Have you ever opened a surprise tax bill in April and wondered what you could have done differently?
Are you scrambling every December trying to make last-minute tax moves while juggling holiday chaos, customer demands, and family time?
Year-end tax planning doesn't have to feel like a frantic scramble. But it does require starting earlier than most business owners think and understanding which moves actually matter.
At Patrick Accounting, we've guided hundreds of small business owners through Q4 planning, helping them avoid costly mistakes and feel confident heading into the new year.
In this episode, you'll learn when to start planning, what equipment purchases actually make sense, how to time your expenses, and what documents to gather now before the holiday chaos begins. Continue reading for an October-December action plan so you can avoid tax surprises and make strategic moves before it's too late.
If you're reading this in October and just now thinking about year-end tax planning, you're in good company. This is when most business owners finally start thinking about taxes.
The problem is that by October, many of your best tax-saving opportunities have already passed.
Proactive tax planning should start in January, not October. Businesses that pay the least in taxes (legally) are the ones making strategic moves throughout the year, not scrambling in Q4.
Even so, October isn't too late to make moves. It's just later than ideal.
You still have time to make strategic equipment purchases, adjust retirement contributions, time expenses strategically, gather critical documents, set bonuses appropriately, and plan for next year.
Buying equipment is the most common (and most misunderstood) year-end tax strategy. You've probably heard some version of this advice: "Go spend money to lower your taxes!"
Here's why that's terrible advice: You're still spending the money.
If you buy a $60,000 truck just to get a tax deduction, you're not really "saving" money. You've spent $60,000 to potentially save $15,000-$20,000 in taxes. You're still out $40,000-$45,000.
That's not tax planning. You're just buying stuff you might not need.
Strategic equipment purchases can be smart year-end moves if they meet specific criteria:
We have an optometrist client who's mastered this approach. Every year, we discuss what equipment he's planning to upgrade. We look at his options, discuss the timing, and make sure any purchases happen before year-end if it makes sense from both an operational and tax perspective.
When you make a qualifying equipment purchase, you may be able to take advantage of bonus depreciation, which allows you to write off a significant portion (or potentially all) of the equipment cost in the first year.
Key takeaway:
Don't buy something you don't need just to lower your tax bill.
But if you DO need it, timing matters.
If your business uses cash-basis accounting (which most small businesses do), you get a tax deduction when you pay an expense, not when you incur it. This creates opportunities for strategic timing.
Consider paying these expenses before December 31 if you're looking to reduce this year's taxable income:
If you had an unexpectedly down year and expect to be more profitable next year, you might consider deferring payment of certain bills until January. This way, you take the deduction when you're in a higher tax bracket and it's worth more.
A $1,000 deduction might not sound like much, but why leave money on the table? When you're looking at multiple expenses across your business, these strategic timing decisions can add up to meaningful tax savings.
One of the biggest missed opportunities we see is with retirement contributions and Health Savings Account (HSA) funding.
During year-end planning meetings, we always ask: "Are you on track to max out your retirement contributions?" You'd be surprised how often the answer is "I don't know" or "Probably not."
Depending on your retirement plan type, you may be able to make substantial tax-deductible contributions to a 401(k), Solo 401(k), SEP IRA, or SIMPLE IRA. The specific contribution limits vary by plan type and are adjusted annually.
These contributions reduce your taxable income dollar-for-dollar, which can result in significant tax savings depending on your tax bracket.
If you have a high-deductible health plan, don't forget your HSA. HSA contributions are tax-deductible, grow tax-free, and can be withdrawn tax-free for qualified medical expenses, making them one of the most tax-advantaged accounts available.
Some retirement contributions can be made after year-end (up until your tax filing deadline), while others must be made by December 31. This is why having this conversation NOW matters. If you need to adjust your payroll to maximize your 401(k) contributions, you need to do it in your remaining paychecks for the current year. You can't contribute retroactively.
Overlooking the administrative side of year-end tax planning is one of the quickest ways to turn January through April into a stressful mess.
Start gathering these documents now:
Gathering documents in October beats chasing them down over the holidays.
Many businesses think about bonuses at year-end, and these decisions have significant tax implications.
If you're planning employee bonuses, timing matters. Bonuses paid in December are deductible on this year's tax return. Bonuses paid in January are deductible on next year's tax return.
If you're an S-Corp owner, the IRS requires that you pay yourself a reasonable salary before taking profit distributions, so planning that mix before year-end affects your tax liability.
These decisions need to be made before December payroll runs. Once the year closes, your options become much more limited.
Unfortunately, we regularly see new clients come to us in October or November, and when we ask, "Have you been setting aside money for taxes?" the answer is often "Well, not really."
Now they're facing what we call the double whammy: They need to find $50,000 for this year's tax bill, PLUS they need to start planning and saving for next year's taxes.
That's $100,000 in tax planning in a very short window. It's stressful, it strains cash flow, and it's completely avoidable.
If you're in this position:
This means setting aside a percentage of every deposit into a tax savings account or making quarterly estimated tax payments.
Playing catch-up means finding $50K for this year while also planning to save $50K for next year. That's the double whammy nobody wants.
Here's exactly what you should do right now:
✔ Schedule your year-end planning meeting with your accountant.
✔ Review your year-to-date profit and loss statement.
✔ Calculate your current tax projection.
✔ List any equipment purchases you're planning for early next year.
✔ Start gathering W-9s from all contractors.
✔ Check your retirement and HSA contribution status.
✔ Review (or reconstruct) your mileage log.
✔ Identify any receivables that should be written off.
You don't have to do everything at once. But starting now (in October) gives you time to execute thoughtfully rather than reactively.
After years of seeing business owners scramble through Q4, we can tell you this: The businesses that pay the least in taxes (legally) aren't waiting until October to figure it out. They're planning in January, checking in midyear, and adjusting intentionally in Q4.
Now, you have a clear October-December roadmap for avoiding tax surprises and making confident, strategic moves.
At Patrick Accounting, we've helped hundreds of small business owners move from last-minute chaos to year-round clarity. If you're tired of tax season stress and want a proactive partner, see Who’s a Good Fit for Patrick Accounting.
And then...
Your most tax-efficient year yet starts with what you do today.