December is a terrible time to start year-end tax planning. The most effective strategies require lead time — payroll adjustments, retirement plan setup, and purchase timing can’t all happen in the last week of the year. Use this mid-year checklist to get ahead of it.
Get Your Books Current First
Every planning decision depends on reliable numbers. Before projecting income or timing expenses, make sure your bookkeeping is reconciled through the most recent month.
- Reconcile all bank and credit card accounts
- Categorize uncoded transactions and clear out “ask my accountant” suspense accounts
- Separate any personal expenses that wandered into the business
- Verify payroll records match your filings
If your books are months behind, catching up now is far cheaper than a scramble in January — and your tax projections will actually mean something.
Project Your Income — Then Manage It
With clean books, project where your taxable income will land for the year. From there, common levers include:
Timing Income and Expenses
Cash-basis businesses can often defer income into next year or accelerate deductible expenses into this one — stocking up on supplies, prepaying rent or insurance, or scheduling necessary purchases before December 31. Whether that helps depends on which year you expect to be in a higher bracket.
Equipment and Section 179
Qualifying equipment and software placed in service by year-end may be deductible immediately rather than depreciated over time. Don’t buy things your business doesn’t need just for a deduction — a dollar spent to save thirty cents of tax is still seventy cents gone — but if a purchase was already on the horizon, timing it matters.
Retirement Contributions
Contributions to a SEP-IRA, Solo 401(k), or other qualified plan remain one of the most powerful ways to reduce taxable income. Some plans must be established during the tax year even if funding happens later, so review your options before the fall.
Review the Big-Picture Items
- Entity structure: Is your LLC, S-corp, or sole proprietorship still the right fit at your current profit level?
- Reasonable salary: S-corp owners should confirm their salary remains defensible before year-end payroll runs.
- Estimated payments: Compare what you’ve paid against your projection to avoid underpayment penalties.
- Mileage and home office records: Contemporaneous logs beat reconstructed ones every time.
Put a Planning Meeting on the Calendar
A one-hour review in the fall — with actual numbers in hand — routinely saves business owners more than it costs. Waiting until your return is being prepared means your options have already closed.
This article is provided for general informational purposes only and does not constitute tax, legal, or accounting advice. The strategies described may not suit your situation — consult a qualified tax professional before acting.