The most expensive way to handle your taxes is to think about them once a year ? in March or April, after most of your options have expired. Tax planning done in January or February for the prior year is largely reactive: you’re reporting what already happened, with limited ability to change it. Year-round tax planning is different. It positions your business throughout the year to minimize what you legally owe, rather than just reporting it.
Why Year-Round Tax Planning Matters
Most meaningful tax strategies have to be executed before December 31. Retirement contributions, equipment purchases, timing of invoices, S-Corp elections, and entity structure decisions all have year-end or mid-year deadlines. A business owner who discovers in February that they should have made a retirement contribution in December has missed the opportunity for that year.
Year-round planning means you see these windows before they close.
January: Start Clean
- Reconcile all accounts from the prior year. Your books should be closed and accurate before January 31.
- Send 1099-NECs to contractors and file with the IRS by January 31.
- File W-2s with the SSA by January 31.
- Review your entity structure. If you want to elect S-Corp status for the new year, the Form 2553 deadline is March 15. Now is the time to decide.
- Set up or confirm your quarterly estimated tax payment schedule.
- Open a tax savings account if you don’t have one. Establish the habit of regular transfers.
February?March: Prior Year Taxes
- Compile prior year tax documents (1099s, bank statements, prior year return).
- Meet with your tax preparer in February or early March ? before the April rush, when you can actually have a strategy conversation rather than a data-entry session.
- If you’re an S-Corp, the business return (Form 1120-S) is due March 15. Your individual return (Form 1040) is due April 15.
- Make IRA or SEP-IRA contributions for the prior year ? you have until the individual return due date (April 15, or October 15 with extension) to fund certain accounts for the prior year.
April: First Quarterly Estimate
- File or extend your personal return by April 15.
- Pay first quarter estimated taxes by April 15.
- If you filed an extension, calculate whether any balance is owed. Extensions extend the time to file, not the time to pay. If you owe tax, the payment was due April 15.
- Review your Q1 financials. Is income tracking above or below last year? Adjust your estimated tax payments accordingly.
May?June: Mid-Year Check-In
- Run a mid-year tax projection. This is the most important planning activity of the year. Using your year-to-date P&L, project your full-year income and estimate your likely tax bill.
- Identify deductions and strategies that could reduce the projected bill:
- Are retirement contributions on track?
- Do you have equipment purchases planned? Would accelerating them reduce this year’s tax?
- Is your home office documented and being claimed?
- If you use a vehicle for business, is your mileage log current?
- Pay second quarter estimated taxes by June 15.
July?August: Structure and Strategy Review
- If profit is running significantly higher than expected, revisit entity structure. Is this the year to make the S-Corp election effective for next year? (The election must be filed by March 15 to be effective for the following year, but planning happens now.)
- Review your accountable plan if you operate as an S-Corp ? are you reimbursing yourself for home office, mileage, and other business expenses through the plan?
- Review your payroll if applicable. Is your reasonable salary still appropriate given current-year profit?
- Assess whether a cost segregation study makes sense if you purchased real estate this year.
September: Third Quarter Estimate and Year-End Prep Begins
- Pay third quarter estimated taxes by September 15.
- Begin year-end planning in earnest. With three quarters of data, your full-year projection is accurate enough to make meaningful decisions.
- If you’re considering year-end equipment purchases (Section 179), now is the time to identify what you need and plan the purchase before December 31.
- Maximize retirement contributions if you’re behind: Solo 401(k) employee contributions must be made by December 31 (employer contributions can wait until the tax filing deadline).
October?November: Execute Year-End Strategies
- If you extended your individual return, the extended deadline is October 15.
- Make equipment purchases intended for Section 179 deduction before December 31. The asset must be placed in service by year-end.
- If income is higher than expected, consider strategies to reduce taxable income: prepaying deductible expenses (insurance, business subscriptions), accelerating charitable contributions, or deferring invoices to shift income to next year if cash flow allows.
- Conversely, if income is lower than expected, you may want to accelerate income into this year if next year’s bracket will be higher.
- Review accounts receivable. Are there any bad debts you can write off? Uncollectible invoices are deductible as bad debt expenses once deemed uncollectible.
December: Close Out the Year
- Make final retirement contributions by December 31 for Solo 401(k) employee deferrals.
- Finalize any planned equipment purchases.
- Review your books for uncategorized or miscategorized transactions ? clean them up now while memory is fresh.
- Collect W-9 forms from any contractor you paid $600+ this year who hasn’t provided one.
- Confirm your health insurance deduction for the year ? is your premium documented?
- Run a final P&L for the year and compare it to your projection. Any surprises that need addressing before January?
The Difference Year-Round Planning Makes
Business owners who implement year-round tax planning typically save $2,000?$10,000+ annually compared to those who only think about taxes in April. The savings come from timing, strategy, and visibility ? not from aggressive positions that create audit risk. Legitimate tax minimization is the result of executing well-established strategies at the right moment in the calendar year.
At Simple Books Now, tax planning is ongoing ? not a one-time April conversation. If you’d like to set up a year-round planning relationship where you’re never surprised by your tax bill, book a free call with Luisa. We’ll start with where you are now and build the calendar that works for your business.
