As 2025 winds down, here are some ideas to help you prepare for filing your upcoming tax return:
Informational returns
Identify all vendors who require a 1099-MISC and a 1099-NEC. Obtain tax identification numbers (TINs) for each of these vendors if you have not already done so.
Form 1099-K planning
Consider labeling business and personal accounts separately on platforms like Venmo and PayPal. Mixing funds could cause reporting errors, especially as platforms enhance their 1099-K tracking capabilities.
Be prepared for overtime and tip headaches
While 2025 is a transition year before the tax-free tip and overtime income must be reported on reformatted W-2s and 1099s, your employees still need to prove their deduction! So be prepared to track both tips and overtime pay from your payroll system.
Shifting income and expenses
Consider accelerating income, or deferring earnings, based on profit projections.
Separation of expenses
Review business accounts to ensure personal expenses are not present. Reimburse the business for any expenses discovered during this review.
Create expense reports
Having expense reports with supporting invoices and business credit card statements with corresponding invoices will help substantiate your deductions in the event of an audit.
Fixed asset planning
Section 179 or bonus depreciation expensing versus traditional depreciation is a great planning tool. If using Section 179, the qualified assets must be placed in service prior to year-end.
Leveraging business meals
Business meals with clients or customers are 50% deductible. Retain the necessary receipts and documentation that note when the meal took place, who attended and the business purpose on each receipt.
Charitable opportunities
Consider any last-minute deductible charitable giving, including long-term capital gain stocks.
Cell phone record review
Review your telephone records for qualified business use. While expensing a single landline out of a home office can be difficult to deduct, cell phone use can be documented and deducted for business purposes.
Inventory review
Review your inventory for proper counts and remove obsolete or worthless products. Keep track of the obsolete and worthless amounts for a potential deduction.
Review your receivables
Focus on collection activities and review your uncollectible accounts for possible write-offs.
Review your estimated tax payments
Recap your year-to-date estimated tax payments and compare them to your forecast of full-year earnings. Then make your 2025 4th quarter estimated tax payment by January 15, 2026.
