The final months of the year are when tax planning becomes much more valuable. By September, most business owners already have enough year-to-date information to see whether revenue, expenses, payroll, investments, and estimated tax payments are tracking as expected — making this an ideal time to identify issues before year-end, while there may still be time to act.
For business owners in Los Angeles and throughout California, a year-end review should go beyond asking "How much tax will I owe?" The better question is: are the books accurate, are tax payments on track, and are there decisions we should make before December 31? Below are seven areas to review now.
1. Start With Clean, Current Books
Tax planning is only as reliable as the accounting behind it. Before projecting year-end income, businesses should make sure their bookkeeping reflects what has actually happened during the year. A practical cleanup should include reconciling bank and credit card accounts, reviewing accounts receivable and payable, confirming revenue has been recorded correctly, reviewing expenses for missing or duplicate entries, updating fixed-asset records, confirming purchases and disposals of equipment, reviewing owner contributions and distributions, identifying personal transactions recorded as business activity, and organizing supporting documentation for significant expenses.
If the books are incomplete, a tax projection can produce the wrong answer even if the tax calculation itself is correct. For that reason, bookkeeping cleanup and tax planning should usually happen together. See Bookkeeping Cleanup Before Year-End 2026.
2. Recalculate 2026 Estimated Taxes
Federal income taxes operate on a pay-as-you-go system. Business owners and other taxpayers whose income is not fully covered by withholding may need to make estimated tax payments during the year. The third federal estimated tax deadline for calendar-year individuals was September 15, 2026. The next general payment deadline is January 15, 2027.
If income has changed significantly since earlier estimates were prepared, the remaining payment should not simply be based on the previous quarter. A year-to-date projection should consider business profit or loss, W-2 withholding, self-employment income, interest and dividends, capital gains and losses, rental activity, available deductions and credits, and estimated payments already made. The IRS generally requires individuals to make estimated payments when they expect to owe at least $1,000 after withholding and credits, subject to the applicable safe-harbor rules. If the September payment was missed or understated, reviewing the situation sooner can help determine the appropriate next step. See Quarterly Estimated Taxes 2026 and Missed the September 15 Estimated Tax Deadline?.
3. Review Retirement Contributions Before Year-End
Retirement planning can be both a long-term financial decision and an important part of year-end tax planning. For 2026, the IRS increased the employee contribution limit for most 401(k), 403(b), governmental 457 plans, and the federal Thrift Savings Plan to $24,500. The IRA contribution limit increased to $7,500 for 2026. Additional catch-up contribution rules may apply depending on age and plan type.
For business owners, the right strategy depends on the structure of the business, compensation, employees, and the retirement plan already in place — options may include 401(k) plans, Solo 401(k) plans, SEP IRAs, SIMPLE IRAs, and Traditional or Roth IRAs when eligible. The important point is not simply to maximize a contribution, but to review the available options early enough to determine what fits the business and the owner's overall tax plan.
4. Review California Pass-Through Entity Tax Planning
California's Pass-Through Entity Elective Tax (PTE tax) remains an important planning area for eligible partnerships and S corporations. For taxable years beginning in 2026, California continues to allow qualified entities to elect into the PTE tax regime — the elective tax is generally calculated at 9.3% of qualified net income.
For 2026 through 2030, California changed the consequences of missing or underpaying the June 15 first payment. A qualified entity may still be able to make the election, but the credit available to qualified taxpayers can be reduced when the required first payment was not made properly. Because the benefit depends on the entity's facts, owner eligibility, taxable income, and payment history, PTE planning should be reviewed as part of the year-end projection rather than treated as an automatic election. See California PTE Elective Tax 2026.
5. Review Major Purchases and Fixed Assets
Before making a year-end equipment or vehicle purchase solely for a tax deduction, business owners should first determine whether the purchase makes business sense. For assets already acquired during 2026, the accounting records should clearly identify purchase date, cost, business-use percentage, financing if applicable, disposal of any replaced asset, and whether the item should be capitalized or expensed.
Depreciation treatment can differ depending on the asset and the business's federal and California tax situation — this is particularly important in California because state depreciation rules do not always conform to federal treatment. A fixed-asset review before year-end can prevent missing information during tax preparation and allow the tax team to evaluate the available treatment while there is still time to plan. See Fixed Asset Review & California Depreciation Planning 2026.
