Year-End Tax Planning for North Dallas Small Businesses

By the time you are sitting across from your CPA in February or March, the tax year is closed. There is very little left to do except report what happened. The business owners in North Dallas who pay the least in taxes are the ones who take stock of their situation in October and November and make intentional decisions before December 31.

Review Your Estimated Income for the Year

Pull your year-to-date profit and loss report and project your full-year income. Compare it to last year. Has income gone up significantly? That might mean you are in a higher tax bracket this year and additional year-end moves make sense. Is income lower than expected? You might defer some deductions to next year when they would offset higher income.

Accelerate Deductions Before December 31

If you have business expenses you were planning to make in January, consider making them in December instead. Any deductible expense paid before December 31 reduces your current-year taxable income. This can include software subscriptions prepaid for next year, office supplies, professional development courses, business insurance premiums, and marketing materials.

Buy Equipment Using Section 179 or Bonus Depreciation

If you have been thinking about purchasing equipment, vehicles, or other business assets, year-end is a good time to act. Section 179 expensing allows you to deduct the full cost of qualifying assets in the year of purchase rather than depreciating them over several years. The asset must be placed into service before December 31. A computer, piece of equipment, or work vehicle purchased in late December qualifies if you start using it before the year ends.

Maximize Retirement Contributions

If you have a SEP-IRA, you can contribute up to 25 percent of your net self-employment income, with the contribution limit adjusted annually. Contributions to a SEP-IRA can actually be made after the year ends, up to your tax filing deadline including extensions. If you have a SIMPLE IRA or Solo 401(k), the contribution deadline rules are different and you need to act before December 31 for some types of contributions.

Review and Send Year-End W-9 Requests

If you paid any contractors or vendors more than $600 during the year, you are required to issue a 1099-NEC by January 31. Before year-end, make sure you have a completed W-9 on file for every contractor. Trying to collect W-9s in January when people are busy is harder than collecting them before the year ends.

Consider Timing Your Business Income

If your business uses the cash basis of accounting, you have some flexibility in when you recognize income. Invoices you send in December are typically not paid until January. If pushing year-end invoicing slightly into January would keep you in a lower tax bracket, that timing decision is worth discussing with your CPA.