The calendar flips to December, and suddenly everyone’s talking about tax planning. You’ve probably heard the standard advice a hundred times: keep better records, track your mileage, save those receipts.
But what about the strategies that actually move the needle on your business tax bill? The ones that fly under the radar while potentially saving you serious money when income tax filing time arrives?
New Jersey business owners face a unique challenge. You’re dealing with both federal obligations and state-level complications that businesses in other states don’t worry about.
While you’re focused on closing deals and managing year-end operations, these five often-missed opportunities are sitting right in front of you.
Tax Year End Strategies In NJ
Write Off That Bad Debt You’ve Been Carrying
Remember that client who never paid their invoice from eight months ago? The one where you’ve given up hope but kept the receivable on your books because writing it off felt like admitting defeat? December is when you stop being optimistic and start being strategic.
Bad debt deductions let you write off money you’re legitimately owed but will never collect. The catch is timing and documentation. You need to show you already included that income in a prior year’s earnings and that you’ve made reasonable collection efforts. Sending one email doesn’t count. Having a paper trail of multiple collection attempts, final notices, and maybe even a terminated relationship does.
This deduction reduces your business tax directly against the income you reported when you thought you’d actually get paid. Business owners often wait years to write off uncollectible accounts because it feels like giving up. But from an income tax perspective, claiming the deduction now makes more sense than letting it sit there indefinitely while you pay taxes on money you’ll never see.
Bonus Your Employees (and Yourself) Strategically
Year-end bonuses aren’t just about keeping your team happy. They’re deductible business expenses that reduce your taxable income if structured correctly. The key word there is “structured.”
For your employees, bonuses paid before December 31st get deducted on this year’s business tax return, even if the checks don’t clear until January. This timing can make a real difference if you’re looking at higher-than-expected profits and want to reduce your income tax liability.
If you’re operating as an S corporation, your own compensation gets trickier. The IRS expects you to pay yourself a reasonable salary before taking distributions. Business owners who’ve been light on salary and heavy on distributions all year can sometimes adjust this in December by issuing themselves a bonus to bring their W-2 compensation closer to reasonable levels. This move protects you during audits and ensures your business tax treatment holds up under scrutiny.
Cash-basis businesses have an advantage here. Accrue the bonus in December, pay it by March 15th, and you can still deduct it on the current year’s return. Just make sure the payment actually happens within that window.
Evaluate Your Inventory Like You Actually Care
Inventory adjustments bore everyone to tears. Nobody got into business because they love counting stock and adjusting cost of goods sold. But if you’re selling physical products, your year-end inventory count directly affects your taxable income.
Here’s what business owners miss: damaged inventory, obsolete products, and items you’ll realistically never sell still count as assets unless you formally write them down. That box of promotional materials with last year’s branding? The product line you’ve discontinued but still have sitting in the back? These items are inflating your inventory value and your business tax burden.
Taking a physical inventory count before December 31st lets you identify shrinkage, damage, and obsolescence. Writing these down reduces your closing inventory, which increases your cost of goods sold, which decreases your taxable income. It’s accounting, so it sounds complicated, but the math is straightforward: lower inventory value equals lower income tax when filing time comes around.
New Jersey business owners with warehouses or retail spaces should physically walk their inventory rather than trusting whatever their software says. Systems lie. Spreadsheets don’t catch the water damage from that leak last March or the items customers have been stealing all year.
Bunch Your Charitable Contributions
You donate to local causes throughout the year. A little to the food bank, something for the youth sports league, a check to your college alumni fund. These donations are deductible, but scattering them across twelve months means missing a strategic opportunity.
Bunching contributions means making two years’ worth of charitable donations in one calendar year, then taking the standard deduction the following year. This strategy works brilliantly when your business had a particularly profitable year and you want to offset that income.
For business owners, this gets even more interesting with qualified charitable distributions if you’re over 70½ and have an IRA. You can donate directly from your IRA to charity, satisfy your required minimum distribution, and keep that money out of your taxable income entirely. This doesn’t help with business tax directly, but it reduces your overall income tax filing burden.
Consider donor-advised funds for this strategy. Contribute a large amount in December, get the full deduction on this year’s return, then distribute the funds to actual charities over the next several years. You control the timing of the deduction while still supporting causes gradually.
Clean Up Your Books Before They’re Set in Stone
Most business owners treat their books like they’re finished once December ends. But here’s the reality: until you file your return, nothing’s actually final. January and February offer a window to review your books with fresh eyes and catch mistakes that’ll cost you money.
Miscategorized expenses are everywhere. That equipment repair that got coded as a supply purchase. The professional development course that ended up in entertainment. These miscategorizations might seem minor, but they affect your income tax calculations and sometimes trigger unnecessary red flags with the IRS.
Business owners who review their books in early January, before income tax filing season really heats up, spot errors while they can still fix them cleanly. Your accountant will thank you, and your business tax return will actually reflect reality instead of whatever got entered during a busy month when someone was just trying to reconcile the credit card statement quickly.
Making These Strategies Actually Work
Here’s the truth about year-end tax planning: knowing these strategies doesn’t help if you don’t actually implement them. Reading this blog post in late December and thinking “I should probably do something” leads to the same result as not reading it at all.
Pick one or two strategies that genuinely apply to your situation. You probably don’t need all five. Focus on the ones where you can see obvious money sitting on the table, then execute before the calendar changes. Your future self, writing that business tax check next spring, will appreciate the effort.
