BUSINESS OWNER GUIDE / TAX PLANNING
A year-end tax checklist
for small business owners.
Six conversations to have before year-end: your projected tax, owner pay, equipment, records, Alabama filings, and the work still needed before you file.
Tax planning is most useful while there is still time to act. For a small business owner, the starting point is a current set of books, a realistic estimate of the rest of the year, and a clear picture of taxes already paid. This checklist helps organize that conversation for businesses in Mobile and Baldwin counties.
1. Update the projection—not just the bank balance.
Cash in the bank is not the same as taxable profit. Loan proceeds, principal payments, equipment purchases, owner transfers, and the timing of receipts can all make the two look different. Begin with reconciled financial statements and identify anything that still needs accounting attention.
Then put the business result together with the owner’s other income, withholding, and estimated payments. A profitable year may call for a different plan from last year; a slower year may also justify revisiting the numbers.
- Bring a year-to-date profit-and-loss statement and balance sheet.
- Identify income and significant expenses expected before year-end.
- Gather tax-payment confirmations and current withholding information.
- Include other household income and relevant ownership interests.
Federal income tax is generally paid during the year through withholding or estimated payments. A late catch-up payment does not necessarily eliminate an earlier underpayment penalty. IRS guidance on estimated taxes ↗
2. Review how the owners were paid.
Owner draws, distributions, payroll, reimbursements, and loans should be clearly identified in the books. The correct treatment depends on the entity and the facts; an owner payment should not automatically be recorded as a wage or operating expense.
For an S corporation shareholder who performs services, review reasonable compensation before the final payroll runs. The IRS considers the work performed and the circumstances. An arbitrary percentage of revenue or profit is not a substitute for that review.
- Reconcile shareholder payroll and distributions to the books.
- Document the owner’s duties, time, experience, and compensation support.
- Identify personally paid business costs and review their documentation and treatment.
- Discuss changes in ownership, contributions, or owner loans.
3. Evaluate equipment before buying it.
A deduction reduces taxable income; it does not reimburse the purchase price. Start with whether the business needs the asset and can afford the cash commitment. Then review the federal and Alabama tax treatment, financing, business use, and available elections with your CPA.
For depreciation, the placed-in-service date generally means when the property is ready and available for its specific business use. An order, a payment, or a delivery alone may not establish that date. Do not assume every purchase qualifies for an immediate full deduction.
- Keep purchase invoices and financing documents.
- Record delivery, installation, and ready-for-use dates.
- Maintain support for business use, including vehicle records where applicable.
- List equipment sold, traded, retired, or converted to personal use.
IRS Publication 946: depreciation and placed-in-service rules ↗
4. Resolve the records that delay a return.
A year-end planning meeting works better when unexplained transactions are addressed first. Missing loan statements, duplicate income, unrecorded fees, incomplete payroll entries, and unidentified owner transactions can change the starting numbers.
For contractors and service businesses, keep the operating detail behind the books: customer deposits, unpaid invoices, subcontractor payments, job records, and equipment information. The records needed for the return may differ from what appears on a bank statement.
- Reconcile bank and credit card accounts through the latest complete period.
- Collect vendor information and review potential information-return filings.
- Resolve payroll, loan, asset, and owner-account differences.
- Identify missing documents and assign responsibility for obtaining them.
Need help establishing a reliable starting point? Read about bookkeeping and cleanup or our guide to monthly financial reports for contractors.
5. Check Alabama and local filings separately.
Your federal income tax return is only one part of the filing picture. Review state income-tax matters, payroll accounts, sales-tax registrations, and reportable business personal property for the activities and locations involved.
Alabama’s Department of Revenue describes business personal property reporting based on property owned on October 1, with reporting to the local assessing official between October 1 and December 31. Review the assets, additions, and disposals with the appropriate county and confirm the requirements that apply to your business.
For sales tax, a state account does not necessarily cover every local obligation. Alabama does not administer every city and county tax. Businesses operating in multiple jurisdictions should confirm the applicable registrations, filing responsibilities, and payment records.
- Review reportable equipment and other business personal property.
- Check the jurisdictions where the business operates.
- Gather notices, account numbers, and recent filing confirmations for your CPA.
- Identify who is responsible for each filing and its due date.
Alabama business personal property guidance ↗
Alabama local sales-tax guidance ↗
6. Agree on the filing and payment plan.
Before tax season, identify the returns being prepared, documents still outstanding, information needed from other preparers, and dates for delivery and review. A business owner may need coordination between an entity return, Schedule K-1s, and a personal return.
An extension gives more time to file; it generally does not extend the ordinary payment deadline. If an extension is likely, discuss the estimated balance and payment timing before the original applicable deadline. Different returns can have different deadlines.
- Confirm the entities, owners, tax years, and state returns involved.
- Agree on a secure document handoff and a date for missing records.
- Discuss extension calculations and payments where needed.
- Flag major decisions before the transaction or commitment takes place.
Bring these records to the planning conversation.
Your prior business and personal returns; current financial statements; tax payments and withholding; payroll summaries; owner draws and contributions; equipment and financing records; and a short list of decisions you expect to make. Send sensitive documents through the client portal after onboarding, not the public inquiry form.
Collins CPA LLC provides business tax preparation, individual tax preparation, and tax planning and estimates for clients in Mobile and Baldwin counties.
This guide provides general information. The appropriate treatment depends on your entity, records, timing, and applicable federal, state, and local rules. A planning engagement addresses your particular facts.