The October Checkup: 5 Things Small Business Owners Should Do Before Year-End

By Sandy Shao (邵贤弟), EA, CFA

Most people think tax planning happens in March or April, when it's time to file the return. The truth is the opposite: by the time you file, most of your options for the prior year are already gone.

MYTH: "I'll deal with my taxes when I file."

REALITY: The moves that actually save you money — timing purchases, funding retirement plans, cleaning up your books — must happen before December 31. January is just paperwork.

October is when real tax planning happens. Three months are still left to act, and enough of the year's numbers are in to make smart decisions. Here are five things worth doing now.

1. Reconcile your books now, not in April

Go through your business bank accounts and credit cards, make sure every transaction is categorized, and confirm your books match your statements.

Clean books catch deductions you'd otherwise forget — software subscriptions, supplies, bank fees, small charges — and they make your return cheaper and faster to prepare.

If you use accounting software, a monthly reconcile takes about 20–30 minutes. If your books are nine months behind, catching up now beats guessing in January — and guessing is how deductions get missed.

2. Check your estimated tax payments

The IRS expects self-employed owners to pay taxes quarterly — April, June, September, and January 15 for the fourth quarter. Compare what you've paid so far this year against what you've actually earned.

If business was better than expected, you can increase the January payment to catch up, which helps you avoid underpayment penalties — and avoids a painful surprise in April. If business was slower, you can lower the payment instead; overpaying is an interest-free loan to the government.

This is worth reviewing even if you have a bookkeeper — estimated payments are your responsibility, not theirs.

3. Time your equipment purchases

Equipment is deductible based on when you start using it — "placed in service" in tax language — not when you order or pay for it. A laptop, machine, or vehicle delivered and in use by December 31 generally counts toward this year's taxes; the same item arriving in January counts toward next year. Current rules let most small businesses deduct the full cost of qualifying equipment in the year they start using it (Section 179 and bonus depreciation).

Moving a purchase by a few weeks can shift the deduction into the year it helps you most. But don't buy things you don't need just for the deduction — a tax deduction on a machine you won't use still costs you money.

Same idea for prepaid expenses: paying rent, insurance, or supplies in December can generally be deducted this year if the benefit period is 12 months or less — for example, paying January's rent in December.

4. Review your retirement plan contributions

A SEP IRA is flexible — it can be opened and funded as late as your tax filing deadline (including extensions). A Solo 401(k) is stricter: you must make your employee-deferral election by December 31. Miss that date and that portion of the deduction is gone for the year, even though the employer part can wait.

Contributions lower this year's taxable income while building your retirement savings — one of the few year-end moves that does both.

Solo owners with no employees and strong income can often deduct more with a Solo 401(k) — but only if it's set up correctly and on time. October is a good month to check where you stand.

5. Get January's paperwork ready now

W-2s and 1099s must go out by January 31. Collect a W-9 from every contractor you paid this year now, while you still remember who they are.

Review your accounts receivable and write off anything truly uncollectible before year-end. And bring your mileage log up to date — the IRS requires a contemporaneous record (date, miles, business purpose); a log reconstructed from memory in April doesn't hold up in an audit.

Do this now and January becomes paperwork instead of a scramble — and you won't be chasing contractors for forms while they're on holiday.

The bottom line: the tax moves that save real money have December deadlines. The earlier you start your year-end checkup, the more options you have left.

Ascend Tax & Advisory can help you spot missed deductions in your books, estimate this year's tax payments, plan retirement contributions, or put together a year-end tax plan — so you can make the most of the time left before December 31. Get in touch if you'd like help sorting out what's worth doing this year and what can wait.

This article is for educational purposes only and is not tax advice. Every business situation is different — talk with a qualified tax advisor about your own circumstances before making year-end moves.