Year-End Tax Planning Checklist for Small Business Owners
The most impactful tax planning happens in the fourth quarter. Decisions made between October and December 31 determine whether income and deductions land in the current year or the next. For cash-method businesses (most small businesses), the timing of payments and receipts is the primary lever. A $50,000 equipment purchase in December vs. January changes the current year’s tax by $12,000-$15,000. A retirement contribution made before December 31 (or before the filing deadline for SEP IRA) shifts thousands from taxable income to retirement savings.
The six highest-impact year-end moves for most small business owners: (1) Maximize retirement contributions (Solo 401(k) deferral deadline is December 31 for employee contributions; employer contributions and SEP IRA contributions can be made until the tax filing deadline including extensions). (2) Purchase equipment and place it in service before December 31 (Section 179 and bonus depreciation require the asset to be “placed in service” in the tax year). (3) Prepay deductible expenses (January rent paid in December, annual insurance premiums, subscription renewals). (4) Defer income if possible (delay invoicing, delay project completions, negotiate January payment dates with clients). (5) Review the S-Corp salary if applicable (ensure the W-2 salary is reasonable and the payroll is processed before December 31). (6) Make estimated tax catch-up payments by January 15 to avoid underpayment penalties for the current year.
What is the retirement contribution deadline?
The deadlines differ by plan type:
Solo 401(k) employee deferral: December 31 (or the last business day of the year for S-Corp owners whose last payroll is before December 31). This is the $23,500 (2025) contribution. It cannot be made after December 31 under any circumstances.
Solo 401(k) employer contribution: The tax filing deadline, including extensions (October 15 for calendar-year filers on extension). This is the 25% of compensation / net SE income contribution. Many business owners file an extension specifically to have more time for this contribution.
SEP IRA: The tax filing deadline, including extensions. Both the plan establishment and the contribution can be made by this date. This is the most flexible plan for late-stage tax planning: a business owner who files an extension in April can establish and fund a SEP IRA as late as October 15.
SIMPLE IRA employee deferral: December 31 (the payroll-processing deadline). Employer match: due by the tax filing deadline including extensions.
What about income deferral?
Cash-method businesses recognize income when received. Delaying the receipt of income from December to January shifts it to the next tax year. Legitimate strategies:
- Delay invoicing: send invoices in late December with net-30 terms, so payment arrives in January.
- Negotiate payment timing: for large projects completing in December, agree with the client to receive payment in January.
- Delay project completion: if a project is nearly complete, delay the final deliverable until January.
The risk of income deferral: if next year’s income is higher, the deferred income is taxed at a higher rate. Income deferral is most valuable when the current year’s income is unusually high (a large one-time project) and next year’s income is expected to be lower or similar.
What about the QBI threshold?
For SSTB owners (coaches, consultants, financial advisors, lawyers, accountants, medical professionals), the QBI deduction phases out above $191,950 single / $383,900 MFJ (2025). Year-end planning to stay below the threshold includes all of the above (retirement contributions, prepaid expenses, equipment purchases) plus charitable contributions (which reduce AGI, not QBI directly, but reduce the overall tax burden).
For non-SSTB owners (construction, cleaning, fitness, photography, real estate agents), the QBI deduction is available at all income levels, but the limitation above the threshold (50% of W-2 wages or 25% of W-2 wages + 2.5% of UBIA) may require adjusting the S-Corp salary or making equipment purchases before year-end to ensure the UBIA supports the full QBI deduction.
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Yarik Yarosh, CPA. "Year-End Tax Planning Checklist for Small Business Owners." Blue Cloud CPA, September 5, 2026. https://bluecloudcpa.com/guides/small-business-year-end-tax-planning-checklist
This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.