Year-end tax work divides cleanly into two lists that founders routinely blur together: moves that expire at midnight on December 31, and mechanics that come due in January. The expensive mistakes all live on the first list — once the year closes, the levers are gone, and April becomes pure arithmetic on decisions you can no longer change. So this checklist is organized the way the deadline actually works: what to decide before 12/31, what to close out in January, and how to run the year-end close that makes both possible.
If you file on the cash basis, you control more timing than you may realize: income lands when collected, deductions when paid. Expecting a better year next year? Invoice in early January rather than late December and the revenue defers. Expecting rates or income to rise? Accelerate collections into December. On the expense side, paying January's known obligations — insurance, software renewals, contractor invoices — in December pulls the deduction forward a year. Accrual filers have far less room here (the economics, not the payment date, control), which is worth knowing before you burn a December afternoon on a strategy your accounting method doesn't support — the distinction is exactly the one covered in cash vs. accrual accounting. And one standing caveat we give every client: never spend money merely because it's deductible. A deduction returns cents on the dollar; only accelerate spending you'd incur anyway.
Fixed assets placed in service by December 31 can generally be expensed immediately — §179 for most equipment purchases within its limits, bonus depreciation beyond that — rather than depreciated over years. The operative phrase is placed in service: ordered-but-not-delivered doesn't count. Same caveat as above; the deduction subsidizes a purchase you needed, it doesn't justify one you didn't.
December is the annual reckoning for receivables that won't collect (document the collection attempts — the write-off needs a paper trail), inventory that's obsolete, and assets that were disposed of but never removed from the books. Each cleanup entry is both better financial reporting and a current-year deduction; leaving them on the books overstates income and the tax on it.
S corporation owner-employees must take reasonable W-2 compensation before distributions, and the IRS tests this annually with hindsight you don't get. If distributions ran ahead of salary this year, a December payroll true-up fixes it; a March realization doesn't, because W-2 wages can't be created retroactively. Bonus benefit: extra December withholding is treated as paid evenly through the year, which can retroactively cure an estimated-tax shortfall (mechanics in the quarterly estimates guide).
Retirement contributions are one of the few deductions that build your own balance sheet, but the deadlines are split: employee deferral elections (solo 401(k) in particular) generally must be made by December 31, while employer contributions and even establishing certain plans can wait until the filing deadline. The December question is simply: does a plan need to exist or have an election in place by year-end for what you intend? Ask it now, not in March.
If you'll claim the R&D credit, December is when the substantiation should be pulled together — time allocations confirmed with the engineers who still remember the year, project documentation collected, cloud spend segregated by environment. Contemporaneous documentation is what survives examination; the version reconstructed at filing is the version that doesn't.
Run the safe-harbor math before year-end while withholding adjustments are still possible: have you paid in 100% (or 110%) of last year's tax, or 90% of this year's? A December correction stops the underpayment interest clock; the Q4 estimate itself is due January 15.
Every item above depends on books that are actually right, which is what the year-end close produces. The sequence: record all revenue and expense activity through 12/31; reconcile every bank, credit card, and payment-processor account and chase the uncleared items; book the accrual entries (services received but not yet invoiced, revenue collected but not yet earned — deferred revenue schedules especially, for SaaS); record depreciation and the write-offs from item 3; then produce and actually read the final statements — P&L, balance sheet, cash flow — asking what drove the numbers, not just whether they exist. Two practical notes from doing this a few hundred times: a company reconciling monthly closes the year in days, while a company reconciling annually closes the year in weeks — the monthly close is what makes December boring, in the good way. And your tax preparer needs the closed books plus the full document set (prior returns, payroll reports, estimated payments made, K-1s received) — delivering it complete in January is the single biggest determinant of whether your filing season is calm.
Everything on the before-12/31 list shares a property: it requires knowing your approximate full-year picture while the year is still open. That's the actual function of a year-end planning session with your accountant — held in November or early December, working from eleven months of real numbers — where the timing moves, compensation true-ups, credit elections, and reserve levels get decided with time to execute. A tax return filed in April reports history; the planning meeting in November is where the history gets improved. If your startup has never had that meeting, this is the year to change that — and the rest of the filing landscape is mapped in Startup Taxes 101.