If you’re like most business owners, tax planning isn’t exactly top of mind in June or July. Here’s something many business owners don’t realize: the tax decisions you make in the middle of the year often have far more impact than anything you scramble to do in November or December. 

Why Waiting Until December Could Be Costing You

 Most business owners treat tax planning like a year-end activity. The problem? By December, your options are extremely limited. 

 When you wait until Q4 to start thinking about your tax situation, the income has already been earned. Many of the strategies that could have reduced your tax bill, such as retirement contributions, timing of expenses, and entity structure adjustments, either can’t be implemented that late in the year or they lose much of their effectiveness. 

 Three Numbers Worth Checking Right Now 

 You don’t need to spend hours reviewing your financials to get a useful picture of where things stand. Start with these three numbers: 

  1. Net income year-to-date. Are you tracking ahead of last year or behind? This single number tells you whether you should be looking to accelerate deductions, adjust estimated payments, or plan for a larger-than-expected tax bill.  
  1. Estimated tax payments made so far. Underpaying estimated taxes is a common and easily avoidable way business owners get hit with IRS penalties. If your income is up this year, your quarterly payments may need to be, too. 
  1. Owner compensation and distributions. How you pay yourself directly affects payroll taxes and overall tax liability. If this hasn’t been revisited in a while, or if your business has grown significantly, now is a smart time to take a fresh look. 

 The Midyear Opportunity Most Profitable Owners Miss 

 If your business is having a good year, there’s one strategy that many profitable owners overlook entirely. That is maximizing retirement contributions. 

A SEP-IRA or Solo 401(k) can allow you to set aside tens of thousands of dollars on a pre-tax basis. That’s real money working toward your future. Many owners know these accounts exist, but haven’t set one up, or aren’t contributing anywhere near what they’re eligible for. 

 Other commonly overlooked midyear moves include: 

  • Revisiting your entity structure. If you’re operating as a sole proprietor or single-member LLC and your income has grown, converting to an S-Corp may reduce your self-employment tax burden meaningfully. But this decision needs to happen well before year-end to be effective in the current tax year. 
  • Timing larger purchases strategically. If you’ve been thinking about upgrading equipment, vehicles, or technology, the second half of the year is a great time to plan those purchases with your tax situation in mind, rather than making them on a whim and finding out later what the impact was. 
  • Setting up (or reviewing) an accountable plan. If you or your employees are being reimbursed for business expenses, having a written accountable plan in place ensures those reimbursements aren’t treated as taxable income. It’s a small administrative step that can have a real payoff. 

Having a Better Year Than Expected? Act Now. 

Good news can sometimes bring unexpected consequences. If your business is performing better than you planned this year, that’s worth celebrating and a signal to get proactive. 

Business owners who have a breakout year and don’t adjust their tax strategy along the way often end up with a large, surprise tax bill in the spring, with no cash set aside to cover it. That scenario is avoidable when you’re paying attention midyear. 

 If your revenue is running significantly higher than last year, here’s what to do right away: 

  1. Review your projected tax liability based on your current income trajectory so there are no surprises at filing time. 
  1. Talk to your CPA about accelerating deductions into this tax year before December. 
  1. Revisit your retirement contribution limits; a better year may mean you can put away more. 
  1. Ask whether any planned large expenses can be moved into this year rather than next. 

Frequently Asked Questions 

When is the best time to start tax planning for my business? 

The best time is right now, regardless of what month it is. Most business owners wait until November or December, but by then your options are limited. A midyear review gives you six months to make adjustments that can meaningfully reduce your tax bill. 

How much should I be paying in estimated taxes? 

A general rule of thumb is that you should be paying enough to satisfy IRS safe harbor requirements and avoid underpayment penalties. If your income has grown significantly, it’s important to understand how that may affect your overall tax liability and plan accordingly. Even when estimated payments meet safe harbor requirements, you may still have a balance due when you file your return. 

What is an accountable plan and do I need one? 

An accountable plan is a written policy that outlines how your business reimburses employees, or yourself, for business expenses. Without one, those reimbursements can be treated as taxable income. It takes minimal effort to set up and can save you money every year. 

What retirement account options are available to small business owners? 

The two most common options are a SEP-IRA and a Solo 401(k). Both allow business owners to contribute significantly more than a traditional IRA, in some cases up to $70,000 or more per year depending on income. Contributions are tax-deductible, which directly reduces your taxable income for the year. 

How do I know if I should switch to an S-Corp? 

If your business is generating consistent net profit, typically $50,000 or more annually, an S-Corp election may reduce your self-employment tax liability. It’s not the right move for every business, and the timing matters. This is a conversation worth having with your CPA well before year-end. 

What’s the one thing a business owner should do right now? 

Pull your profit and loss statement for the first half of the year and compare it to the same period last year. If something looks significantly different, higher income, unexpected expenses, or a gap in estimated payments, that’s your signal to schedule a conversation with your CPA before summer ends. 

One Move. Real Impact. 

If you’re short on time but want to make one meaningful move this month, pull your profit and loss statement for the first six months of the year and compare it to the same period last year. 

You don’t need to be a numbers person to do this. The comparison will quickly show whether income is up, expenses are running higher than expected, or something needs attention. That insight alone will tell you whether it’s time to call us before summer is over. 

It’s a simple habit. But it’s the kind of habit that separates business owners who feel in control of their finances from those who spend every April in a panic. 

Don’t wait until December. 

 Ready to make this easier?  

Contact our team to schedule a midyear tax review and finish the year with confidence.  

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