Week 3: January 19-25, 2026
DON’T MISS
February 2 Is Next Week (Jan 31 Falls on Saturday)
The January 15 estimated tax deadline has passed. If you missed it, pay now to minimize penalties. The underpayment penalty runs from the deadline until you pay.
Looking ahead to February 2, 2026:
W-2s due - Employers must provide to employees
1099-NEC due - Payers must send to contractors AND file with the IRS by this date (paper or electronic - there is no extended deadline for 1099-NEC
1099-MISC due - For rents, royalties, and other payments (recipient copies; some boxes have later deadlines)
Form 940 due - Annual federal unemployment tax return
If you paid contractors $600 or more in 2025, you must send them 1099-NEC forms AND file Copy A with the IRS by February 2. Unlike 1099-MISC (which has a February 28 paper/March 31 electronic filing deadline), there is no automatic extension for Form 1099-NEC.
NOTE: 2026 TAX LAW CHANGE - The $600 reporting threshold increases to $2,000 for payments made in tax year 2026 under the One Big Beautiful Bill Act (OBBBA Section 70433).
Source: IRS Publication 509; IRS General Instruction for Certain Information Returns (2025)
THE SOLOPRENEUR’S BRIEF
Mileage Documentation Excellence: How to Never Lose a Deduction
The vehicle deduction is one of the most valuable write-offs for solopreneurs. It's also commonly challenged in IRS examinations. The difference between keeping and losing this deduction comes down to one thing: documentation.
What the IRS Requires
For every business trip, you must record:
Date - When did you drive?
Destination - Where did you go?
Business purpose - Why was it business-related?
Miles driven - How far was the trip?
The IRS calls this "contemporaneous" documentation, meaning you record it at or near the time of the trip. A log recreated at tax time from memory will not hold up in an audit.
In Plain English: If you do not record mileage at or near the time you drive, the IRS can disallow the entire deduction. Logs recreated later from memory or calendars generally do not survive an audit.
The 2026 Standard Mileage Rate
For 2026, the IRS standard mileage rate is 72.5 cents per mile for business use. At 10,000 business miles, that's a $7,250 deduction.
What Counts as Business Mileage
Driving to meet clients
Trips to the office supply store
Bank runs for business deposits
Travel between job sites
Driving to professional development events
What does NOT count:
Commuting from home to your regular office
Personal errands combined with business trips (only the business portion counts)
Travel where business purpose cannot be documented
In Plain English: If your home qualifies as your principal place of business, you generally have no commute. That means most business-related trips starting from home can count as deductible mileage.
WHAT TO DO: Begin tracking mileage now, even if prior records are incomplete. Partial contemporaneous records are better than none. Start Now, Not Later.
Source: IRS Publication 463
UNDER THE HOOD
How the IRS Actually Verifies Mileage Claims
Think the IRS can't check your mileage? Think again. Here's what they look at:
Total miles vs. claimed business miles. If you claim 25,000 business miles but your car only has 20,000 total miles on it, you have a problem.
Reasonableness. 500 business miles per week for a consultant who works from home? That raises questions.
Supporting evidence. Calendar entries, client invoices, and receipts that corroborate your claimed trips.
In Plain English: The IRS focuses on whether your mileage numbers are mathematically possible and consistent with your business. If the totals do not make sense, the deduction is likely challenged.
Source: IRS Publication 463; IRS Audit Technique Guide
BRIEF RECAP
Key takeaway: The mileage deduction is only as strong as the records behind it. Contemporaneous logs, a qualifying home office, and consistent tracking are what protect this write-off if the IRS asks questions later.
In last week’s issue: A large tax refund usually means you overpaid throughout the year. Adjusting estimated payments to meet safe harbor rules allows your money to stay in your control instead of sitting with the IRS interest-free.
Next week: You still have real opportunities to lower last year’s tax bill if you act before the deadlines pass. Retirement contributions made correctly can reduce what you owe, but timing matters. Just as important, working with a qualified and accountable tax preparer helps prevent problems that usually show up long after filing season ends.
Disclaimer: This publication is provided for general informational and educational purposes only and does not constitute personalized tax, legal, or accounting advice. Tax laws are complex and subject to change, and their application depends on individual circumstances. Readers should consult qualified professionals regarding their specific situations.
Circular 230 Disclosure: To ensure compliance with U.S. Treasury Department regulations, we inform you that any U.S. federal tax discussion contained in this publication is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code or for promoting, marketing, or recommending any transaction or matter addressed herein.