For small business owners, the last few months of the year aren't just the holiday season. They're your most important financial window. The decisions you make before December 31st directly determine your tax liability, your cash position going into the new year, and how smoothly tax season will go.
This checklist is built specifically for small business owners, whether you're a sole proprietor, LLC,S-Corp, or partnership. Work through it now while there's still time to takeaction.
1. Get Your Books Reconciled. All 12 Months.
Nothing else on this list matters if your books aren't clean. Before your accountant can prepare your return, every bank account, credit card, and loan needs to be reconciled to the actual statements, for every single month of the year.
Unreconciled books mean:
• Your financial reports are unreliable
• Deductions get missed because expenses aren't properlycategorized
• Your accountant spends extra time cleaning up, andcharges you for it
• Errors can end up on your tax return
💡 If your books are behind, this is the single most important thing to fix before year end. Bookkeepme LLC specializes in exactly this. Getting books caught up quickly and accurately so nothing falls through the cracks at tax time.
2. Review Your Profit & Loss Statement
Pull your year-to-date P&L right now. This tells you where you stand, and what planning opportunities you still have before December 31st.
If your profit is higher than expected:
• Consider accelerating deductible expenses before year end. Pay outstanding invoices, buy needed equipment, prepay business expenses
• Increase retirement plan contributions to reduce taxable income
• Make any planned charitable contributions before December 31st
If your profit is lower than expected:
• Consider deferring income to this year if possible. Is there work you can complete and invoice before December 31st?
• Review whether all revenue has been properly recorded
• Identify any expenses that were recorded but shouldn't be. These inflate costs and understate profit
The goal is to understand yourtax position now, not in April when nothing can be changed.
3. Maximize Business Deductions
This is where many business owners leave money on the table. Before December 31st, make sure every legitimate business expense is captured and properly categorized.
Commonly Missed Business Deductions
• Home office: if you use part of your home exclusively and regularly for business, a portion of rent, mortgage interest, utilities, and insurance may be deductible
• Vehicle and mileage: if you use your vehicle for business you need a mileage log; the 2024 standard mileage rate is 67 cents permile
• Business meals: 50% deductible when directly related to business; record the date, who was present, and the business purpose
• Professional development: courses, workshops, conferences, books, and subscriptions related to your business are fully deductible
• Software and technology: any tools, apps, or subscriptions used in the business
• Marketing and advertising: website costs, ads, business cards, promotional materials
• Professional services: accounting, legal, consulting fees paid this year
• Health insurance premiums: self-employed owners may deduct 100% of premiums for themselves and their family
• Retirement plan contributions: see Section 5 below
⚠️ Deductions require documentation. A generalestimate is not enough. Keep receipts, invoices, bank statements, and recordsfor every deduction you claim. The IRS requires proof.
4. Review Asset Purchases: Section 179 and Bonus Depreciation
Did you purchase equipment, vehicles, computers, machinery, or other business assets this year? These mayqualify for significant first-year deductions rather than being depreciatedover many years.
Section 179 Expensing
• Allows you to deduct the full cost of qualifying equipment and assets in the year of purchase
• 2024 limit: up to $1,160,000 in qualifying asset purchases
• Asset must be placed in service before December 31st, purchased and actually in use
• Applies to equipment, machinery, computers, business vehicles, and certain building improvements
Bonus Depreciation
• Allows additional first-year depreciation on qualifying assets
• For 2024 bonus depreciation is 60%, down from 100% since 2023 phasing down from 100% since 2023
• Applies to new and used assets that are new to yourbusiness
💡 Thinking about buying equipment or technologyfor next year? It may make financial sense to purchase it before December 31stto capture the deduction this year. Talk to your tax advisor before making thepurchase.
5. Maximize Retirement Plan Contributions
Retirement plan contributions are one of the most powerful tax reduction tools available to business owners,and they directly benefit you personally. Here are the main options:
SEP-IRA(Simplified Employee Pension)
• Contribute up to 25% of net self-employment income or$69,000, whichever is less
• Simple to set up and administer
• You have until your tax return due date (including extensions) to contribute for the prior year
• Best for sole proprietors and single-owner businesses
Solo401(k)
• Available to self-employed individuals with no full-time employees other than a spouse
• 2024 contribution limit: up to $69,000 ($76,500 if 50or older)
• Combines employee and employer contributions for ahigher total limit than a SEP-IRA for lower income levels
• Plan must be established by December 31st even if contributions can be made later
SIMPLE IRA
• Good option for businesses with employees
• 2024 employee contribution limit: $16,000 ($19,500 if 50 or older)
• Employer must make either matching or non-elective contributions
6. Review Accounts Receivable and Accounts Payable
Accounts Receivable, Money Owed to You
• Review all open invoices. Which ones can you collectbefore December 31st?
