If you own a business, there is an important difference between preparing your taxes and planning for your taxes.
Tax preparation looks backward. It tells us what happened during the year and allows your CPA to prepare the required returns accurately.
Tax planning looks forward. It gives you an opportunity to understand where your business stands, estimate what you may owe, and determine whether there are decisions worth making before the year is over.
That’s why the last few months of the year can be so valuable for business owners. By the time your tax return is being prepared, some planning opportunities may have already passed.
Here are several areas worth reviewing with your CPA before December 31.
Start With Accurate Financial Information
Good tax planning starts with good numbers.
Before your CPA can make a meaningful tax projection, your bookkeeping should be reasonably current, bank and credit card accounts reconciled, and significant or unusual transactions identified.
From there, you can look at how revenue and profitability compare with last year, whether expenses have changed, and whether there have been significant purchases, asset sales, payroll changes, owner distributions or other transactions.
The objective isn't simply to clean up the books for tax preparation. It's to create an accurate financial picture that can be used to make decisions.
Project Your Full-Year Income and Tax Liability
A year-end tax projection helps estimate where your business—and, when appropriate, you personally—may land by December 31.
This can be particularly important for owners of pass-through businesses such as S corporations and partnerships because business income generally flows through to the owners' individual returns.
If profits are considerably higher than expected, estimated payments based on last year's income may no longer be sufficient. If profits have fallen, the opposite may be true.
Tax planning doesn't necessarily make the tax go away. It does make it easier to understand what's coming and prepare for it.
Review Major Purchases
Business owners frequently ask whether they should purchase equipment or other assets before year-end to generate a tax deduction.
Current federal law provides favorable depreciation treatment for many qualifying business assets, including permanent 100% bonus depreciation for certain eligible property acquired after January 19, 2025.
That can create valuable planning opportunities, but taxes shouldn't be the only consideration.
Before making a major purchase, ask whether the business actually needs it, what it will do to cash flow, how it will be financed, and how the deduction fits into your overall tax situation.
A good tax decision should also be a good business decision.
Review Estimated Taxes, Compensation and Distributions
Year-end is also a good time to review what's already been paid in estimated taxes against what you now expect to owe.
For owners of closely held businesses—particularly S corporations—this is also an opportunity to review wages, distributions, shareholder loans and other transactions between the business and its owners.
These are much better conversations to have while the year is still open than several months later during tax preparation.
Consider What Changed During the Year
Not every important tax issue appears on a financial statement.
Did you hire employees in another state? Begin doing business somewhere new? Add an owner? Purchase real estate? Take on debt? Experience significant growth? Start considering the sale or transition of your business?
Tell your CPA.
Changes in the business can affect federal taxes, state filing requirements, payroll and longer-term planning.
Pay Attention to Changing Tax Laws
Tax laws change, which is another reason year-end planning shouldn't simply repeat what you did last year.
Federal legislation enacted in 2025 made significant changes affecting businesses, including depreciation and other business tax provisions.
State laws continue to evolve as well. In Massachusetts, for example, eligible pass-through businesses have additional considerations beginning in 2026 because the Commonwealth now provides two elective pass-through entity excises.
That doesn't mean every eligible Massachusetts business should make an election. It means business owners should evaluate the available options with their CPA based on their particular circumstances.
Businesses operating in multiple states may have even more to consider because state rules vary considerably.
Tax Planning Is Part of Business Planning
Tax decisions don't happen in isolation.
Hiring affects payroll and profitability. Equipment purchases affect cash flow. Expansion into another state can create new opportunities as well as new tax obligations.
That's why I believe a CPA's role should involve more than preparing an accurate return after the year has ended.
A productive year-end planning conversation should answer three basic questions:
Where are we now? Where do we expect to be by year-end? And is there anything we should address while we still have time?
If you own a small business and haven't reviewed your 2026 tax position yet, now is a good time to start.
Julie Moran, CPA works with small-business owners in Massachusetts and across the country to provide proactive business tax planning and preparation throughout the year. Schedule a call with Julie. https://calendly.com/julie-juliemorantax/30min
Frequently Asked Questions About Year-End Business Tax Planning
When should a small business begin year-end tax planning?
Ideally, before the final weeks of the year. Starting in the fall gives you and your CPA time to review financial results, project income and evaluate potential planning decisions before December 31.
What information does my CPA need for year-end tax planning?
Generally, your CPA will need current financial statements and information about estimated tax payments, payroll, major purchases or sales, owner transactions and significant changes in the business.
Is tax planning the same as tax preparation?
No. Tax preparation primarily reports transactions that have already occurred. Tax planning evaluates your current situation and considers decisions that may affect your future tax position.
Can tax planning reduce what my business owes?
Sometimes planning identifies legitimate opportunities to reduce or defer taxes. But the objective isn't simply to pay the least possible tax. Good planning considers taxes alongside cash flow, business needs and longer-term objectives.
Do I need year-end tax planning if my business operates in more than one state?
It may be particularly valuable. Hiring employees, generating revenue or establishing operations in another state can create additional tax and filing requirements.
This article provides general educational information and is not intended as individualized tax, accounting or legal advice. Tax laws and individual circumstances vary. Consult your tax advisor regarding your specific situation.
