Year-End Tax Deductions: Bookkeeping FAQs for Small Business Owners

Year-end is the perfect time to review your bookkeeping and make sure you are not missing deductions that could reduce your tax bill. Clean, accurate records are the key to capturing every eligible expense before filing season begins.

Q: What deductions should I check before year-end?
A: Review business mileage, software subscriptions, supplies, equipment purchases, contractor payments, and prepaid expenses for next year. These deductions only count if they are properly recorded in your bookkeeping system.

Q: Does the timing of expenses matter?
A: Yes. Cash-basis businesses must actually pay the expense before December 31 for it to count this year. Accrual-basis businesses must document the expense as incurred before year-end.

Q: What bookkeeping tasks support year-end tax savings?
A: Reconcile bank accounts, enter all outstanding receipts, update vendor details for 1099s, and review expense categories. Accurate books prevent missed deductions and reduce filing errors.

Example:
A retailer in Herndon reviewed their books in early December and uncovered several unentered invoices for packaging and shipping. Once recorded, those legitimate expenses lowered their taxable income and improved the accuracy of their year-end reports.