The Eleven Year-End Moves

1. Review entity structure. S-corp vs. LLC vs. sole proprietorship has meaningful tax consequences. As revenue grows, the right structure may change. Conversions are easier between tax years than mid-year.

2. Fund retirement plans aggressively. Solo 401(k), SEP IRA, SIMPLE IRA, Cash Balance Plan. Many of these can be funded through the tax filing deadline (with extensions), not just by year-end. A Solo 401(k) for a successful one-person business can shelter $70K+ of income in 2025.

3. Accelerate deductible expenses. Pay January expenses in December (rent, software subscriptions, insurance) where deductible in the current year. Equipment purchases, professional services, marketing campaigns — all accelerate-able for cash-basis businesses.

4. Defer income. Hold off invoicing until January for cash-basis businesses, or accelerate invoicing in early January for accrual-basis. Bonuses, distributions, and discretionary income can be timed across years.

5. Optimize QBI deduction. The Qualified Business Income deduction allows up to 20% of pass-through income to be deducted, but the rules limit eligibility based on income, business type (specified service trade or business vs. not), and W-2 wages paid. Year-end planning can preserve eligibility.

6. Section 179 / bonus depreciation. For equipment purchases, immediate expensing under Section 179 or bonus depreciation often beats normal depreciation. The bonus depreciation percentage continues to phase down post- TCJA, so the timing of major purchases matters.

7. Review reasonable compensation for S-corp owners. S-corp owners must pay themselves “reasonable compensation” via W-2. Setting it too low triggers IRS scrutiny; setting it too high gives up payroll-tax savings. Year-end is the time to confirm the comp level for the year.

8. Estimated tax payment safe harbor. Avoid underpayment penalties by hitting the safe harbor (110% of prior year's tax for high earners, 100% otherwise). Catch up via Q4 estimated payment if needed.

9. Reconcile 1099s and W-2 documentation. Get vendor W-9s on file, prepare 1099s for issuance in January. Late or incorrect 1099s create penalty exposure and IRS notices.

10. Coordinate business and personal returns. Business owners' tax planning has to integrate the business return with the personal return. Charitable giving, capital gains, retirement contributions, and home office all interact across the two.

11. Plan next year's quarterly payments. Use the safe-harbor rule for next year. Set up automatic quarterly payments at the right level to avoid the scrambling-in-March pattern.

Real Scenario: A Solo Consultant's Year-End

A solo consultant operating as an S-corp, $400K revenue, $150K net income after reasonable salary.

Year-end moves:

• Solo 401(k) employee deferral ($23.5K) plus employer profit-sharing (~$30K). Total $53.5K of pre-tax retirement savings.
• Mega-backdoor Roth via Solo 401(k) plan amendment if desired (~$15K of after-tax-converted-to-Roth).
• Cash Balance Plan for additional $50K–$150K of pre-tax deduction (where business cash flow supports it).
• Donor-advised fund contribution of $20K to consolidate charitable giving and capture deduction at the high marginal rate.
• Section 179 expensing on a new business laptop and software ($5K).
• Confirm Q4 estimated tax payment hits safe harbor.

Net effect: $80K–$200K+ of tax-advantaged deferral and deduction in a single year. Tax savings: $25K–$60K depending on aggressive Cash Balance funding.

The Quarterly Rhythm

Year-end planning works best when it sits inside a quarterly rhythm. The pattern that produces the best results: Q1 review of prior-year actuals, Q2 mid-year projection update and entity-structure check, Q3 preliminary year-end planning conversation, Q4 execution of identified moves before December 31.

Business owners who treat tax planning as a quarterly discipline rather than an annual scramble typically capture an additional $5K–$30K/year in savings versus the November-only approach — primarily from earlier identification of opportunities, better projections, and more time to set up structural moves (retirement plan amendments, entity changes, PTET elections).

Common Mistakes

• Waiting for tax season to think about retirement plan contributions and entity decisions.
• Missing the safe-harbor estimated tax thresholds and triggering underpayment penalties.
• Underfunding retirement plans because of cash-flow comfort rather than tax math.
• Ignoring Cash Balance plans for high-income business owners who could shelter materially more.
• Failing to use a donor-advised fund for charitable consolidation in high-income years.

The Bottom Line

Most business owner tax planning is done in November and December, not in March. Once the year closes, most of the levers stop working.

For business owners, year-end planning isn't optional — it's the highest-ROI activity of the entire year. The lifetime tax savings from disciplined year-end planning are typically $100K+ over a decade-plus business career.