Year-End Tax Checklist for Small Businesses: What to Do Before December 31

December has a way of arriving faster than anyone expects — and for small business owners, that means tax season is closer than it feels. The good news? A little preparation before December 31 can save you hundreds (or thousands) of dollars and a whole lot of stress in the spring.

At The Gap ProAdvisors, we work with small business owners across Texas and nationwide every year-end. Here’s the exact checklist we walk our clients through.

Before you can do anything else, your books need to be current. That means every bank account, credit card, and loan account should be reconciled through at least the end of November — ideally through mid-December.

If your books are behind, now is the time to catch up. Messy or incomplete records are the single biggest reason small business owners overpay on taxes — deductions get missed, income gets double-counted, and your CPA or tax preparer has to charge you more to sort it out.

Action item: Log into QuickBooks (or your accounting software) and confirm your last reconciliation date. If it’s more than 30 days behind, get it caught up now.

Pull a year-to-date Profit & Loss (P&L) report and actually read it. You’re looking for a few things:

• Unusual spikes or dips in revenue or expenses — these could signal a data entry error
• Large uncategorized transactions — these need to be assigned before year-end
• Your estimated net income — this tells you roughly what you’ll owe in taxes

Knowing your approximate taxable income in November or December gives you time to act. If you’re having a profitable year, there are legal strategies to reduce what you owe — but most of them have to happen before December 31.

If your business is profitable and you need equipment, software, or supplies anyway — buy them before year-end. Under Section 179 of the tax code, most business equipment purchased and placed in service before December 31 can be fully deducted in the current tax year.

Common year-end purchases that qualify:

• Computers, monitors, and office equipment
• Business software and subscriptions
• Vehicles used for business (with proper documentation)
• Office furniture
• Tools and machinery

Important: Only buy things you actually need. Spending $5,000 to save $1,500 in taxes is not a good deal. But if you were going to buy it anyway, buying it in December instead of January is smart planning.

Contributions to a SEP-IRA, SIMPLE IRA, or Solo 401(k) are one of the most powerful tax deductions available to self-employed business owners and small business owners.

• SEP-IRA: You can contribute up to 25% of net self-employment income (up to $72,000 for 2026). Contributions can be made up until your tax filing deadline, including extensions — but setting it up before December 31 gives you more options.
• Solo 401(k): The plan itself must be established by December 31 of the tax year, even if contributions can be made later.
• SIMPLE IRA: Employee contributions must be made by December 31.

If you don’t have a retirement plan set up yet, talk to your financial advisor or bookkeeper now — not in April.

If you paid any contractor, freelancer, or unincorporated vendor $2,000 or more during the year, you’re required to issue them a 1099-NEC. The deadline to send 1099s to recipients is January 31.

Do the prep work now:

• Pull a list of all contractors you paid this year
• Confirm you have a W-9 on file for each one
• Verify their mailing address and Tax ID number (EIN or SSN)

Chasing down W-9s in January is a headache. Doing it in December is easy.

Take a look at any outstanding invoices. If you have clients who owe you money and you’re on a cash-basis accounting method (most small businesses are), you only pay tax on income you actually received.

If you have invoices that are clearly uncollectible, you may be able to write them off as bad debt — but the rules depend on your accounting method. Talk to your bookkeeper or tax preparer before writing anything off.

On the flip side: if you’re having a big year and want to defer some income, consider whether it makes sense to delay sending invoices until January. Again — talk to a professional before doing this.

Two of the most commonly missed deductions for small business owners are the home office deduction and business vehicle mileage — and both require documentation.

Home office: You need to use a dedicated space regularly and exclusively for business. Measure the square footage and calculate the percentage of your home it represents.

Vehicle mileage: The IRS changed the 2026 standard mileage rate mid-year — 72.5 cents per mile for January 1–June 30, and 76 cents per mile for July 1–December 31. If you haven’t been tracking mileage all year, do your best to reconstruct it from your calendar, client records, and Google Maps history. Going forward, use an app like MileIQ or simply log trips in a spreadsheet.

If you run payroll — whether through ADP, Gusto, or another provider — confirm that:

• All payroll tax deposits are current and reconciled
• Year-to-date payroll totals match your P&L
• Employee addresses are current (for W-2 mailing in January)
• Any bonuses you plan to pay are processed before December 31 if you want to deduct them this year

W-2s must be sent to employees by January 31. The prep starts now.

Year-end is a good time to ask: is your current business structure still the right one?

If you’re operating as a sole proprietor or single-member LLC and your net profit is consistently above $40,000–$50,000 per year, you may be leaving significant money on the table by not electing S-Corp status. An S-Corp election can reduce your self-employment tax burden substantially.

The deadline to elect S-Corp status for the following tax year is generally March 15. But the planning conversation needs to happen now, before year-end, so you can make an informed decision.

All of the above is easier — and more effective — when you do it with a professional who knows your business. A 30-minute year-end review call can surface deductions you didn’t know you qualified for, flag potential issues before they become problems, and give you a clear picture of what you’ll owe in April.

At The Gap ProAdvisors, we offer year-end bookkeeping cleanup and tax planning for small businesses across Texas and nationwide — 100% remotely. If your books are behind or you’re not sure where you stand heading into year-end, we’d love to help.

• Reconcile all accounts through November (or later)
• Review your year-to-date P&L for errors and uncategorized transactions
• Make any deductible equipment or software purchases before December 31
• Max out retirement contributions (or establish a plan before December 31)
• Collect W-9s from all contractors you paid $2,000+
• Review accounts receivable for bad debt write-offs
• Document home office square footage and business mileage
• Verify payroll records are complete and current
• Review your business structure with a tax professional
• Schedule a year-end review call with your bookkeeper

Don’t wait until January to deal with December’s mess. The Gap ProAdvisors offers a 2025 Year-End Books Cleanup starting at $800 — we’ll get your books current, reconciled, and ready for tax season so you can hand your accountant a clean set of financials instead of a shoebox of receipts.

Contact us today or schedule a free consultation to get started. We serve small business owners in Buffalo Gap, Abilene, and across all 50 states — entirely remotely.