ridiculous how many owners stay in the same entity structure they started with ten years ago. Your business has evolved; your tax structure should too.

How to fix it: Mid-year is the best time to run an "Entity Comparison." We look at your current income and model out what you’d pay as an S-Corp vs. a C-Corp vs. a Partnership. Sometimes a simple election change can save you $20,000 a year. If this speaks to you, please reach out to us for a consultation.

6. Waiting Until December to Fund Retirement

Many high-net-worth individuals wait until the week of Christmas to ask, "How much can I put in my SEP IRA?"

By then, your cash flow might be tight, or you might realize you missed the deadline to set up a more powerful vehicle, like a Cash Balance Plan. If you’re a high-earner, a Cash Balance Plan can allow you to squirrel away $100k-$200k+ in pre-tax dollars: but you usually can't set these up in the eleventh hour.

How to fix it: We review your retirement contributions now. Are you on track to max out? Should we look at a defined benefit plan? Our team works with your financial advisors to ensure your tax strategy and wealth-building goals are perfectly aligned.

7. The "Vanish" of Deductions: Commingling Expenses

We get it: you’re busy. Sometimes you grab the wrong card at Costco, or you pay for a business software subscription with your personal account. But if your books aren't reconciled monthly, these "invisible" expenses vanish. You forget about them, your accountant doesn't see them, and you lose the deduction.

How to fix it: Stop the bleed. Clean books are the foundation of everything we do. If your bookkeeping is a "hit or miss" situation, we recommend our complete bookkeeping services. We'll reconcile everything through June so you can see exactly where your money is going: and make sure every penny is working for you.

We’re Your Experts and Trusted Partners

Tax planning shouldn't be a once-a-year headache. It should be an ongoing conversation that gives you confidence in your financial future. At SJ Accounting Services LLC, we pride ourselves on being a partner that addresses your concerns the same day: not three weeks later.

Are you ready to stop guessing and start planning?

If you want to ensure your 2026 mid-year review is handled with the precision your business deserves, schedule a call with Sion and our team here. We’d love to help you keep more of what you earn.

Wishing you a productive and profitable summer!

Warmly,

The SJ Accounting Services Team