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Mid Year Tax Check-In

May 13

Written By Eric Dauphin

Eric Dauphin

Key 2025 Tax Updates for Individuals

💼 For Businesses · Mid-Year Planning

By Eric Dauphin, CPA · June 2026 · 6 min read

It's hard to believe, but we're already halfway through 2026. For most business owners, the first six months blur together — clients to serve, payroll to run, fires to put out. Tax season feels like a distant memory, and the next big deadline isn't until October.

That's exactly why mid-year is the most overlooked — and most valuable — moment on the tax calendar.

By July, you have enough year-to-date data to know where your business actually stands. You still have six months of runway to make adjustments that meaningfully change your final tax bill. And you're not yet competing for your CPA's attention against the Q4 rush.

Here are the five mid-year checkpoints every business owner should run through before July. Some take five minutes. Some might prompt a conversation with us. All of them are worth your time.

1. Estimated Payment Safe Harbor: Are You Protected?

Most business owners know they owe estimated taxes quarterly. Far fewer know exactly how much they need to pay to avoid an underpayment penalty.

The IRS gives you a "safe harbor" — if you've prepaid enough by the time the year is over, no penalty applies, regardless of how much more you eventually owe. The threshold:

100% of your 2025 total tax liability (if your 2025 AGI was under $150,000), OR
110% of your 2025 total tax liability (if your 2025 AGI was $150,000 or more)

⚠️ Important: Safe harbor protects you from penalties, not from owing the money. If your 2026 income is significantly higher than 2025, you can still meet safe harbor, defer the rest of the tax bill until April, and avoid penalty — but you'll need to have the cash ready in April.

What to do now:

Pull your 2025 Form 1040 and find your total tax liability (Line 24).
Multiply by 100% or 110% depending on your AGI bracket.
Add up what you've already paid through Q1 and Q2 estimates plus withholding.
If you're short, increase your remaining quarterly estimates (Sept 15 and Jan 15) or boost W-2 withholding.

If your income has shifted meaningfully — new clients, a strong first half, a capital gain, or a side business taking off — this is the single most important number to recalibrate at mid-year.

2. YTD Profit vs. Projection: Are You On Track or Off?

By the end of June, you have six months of real data. Pull your year-to-date profit and loss and compare it against:

Your 2025 P&L (same six-month window)
Your 2026 projection (whatever you assumed back in January)

Three scenarios to think about:

Scenario A: You're tracking close to projection.

Your estimated tax payments are probably right where they should be. No action needed, but it's worth confirming.

Scenario B: You're outperforming projection.

Good problem — but a problem nonetheless. Your January estimates were sized for a smaller year. Without adjustment, you'll either hit a big balance due in April or trip underpayment penalties. We can help you reset Q3 and Q4 estimates to match reality.

Scenario C: You're behind projection.

The opposite concern — you may be overpaying estimates and tying up cash you need for operations. Reducing the remaining estimates can free up working capital, but only if you're confident the trajectory holds.

The most expensive mistake here is assuming "we'll figure it out at year-end." By December, your options narrow dramatically. By July, you still have flexibility.

3. S-Corp Owners: Rebalance Payroll vs. Distributions Before Year-End

If you're operating as an S-corporation, the IRS expects you to pay yourself a "reasonable salary" through W-2 wages before taking distributions. The exact line is gray, but the consequences for getting it wrong aren't — the IRS can reclassify distributions as wages and assess back payroll taxes plus penalties.

Mid-year is the right time to check the mix because payroll is the only piece you have to adjust during the year, not after. Distributions can be timed flexibly; W-2 wages cannot.

Questions to think through:

Is your current salary reasonable for the role you actually perform, the hours you put in, and the revenue your business generates?
Has your business grown materially since you last set your salary?
Are you taking large distributions relative to a thin salary? That's the highest-risk pattern.

What to do now:

Calculate your YTD salary as a percentage of total compensation (salary + distributions).
Compare to industry benchmarks for your role and revenue size.
If the salary feels light, adjust the remaining 2026 payrolls upward — there's still time for bonuses or rate increases to land before December 31.

We can run a reasonable compensation analysis if you want a defensible number on file. This is one of the most common audit triggers for S-corp owners, and the fix is much easier in July than in February.

4. Retirement Plan Contributions: Are You Pacing Toward the 2026 Limit?

2026 contribution limits stepped up again, and many business owners aren't taking full advantage. A quick check at mid-year tells you whether you're on pace.

Key plans for business owners:

SEP-IRA — up to 25% of compensation, with a 2026 cap that benefits high earners. Easy to fund late in the year or even with your extended return.
SIMPLE IRA — straightforward salary deferral plan with employer match. Mid-year is when you check that contributions are flowing correctly through payroll.
Solo 401(k) — the most powerful option for owner-only businesses. Combines employee deferrals (up to the standard 401(k) limit) with employer profit-sharing (up to 25% of compensation). Many owners can stack $60K+ in tax-deferred savings.
Defined benefit plan — for high-income owners over 50, can allow contributions well into six figures. Worth a conversation if you're consistently earning at the top brackets.

What to do now:

Pull your YTD contributions from your plan administrator.
Divide the annual limit by 12, multiply by 6 — that's your "should be at" target for the end of June.
If you're behind, you have six months to catch up. If you're not contributing at all and your tax bill stings, this is the single biggest lever most business owners overlook.

For SEP and Solo 401(k) employer contributions, you actually have until your filing deadline (including extensions) to fund — meaning you can wait to see your full-year picture before locking in the amount. But mid-year is when you decide whether you'll contribute and how much. Plan decisions are easier than scrambling decisions.

5. 2026 Law Changes: What's Actually In Effect This Year

Tax law moves slowly until it doesn't. Several provisions are new or modified for 2026, and they affect how you should be planning for the second half of the year. Without getting into the weeds of every change, here's what business owners should be aware of:

Updated retirement contribution limits for SEP, SIMPLE, 401(k), and IRA accounts — most ticked up modestly from 2025.
1099 reporting thresholds continue to evolve, and the IRS is increasing scrutiny on vendor payment reporting. Confirm your bookkeeping is capturing every vendor paid over $600 in 2026 with a current W-9 on file.
Bonus depreciation and Section 179 rules continue to favor equipment and software purchases, but the planning window matters — placing assets in service in Q3 or Q4 has different cash-flow implications than waiting until December.
State-level changes vary significantly. New York continues to refine the PTET (Pass-Through Entity Tax) election, which can deliver meaningful federal tax savings for S-corp and partnership owners who elect in by the deadline.

This is the section we customize for each client during your mid-year check-in. The provisions that matter depend on your entity structure, your income level, and your industry. What's a non-event for one client is a major opportunity for another.

What to Do This Month

If you read this and one of the five items raised an eyebrow, that's the conversation to have now — not in November. Mid-year planning is the difference between a tax bill you control and a tax bill that controls you.

A few next steps:

Pull your YTD financials and the year-over-year comparison.
Run the safe harbor math on your 2025 return.
Email us with what you found — we'll set up a 30-minute mid-year check-in.

We're not booked solid until October the way we are in March. This is the best time of year to actually have a strategic conversation about your business and your taxes.

Ready for your mid-year check-in?

Send us your YTD P&L and we'll set up a 30-minute strategy conversation.

Schedule Your Check-In →

Eric Dauphin is a principal at Dauphin & Fantacone CPAs, a Syracuse-area firm serving business owners, professionals, and families across New York State. This article is for general informational purposes and does not constitute tax or legal advice. Tax outcomes depend on individual circumstances — please contact us before acting on any of the above.

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