Year-End Tax Planning Moves Most Small Business Owners Miss

If you operate as an S-corp or C-corp, you should be reimbursing yourself through an accountable plan for home office, internet, cell phone, mileage, and unreimbursed travel — instead of taking those as personal deductions.

Done correctly, the reimbursements are deductible to the business and not taxable to you. Done in December for the whole year is fine as long as the documentation supports each expense.

Solo 401(k) plans must usually be adopted by December 31 to allow employee deferrals for the year. SEP IRAs can be adopted up to the return due date but only allow the employer portion.

If you've never had a plan and want one for this year, the timing question matters more than the plan choice.

Reasonable compensation has to be paid through payroll, not booked as distributions. December is the last clean month to add a bonus payroll run and avoid a year-end scramble.

If your salary is materially below the comparable benchmark, this is the moment to fix it.

Distributions in excess of basis become taxable. Personal expenses paid from the business should be reclassified before year-end, not after the return is drafted.

Section 179 and bonus depreciation require the asset to be in service by December 31. With bonus depreciation phasing down, the calendar year you place property in service materially affects the first-year deduction.

Cash-basis businesses can prepay state estimated taxes, professional dues, subscriptions, and insurance to shift the deduction into the current year. Don't overdo it — pulling deductions forward only helps if income is high this year and lower next year.