Most business owners treat Q4 like the finish line. Smart ones treat it like the starting gate.

The year isn't over yet. You still have 79 days. That's enough time to implement strategies that could reduce your 2025 tax bill by thousands and build the foundation for even better results in 2026.

The difference between business owners who scramble in April and those who file confidently in February comes down to what happens in these final months. Q4 isn't about surviving until December 31st. It's about strategic moves that compound: 

• Retirement contributions that reduce this year's taxes while building long-term wealth 
• Entity structure decisions that save money for years to come 
• Systems that make next year's filing effortless

Here are the high-impact Q4 tax moves you can still make before year-end, organized by what matters most for your business structure and profit level.

For S-Corporation Owners

Optimize Your Salary vs. Distribution Mix

The IRS requires S-Corp owners to pay themselves a “reasonable salary,” but many business owners miss the mark. Pay yourself too little and you invite audit risk. Pay yourself too much and you're losing money unnecessarily to payroll taxes.

There’s more at stake than just payroll tax: your Qualified Business Income (QBI) deduction is also impacted by how you pay yourself. Paying too much salary reduces your potential 20% QBI deduction — a missed opportunity for significant tax savings.

If you’re underpaying yourself, now is the time to adjust to meet IRS standards and protect yourself from scrutiny.

If you’re overpaying, Q4 is your window to course correct going forward and lock in a more strategic approach for 2026.

• Setup time: 1–2 hours with your CPA to review benchmarks and execute payroll changes
• Bonus: Optimized salary improves your QBI deduction and reduces payroll tax exposure

>> Note: We provide salary optimization in Q4 for our S-Corp clients as a standard at Better Bookkeeping. Want to learn more? Reach out today to see how we can help you optimize for 2025

Document Your Reasonable Compensation Methodology

If the IRS ever questions your salary level, you'll need documentation showing how you determined it was reasonable. This isn't urgent, but Q4 is a good time to create this record while the year's financial data is fresh.

Gather industry salary surveys from sources like Bureau of Labor Statistics or industry associations, document your responsibilities and time commitment, and create a memo explaining your compensation decision. Store this with your tax records.

• Setup time: 1-2 hours. 
• Insurance value: Protects against potential IRS challenges that could reclassify distributions as wages, triggering back payroll taxes plus penalties.

Maximize Retirement Plan Contributions

For 2025, you have several options depending on when you want to establish the plan and how much you want to contribute:

Solo 401(k): Must be established by December 31st. You can contribute up to $23,500 as the employee (by December 31st) plus up to 25% of your W-2 compensation as the employer (by your tax filing deadline with extensions). Total contribution limit: $70,000 for 2025 ($77,500 if you're 50 or older).

SEP IRA: The most flexible option for last-minute planning. Can be established and funded up until your tax filing deadline (including extensions). Allows contributions up to 25% of W-2 compensation or 20% of net self-employment income, with a maximum of $70,000 for 2025.

• Setup time: 2-3 hours for Solo 401(k) or SEP IRA. Every dollar contributed reduces your taxable income dollar-for-dollar, making this one of the highest-return tax moves available.

For All Business Owners

Strategic Equipment Purchases (Section 179)

Section 179 lets you immediately deduct up to $1,220,000 in qualifying equipment and software purchases for 2025. But the question isn't whether you can take the deduction — it's whether you should make the purchase.

Purchase makes sense if:

• The equipment increases productivity or revenue
• You planned to buy in Q1 2026 anyway
• You have cash reserves without creating cash flow strain

Avoid purchases if:

• The equipment isn't needed for operations
• You must finance at unfavorable terms
• The purchase creates cash flow problems

You "return on hassle" matters here. A $50,000 equipment purchase you were planning anyway takes 30 minutes to accelerate and could save $12,000-$18,000 in taxes (depending on your bracket). A $50,000 purchase you're making only for the tax deduction rarely makes financial sense.

Consider Income and Expense Timing

Two strategies worth evaluating in Q4:

Accelerate deductible expenses into 2025 if you want to reduce this year's tax bill. Prepay expenses you'd incur in Q1 2026 anyway: 

• Insurance premiums 
• Professional subscriptions 
• Software renewals
• Office supplies 
• Professional development 

For cash-basis taxpayers, the expense is deductible when paid, not when incurred.

Defer income into 2026 if you expect to be in a lower tax bracket next year or want to spread income more evenly. Delay December invoicing until January, postpone year-end bonuses to January, defer discretionary consulting income.

• Setup time: 1-2 hours to review upcoming expenses and revenue timing with your bookkeeper or CPA. 
• Potential impact: $2,000-$5,000 in tax savings for every $10,000-$25,000 in expenses accelerated or income deferred.

Review Estimated Tax Payments

If you've had a strong year and your estimated payments are short, make a Q4 payment before December 31st to avoid underpayment penalties. The safe harbor rules protect you if you've paid either:

• 90% of your 2025 tax liability, or
• 100% of your 2024 tax liability (110% if your 2024 AGI exceeded $150,000)
  
  

• Setup time: 30 minutes to run a tax projection and calculate required payment. Every dollar paid in estimated taxes by December 31st avoids potential underpayment penalties of 7-8% annually.

Entity Structure Planning for 2026

S-Corporation Election

If your 2024 return revealed that an S-Corporation election could save significant money, start the planning process now. The setup work, including payroll systems, reasonable compensation research, and state registrations, takes time.

Begin the analysis in Q4 so you're ready to file Form 2553 early in 2026. This gives you breathing room to implement payroll, establish processes, and start the year right.

• Setup time: 2-3 hours with your CPA to run the cost-benefit analysis and create an implementation timeline.
• Potential savings: $10,000-$25,000 annually for profitable LLCs earning $100,000+ in net profit

>> Wondering if an S-Corp is right for your business? Try out our S-Corp calculator to see how much you could save with this election.

The Foundation That Makes These Moves Work

These Q4 strategies save real money—but they work best when your books are current and you're meeting with your CPA quarterly instead of annually. Without clean financials, you're guessing at retirement contribution amounts. Without quarterly planning, you miss timing opportunities until it's too late.

If you're still catching up from months of unreconciled transactions or don't have systems in place for 2026, read our guide on [building better tax systems](link to Article 3). It covers the three core systems—monthly bookkeeping, quarterly tax planning, and organized documentation—that make these year-end moves possible and turn next year's tax season from chaotic to boring.

The Bottom Line

You have 79 days left in 2025. That's enough time to reduce this year's tax bill and build systems that make 2026 completely different.

The strategies in this checklist aren't complicated. Maximize retirement contributions. Time expenses strategically. Document your decisions. Set up monthly bookkeeping. Most of these moves take a few hours and save thousands.

The difference between business owners who dread tax season and those who navigate it with confidence isn't luck or sophisticated planning. It's doing the straightforward work that compounds: tracking expenses when they happen, reconciling accounts monthly, meeting with your CPA quarterly, making strategic moves before December 31st.

Start with the highest-impact moves for your situation: 

• S-Corp owners: review your compensation strategy and maximize retirement contributions. 
• All business owners: accelerate planned expenses and implement monthly bookkeeping. 
• Everyone: schedule your Q1 2026 planning meeting now, while you're thinking about it.

Ready to implement a year-end tax strategy that actually works? We help entrepreneurs build the systems that turn tax season from chaos into confidence. Schedule a consultation to create a customized Q4 plan and set up the processes that make 2026 your best financial year yet.