Year-end tax planning checklist for accounting firms

A year-end tax planning checklist only works on closed books, so the first item on it is closing October. Once October is closed and year-to-date profit per client is a real number, the list is short: S-corp compensation against distributions, bonuses run through payroll before the last pay date, equipment under Section 179 checked against cash, retirement contributions tied to the payroll reports, and the January estimate. Nine weeks is enough time for all of it if the books are current, and not enough for any of it if they aren't.

We run an accounting firm, and year-end planning was the service we sold worst for years. Not because we didn't know the law. Because in the second week of November we were still closing August for half the client list, and you cannot tell an owner to run a $40,000 bonus through payroll when you don't know whether the business made $60,000 or $160,000.

When year-end tax planning should start

Late October or the first week of November, and the trigger is a bookkeeping event, not a calendar one: October is closed. Ten months of actuals plus two months of run rate is a projection a client can act on. Eight months of actuals plus four months of guessing is a conversation that ends with "let's see where December lands," which is the conversation that produces nothing.

Starting in December is too late for the items that need a pay date. Payroll providers have cutoffs several business days before the check date, the last pay date of the year is fixed, and a bonus or a compensation catch-up that misses it is a next-year event. Equipment has to be placed in service, not ordered, by December 31. The window is real and it closes in the middle of the holidays.

The nine-week calendar

Here is how the nine weeks from the last week of October to December 31 run in our firm.

• Week 1. October closes for every client on the monthly close. Pull the year-to-date P&L and balance sheet for each one, next to last year's same period.
• Week 2. Sort the client list into three buckets: needs a meeting, needs an email, needs nothing. Most clients land in the third bucket and that's fine. The meeting bucket is usually a fifth of the list.
• Weeks 3 and 4. Planning meetings, thirty minutes each, one page each. Every meeting ends with a written list of actions and who does them.
• Weeks 5 through 7. Execution. Payroll changes are submitted with the provider's cutoff in mind. Equipment is purchased and placed in service. Retirement plans that need to exist by year end get opened.
• Week 8. The C-corp Q4 estimate is due December 15. November closes, and every projection gets one last refresh with eleven months of actuals.
• Week 9. The final payroll of the year runs. Anything that had to happen through payroll has now happened or hasn't.

The individual Q4 estimate is due January 15, 2027, which means the planning meeting is also where the January cash gets reserved. A client who spends the estimate on a truck in December has a tax problem in January that the truck was supposed to prevent. We covered why the estimate is a bookkeeping number, not a tax number, in Q3 estimated tax is a bookkeeping number, and the same logic holds for Q4.

What should be on a year-end tax planning checklist for small businesses?

The flags we pull from every client's year-to-date numbers, in the order we check them:

1. Profit versus last year. Up more than 25 percent is a meeting. The estimates were based on last year's safe harbor and the client is about to be surprised.
2. Owner compensation versus distributions on S-corps. W-2 comp at $50,000 and distributions at $180,000 is a reasonable-compensation problem that can only be fixed through a pay date before December 31.
3. Cash versus profit. Profit-rich and cash-poor means the estimate is the conversation. Cash-rich means equipment and retirement contributions are on the table.
4. Loans tied to the lender. If whole loan payments have been sitting in the loan account all year, interest expense is understated and profit is overstated by the interest. Fix it before you plan on the number.
5. Fixed assets sitting in Repairs. Anything over a few thousand dollars in Repairs and Maintenance gets a look. It's usually equipment, and it belongs on the depreciation schedule.
6. Payroll liabilities tied to the Q3 941. Retirement contribution math and the reasonable-comp discussion both depend on W-2 comp being right, and the 941 is the proof.

Items four through six are why the checklist starts with the books. A planning meeting run on a P&L where the loan interest is missing and the truck is in Repairs produces advice that's wrong by the size of those errors.

S-corp reasonable compensation and bonuses through payroll

The S-corp owner who took distributions all year and a token salary has one lever left in December, and it's the last payroll run. A compensation catch-up or a bonus goes through payroll with withholding, hits a pay date on or before December 31, and lands on the W-2. It cannot be a journal entry in January that reclassifies distributions to wages.

Two mechanics to get right. First, the provider's cutoff: a December 31 pay date usually has to be submitted the week before, and the last week of December is short. Second, withholding: federal withholding on a separate bonus run is at the flat supplemental rate, which is 22 percent for most owners, and the client should know that before they see the net. The firm's job is to hand the client one number to submit and the date it has to be submitted by.

Section 179 and the cash question

For property acquired after January 19, 2025, both Section 179 expensing and 100 percent bonus depreciation are back, so the deduction is not the constraint for a small business buying a truck or a machine. The constraints are placed-in-service by December 31 and cash.

Section 179 reduces taxable income. It does not produce cash. A client in a 30 percent combined bracket who spends $80,000 on equipment saves roughly $24,000 in tax and is out $56,000 net, or out the down payment and into a loan. Whether that's a good trade depends on whether they needed the equipment. If they did, December is a fine time to buy it. If they didn't, they've bought a $56,000 discount on something they'll sell at a loss.

The books need a fixed-asset record for anything bought: description, cost, placed-in-service date, method. Book the asset and the loan together from the settlement documents, so January doesn't start with the purchase in Repairs and the loan proceeds in Other Income.

Retirement contributions and the payroll tie-out

Employee deferrals have to be withheld through payroll by December 31. Employer contributions to most plans can be made up to the return due date including extensions, which makes them the one big lever that survives into next year. For an S-corp owner, the employer side of a SEP is a percentage of W-2 compensation, so the comp decision and the retirement decision are the same decision, and both depend on the payroll liability account tying to the 941.

We don't quote the annual limits in a planning memo from memory. The firm pulls the current-year figures from the IRS notice and puts them in the client's one-page plan, with the contribution the client can actually make given cash.

How do accounting firms do year-end planning for clients?

The version that works is one page per client: year-to-date profit, projected full year, projected tax, the estimate already paid, the gap, and three to five actions with a date and an owner. Thirty minutes to present it. The client leaves with the page.

The version that doesn't work is the December phone call that starts "so where do you think you'll land." A firm that has to ask that question hasn't closed the books, and the client already knows it.

Where the platform comes in

Woven is our product, and the planning checklist above is the reason we built the monthly close into it: a close board per client shows which October closes are done, the loan sub-ledger keeps interest expense right so year-to-date profit is real, the asset acquisition flow books the equipment and the loan from the settlement documents, and payroll liabilities tie to the 941 inside the same ledger. The planning meeting reads off closed books instead of waiting for them. If you want to see the close board with a client list on it, book a demo.