Tax time can be stressful – but it doesn’t need to be. Maintaining accurate records throughout the year can make a difference when it’s time to gather the information your CPA needs. Here’s what you need to know to be well-prepared for this tax season.
Understand New Tax Laws
While some aspects of the One Big Beautiful Bill Act’s (OBBBA) tax provisions kicked in after it was passed in July of 2025, other provisions didn’t come into play until 2026.
One such change is an expansion of the qualified business income (QBI) deduction phase-in ranges. Since the majority of insurance agency owners are structured as pass-through entities (S Corps, LLCs, Partnerships, or Sole Proprietorships), this potentially increases your after-tax cash flow.
In addition, enhancements to employer-provided childcare credits and PFML (paid family and medical leave) credits will provide some agency owners with an opportunity to offer improved benefits to their staff. As an employer, agencies that take advantage of these tax credits must have appropriate procedures in place to track qualified childcare expenses and wages or premiums paid for PFML.
Track Revenue Streams Accurately
If you aren’t using software that tracks each revenue stream separately, now is the time to consider upgrading. It’s essential to have a clean and indisputable accounting of commissions, bonuses, service fees, and overrides. Because carriers typically pay on a lag, it’s a good habit to keep a log of expected versus received commissions so you can catch discrepancies early and address them before too much time has passed.
Not only will this increase the likelihood that your books will align with year-end 1099s from carriers, it will also reduce the unintentional comingling of funds.
Stay on Top of Expenses
Consider meeting with your CPA early in the year to get their input on areas where you can improve expense tracking and identify additional costs that could be used as QBIs. While some categories are obvious, there are other purchases and subscriptions that could potentially reduce your taxable income:
- W-2 payroll
- Contractor expenditures (1099-NEC)
- Interest expense on loans and credit cards
- Benefits
- Producer/Agent commissions
- Continuing education and licensing fees
- E&O premiums
- Lease or mortgage payments
- Utilities
- Office equipment
- Hardware
- Software and Software-as-a-Service (SaaS) subscriptions
- Marketing and advertising
- Actual vehicle use (IRS doesn’t accept mileage estimates)
Ensure you work with your CPA to calculate your estimated tax payments for 2026 and make them timely so that you can avoid underpayment penalties and interest.
The Right Reports
Tax season is far less stressful for agency owners that maintain accurate records throughout the year and conduct monthly/quarterly reviews of essential reports that summarize the information collected above. Here are three types of reports for you to assess throughout the year to stay on track and make tax-time easier:
- Reconcile bank and credit card statements monthly
- Reconcile commission income reports (by carrier) monthly
- Evaluate Profit & Loss statements monthly
Pulling It All Together
Maintaining accurate records on an ongoing basis is the best way to ensure you’re maximizing tax savings and staying in compliance. The Agency Finance team at First Mid is committed to meeting the needs of insurance agencies at all stages of growth. Contact us at 1-877-894-2785 to learn how we can support