As the year draws to a close, strategic tax planning becomes essential for every business owner. For accrual-basis taxpayers, projecting income and expenses for the current and upcoming year allows you to make informed decisions about when to recognize income and claim deductions. While cash-basis taxpayers have more flexibility in timing payments, accrual-basis businesses can still take advantage of several tax-saving opportunities before December 31.
Review and Record Incurred Expenses
One of the most effective year-end strategies for accrual-basis businesses is ensuring that all expenses incurred in 2025 are properly recorded — even if they won’t be paid until 2026. Doing so allows these expenses to be deducted on your 2025 federal tax return, reducing your taxable income for the year.
Common deductible incurred expenses include:
- Employee wages, commissions, and bonuses
- Payroll taxes
- Advertising and marketing costs
- Interest on business loans
- Utilities and insurance premiums
- Property and real estate taxes
You can also accelerate certain deductions by charging qualified expenses to a business credit card before year-end. This strategy applies to both accrual- and cash-basis taxpayers, allowing you to claim the deduction in the current year while paying later.
Evaluate and Adjust Prepaid Expenses
Take time to review your prepaid expense accounts and ensure that items already used during the year are written off.
If you’ve prepaid for insurance coverage that spans from 2025 into 2026, you may be eligible to deduct the full premium amount this year, provided you make a proper tax method election. This can help front-load deductions and reduce your current tax liability.
Strengthen Your Tax Position with Additional Steps
A few additional steps can make a significant difference in your year-end tax results:
- Review Accounts Receivable: Write off any outstanding invoices that are unlikely to be collected. Documenting uncollectible receivables helps ensure your books and taxable income accurately reflect your financial position.
- Pay Interest on Shareholder Loans: Ensure any shareholder loans are properly documented and that applicable interest payments are made before year-end. This helps maintain compliance and avoid IRS scrutiny.
Partner with Tax Professionals Who Understand Your Business
Year-end tax planning requires foresight, organization, and a deep understanding of current tax laws. The CPAs at Botwinick & Company can help you project your income, optimize deductions, and ensure your financial statements are accurate and compliant — setting your business up for success in 2026.
Contact Botwinick & Co. today to schedule a year-end tax planning consultation and discover how proactive strategies can help reduce your business tax burden.
