As 2025 starts to wind down, businesses should start gearing up for one of the most important administrative tasks of the year. Before you know it, it will be tax season. Having a year-end tax preparation checklist can streamline the process, reduce stress, and help ensure that all necessary documents are organized and ready for filing.
Whether you run a small start-up or manage a growing enterprise, the right preparation now can save you valuable time, prevent costly mistakes, and help you take advantage of every deduction available. Take a look at our checklist to help you start getting prepared!
Gather and Organize All Financial Records
The foundation of year-end tax preparation is having complete, accurate financial documentation. Start by collecting:
- Income statements (profit and loss statements) for the year
- Balance sheets showing assets, liabilities, and equity
- General ledger reports from your accounting software
- Receipts for business expenses, including digital copies if stored electronically
- Bank statements and credit card statements for all business accounts
- Loan documents showing principal and interest payments
Organizing records into clearly labeled folders, whether physical or digital, will make it easier to provide everything to your accountant or tax preparer quickly. Some of these things, like your income statement or balance sheet, you won’t officially use until year-end information is updated, but you can start checking them now to have a good idea of where you stand.
Review and Reconcile Accounts
Before handing off financial records, confirm that your books match your bank and credit card statements. Reconciling accounts ensures that no transactions are missing or incorrectly recorded. Steps to follow include:
- Match each transaction in your accounting software to your bank and credit card records.
- Investigate and resolve discrepancies, such as duplicate entries or missing deposits.
- Ensure all cash transactions are recorded and backed by receipts.
This process helps prevent errors that could trigger an IRS notice or delay your tax filings. Many businesses do this monthly or work with a CPA to keep it ongoing. However, if you don’t have a process, start now, and then you only have the last few months of the year to reconcile as you finish out the year.
Verify Employee and Contractor Information
If you have employees or hire independent contractors, now is the time to make sure all information is correct for year-end reporting:
- Confirm Social Security numbers and mailing addresses for employees (needed for W-2s).
- Verify taxpayer identification numbers (TINs) for contractors (needed for 1099-NEC forms).
- Update payroll records to reflect accurate wages, tips, and withheld taxes.
- Review benefit contributions, including retirement plans and health insurance premiums.
Making corrections before forms are issued avoids the hassle of reprinting or reissuing corrected tax documents later. Starting this process now will help ensure all of the data is ready when it comes time to create your tax forms.
Review Business Expenses for Deduction Opportunities
Many businesses miss out on valuable tax deductions simply because expenses were not tracked or categorized correctly. Before year-end:
- Categorize expenses properly in your accounting software.
- Include all eligible home office deductions, if applicable.
- Review travel, meals, and entertainment expenses to ensure they meet IRS guidelines.
- Check for equipment purchases that may qualify for Section 179 expense or bonus depreciation.
- Ensure all charitable contributions are documented with receipts or acknowledgment letters.
By identifying deductions now, you’ll be better positioned to maximize savings. You might also be able to identify a need that could be a deduction and spend down some income at times.
Assess Inventory and Asset Records
If your business carries inventory, a year-end count is essential for accurate reporting.
- Conduct a physical inventory count and compare it to your records.
- Investigate discrepancies and make necessary adjustments.
- Write off obsolete or damaged items, documenting them for tax purposes.
For fixed assets, review depreciation schedules and confirm that all acquisitions and disposals for the year are recorded accurately.
Plan for Quarterly and Year-End Tax Payments
Businesses often need to make estimated quarterly tax payments. As you prepare for year-end:
- Review your 2025 income and tax liability to determine if an additional estimated payment is needed.
- Avoid penalties by ensuring timely submission of fourth-quarter estimated taxes (due January 15, 2026, for most businesses).
- Set aside funds for any year-end balance due.
If you’ve had a particularly profitable year, consult with a tax professional about possible strategies to reduce your taxable income before December 31.
Prepare Year-End Payroll Filings
Payroll compliance is a major part of business tax preparation. By January 31, 2026, you’ll need to:
- File W-2 forms for employees with the Social Security Administration.
- Issue 1099-NEC forms to contractors paid $600 or more during 2025.
- Submit year-end payroll tax filings, including federal Form 940 (FUTA) and state-specific forms.
Confirm deadlines for your state to avoid late penalties.
Review Retirement Plan Contributions
Retirement plans not only help employees save for the future but can also reduce your business’s taxable income. Before year-end:
- Confirm all employee and employer contributions are made by the required deadlines.
- Ensure contributions do not exceed IRS limits for 2025.
- Discuss with your financial advisor whether making an additional employer contribution could be beneficial for both the business and employees.
Consult on Tax Law Changes for 2025
Tax laws can change from year to year, and staying informed helps ensure compliance and optimal planning. This year, you may need to consider:
- New IRS deduction limits or phase-outs.
- Changes to bonus depreciation percentages.
- Updated reporting requirements for certain business expenses.
A year-end review with a tax professional can help identify strategies tailored to your specific business situation.
Organize Supporting Documentation
If the IRS requests proof for a deduction or expense, having organized documentation will save you time and stress. Keep copies of:
- Receipts for all major purchases.
- Mileage logs for business travel.
- Contracts, invoices, and proof of payment for services.
- Bank records supporting all transactions.
Consider scanning and storing documents in a secure, cloud-based system for easy access.
Get Ready for Year-End Tax Preparation with Katherine M. Johnson, CPA
Taking the time to follow a thorough year-end tax preparation checklist can help your business approach 2025 year-end filings with confidence. When you are proactive with financial records, reconcile accounts, verify employee and contractor data, and review deductions before the new year begins, you set your business up for a smoother, less stressful tax season.
While this checklist covers the essentials, every business has unique circumstances. For personalized guidance, Katherine M. Johnson, CPA, offers professional year-end tax preparation services tailored to your business needs, helping you file on time and maximize your available deductions. Schedule with us today.
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