Fourth Quarter Playbook for Smarter Tax Planning

The Informed Taxpayer

Fourth Quarter Playbook for Smarter Tax Planning

Calendar pages do not save taxes. Decisions do. As we enter the fourth quarter, you have just enough time to tighten your books, project your tax bill, and make smart moves that actually improve cash flow. Here is a straight talking plan to finish strong.

Start with the truth in your numbers You cannot plan from a guess. Get your profit and loss current, balance sheet reconciled, and payroll reports pulled. Know distributions if you file as an S-Corp, and know year to date withholding and estimates. If you have rentals, capital gains from trading, or other income sources, bring those into the picture now. A tax projection is step one. It shows your marginal rate and your likely liability so every move is made with intent.

A vehicle is not a tax plan Yes, depreciation can be powerful. No, spending one hundred thousand on a truck does not cut your tax by one hundred thousand. Deductions reduce taxable income, then your rate does the math. Credits are different. And cash flow is different from tax flow. Financing or paying cash for equipment can lead to the same deduction but very different cash demands. Get advice before you buy. Skip the influencer fluff and run the numbers.

Beware depreciation recapture When you accelerate depreciation and then sell or trade the asset early, you can hand back a chunk through recapture. We see people enjoy the big write off year one and then get hammered a year later. Sometimes the right move is slower depreciation to keep deductions available in future higher rate years. Strategy beats impulse.

Use timing within the rules Many small businesses use cash basis. If you have the working capital, prepay reasonable twelve month expenses like insurance or software and take the deduction this year. On the income side, you might delay billing until January if it makes business sense. But do not play games with constructive receipt. If you have control of the cash, it is income. The mailbox trick does not impress the IRS.

Install an accountable plan now S-Corp owners who want home office, cell phone, internet, or mileage deductions should run them through an accountable plan. Written policy, timely reimbursement, clean documentation. Schedule C owners can mirror the discipline. Mileage logs matter. Tools like MileIQ help, but the best tool is consistency. I have seen legitimate home office reimbursements worth ten thousand a year translate to thousands in tax savings when done correctly.

Get your contractor paperwork right If you pay non employees, collect a W-9 before you pay them and issue Form 1099 when required. Waiting until February to beg for info is how compliance problems start. This is tax planning too because missed forms can lead to penalties and lost deductions.

Consider income shifting only when it is real Paying a family member for actual work performed can make sense. Get a W-9, document the services, and pay at a market rate. Real work. Real paperwork. Real deduction. No shortcuts.

Retirement plans are still on the table Deadlines differ by plan type and entity, and some moves can be made after year end if you set up the plan correctly. Others require action now. If you are considering a SEP, 401k, or cash balance plan, bring your projection and payroll data to your advisor this month so design follows math, not wishful thinking.

Thinking about buying your building Advanced move, not for everyone, but worth a conversation. A self rental structure with proper grouping can align operations and real estate and may position you for cost segregation. This needs careful design, not a last week of December rush.

Stop co mingling Separate business and personal spending. Use the right card at the right time. You will capture more legitimate deductions and make your life easier if questions ever arise.

What to do this week

1. Close your books through September and request a formal tax projection.
2. List planned purchases and projects. Prioritize only those that improve operations or cash flow.
3. Put an accountable plan in writing and start monthly reimbursements.
4. Review contractors. Collect any missing W-9s now.
5. Meet your tax professional to evaluate timing moves, retirement plan options, and any asset purchases. Do not wait for December thirty one.

Do not buy what you do not need Saving thirty cents to waste a dollar is not a plan. The goal is to align cash flow with tax flow and keep more of what you earn over time. If an expense does not advance the business, skip it.

Fourth quarter favors the prepared. Get your data right, project your outcome, and make targeted moves with clear documentation. That is how you control your tax bill and your cash, not the other way around.