January brings clarity that December lacks. Tax returns get filed, liability becomes concrete, and business owners either feel relief or regret about decisions made—or not made—in the final weeks of the previous year.

Year-end tax planning creates those relief moments instead of regret. Strategic actions taken in November and December directly reduce tax bills, shift income into more favorable periods, and position businesses for stronger financial futures.

This guide covers year-end tax planning strategies relevant to Norcross small businesses. The approaches work across industries, though specific applicability depends on individual circumstances. Business owners who implement even a few of these strategies typically find meaningful tax savings while setting up cleaner books for the coming year.

Understanding the Year-End Tax Planning Window

The window for meaningful tax planning narrows as December progresses. Most strategies require transactions to complete before December 31 to affect current-year taxes.

Effective planning starts with knowing approximate current-year income. Without a reasonably accurate profit estimate, tax planning becomes guesswork. The first step in any year-end planning process involves generating current financial statements—Profit & Loss year-to-date, at minimum.

From there, projections inform strategy. Is this a high-income year where reducing taxable income makes sense? Or a lower-income year where accelerating income might be advantageous? The answer shapes everything that follows.

Strategy 1: Accelerate Deductible Expenses

Paying deductible expenses before year-end shifts deductions into the current tax year. For cash-basis taxpayers—which includes most small businesses—the payment date determines when deductions count.

Opportunities to Consider

Prepay recurring expenses. January rent paid in December becomes a current-year deduction. Same with insurance premiums, professional subscriptions, and service agreements.

Stock up on supplies. Office supplies, inventory, and materials purchased and received before December 31 create immediate deductions. This doesn’t mean buying unnecessary items—it means pulling forward planned purchases.

Pay outstanding bills. Vendor invoices sitting in accounts payable could become current-year deductions if paid before year-end.

Make year-end equipment purchases. Section 179 allows immediate expensing of qualified equipment purchases rather than depreciating over multiple years. Computers, machinery, furniture, vehicles—these purchases can create substantial current-year deductions if made by December 31.

Important Limitations

The IRS requires that prepaid expenses provide benefit during the current tax year. Prepaying 24 months of rent in December doesn’t create a full deduction—only a portion qualifies. Generally, prepaid expenses that provide benefit within 12 months of payment, or by the end of the following tax year, receive full deduction treatment.

Equipment must be placed in service—not just ordered or paid for—by December 31 to qualify for current-year Section 179 treatment.

Strategy 2: Defer Income When Appropriate

If current-year income will be taxed at higher rates than anticipated next-year income, deferring income shifts it into a lower-tax period.

How to Defer Income

Delay customer invoicing. Invoices sent in early January trigger payments—and income recognition—in the following year. This approach requires careful cash flow consideration but can be worthwhile for businesses with strong receivables collection.

Delay completion of projects. For businesses that bill upon completion, extending delivery dates into January defers income recognition. Again, cash flow implications need evaluation.

Delay collection of outstanding receivables. Cash-basis taxpayers don’t recognize income until payment is received. Not actively pursuing collection during December delays income recognition—though this sacrifices cash flow and risks non-collection entirely.

When Deferral Makes Sense

Income deferral works best when:

  • Current-year income is unusually high
  • Next-year income is expected to be lower
  • Tax rates are expected to decrease
  • Cash flow can absorb the delay

Deferring income into a higher-tax year accomplishes nothing. Strategy requires understanding both current and projected future tax situations.

Strategy 3: Maximize Retirement Contributions

Retirement contributions provide powerful tax benefits while building long-term wealth. Year-end represents the final opportunity to fund certain accounts.

Individual Retirement Arrangements (IRAs)

Traditional IRA contributions may be deductible depending on income level and workplace retirement plan coverage. The contribution limit for 2024 is $7,000 ($8,000 if age 50 or older) [VERIFY]. Contributions can actually be made until the tax filing deadline (April 15), but planning starts now.

SEP-IRAs

Simplified Employee Pension IRAs allow contributions up to 25% of net self-employment income, with a maximum of $69,000 for 2024 [VERIFY]. Contributions can be made until the tax filing deadline, including extensions—meaning up to October 15 of the following year.

SEP-IRAs offer the largest potential deductions for self-employed individuals. A business owner with $200,000 in net self-employment income could contribute approximately $40,000 pre-tax.

Solo 401(k)s

For self-employed individuals with no employees (or only spouse employees), Solo 401(k) plans allow both employee and employer contributions. The combined limit reaches $69,000 for 2024 ($76,500 if age 50+) [VERIFY].

Critical deadline: Unlike SEP-IRAs, Solo 401(k) plans must be established by December 31 to make contributions for that tax year. The actual contributions can be made later, but the plan itself must exist before year-end.

Company Retirement Plans

Business owners with 401(k), SIMPLE IRA, or other retirement plans should review contribution levels. Maximizing contributions reduces current-year taxable income while building retirement assets.

