The Annual New Architecture Firm Review Checklist

2026-08-21

A practical checklist for new architecture firm owners to review finances, taxes, and compliance annually. Includes steps, deadlines, and cost ranges.

Running a new architecture firm means juggling design deadlines, client meetings, and the business side of practice. One task that often gets pushed aside is the annual review of your firm’s financial and tax health. This checklist helps you systematically review your books, tax obligations, and compliance, so you can avoid surprises and keep your practice profitable. Follow these steps in order, and you will have a clear picture of where your firm stands and what to fix before the next tax season.

Why an Annual Review Matters for New Architecture Firms

Architecture firms have unique tax considerations: project-based revenue, pass-through entity structures (like LLCs or S-corps), and significant deductions for software, equipment, and professional development. An annual review ensures you are not overpaying taxes, missing deductions, or falling behind on compliance. For a new firm, this review can also highlight cash flow issues before they become critical. Most firms spend 4-8 hours on this process, and many hire a CPA for a one-time check, costing $300-$800.

Step 1: Reconcile Your Financial Statements

Start by pulling your profit and loss statement, balance sheet, and cash flow statement for the past 12 months. Compare them to your bank and credit card statements to ensure every transaction is recorded. Look for:

Unreconciled transactions: mark any that are missing or duplicated.
Personal expenses mixed with business: separate them immediately.
Outstanding invoices: list any unpaid client invoices and follow up.

If you use accounting software like QuickBooks or Xero, run a reconciliation report. If you are still using spreadsheets, now is the time to consider a proper system. A basic plan costs $30-$60/month, and it will save you hours each year.

Step 2: Review Your Entity Structure and Tax Classification

Your firm’s legal structure affects your tax liability and personal liability. Common structures for architecture firms include sole proprietorship, LLC, S-corp, and C-corp. Review whether your current structure still fits your revenue and growth plans.

Sole proprietorship: simplest, but no liability protection. You pay self-employment tax on all profits.
LLC: offers liability protection and pass-through taxation. You can elect S-corp status to save on self-employment tax, but you must pay yourself a reasonable salary.
S-corp: can reduce self-employment tax, but requires payroll processing and annual filings.
C-corp: subject to double taxation, but may be beneficial if you plan to reinvest profits or seek outside investors.

If you are unsure, consult a CPA. Changing your entity structure mid-year can be complex, so do it during this annual review. Filing fees for an LLC range from $50-$200 depending on your state, and S-corp election costs $0-$100.

Step 3: Maximize Deductions Specific to Architecture Firms

Architecture firms have several industry-specific deductions that new owners often miss. Review your expenses to ensure you are claiming all eligible items:

Software and subscriptions: AutoCAD, Revit, Adobe Creative Cloud, project management tools. Deduct the full cost if under $2,500 per item, or depreciate over time.
Hardware: computers, monitors, printers, and drawing tablets. Section 179 allows you to deduct the full purchase price in the year of purchase, up to $1,160,000 for 2026.
Professional development: conference fees, continuing education courses, and architecture magazines. Deduct up to $2,000 per year without special documentation.
Home office: if you have a dedicated space, use the simplified method ($5 per square foot, up to 300 square feet) or actual expenses.
Vehicle use: if you drive to project sites, track mileage. The standard mileage rate for 2026 is $0.70 per mile.
Business meals: deduct 50% of client meals and project-related meals.

Keep receipts and a log for any expense over $75. Use a dedicated business credit card to simplify tracking.

Step 4: Check Your Estimated Tax Payments

As a new firm, you likely make quarterly estimated tax payments to the IRS and your state. Review your 2025 payments against your actual tax liability. If you underpaid, you may owe penalties. If you overpaid, adjust your 2026 payments.

Federal estimated tax: due April 15, June 15, September 15, and January 15.
State estimated tax: varies, but most states follow the federal schedule.
Penalty for underpayment: roughly 5% of the underpaid amount, plus interest.

Use IRS Form 1040-ES to calculate your payments. If your income fluctuates, consider the annualized income installment method to avoid penalties.

Step 5: Review Your Retirement Plan Contributions

Retirement plans reduce your taxable income and help you save for the future. For new architecture firms, common options include:

SEP IRA: allows contributions up to 25% of net earnings, max $69,000 for 2026. Easy to set up, but contributions are made only by the employer.
Solo 401(k): allows employee and employer contributions, with a total limit of $69,000 (plus catch-up if over 50). You can contribute as both employee and employer.
SIMPLE IRA: good if you have employees, with a lower contribution limit of $16,000 plus employer match.

You must set up these plans by December 31 to deduct contributions for that tax year. If you missed the deadline, you can still contribute to a traditional IRA until April 15, 2026, for the 2025 tax year.

Step 6: Verify Your Payroll and Contractor Filings

If you have employees, ensure you are running payroll correctly and filing all required forms. Common mistakes include misclassifying employees as independent contractors, which can lead to back taxes and penalties.

Form 941: quarterly federal payroll tax return.
Form 940: annual federal unemployment tax return.
W-2s: must be issued to employees by January 31.
1099-NEC: must be issued to contractors who earned $600 or more by January 31.

If you use a payroll service like Gusto or ADP, they handle most filings. Costs range from $40-$100/month plus per-employee fees. If you do it yourself, set calendar reminders for each deadline.

Step 7: Assess Your Compliance with Licensing and Insurance

Architecture firms must maintain professional licenses and insurance. Review that your firm’s license is current and your continuing education requirements are met. Also check your insurance policies:

Professional liability (errors and omissions): essential for architects. Premiums range from $2,000-$10,000 per year depending on firm size and location.
General liability: covers bodily injury and property damage. Costs $500-$2,000 per year.
Workers’ compensation: required if you have employees, costs vary by state and payroll.

If you have not reviewed your policies in a year, get quotes from two or three insurers to ensure you are not overpaying.

Step 8: Plan for Next Year’s Taxes

Use your review to create a tax projection for the upcoming year. Estimate your revenue, expenses, and taxable income. Then set aside a percentage of each client payment for taxes. A common rule is to save 25-30% of net profit for federal and state taxes. Open a separate savings account for this purpose, and transfer funds monthly.

Also, review your bookkeeping system. If you are still using manual methods, consider upgrading to a tool like FreshBooks or QuickBooks Self-Employed, which cost $15-$30/month and automate expense tracking.

FAQ

Q: When is the best time to do this annual review? A: Ideally, within the first two months of your fiscal year, after you have received all your tax forms (W-2s, 1099s, K-1s). This gives you time to make adjustments before the April 15 deadline.

Q: Can I deduct the cost of my architectural software? A: Yes, if the software is used for business. If it costs less than $2,500, you can deduct the full cost in the year of purchase. More expensive software must be depreciated over 3-5 years, unless you use Section 179.

Q: What if I missed making estimated tax payments? A: You can still make a payment as soon as possible to reduce penalties. The IRS calculates penalties based on how long the underpayment was outstanding, so paying now helps. You may also qualify for a waiver if it is your first year in business.

Q: Should I hire a CPA for this review? A: If your firm has revenue over $100,000 or you have employees, a CPA can save you money by finding deductions and avoiding mistakes. A one-time review costs $300-$800, which is often worth it.

The bottom line

An annual review is not just about filing taxes; it is about understanding your firm’s financial health. By following this checklist, you will catch errors, reduce your tax bill, and set your practice up for growth. Set aside a half-day each year to complete these steps, and you will avoid costly surprises. If you are unsure about any area, invest in professional help. The cost is a fraction of the potential penalties and missed savings.