6. Document Deductions Before the Year Closes
A legitimate business deduction is much easier to support when the documentation is collected as the year progresses rather than months later. Areas that commonly require additional support include business mileage, travel, meals, home-office expenses, professional fees, insurance, business use of personal assets, charitable contributions, and large or unusual business expenses. This does not mean spending money simply to create deductions — the objective is to make sure valid expenses are properly recorded and supported, and that personal and business activity are clearly separated.
7. Shift From Tax Preparation to Tax Planning
There is an important difference between preparing a tax return and planning for one. Tax preparation looks backward. Tax planning uses the information available today to decide what should happen next. A useful year-end planning meeting should answer questions such as: What is the projected 2026 taxable income? Are estimated tax payments sufficient? Are there bookkeeping issues that need to be corrected? Are there major gains, losses, or transactions that need special treatment? Should withholding be adjusted? Are retirement contributions on track? Does California PTE tax planning need to be revisited? Are there business decisions that should be completed before year-end? What information will the tax team need before filing season? The earlier these questions are addressed, the more useful the answers can be.
A Practical September-to-December Checklist
| Period | Focus |
|---|---|
| September / Early Q4 | Bring bookkeeping current; review YTD profit; confirm estimated payments made; identify major transactions; begin the year-end projection |
| October–November | Correct accounting issues; review payroll and withholding; evaluate retirement contributions; review fixed assets; revisit California PTE tax planning |
| December | Complete time-sensitive actions; confirm documentation; finalize the projected tax position; prepare for the January 15 payment; organize records for filing |
The Main Goal: Fewer Surprises at Tax Time
A strong year-end process should create clarity before the tax return is prepared. For many businesses, the most valuable outcome is not simply a lower tax bill — it is knowing where the business stands, what tax obligations are expected, which records are still missing, and which decisions can still be made before the year closes. That is why September and the beginning of Q4 are an important planning window. See 2026 Year-End Tax Planning Timeline for California Business Owners and Tax Planning in Los Angeles.
Compliance Resources and Tools
- IRS — Estimated Taxes (accessed September 22, 2026).
- IRS — Publication 505 (2026), Tax Withholding and Estimated Tax (accessed September 22, 2026).
- IRS — 401(k) limit increases to $24,500 for 2026; IRA limit increases to $7,500 (accessed September 22, 2026).
- IRS — Retirement Plan Contribution Limits (accessed September 22, 2026).
- California FTB — Pass-Through Entity Elective Tax (accessed September 22, 2026).
- California FTB — 2026 Form 3893 Instructions (accessed September 22, 2026).
- September and early Q4 give business owners enough year-to-date information to catch issues before year-end.
- Tax projections are only as reliable as the bookkeeping behind them — cleanup and planning should happen together.
- The next federal estimated tax payment is generally due January 15, 2027, and should be recalculated, not repeated.
- 2026 retirement contribution limits increased to $24,500 (401(k)/403(b)/457/TSP) and $7,500 (IRA).
- California's PTE elective tax remains at 9.3% of qualified net income, but June 15 payment history can reduce the available credit.
- Fixed-asset and deduction documentation collected during the year is far easier to support than documentation gathered later.
- Tax planning looks forward; tax preparation looks backward — the earlier planning questions are addressed, the more useful the answers.
References
- Internal Revenue Service. Estimated Taxes. irs.gov (accessed September 22, 2026).
- Internal Revenue Service. Publication 505 (2026), Tax Withholding and Estimated Tax. irs.gov/publications/p505 (accessed September 22, 2026).
- Internal Revenue Service. 401(k) limit increases to $24,500 for 2026; IRA limit increases to $7,500. irs.gov (accessed September 22, 2026).
- California Franchise Tax Board. Pass-Through Entity Elective Tax. ftb.ca.gov (accessed September 22, 2026).
The information contained in this publication is provided for educational and general informational purposes only. It does not constitute tax advice, accounting advice, legal advice, or any other form of professional advice and does not create a client-professional relationship.
The content reflects tax law and regulations applicable on the date of publication only and is subject to change without notice. Examples and illustrations are hypothetical and do not represent any specific taxpayer situation. Past results or referenced positions do not guarantee future outcomes.
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