Strategy 4: Review Business Entity Structure

Year-end prompts evaluation of whether current business structure remains optimal.

S-Corporation Election Considerations

Businesses operating as sole proprietorships or single-member LLCs pay self-employment tax (Social Security and Medicare) on all profits—currently 15.3% on the first $168,600 of earnings [VERIFY].

S-Corporation election allows splitting income between salary (subject to employment taxes) and distributions (not subject to self-employment tax). For profitable businesses, this election can save thousands annually.

S-Corporation election requires filing Form 2553. For a business to be taxed as an S-Corporation starting January 1, the election must be made by March 15 of that year—but planning happens now. Late S-Corporation elections are sometimes available for businesses that missed the deadline.

Entity Change Timing

Any business structure changes—incorporating, converting between entity types, or adding partners—typically work best at year-end or year-beginning. Clean breaks between tax years simplify reporting and prevent mid-year complications.

Strategy 5: Harvest Capital Losses

Investments that have declined in value represent loss harvesting opportunities. Selling depreciated assets creates capital losses that offset capital gains—or up to $3,000 of ordinary income per year [VERIFY], with excess losses carrying forward.

Assets to Review

  • Stock portfolio positions
  • Business equipment no longer in service
  • Real estate investments (complex rules apply)
  • Cryptocurrency holdings

Wash Sale Warning

The IRS disallows losses if a “substantially identical” security is purchased within 30 days before or after the sale. Selling stock to harvest losses while immediately repurchasing triggers this rule and invalidates the loss.

For portfolio rebalancing that doesn’t involve wash sale complications, year-end provides a natural checkpoint.

Strategy 6: Charitable Contributions Planning

Business charitable contributions can reduce taxable income while supporting valued organizations.

Donation Timing

Contributions must be made by December 31 to count for current-year deductions. Pledges don’t count—actual transfers must occur.

For cash contributions, mailing a check by December 31 generally suffices (postmark date controls). Credit card contributions count when charged, not when the bill is paid.

Donation Documentation

Contributions over $250 require written acknowledgment from the charity. Contributions of property over $500 require additional documentation. Missing documentation can invalidate deductions entirely.

Bunching Strategy

Standard deduction increases have made charitable giving less advantageous for some taxpayers. “Bunching” multiple years’ contributions into a single year can push itemized deductions above the standard deduction threshold, creating actual tax benefit.

Donor-advised funds facilitate bunching—contribute a large amount this year (taking the deduction), then distribute to charities over multiple years.

Strategy 7: Review Employee Benefits

Certain employee benefit payments create deductions while providing value to employees.

Year-End Bonuses

Bonuses paid before year-end create current-year deductions (and current-year income for employees). Cash-basis businesses must actually pay bonuses—accruing them isn’t sufficient unless paid within 2.5 months of year-end to related parties under certain conditions.

Health Insurance Premiums

Self-employed individuals can deduct health insurance premiums for themselves, spouses, and dependents. Ensuring premiums are current through December maximizes this deduction.

Accountable Plan Reimbursements

Business expense reimbursements through an accountable plan provide tax-free benefits to employees while creating business deductions. Year-end is a good time to process outstanding employee expense reports.

Action Timeline for Year-End Planning

November 1-15:

  • Generate current-year financial statements
  • Project full-year income
  • Identify applicable strategies

November 15-30:

  • Evaluate equipment purchase opportunities
  • Review retirement contribution options
  • Assess entity structure changes

December 1-15:

  • Execute equipment purchases
  • Prepay appropriate expenses
  • Make retirement contributions
  • Process charitable donations

December 15-31:

  • Final expense payments
  • Last-minute invoice timing decisions
  • Documentation review

Key Takeaways

  • Start with current financials. Effective planning requires knowing approximate current-year income.
  • Equipment purchases provide immediate deductions. Section 179 allows full expensing of qualified assets placed in service by December 31.
  • Maximize retirement contributions. SEP-IRAs and Solo 401(k)s offer substantial deduction opportunities for self-employed individuals.
  • Timing matters. Most strategies require completion before December 31 to affect current-year taxes.
  • Professional guidance helps. Tax situations vary significantly—strategies that help one business might not benefit another.

Conclusion

Year-end tax planning rewards attention and action. Norcross business owners who invest time in reviewing their situations before December 31 consistently find opportunities to reduce tax liability legally and strategically.

The approaches in this guide represent common opportunities, but individual circumstances determine which strategies apply. Professional tax planning consultation provides personalized analysis that identifies the most valuable opportunities for specific situations.

Either way, the time to act is now. January brings certainty—December preserves options.

Cheralis Financial provides year-end tax planning services for Norcross and Gwinnett County businesses. Contact us to schedule a planning consultation before December 31.