Year-end business tax planning while clients can still act

Year-end tax planning is most useful while business owners still have time to act. Once the year closes, opportunities involving asset purchases, expenses, employee benefits and retirement plans may already be fixed.

For tax professionals, this means bringing conversations that might otherwise happen during return preparation forward, while clients still have time to evaluate their options.

Review asset purchases before the year closes

A client planning to purchase equipment or other business property may have several decisions to make beyond whether the business needs the asset.

Timing can affect when depreciation begins, while available depreciation methods and elections can affect how the cost is recovered. A planned purchase therefore creates an opportunity to consider both business need and potential tax consequences before the client completes the transaction.

The same applies when a client has already made substantial purchases during the year. Reviewing those transactions before filing season gives the practitioner time to identify the depreciation methods and elections that may need to be evaluated.

Rather than discovering a major asset purchase while preparing the return, year-end planning brings that conversation forward while the client's remaining plans for the year are still taking shape.

Check retirement plans and employee benefits

Retirement plans and employee fringe benefits can both create planning opportunities, but they do not follow the same rules or timelines.

Before year-end, practitioners can review the client’s current retirement plan, including contribution limits and key funding deadlines. Clients considering employee benefits may also have decisions that are worth addressing before filing season begins.

These conversations can be especially useful when a business owner’s plans have changed during the year. Changes in operations or cash flow may affect which strategies the client wants to consider.

The point isn't to treat every available strategy as appropriate for every business. It is to identify the areas that deserve review while there is still time to make an informed decision.

Evaluate the timing of income and expenses

The timing of business income and expenses can affect taxable income from one year to the next.

Depending on the client's circumstances, year-end planning may include evaluating opportunities to accelerate deductions or defer income. Those decisions should be considered as part of the client's broader tax position rather than used automatically simply because the calendar is approaching Dec. 31.

Looking at the expected results for both the current and upcoming year can also help frame the conversation. A strategy that changes the timing of an item may shift its tax effect rather than eliminate it, so practitioners need to consider what the client is trying to accomplish.

Account for the client's entity type

Year-end planning also needs to reflect the client’s entity type.

A strategy that works well for one entity may produce a different result for another. Entity choice can affect how tax items flow to the owner and how planning decisions play out on the return.

Entity type should be part of the planning analysis rather than an afterthought. Before recommending a year-end move, practitioners should consider how it fits within the rules that apply to the client's business and its overall tax situation.

NATP's 2026 Year-End Tax Planning for Businesses webinar on Nov. 16 takes a closer look at these decisions. The course covers asset purchases and depreciation elections, retirement plans and employee fringe benefits, income and expense management, and planning considerations based on entity type. The webinar is also available on demand after the live event.

A.J. Reynolds, EA, presents the two-CPE webinar and brings more than 30 years of tax experience and real-world practitioner issues into his NATP instruction.