• Send payment reminders now, before the holiday slowdownhits
• If you have invoices that are clearly uncollectable, abad debt deduction may be available. Talk to your accountant
• Cash basis businesses: income is taxable when received,so collecting more before year end increases this year's taxable income. Timecollections strategically.
Accounts Payable, Money You Owe
• Review outstanding bills and vendor invoices
• If you're on the cash basis (most small businesses are), expenses are deductible when paid. Pay outstanding business expensesbefore December 31st to take the deduction this year
• Prepaying certain expenses for early next year may alsobe deductible. Discuss with your accountant.
7. Handle Your Workers Correctly: W-2s and 1099s
This is one of the most audited areas for small businesses and the deadlines are strict.
Employees,W-2 Forms
• W-2 forms must be sent to employees and filed with the Social Security Administration by January 31st
• Make sure all payroll has been processed correctly and payroll tax deposits are current
• If you have any outstanding payroll tax obligations, resolve them immediately. Payroll tax debt is one of the most serious taxissues a business can face
Independent Contractors, 1099-NEC Forms
• Any contractor paid $2,000 or more during the year must receive a 1099-NEC by January 31st
• Make sure you have a completed W-9 on file for everycontractor. Collect them now if you don't
• 1099s must also be filed with the IRS by January 31st
• Failure to file accurate 1099s on time results in penalties per form
⚠️ Worker misclassification: paying someone as acontractor when they should be an employee, carries significant penalties. If you're unsure about any worker's classification, get it reviewed before year end.
8. Review Your Business Structure
Year end is a good time to ask whether your current business structure is still the right one. Tax lawschange, your income changes, and the structure that made sense when you startedmay not be the most tax-efficient one today.
• Sole proprietors with growing income may benefit from electing S-Corporation status. This can reduce self-employment taxsignificantly
• Single-member LLCs taxed as sole proprietors should evaluate whether an S-Corp election makes sense given their income level.
• Partnerships should review their partnership agreement to ensure profit and loss allocations are still appropriate
• Any structure change generally needs to be implemented at the start of a new tax year. The time to plan is now
9. Make Your Q4 Estimated Tax Payment
If you pay quarterly estimated taxes your Q4 payment is due January 15th. Before you send that payment, review your full-year income and expenses to make sure the payment amount is accurate.
• If you had a significantly better year than expected,your Q4 payment may need to be higher to avoid an underpayment penalty
• If your year was slower than expected, you may be ableto reduce the payment
• Your accountant or tax advisor can help you calculate the right number based on your year-to-date P&L
10. Rhode Island Business Reminders
• RI Annual Report: LLCs and corporations must file annually with the RI Secretary of State. Make sure yours is current or you riskpenalties and administrative dissolution
• RI Sales Tax: If your business collects sales tax, make sure all filings and payments are current through year end
• RI Division of Taxation: Any outstanding state tax balances should be resolved before year end to prevent additional interest andpenalties
• RI Business Tax: Review your RI business tax obligations. The requirements vary by entity type and income level
• Any contractor paid $100 or more during the year must receive a 1099-NEC by January 31st. This is lower than the IRS limit of $2,000.
11. Schedule a Year-End Meeting With Your Tax Advisor
This is the most important item on the entire list, and it needs to happen before December 31st, not after.
A proactive year-end meeting is where real tax savings happen. Once January 1st arrives, most of your optionsare gone. Use this meeting to:
• Review your estimated tax liability for the year
• Discuss any major decisions, including asset purchases, retirement contributions, income timing
• Identify deductions you may have missed
• Plan for the year ahead, including estimated payments,structure changes, growth plans
• Make sure nothing falls through the cracks
Business owners who work with their tax advisor proactively, not reactively, and consistently pay less intaxes and have far fewer surprises.
The Bottom Line
The effort you put in before December 31st directly determines your tax bill. Clean books, captureddeductions, proper worker documentation, and a conversation with your taxadvisor are the four things that matter most.
We've seen first hand, after years of preparing business tax returns, the difference between business ownerswho plan and those who don't. The ones who plan keep more. It really is thatstraightforward.
Ready to close the year strong?
Book a free 30-minute Discovery Call with Us. Email us at tax@bkmri.com
