Year-End Tax Prep for Small Business Owners: What to Do Before December 31st
- KG Accounting
- Oct 16
- 4 min read
As Q4 rolls in, most small business owners are focused on finishing strong. But while you’re juggling sales goals and year-end projects, there’s something else you can’t afford to overlook: your tax prep.
The final months of the year offer a unique opportunity to get ahead of tax season, make smart financial decisions, and position your business for growth in the new year. Whether you’re a solopreneur or running a team, now is the time to tighten up your books, review your numbers, and take action while it still counts.
Use this step-by-step year-end tax checklist to help you get organized, reduce your tax burden, and avoid last-minute scrambling.
1. Get Your Books Up to Date
Before you do anything else, make sure your bookkeeping is current and accurate. Your financial reports are the foundation of your tax return; if they’re messy, your taxes will be too. Check that:
All income and expenses are categorized correctly
Accounts are reconciled through the latest month
Business and personal transactions are clearly separated
Any unpaid invoices or outstanding bills are accounted for
Need help with cleanup? Explore our Accounting & Bookkeeping Services — we’ll get your books tax-ready, fast.
2. Review Year-to-Date Financials
With your books in order, run a few essential reports:
Profit & Loss Statement
Balance Sheet
Cash Flow Statement
These will help you spot:
Surprising profits (which could impact your tax bill)
Excess expenses you can trim before year-end
Opportunities for deductions or retirement contributions
If your income has significantly changed, now’s the time to adjust your estimated tax payments or plan ahead to reduce your liability.
3. Make Smart Year-End Purchases
If your business is profitable, consider making strategic purchases before December 31 to increase your deductible expenses. This might include:
Office supplies or equipment
Software subscriptions
Marketing or website investments
Continuing education or professional memberships
Just make sure purchases are legitimate, necessary, and made before the end of the tax year.
4. Evaluate Contractor Payments (1099s)
Did you pay any freelancers or contractors $600 or more during the year?
If so, you’ll need to file Form 1099-NEC with the IRS and send a copy to each contractor by January 31. Now is the time to:
Collect W-9 forms
Verify payment totals
Update addresses and contact info
Tip: Organizing this now will save you a ton of stress in January.
5. Assess Your Business Entity Structure
As your business grows, the structure you started with might no longer be the best fit. For example, if you're currently a sole proprietor but earned $100K+, switching to an S-Corp in the new year could save you thousands in taxes.
This isn’t a change to make blindly — but Q4 is the time to talk with a professional about whether your entity type still supports your financial goals.
Not sure if it’s time to upgrade? Our Fractional CFO Services include proactive financial strategy tailored to your stage of growth.
6. Contribute to Retirement & Tax-Advantaged Accounts
If your business has excess cash and you want to reduce your taxable income, consider contributing to:
SEP IRA
Solo 401(k)
HSA (if eligible)
These accounts can help you lower your tax bill while setting you up for long-term financial security. Just be mindful of contribution deadlines and limits.
7. Prepare for Owner Compensation & Tax Planning
One of the most overlooked aspects of year-end prep is paying yourself properly and planning for the taxes associated with it.
Did you take an owner’s draw or pay yourself a salary?
Did you set aside funds for self-employment taxes?
Do you owe quarterly payments in January?
Review how much you’ve paid yourself this year, make any final distributions, and ensure you’ve withheld (or set aside) the proper tax amounts. Learn more about How to Pay Yourself as a Small Business Owner
8. Plan for Next Year
Once you’ve closed out your financials, it’s time to look ahead. A strong tax strategy isn’t just about cleaning up last year’s mess, it’s about creating systems that work year-round. In Q4, work with your accountant or fractional CFO to:
Set revenue & expense targets
Build a monthly cash flow plan
Establish or revise your budget
Set financial goals for the next 12 months
Learn more about: Small Business Budgeting 101
9. Download Our Free Year-End Cash Flow Checklist
Not sure where to begin? Our free guide walks you through 5 practical financial moves to wrap up your year with clarity — and enter the new one with confidence. Download: 5 Financial Fixes for Small Business Cash Flow
10. Still Feeling Stuck? Let’s Talk.
If you’re feeling behind, disorganized, or unsure what your numbers are telling you — you don’t have to figure it out alone. At KG Accounting, we specialize in helping small business owners:
Clean up their books
Plan for taxes and compensation
Build cash flow systems that actually work
Our Right-Fit Call is a free, no-pressure conversation where we get to know your business and explore the best next step for your financial goals.
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