Every year I have the same painful conversation with prospective clients:
“If we had talked last November, you could have saved $50k. But here we are in February…”
Tax planning is about so much more than just buying a G-Wagon on December 31. It’s a strategy that, when done right, can save you thousands each year.
Here are five year-end tax saving strategies:
#1: Choose the Right Entity Structure
Your business structure matters. A simple adjustment can mean huge savings.
A new client earning $400k annually was operating solo with no formal entity and zero tax planning. After restructuring, they’re now saving $32k every year—permanently.
Don’t let your business structure work against you. A review now can make all the difference come tax season.
#2: Optimize Your Salary
Look, an LLC isn’t a magic wand, but paying yourself the right way can lead to significant savings.
Without careful planning, many business owners pay excessive self-employment tax, miss out on Qualified Business Income (QBI) deductions, and miss withholding and retirement opportunities.
Salaries need to be set and paid by December 31st. Once the year ends, we can fix it going forward, but there’s no going back to regain the sunk costs.
#3: Plan for Retirement
Effective retirement planning has to be thought through, done right, and done on time.
Folks talk a lot about asset diversification, but not so much about asset location. Having the right mix can make and save you millions over your lifetime:
- Taxable accounts
- Tax-free accounts (e.g., Roth IRAs)
- Deferred accounts (e.g., 401ks and traditional IRAs)
Rule of Thumb: Contribute to a Roth if your effective tax rate is 24%, and think about deferring when it’s 32%+.
And your heirs will thank you; SECURE 2.0 killed the stretch IRA. They’ll pay tax on the full deferred balance within 10 years of inheritance.
#4: Make Quarterly Tax Payments
I just met with a prospect who is crushing it earning $600k, but they haven’t made any quarterly payments. Now they face a $225k tax bill in April, plus $10k in penalties.
Here’s what most folks miss: People with a W2 have taxes taken out of every paycheck. People with small business or 1099 income have to handle their own taxes—and the IRS wants their money quarterly. If they don’t get it they’ll charge 8% interest and tack on penalties.
The fix is simple: Review your finances monthly and reserve 25-35% of profit to pay your quarterly taxes.
#5: Better Bookkeeping
Bookkeeping doesn’t sound like a year-end tax strategy—but bad books could be costing you more than you think. Clean books allow you to see the opportunities to push all the fun tax levers and dial in the savings.
I can’t tell you how many times people say, “I know I have deductions, but they are all over the place. I’d rather not take them than risk an audit.”
This is a terrible idea, and a foolish way to waste your money. Set up a business account and track everything!
We recently reviewed a client’s DIY books and found $34k in missed deductions: They had personal expenses mixed in, missed vehicle deductions, missed home office deductions and no tracking for travel expenses.
It isn’t about perfection. It’s about keeping money in your pocket.
Bonus: Beneficial Ownership Information (BOI) Reporting
Over 25 million businesses will need to report ownership to FinCEN by December 31, 2024.
Miss the filing? Penalties run $500/day. It’s a straightforward filing, but the penalties add up quickly.
Contact your CPA or send me a message if you need help.
Tax planning isn’t just a December activity—it’s a year-round discipline that pays off big. Want to save serious money? Talk with your CPA now. Don’t wait until February when it’s too late to implement these strategies.
If you’re ready to learn more, join me for a year-end tax planning workshop on Tuesday, November 19th at 2pm CST. We’ll cover all of these strategies and more!
Even if you can’t attend live, register and we’ll send the recording so you won’t miss a thing.
All the best,
Mitchell