End-of-Year Business Tax Planning Checklist
As the year draws to a close, small business owners often focus on finishing projects, balancing books, and preparing for the holidays. But there’s one more crucial task that can have a lasting impact — year-end tax planning. Taking time to review your financial position before December 31 can reduce your tax liability and set you up for a stronger year ahead.
Here’s a practical checklist to guide your planning process:
1. Review Your Financial Statements
Start with your profit and loss statement, balance sheet, and cash flow report. Make sure your records are accurate and up to date. Spot any discrepancies and reconcile your accounts. This ensures you have a clear picture of your business’s financial health — and it helps your accountant identify opportunities for tax savings.
2. Accelerate or Defer Income and Expenses
Timing matters. If you expect to be in a higher tax bracket next year, consider accelerating expenses (like supplies, bonuses, or equipment purchases) before year-end to reduce taxable income.
Conversely, if next year’s income will be lower, defer expenses to keep deductions available when they’ll have the greatest impact.
3. Take Advantage of Section 179 and Bonus Depreciation
If you’ve purchased new equipment, technology, or vehicles, review the IRS Section 179 deduction and bonus depreciation rules. These provisions allow you to deduct a large portion — or even the full cost — of qualifying assets in the year of purchase, rather than spreading the expense over time.
4. Maximize Retirement Contributions
Contributing to retirement plans like SEP IRAs, SIMPLE IRAs, or 401(k)s not only supports your financial future but also reduces taxable income. Ensure contributions are made before year-end to take advantage of current-year deductions.
5. Review Payroll and Estimated Taxes
Confirm that all payroll taxes have been correctly withheld and deposited. If your quarterly estimated tax payments have been inconsistent with your actual income, make a final payment to avoid penalties or interest.
6. Check Your Business Deductions
Review deductions for common expenses like office supplies, travel, marketing, insurance, and professional fees. Don’t overlook small items — together, they can make a meaningful difference on your return.
7. Consult Your Accountant
Tax laws change frequently. Before making major financial decisions, talk to your accountant or tax professional. A quick year-end review can uncover deductions you’ve missed and prevent costly mistakes.
A little planning now can save a lot of stress later. By tackling this checklist before December 31, you’ll enter tax season prepared — with fewer surprises and more savings.