Most S-corp tax savings expire on December 31. After that, you're not planning — you're just reporting what happened. Here's what to review in the fourth quarter, every year.
1. Reasonable compensation check
The IRS expects S-corp owners who work in the business to take a reasonable salary before distributions. Too low invites payroll tax problems; too high wastes payroll taxes unnecessarily. Review your salary against your role, hours, and what you'd pay someone else to do the job — and adjust the final payrolls of the year if needed.
2. Distributions and basis
- Confirm you have sufficient basis to take distributions tax-free.
- Check that distributions are proportional if there are multiple shareholders.
- Don't let the operating account run dry to hit a distribution target — cash flow still matters in January.
3. Retirement contributions
- Solo 401(k) employee deferrals need to be set up through payroll before year-end.
- Employer profit-sharing contributions can wait until the filing deadline — but the plan must exist first.
- Compare Solo 401(k) vs. SEP-IRA vs. cash balance plan if profits jumped this year.
4. Timing moves
- Accelerate deductible expenses (equipment, software renewals, bonuses) into December if this was a high-income year.
- Defer invoicing to January if next year's rate will be lower — or do the opposite.
- Review Section 179 and bonus depreciation on any equipment or vehicle purchases.
5. Clean-up items
- Reimburse yourself for business expenses paid personally through an accountable plan — before year-end.
- Confirm health insurance premiums for owners are correctly included in W-2 wages (a very common miss).
- Verify estimated payments made to date and project the final number — no April surprises.
- Collect W-9s from contractors now so January 1099s aren't a scramble.
The pattern: every one of these has a deadline attached to the calendar, not to tax season. That's why tax planning at Lemoti runs all year — the return is just the receipt.