Key Year-End Tax Questions for Businesses to Consider

As we approach the end of the year, it's crucial to strategize about your taxes. Thoughtful planning before December 31 can reduce your tax liability, enhance cash flow, and position your business for a robust start in the upcoming year. Whether you're a solo entrepreneur or at the helm of a growing enterprise, these seven questions can steer your year-end review and help you discover valuable savings opportunities.

1. Have I Accounted for All Business Expenses?

Small types of business spendings can accumulate into significant deductions, but only if accurately tracked. It's easy to overlook receipts or minor purchases, particularly if personal accounts occasionally fund business transactions. Before the year concludes, gather all receipts, reconcile credit card statements, and ensure nothing is missed. Don't forget recurring costs such as software subscriptions, business meals, ongoing education, professional memberships, or mileage costs. Moreover, if you have a home office, part of your utilities or rent may be deductible. A thorough review now guarantees you claim every eligible expense when it matters most.

2. Should I Make Major Purchases Before Year-End?

Considering upgrading equipment, buying a company vehicle, or investing in new tech? The timing might significantly affect your tax situation. Under Section 179 and bonus depreciation rules, businesses might deduct the full or partial cost of qualifying purchases this year instead of spreading them over several years. Buying before December 31 can advance those deductions to this year’s return. However, spend strategically—don't make purchases solely for a write-off. Evaluate if the purchase supports your operations and long-term growth objectives.

3. Am I Maximizing Retirement Contributions?

Retirement plans aren't solely for employees—they're among the most effective tax-saving tools for business owners. Contributions to plans like SEP IRAs, SIMPLE IRAs, or 401(k)s reduce taxable income while aiding both you and your team in future preparedness. If you haven't recently reviewed your retirement plan options, now's a perfect time. Increasing contributions before year-end can lower current tax liabilities while laying the groundwork for long-term financial security. Even sole proprietors and small businesses can significantly benefit from optimizing these opportunities.

4. How Are My Payroll and Owner’s Compensation Structured?

The year’s end is an ideal time to evaluate your compensation and employee pay. If you’re operating as an S-Corporation, ensure your “reasonable salary” complies with IRS standards—too low or too high can both lead to issues. For sole proprietors or partnerships, review your withdrawals throughout the year and whether estimated tax payments align with expectations. Adjustments now can balance cash flow and avoid surprises during tax season. Payroll reviews also offer a chance to verify proper reporting of benefits, withholdings, and bonuses before January’s W-2s and 1099s dispatch.

5. Am I Missing Any Tax Credits?

Often overlooked, tax credits can be more valuable than deductions as they reduce your tax bill dollar-for-dollar. Depending on your sector and activities, you might qualify for incentives like the Research and Development (R&D) credit, energy-efficiency credits, or the small business health care tax credit. These programs regularly change or expand, so it's worth asking your accountant to ascertain eligibility. Even small credits can have a notable impact when applied directly to your year-end balance due.

6. Should I Adjust My Estimated Tax Payments?

Nobody enjoys tax season surprises. If your business’s income exceeded or fell short of expectations this year, updating estimated payments can prevent penalties and better manage cash flow. Review your year’s income and expenses against initial projections. If a strong quarter or new revenue streams occurred, increasing your final quarterly payment might be sensible. Conversely, if revenue dipped, adjusting downward can preserve liquidity. Proactive measures now maintain a smooth and predictable financial outlook.

7. What Is My Tax Outlook for Next Year?

While year-end tax planning wraps up the current year, it’s an excellent time to gaze forward. Today's decisions can shape your company's financial health for years. Consider how upcoming changes—like staffing plans, expansion projects, or anticipated equipment needs—might affect your 2026 taxes. Engaging in a forward-looking discussion with your accountant can create strategies balancing immediate savings with long-term growth. For example, deferring income or accelerating deductions based on expected income levels next year might be wise.

Conclusion: Plan Now for Future Gains

Successful business owners don’t wait until April to think about taxes—they plan ahead. A careful year-end review can uncover hidden deductions, identify credit opportunities, and facilitate smart choices that keep more funds active in your business. If you’d like to ponder your year-end tax strategy or refine your financial plan, act now. Reach out to your advisor or contact our office to schedule a consultation before December 31. A bit of preparation today can transform into substantial savings tomorrow—setting your business for a confident start to the new year.