End-of-Year Tax Moves Every Small Business Should Make Before December 31

The end of the year is one of the most important times for small business owners. It’s your last chance to lower your tax bill, clean up your books, and set yourself up for a smooth tax season.

The problem is that most business owners wait until January, when it’s too late to take advantage of some of the best tax-saving opportunities.

If you want to enter the new year organized, confident, and ready for growth, here are the most important tax moves to make before December 31.

1. Update and Clean Up Your Bookkeeping

Nothing affects your tax bill more than accurate books. Your income, deductions, and tax strategy all depend on clean records.

Before December 31, make sure your books are up to date:
• All bank and credit card accounts reconciled
• Income categorized correctly
• Expenses recorded
• Outstanding invoices reviewed
• Contractor payments tallied
• Missing receipts uploaded

Clean records help you catch missed deductions and prevent incorrect reporting.

This is also the best time of year to hire a bookkeeper if your books are behind.

2. Run a Year-End Profit Estimate

Once your books are updated, calculate your estimated profit for the year.
This gives you a clear idea of:
• How much you may owe in taxes
• Whether you should spend or save before year-end
• Whether an S Corp election may benefit you next year

Knowing your profit early gives you time to act, instead of reacting in April.

3. Make Last-Minute Business Purchases (If They Make Sense)

If you need equipment, software, tools, or office supplies soon, buying them before the end of the year may allow you to deduct the expense on this year’s taxes.

Qualifying purchases might include:
• Laptops
• Office furniture
• QuickBooks or software subscriptions
• Cameras or tools
• Business phones
• Equipment under Section 179 rules

Important
Only buy what you truly need.
The IRS allows deductions for legitimate business expenses, not unnecessary spending.

4. Maximize Your Retirement Contributions

Retirement plans let you reduce taxable income while building long-term wealth.

Options include:
• SEP IRA
• Solo 401(k)
• Traditional IRA

If you’re self-employed, a year-end contribution can meaningfully reduce your tax bill.

This is also a great time to ask your tax professional which plan fits your business best.

5. Review Your Owner Pay and Distributions

If you are an S Corp owner, make sure your salary and distributions are in line with IRS requirements.

If your salary is too low or too high, adjusting before year-end can help balance payroll taxes and distributions.

LLC owners should review:
• Owner draws
• Estimated tax payments
• Cash reserves

Year-end is your last chance to correct over- or under-payments.

6. Send W-9 Requests to Contractors Now

If you paid any contractors this year, request their W-9 forms now.

You’ll need this information to file 1099s in January, and waiting until the holidays are over creates unnecessary stress.

Any contractor paid $600 or more will need a 1099 (unless they were paid by credit card or PayPal).

7. Check Your Mileage and Home Office Records

These deductions are commonly missed because business owners wait too long to track them.

Before December 31:
• Update your mileage log
• Confirm your business-use percentage
• Document your home office measurements

Every small detail helps increase your deductions at tax time.

8. Pay Outstanding Bills and Invoices

Cash basis taxpayers can reduce taxable income by paying bills before year-end.

Examples include:
• Utility bills
• Contractor invoices
• Software subscriptions
• Rent
• Insurance premiums

Only pay early if it fits your cash flow.
The goal is to reduce taxes without creating financial strain.

9. Review Your Business Structure for Next Year

If your profit is growing, you may benefit from switching to an S Corp next year.

A good time to evaluate this is November or December, when you have a clear view of your income.

An S Corp can reduce self-employment taxes, but only when income is high enough to support the structure.

10. Schedule a Year-End Review With a Bookkeeper or Tax Professional

This is the best way to catch missed deductions, fix errors, and avoid surprises.

A year-end review helps you:
• Understand your tax position
• Plan your quarterly payments
• Prepare your business for filing
• Create a financial strategy for next year

It’s much easier to make adjustments before December 31 than after.

Final Thoughts

The end of the year is your last window to lower your taxes and clean up your financial picture.
A few smart moves in November and December can save you thousands and make tax season painless.

If you want help preparing your books, estimating your taxes, or planning year-end strategies, Red Leaf Bookkeeping can take the pressure off your plate.

👉 Book a Money Clarity Call today and start the new year organized, confident, and tax-ready.