%20(1).webp)
Contact Us
Contact Us
September marks an important transition for business owners. Three quarters of the year are nearly complete, year-to-date financial results are becoming much clearer, and there is still time to make meaningful tax planning decisions before December.
That makes September an ideal time to step back and evaluate where your business—and your potential tax liability—may be headed.
For business owners in Boise, Meridian, Eagle, and throughout the Treasure Valley, proactive tax planning before Q4 can help identify potential tax-saving opportunities, improve cash flow planning, and reduce the likelihood of an unwelcome surprise when tax season arrives.
The key is not simply knowing how much income your business has earned so far. Effective strategic tax planning means using that information to decide what, if anything, should change before the year ends.
Here are several areas Idaho business owners should review before entering the fourth quarter.
The first step in effective tax planning is understanding where your business actually stands.
By September, you should have enough financial information to compare your year-to-date revenue, expenses, and profitability against both your expectations and the prior year.
Questions worth reviewing include:
This is one reason accurate bookkeeping becomes particularly valuable as year-end approaches. Tax planning decisions are only as useful as the financial information behind them.
If your books are several months behind, September is a good time to get them current rather than waiting until December—or tax season—to discover what actually happened during the year.
Once year-to-date financials are reasonably accurate, the next step is projecting where the business is likely to finish the year.
A tax projection uses your current financial results along with reasonable expectations for the remaining months to estimate your potential year-end tax position.
This is different from simply looking at last year's tax return.
Your business may have changed considerably since then. Revenue may have increased, expenses may have fallen, you may have hired employees, purchased equipment, changed compensation, or experienced other events that affect your tax situation.
As we discussed in How Business Owners Can Use Tax Projections to Make Better Financial Decisions, projections can help turn tax planning from a reactive exercise into an ongoing business strategy.
Knowing your likely tax position in September gives you something extremely valuable:
time.
If the projection reveals a larger-than-expected tax liability, there may still be several months to evaluate potential strategies. Discovering the same problem after December 31 can dramatically reduce the number of options available.
September is also an important time to review estimated tax payments.
Business owners often base estimated payments on prior-year results or projections made much earlier in the year. But businesses rarely perform exactly as expected.
If your income has increased substantially, your estimated payments may no longer reflect your likely tax liability. If income has decreased, your payment strategy may also deserve another look.
The goal isn't simply to pay as much as possible throughout the year. It is to develop an estimated payment strategy that appropriately reflects your tax situation while allowing the business to manage its cash flow effectively.
This is particularly important for owners of pass-through businesses, where business income may ultimately flow through to the owner's individual tax return.
A CPA can review your year-to-date results, previous payments, and expected Q4 performance to help determine whether adjustments should be considered before year-end.
For business owners operating through an S corporation, September is a good time to review how compensation and distributions have been handled throughout the year.
S corporation owners who perform services for the business generally need to consider reasonable compensation requirements. Waiting until the end of the year to evaluate payroll can create unnecessary complications.
Questions to review include:
These decisions should be based on the facts and circumstances of the business—not an arbitrary salary amount or a percentage found online.
Our previous article, Tax Planning Strategies for S-Corporation Owners in Idaho, explores several of the planning considerations that can affect S corporation owners throughout the year.
September provides an opportunity to identify potential issues while there is still time to address them.
As year-end approaches, business owners often begin hearing advice such as:
“Buy something before December so you can write it off.”
That isn't necessarily good tax planning.
A deduction can reduce taxable income, but spending money solely to create a deduction can still leave the business with less cash.
Instead, consider whether significant purchases are already necessary for the business.
For example, are you planning to purchase:
If the business genuinely needs an investment, the timing of that purchase may become part of a broader tax planning conversation.
Depending on the asset, how it is used, when it is placed in service, and current tax rules, different depreciation or deduction strategies may be available.
The important distinction is that tax planning should support good business decisions—not create unnecessary spending simply for the sake of a deduction.
Retirement planning can also intersect with business tax planning.
Depending on the business structure and existing retirement plan, owners may have opportunities to make contributions or establish strategies that benefit both themselves and eligible employees.
Options may include plans such as:
Each comes with different contribution limits, deadlines, eligibility requirements, administrative responsibilities, and tax considerations.
That means September is a much better time to begin the conversation than the final week of December.
If establishing or modifying a retirement strategy is part of your year-end plan, your CPA and financial advisor can help you understand how the decision may fit into your broader financial and tax picture.
Tax planning should not happen separately from cash flow planning. For some businesses, Q4 is the strongest part of the year. For others, business slows significantly as the holidays approach.
Consider what the next several months are likely to look like:
These questions can help improve the accuracy of your tax projection and give you a better understanding of how much cash the business may need to reserve.
This is also where Business Advisory services can complement tax planning. Tax decisions should make sense within the larger financial strategy of the business rather than being considered in isolation.
Some of the most important tax planning conversations begin with events that don't initially seem like “tax issues.”
Think about what has changed since January.
Did you:
These events may affect your tax planning strategy.
Your CPA cannot plan around information they do not have, which is why proactive communication throughout the year can be so valuable.
Tax preparation and tax planning serve two very different purposes.
Tax preparation looks backward. It reports financial activity that has already occurred.
Tax planning looks forward. It evaluates your current position and considers what decisions may still be available.
By the time a tax return is being prepared, the year has already ended. Many transactions cannot simply be recreated or changed because a different outcome would have been preferable.
September, on the other hand, still provides time.
That is why we encourage business owners to think about taxes before December rather than treating tax planning as something that happens only during tax season.
There is no universal September tax strategy that works for every business.
The right approach depends on factors such as your business structure, profitability, compensation, estimated payments, cash flow, future plans, and personal tax situation.
But one principle applies broadly:
The earlier you understand your potential tax position, the more time you have to make informed decisions.
For Idaho business owners, September can be one of the most useful planning points of the year. You have enough financial data to see where the year is heading while still having a full quarter available to evaluate potential strategies.
That is a much stronger position than discovering a tax problem after the year has already closed.
If your business has experienced significant growth, changing profitability, or other major financial changes this year, now is the time to evaluate your tax position—not after December 31.
LeBeau & Associates, CPAs helps business owners throughout Boise, Meridian, Eagle, and the Treasure Valley take a proactive approach to tax planning and business strategy.
Schedule a Strategic Tax Planning Consultation to review where your business stands and begin preparing for year-end.
Call LeBeau & Associates, CPAs at (208) 898-9900 to learn more about proactive tax planning for your business.
