Year-End Tax Planning Checklist for Small Businesses

The end of the year is approaching fast, and smart tax planning now can save you thousands when you file your return. Here's your comprehensive checklist for year-end tax moves that apply to small businesses across the country.

Equipment and Asset Purchases

Section 179 Deduction

• Purchase and place equipment in service by December 31
• Deduct up to $2,500,000 in qualifying purchases
• Includes computers, software, vehicles, and machinery

Bonus Depreciation

• 100% bonus depreciation available for 2025 (for property acquired on/after Jan 20, 2025)
• Applies to new and used equipment
• No dollar limit (unlike Section 179)

Action item: If you're planning equipment purchases for early 2026, consider moving them to December 2025 for immediate tax benefits.

Income and Expense Timing

Accelerate Deductions

• Pay January expenses in December
• Prepay insurance premiums
• Make charitable contributions
• Pay outstanding invoices to vendors

Defer Income (if beneficial)

• Delay invoicing until late December
• Defer year-end bonuses to January
• Consider installment sales for large transactions

Important: Only defer income if you expect to be in a lower tax bracket next year.

Retirement Contributions

Make Maximum Contributions

• SEP IRA: Deadline is tax filing deadline (with extension)
• Solo 401(k): Employee deferrals due by December 31 ($23,500 limit)
• SIMPLE IRA: Contributions due by December 31 ($16,500 limit)

Pro tip: Even if you can't fund by December 31, set up the plan now to maximize 2025 contributions.

State and Local Considerations

State-Specific Tax Credits

• Research and Development Credits (available in many states)
• Investment and Jobs Creation Credits
• Historic Rehabilitation Credits
• Energy Efficiency Incentives

Sales Tax Compliance

• Ensure all sales tax returns are filed in your home state
• Review nexus (physical and economic) in other states where you do business
• Reconcile collected vs. remitted amounts
• Verify your registration in any new jurisdictions

Employee-Related Items

Payroll Review

• Verify all employees are properly classified
• Review 1099 contractor relationships
• Ensure W-2 information is accurate
• Process year-end bonuses strategically

Benefits and Reimbursements

• Maximize health insurance deductions
• Process expense reimbursements
• Review accountable plan compliance

Entity Structure Review

Consider S-Corp Election

• Deadline: March 15, 2026 (for 2026 tax year)
• Can save 10-15% in self-employment taxes
• Requires reasonable salary and payroll setup

Multi-Member LLC Considerations

• Review partnership agreement
• Consider profit-sharing arrangements
• Evaluate guaranteed payments

Documentation and Record-Keeping

Organize Records

• Compile all receipts and invoices
• Document business mileage
• Photograph or scan important documents
• Update asset depreciation schedules

Review Estimated Tax Payments

• Calculate Q4 2025 estimated payment (due January 15, 2026)
• Avoid underpayment penalties
• Consider safe harbor rules

Tax Law Changes for 2025

What's New

• Standard mileage rate: 70 cents per mile (2025 rate)
• 401(k) contribution limits: $23,500 ($31,000 if age 50+)
• SEP IRA contribution limit: $70,000
• Bonus depreciation: 100% reinstated for 2025
• Beneficial ownership reporting requirements in effect

Common Year-End Mistakes to Avoid

1. Missing the December 31 deadline for equipment purchases
2. Forgetting to document business use of assets
3. Not reviewing estimated tax payment requirements
4. Failing to maximize retirement contributions
5. Ignoring state-specific credits and deductions available in your area

Your Year-End Action Plan

By December 15:

• [ ] Review profit projections
• [ ] Identify equipment needs
• [ ] Calculate estimated tax liability
• [ ] Plan retirement contributions

By December 31:

• [ ] Make equipment purchases
• [ ] Pay deductible expenses
• [ ] Make retirement contributions (if required)
• [ ] Review and organize records

By January 15, 2026:

• [ ] Pay Q4 2025 estimated taxes
• [ ] Finalize year-end planning

Need Help with Year-End Tax Planning?

Year-end tax planning can be complex, but the savings are substantial. Virani CPA specializes in helping small businesses across the country minimize their tax liability through strategic planning.

Schedule a year-end tax planning consultation to ensure you're taking advantage of every available deduction and credit.

Don't wait until tax season—proactive planning now pays dividends when you file your return.