Why Year-End Tax Planning Starts in October, Not December
Year-end tax planning has a real deadline — December 31 — but most of the moves that actually matter need lead time most business owners don't give themselves. Starting the conversation in October, rather than the second week of December, is what makes the difference between having real options and reacting to whatever the numbers happen to show.
Equipment Purchases Take Time to Actually Execute
Bonus depreciation and Section 179 both require the property to be placed in service by December 31, not just ordered or paid for. Equipment with a lead time — custom machinery, vehicles on backorder, anything requiring installation — needs to be identified and ordered well before the holidays if it's going to actually be in service by year-end. A decision made in the second week of December is often too late for the equipment itself to arrive.
Retirement Plans Have Their Own Setup Windows
A SEP-IRA can generally be established quite late, while many 401(k), defined benefit, and cash balance plan decisions need earlier action. One important exception: SECURE 2.0 allows certain sole proprietors with no employees to adopt a first-year 401(k) after year-end and make that year's elective-deferral election by the unextended return due date. Waiting until December to explore whether a different retirement structure would save more in taxes often means missing the window to actually implement it for the current year.
Payroll Adjustments Have to Go Through Actual Payroll Runs
For S-corp owners, adjusting officer compensation to a more defensible level, or timing a year-end bonus, has to happen through an actual payroll run with proper withholding — it can't be fixed retroactively after December 31 with a journal entry. Reviewing this in October leaves time for one or two more payroll cycles to correct course. If an issue isn't discovered until after year-end, correcting prior-year wages can require Forms 941-X and W-2c and is far messier than getting the payroll right before December 31.
Income and Expense Timing Needs a Real Projection First
Deciding whether to accelerate an expense into this year or defer income into next year requires an actual projection of taxable income — not a guess. Building that projection takes time, especially if bookkeeping isn't fully current, and it needs to happen before the moves it's supposed to inform, not alongside them in the final days of the year.
This information is educational and describes general year-end planning considerations, not a substitute for a projection based on your specific numbers. If you haven't started this conversation yet this year, October is still good timing — our tax planning team can build a real projection while there's still runway to act on it.
Related service: Tax Advisory & Planning
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