Your End-of-the-Year Checklist for Small Business Owners
By Michael Nedreski
With the year winding down and the holiday season upon us, it's an important time for small business owners to assess their operations and financial health. While many are preoccupied with celebrations and family gatherings, business owners should also focus on closing out the year successfully.
This year-end checklist for small business owners is crafted to help you cover essential details during this vital period. It serves as a guide to shield your business's financial well-being, helping you reduce your tax liability and kick off 2025 on a positive note.
1. Review IRS Elections (Especially if You Had a Net Operating Loss)
If you had a net operating loss (NOL) this year, double-check your IRS elections to ensure you made the correct ones. This is one of the biggest issues our CPAs see when they help small business owners file their taxes.
All these decisions play a role in how much money your business may owe in taxes. Talk with a CPA or financial professional about which elections may be right for you.
Additionally, how you structure your small business can make all the difference in the world when it comes to taxes. A tax professional can help you decide which entity type is the best for your business and help you apply before the deadline hits.
For example, let's say you found out you could save more in taxes by structuring your business as an S corporation instead of an LLC. If you're a new business, you have two months and 15 days from the day you file your articles of formation to file your S corp elections. So, if you filed your articles of formation on March 1, you have until May 16 to file your S corp election for it to take effect that same tax year.
2. Review Your Deductions
One essential aspect of your end-of-the-year checklist as a small business owner is reviewing your deductions. This involves assessing your business expenses and identifying potential deductions that can help reduce your tax liability. Keep in mind that tax laws and regulations can change, so staying up-to-date with the latest rules is crucial.
There are several deductions available for basic business expenses and these can help reduce your taxable income significantly. Some common examples of business expenses include:
- Advertising
- Legal and professional fees
- Office expenses, including costs related to the business use of your home
- Business use of your vehicle
- Continuing professional education
- Memberships to professional organizations
Tax-deductible business expenses need to be ordinary and necessary to operate your business. Consult your tax professional for more details on qualified business expenses.
3. Review Depreciation
New depreciation rules have come into effect in recent years due to the Tax Cuts and Jobs Act (TCJA). These changes allow you to write off most depreciable assets in the year they're placed into service, according to the IRS. (1)
Common items you can write off for depreciation include computers, equipment, machinery, cell phones, buildings, office furniture, and vehicles, as well as intangible items like copyrights.
Make sure you keep a list of everything that counts as a depreciable expense. Doing so will help you lower your business's taxable income.
4. Check Eligibility for Company Retirement Plans
There are several different tax-advantaged retirement plans available to small business owners, including the solo 401(k), the SEP IRA, and the SIMPLE IRA. A solo 401(k) is designed for businesses with only one employee, the business owner, whereas SEPs and SIMPLEs can be used for businesses with more employees, though SIMPLE IRAs are capped at 100 employees.
According to the IRS, (2) an employee can participate in a SEP IRA if they:
- Are at least 21
- Have worked for the employer in at least 3 of the last 5 years
- Received at least $750 in 2024
Business owners can choose to be less restrictive than this and allow other employees to participate in a SEP, but you can't be more restrictive than these IRS rules allow.
Review your SEP IRA eligibility requirements to ensure employees can participate in the program if you want them to.
Choosing to add an employer-sponsored retirement plan to your company can be a great way to take advantage of tax credits, (3) including those for setting up a new plan and auto-enrolling employees. You may also be eligible for additional tax deductions by making qualified employer contributions on behalf of your employees. It's important to review your options with a qualified financial professional before making a decision on a retirement plan as each plan type comes with its own unique benefits and drawbacks.
5. Review New Due Dates & Filing Methods for 1099s
A new rule that began in 2020 (4) states any freelancers or contract workers who earned more than $600 from your company will receive Form 1099-NEC instead of 1099-MISC. NEC stands for "non-employment compensation"—and it's only used for reporting independent contractor income.
1099-NEC forms are due on January 31. If this day falls on a weekend, they're due the following business day.
We Are Here to Assist You
At White Oak Wealth Partners, we focus on empowering small business owners to build, safeguard, and enjoy their wealth for the long term. If you're looking to finalize any financial loose ends before the new year, we're here to help. We collaborate closely with our network of CPAs to make sure you receive comprehensive financial advisory services, including tax planning and cash flow management.
To get started, contact us by calling 814-835-4551, emailing MICHAEL.NEDRESKI@LPL.COM, or scheduling an appointment here.
About Michael
Michael Nedreski is managing partner at White Oak Wealth Partners, a specialized financial lifestyle and wealth management firm serving entrepreneurs, business owners, executives, and their families. Mike has 30-plus years of experience in the financial services industry and is committed to serving his clients through holistic financial planning, disciplined investment strategies, and proactive personal service.
A native of Erie, Pennsylvania, Mike began his career in the financial services industry in 1988. He has earned the Chartered Retirement Planning CounselorSM (CRPC®) designation conferred by College for Financial Planning (188-LPL). Mike is also an active member of the Financial Services Institute (FSI) and Financial Planning Association (FPA).
When not working, Mike enjoys spending time with his wife, Amy, and their children. He volunteers in his community and at his church and his children's schools. An outdoors enthusiast, Mike loves hunting, fishing, golfing, and spending time near or on the water. He also enjoys working out and watching some of his favorite sports teams, the Pittsburgh Pirates and the Cleveland Browns. To learn more about Michael, connect with him on LinkedIn.
Specific individualized tax advice not provided. We suggest that you discuss your specific tax issues with a qualified tax advisor.
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(2) IRS, 2024, July, https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-seps#:~:text=Employees%20must%20be%20included%20in,your%20business%20for%20the%20year.
(3) IRS, 2024, August, https://www.irs.gov/retirement-plans/retirement-plans-startup-costs-tax-credit
(4) Intuit TurboTax, 2024, October, https://turbotax.intuit.com/tax-tips/irs-tax-forms/what-is-form-1099-nec/L5fbwIFSn
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