Year-End Tax Strategies: 7 Questions to Guide Your Business

As we approach the year's end, it's crucial to strategize about taxes. Proactive planning before December 31 can result in significant tax savings, better cash flow, and a solid start for your business in the new year. Whether you're a sole proprietor or leading a growing company, consider these seven key questions to guide your year-end tax review and uncover valuable savings opportunities.

1. Are All Business Expenses Accounted For?

Small expenses can accumulate into substantial deductions, but only if accurately tracked. It's easy to lose track of receipts or overlook minor expenses, particularly if personal accounts are occasionally used for business transactions.

Conduct a thorough review before the year concludes by gathering all receipts, reconciling credit card statements, and ensuring nothing has been overlooked. Be vigilant for recurring expenses like software subscriptions, business meals, professional memberships, and mileage. If you use part of your home as an office, consider deducting a portion of utilities or rent. A meticulous review now ensures you claim all legitimate expenses when needed most.

2. Should You Make Major Purchases Now?

Thinking about upgrading equipment, acquiring a company vehicle, or investing in new technology? The timing can significantly impact your taxes. Under Section 179 and bonus depreciation rules, businesses can deduct the full or partial cost of qualifying purchases in the current year instead of spreading it out.

Purchasing before December 31 may allow you to accelerate these deductions into this year's return. However, avoid spending unnecessarily just for a deduction. Assess whether the purchase supports your operations and long-term growth objectives.

3. Are You Maximizing Retirement Contributions?

Retirement plans are not just for employees; they're a powerful tax-saving tool for business owners. Contributions to plans like SEP IRAs, SIMPLE IRAs, or 401(k)s reduce taxable income while aiding in future planning for you and your team.

If you haven't reviewed your retirement plan options recently, now is an excellent time. Enhancing contributions before year-end can decrease your current tax liability while setting up a secure financial future. Even sole proprietors and smaller firms can significantly benefit from maximizing these opportunities.

4. How's Your Payroll and Owner Compensation?

The end of the year is a perfect time to reassess how you compensate yourself and your team. If your business operates as an S-Corporation, ensure your "reasonable salary" complies with IRS requirements—both underpaying and overpaying can lead to issues. For sole proprietors or partnerships, review your year's withdrawals and check if your estimated tax payments align.

Appropriate adjustments now can balance cash flow and prevent tax season surprises. Payroll reviews also provide a chance to confirm benefits, withholdings, and bonuses are correctly reported before issuing W-2s and 1099s in January.

5. Are There Tax Credits You're Overlooking?

Tax credits can often be more beneficial than deductions as they reduce your tax bill dollar-for-dollar. Depending on your business activities and industry, you might qualify for credits like the R&D credit, energy-efficiency incentives, or the small business health care tax credit.

These programs frequently evolve, so consult with your accountant to see if you qualify. Even a minor credit can have a significant impact when directly applied to your year-end balance.

6. Do You Need to Adjust Your Estimated Tax Payments?

Prevent tax season surprises by reviewing your estimated payments. If your year's income exceeded (or fell short of) expectations, revising your payments can help avoid penalties and manage cash flow better.

Compare your annual income and expenses against initial projections. If you've experienced a strong quarter or introduced new revenue streams, increasing your last quarterly payment might be wise. Conversely, if revenue has declined, adjusting down can preserve liquidity. Taking proactive measures now ensures a smooth and predictable financial outlook.

7. How Does Next Year's Tax Picture Appear?

While year-end planning wraps up the current year, it's also ideal for looking ahead. Decisions made today can influence your financial health in the coming years. Consider how future changes—like hiring, expansions, or new equipment needs—affect your 2026 tax outlook.

Engage in forward-looking discussions with your accountant to form strategies that balance short-term savings with long-term growth. For instance, deferring income or accelerating specific deductions could align with anticipated income levels for next year.

In Conclusion: Plan Ahead for Future Benefits
The most successful business owners don't wait until April to think about taxes—they begin planning before January. A thorough year-end review can reveal hidden deductions, credit opportunities, and help you make informed decisions to keep more money working for your business.

If you'd like to discuss your year-end tax strategy or explore ways to enhance your financial planning, act now. Contact your trusted advisor or our office to schedule a consultation before December 31. A little preparation now can translate to substantial savings later and set your business up for a confident start in the new year.