Five Tax-Planning Steps Business Owners Should Take Before Year-End

Year-end tax planning allows business owners to review their finances while there is still time to address certain issues.

Here are five important steps to consider.

Make sure business bank and credit card accounts are reconciled and that income and expenses are properly recorded.

Review:

• Outstanding customer invoices
• Unpaid business bills
• Loan balances
• Payroll records
• Contractor payments
• Major equipment purchases
• Owner payments and distributions
• Owner's salary
• Owner's basis in the business

Good records help the business identify deductible expenses and support the amounts reported on its tax return.

Prepare a tax projection using expected annual business income, deductions, wages, investment income, credits, withholding, and estimated tax payments.

Sole proprietors, partners, and S corporation shareholders may need to make estimated tax payments during the year. If income has increased or decreased, the remaining payments may need to be adjusted.

Consider whether the business genuinely needs equipment, furniture, technology, or a vehicle.

A purchase should support the business rather than being made only to receive a tax deduction. To qualify for depreciation for the current year, the property generally must be placed in service and available for business use before year-end.

A business owner may be able to reduce current taxable income while saving for retirement through a SEP IRA, SIMPLE IRA, 401(k), or another qualified retirement plan.

Different plans have different establishment dates, employee-election deadlines, contribution deadlines, coverage requirements, and annual limits. These rules should be reviewed before choosing or funding a plan.

Confirm that employee wages, owner compensation, health-insurance premiums, retirement contributions, and payroll-tax deposits have been handled properly.

For payments made during 2026, the general Form 1099-NEC reporting threshold is $2,000. Businesses should review payments made to contractors and make sure all the required W-9 forms are on file. Best practice is to keep collecting W-9s from everyone before making a payment or before a contractor starts working. You can't know in January who crosses $2,000 by December, and backup-withholding exposure doesn't wait.

Year-end planning does not mean spending money simply to receive a deduction. The goal is to understand the business's tax position and make decisions that support both tax efficiency and the long-term health of the business.