Year-End Tax Planning: 7 Questions to Ask Your CPA Before Thanksgiving

Thanksgiving marks the beginning of the final stretch of the year.

For business owners, it should also mark an important financial checkpoint.

There is still time to review financial performance, evaluate tax exposure, address cash flow, and make strategic decisions before December 31. Waiting until tax season means many of those opportunities have already passed.

Before the holiday calendar takes over, schedule a conversation with your CPA and ask these seven questions.

1. What Is My Projected Tax Liability for the Year?

A business owner should have an estimate of their tax position before the year ends.

Review current financial results, projected year-end income, estimated payments already made, and any significant changes that could affect your tax liability.

The objective is simple: know what may be coming and have time to prepare for it.

2. Is My Business Actually More Profitable Than Last Year?

Revenue growth and profit growth are not the same thing.

Compare year-to-date revenue, gross margin, operating expenses, and net profit with the prior year.

If sales increased but profit did not, determine where the difference occurred.

Higher payroll, increased vendor costs, pricing issues, overhead, or declining margins may be affecting performance.

Understanding those changes now gives you an opportunity to address them before entering another year.

3. Are There Tax Planning Opportunities We Should Consider Before December 31?

Tax planning should happen before the tax year closes.

Depending on your business and financial position, there may be decisions involving equipment purchases, retirement contributions, timing of income or expenses, depreciation, compensation, or other strategies worth evaluating.

The important word is evaluate.

A purchase should make financial sense for the business, not simply be made to generate a deduction.

Your CPA can help determine which strategies are appropriate based on your specific circumstances.

4. What Does My Cash Flow Look Like Through the First Quarter?

Profitability does not guarantee healthy cash flow.

Look beyond the current bank balance and consider upcoming:

• Payroll

• Tax payments

• Debt obligations

• Vendor payments

• Insurance renewals

• Planned purchases

• Seasonal changes in revenue

• Other significant expenses

A forward-looking cash flow forecast can identify potential pressure before it becomes a problem.

5. Do I Have Too Much Money Sitting in Accounts Receivable?

Revenue on an income statement does not necessarily mean cash in the bank.

Review outstanding invoices and determine how much money is currently owed to the business.

Look specifically at aging receivables.

If customers are consistently paying late, year-end is a good time to strengthen collection procedures, payment terms, invoicing processes, or follow-up systems.

6. Should We Make Any Major Purchases or Investments Before Year-End?

Equipment, technology, vehicles, inventory, hiring, and other investments can affect taxes, cash flow, and future profitability.

Before making a year-end purchase, evaluate more than the potential tax benefit.

Ask:

• Does the business need it?

• Can cash flow support it?

• Will financing be required?

• What return should the investment generate?

• How will it affect next year's operating costs?

• Are there relevant tax implications?

Your CPA should help you evaluate the financial impact before the money is spent.

7. What Should We Do Differently Next Year?

Year-end planning should not stop with taxes.

Use the financial information from the current year to establish priorities for the next one.

That may include improving margins, building cash reserves, adjusting pricing, reducing unnecessary expenses, improving collections, creating a budget, forecasting cash flow, or establishing more consistent financial reviews.

Your financial statements should provide more than a record of the past.

They should help determine what happens next.

Don't Wait Until Tax Season to Talk to Your CPA

By the time a tax return is being prepared, most of the financial decisions affecting that year have already been made.

Year-round tax planning and financial advisory give business owners an opportunity to make decisions while there is still time to influence the outcome.

At Ciaccia CPA, we work with business owners throughout the year to connect accounting, tax planning, financial performance, and business strategy.

Before Thanksgiving turns into December 31, schedule a year-end financial conversation with Ciaccia CPA. Let's review where your business stands, what should be addressed before year-end, and what you can do now to enter the new year financially prepared.