7 Essential Tax Questions to Address Before Year-End

As the year comes to a close, it's critical to strategically consider your tax planning to reduce your tax burden, improve cash flow, and position your business for a strong new year. From solo entrepreneurs to expanding companies, asking the following seven key questions can guide your year-end review and help uncover valuable savings opportunities.

1. Have all business expenses been recorded?

Minor expenses can lead to substantial deductions if accurately tracked. Missing receipts or unaccounted minor purchases, especially those from personal accounts, can slip through easily. Prior to the year's end, gather all receipts, reconcile credit card statements, and ensure nothing is overlooked. Consider recurring charges like software subscriptions, business meals, educational courses, memberships, or mileage. If you have a home office, parts of your utilities or rent might be deductible. Conducting a thorough review now ensures all legitimate expenses are claimed when needed most.

2. Are there major purchases to consider before year's end?

If you have plans to upgrade equipment, buy a company vehicle, or invest in technology, the timing could significantly affect your taxes. Under Section 179 and bonus depreciation rules, businesses may fully or partially deduct the costs of qualifying purchases in the current year rather than spreading them over several years. Making such purchases before December 31 could move those deductions to this year's tax return. However, assess these purchases strategically, ensuring they support business operations and long-term goals, rather than spending merely for tax benefits.

3. Are retirement contributions being optimized?

Not limited to employees, retirement plans are powerful tools for business owners too. Contributions to plans such as SEP IRAs, SIMPLE IRAs, or 401(k)s not only reduce taxable income but also prepare both you and your team for the future. If your retirement plans haven't been reviewed lately, now is an opportune moment. Increasing contributions before the year concludes can lower current taxes while enhancing long-term financial security. Sole proprietors and small businesses can also benefit greatly from these opportunities.

4. What about payroll and owner’s compensation?

Year-end is a fitting time to appraise how you pay yourself and your team. For S-Corporations, assure your "reasonable salary" aligns with IRS standards—extremes in either direction can cause problems. Sole proprietors or partnerships should check how much they’ve withdrawn over the year and if estimated tax payments are accurate. Tweaks now can balance cash flow and prevent surprises come tax season. Reviewing payroll allows you to verify benefits, withholdings, and bonuses before sending out W-2s and 1099s in January.

5. Are there tax credits you're overlooking?

Tax credits are often unnoticed yet can be more beneficial than deductions, as they reduce your tax bill directly. Depending on your industry and activities, you might qualify for incentives like the Research and Development (R&D) credit, energy-efficiency credits, or the health care tax credit for small businesses. These programs constantly evolve, so consult your accountant to check eligibility. Even small credits can substantially impact your year-end tax liabilities.

6. Do estimated tax payments need adjustment?

No one welcomes tax season surprises. If business income exceeded or fell short of expectations, revising estimated payments can help avoid penalties and manage cash flow effectively. Review your year's income and expenses versus initial projections. If you had an extraordinary quarter or found new revenue streams, increasing your final payment may be wise. Conversely, if revenues dipped, reducing payments can help with liquidity. A proactive approach now stabilizes your financial outlook.

7. How does the tax picture look for the next year?

While year-end tax planning primarily wraps up the current year, it's also the perfect chance to gaze ahead. Current decisions shape your company's financial stability for years. Think about upcoming changes—like hiring plans, expansion projects, or anticipated equipment needs—and how they affect your 2026 tax position. Discussing with your accountant now can help design strategies balancing short-term savings with long-term progress. For instance, deferring income or speeding up certain deductions might align with next year's expected income levels.

Plan now, benefit later—successful business owners consider taxes well before April, planning starts before January's arrival. A thoughtful year-end review can uncover hidden deductions, reveal credit opportunities, and ensure you make wise decisions, keeping more money within your business. If you're ready to discuss your strategy or explore strengthening your financial plan, now’s the time to act. Contact your trusted advisor or schedule a meeting with our office before December 31. Some preparation today can bring significant savings tomorrow and set your business confidently for the new year.