Ways to Potentially Lower Taxable Income

Lowering taxable income usually starts with planning before year-end. Common strategies may include retirement contributions, HSA contributions if eligible, tracking deductible expenses, reviewing credits and deductions, and timing certain income or expenses when appropriate.

For business owners, clean bookkeeping is often one of the biggest tax planning tools because missed expenses can lead to overstated income. For individuals, the right strategy depends on filing status, income level, deductions, credits, and whether retirement or health savings options are available.

• Review retirement contribution opportunities.
• Track deductions and credits you may qualify for.
• Keep support for business expenses, charitable contributions, and tax documents.
• Plan before year-end instead of waiting until filing season.

2025/2026 Tax Law Updates to Watch

Recent federal tax law changes may affect deductions, credits, withholding, planning, and filing outcomes for individuals and business owners. The One Big Beautiful Bill Act, signed into law on July 4, 2025, made significant changes to federal taxes, credits, and deductions.

Some notable areas to watch include updated standard deduction amounts, new or enhanced deductions for certain workers and seniors, retirement contribution limits, and business-related tax provisions. Because eligibility rules and phaseouts can be specific, these changes should be reviewed based on your facts.

• Review updated standard deduction amounts for 2025 and 2026.
• Check whether new deductions for tips, overtime, seniors, or auto loan interest apply.
• Review retirement contribution limits and planning opportunities.
• Business owners should review entity, payroll, depreciation, and compliance impacts where relevant.

When Should You Consider Tax Planning?

Tax planning is most useful before a major event happens or before the year closes. If your income, business activity, investments, or filing situation changes, waiting until tax season can limit your options.

Planning does not always mean using complicated strategies. Often, it means reviewing estimated taxes, withholding, entity structure, retirement contributions, deductions, credits, and recordkeeping while there is still time to act.

• You started a business, side hustle, or freelance work.
• Your income increased significantly or became less predictable.
• You sold stock, crypto, real estate, or other investments.
• You moved states, got married, had a child, or bought a home.
• You received a large tax bill, refund surprise, or IRS/state notice.
• Your business hired workers, paid contractors, or expanded into new states.

What New Business Owners Should Track

New business owners should start tracking income, expenses, bank activity, receipts, mileage, contractor payments, sales tax activity, and entity-related documents as early as possible. Waiting until tax season can make cleanup harder and may cause deductions or compliance items to be missed.

A simple accounting system, separate business bank account, and consistent monthly review process can make tax filing, estimated tax planning, and business decisions much easier.

• Track gross income and business expenses separately from personal activity.
• Keep receipts, invoices, bank statements, and vendor records.
• Monitor contractor payments that may require 1099 reporting.
• Review sales tax and state compliance requirements if selling taxable goods or services.

Understanding Estimated Taxes

Estimated taxes are commonly relevant for self-employed individuals, business owners, partners, S corporation shareholders, investors, and others who receive income without enough withholding. The goal is to pay tax throughout the year instead of waiting until the return is filed.

Estimated tax planning usually involves projecting income, deductions, credits, and withholding. If payments are missed or too low, penalties may apply even if the final return is filed on time.

• Review income that is not subject to withholding.
• Estimate taxable income and expected tax for the year.
• Consider quarterly payment due dates.
• Adjust payments as income changes during the year.

How to Organize Records for Tax Season

Good records make tax preparation more accurate and less stressful. The goal is to keep documents organized in a way that supports the numbers reported on the tax return.

For individuals, this may include W-2s, 1099s, investment statements, mortgage interest forms, charitable contribution support, and other tax documents. For businesses, this includes income records, bank statements, receipts, invoices, payroll records, contractor information, and bookkeeping reports.

• Create separate folders for income, deductions, payments, and notices.
• Reconcile business bank and credit card accounts regularly.
• Keep receipts and support for business expenses.
• Avoid sending sensitive documents through regular email unless specifically instructed.

IRS Notices: What to Do First

If you receive an IRS or state tax notice, do not ignore it. Start by identifying the tax year, notice number, deadline, balance or issue, and what the agency is requesting.

Not every notice means something is wrong, but many notices have response deadlines. Keep the full notice, envelope, and any related tax documents. If you are unsure how to respond, reach out before the deadline.

• Read the notice carefully and note the response deadline.
• Confirm the tax year and issue involved.
• Compare the notice to your filed return and payment records.
• Do not send sensitive documents through unsecured channels unless instructed.

Sales Tax Basics for Business Owners

Sales tax rules depend on what you sell, where you sell, where your customers are located, and whether your products or services are taxable. Business owners should review registration, collection, filing, and recordkeeping requirements before selling taxable goods or services.

In New York, businesses that make taxable sales may need to register as a sales tax vendor and obtain a Certificate of Authority before beginning taxable sales. Multi-state businesses may also need to review nexus rules and filing obligations in other states.

• Determine whether your product or service is taxable.
• Review whether registration is required before sales begin.
• Track taxable and non-taxable sales separately.
• Keep support for exemption certificates and filed sales tax returns.

1099s and Contractor Payments

Businesses that pay independent contractors may need to collect Form W-9 information and issue annual information returns, such as Form 1099-NEC, when filing requirements are met.

Good contractor records help avoid year-end scrambling. Before paying a contractor, businesses should collect the correct legal name, tax identification number, address, and payment details.

• Collect Form W-9 before paying contractors.
• Track payments by vendor throughout the year.
• Review whether payments meet 1099 filing thresholds.
• Keep copies of filed forms and vendor support.

Retirement and HSA Planning Basics

Retirement accounts and health savings accounts can be important planning tools because they may offer tax advantages when used properly. Contribution limits, eligibility rules, and deduction treatment can change from year to year.

Before contributing, review the current limits and whether the account type fits your tax situation. Business owners may also have additional retirement plan options depending on the structure and number of employees.

• Review annual IRA and retirement plan contribution limits.
• Confirm whether you are eligible for deductible IRA contributions or HSA contributions.
• Consider employer-sponsored retirement plans when available.
• Coordinate retirement planning with your broader tax strategy.

Individual Tax Document Checklist

Gathering documents early can make tax preparation smoother and reduce delays. The exact documents needed depend on your income sources, deductions, credits, investments, state filings, and life changes during the year.

• Personal information: legal name, current address, date of birth, Social Security numbers or ITINs for taxpayer, spouse, and dependents.
• Prior-year tax return, if you are a new client or had a major filing change.
• Income forms: W-2, 1099-NEC, 1099-MISC, 1099-K, 1099-INT, 1099-DIV, 1099-B, 1099-R, SSA-1099, unemployment forms, and K-1s.
• Investment activity: brokerage statements, stock sales, crypto reports, capital gain/loss summaries, and cost basis details where available.
• Self-employment or side income: income records, expense summaries, mileage logs, home office details, and business bank or platform reports.
• Home and property items: mortgage interest, real estate taxes, rental income/expenses, closing statements, or refinance documents if applicable.
• Deductions and credits: charitable contribution support, medical expenses, education forms, childcare details, student loan interest, and energy credit documents.
• Health-related forms: Form 1095-A for marketplace insurance, HSA Forms 1099-SA and 5498-SA if applicable.
• Tax payments: estimated tax payments, extension payments, withholding records, and prior IRS/state payment confirmations.
• IRS or state notices received during the year.

Business Tax Document Checklist

Business tax preparation is much easier when financial records are complete, reconciled, and organized. The right checklist depends on your entity type, accounting system, payroll activity, contractors, sales tax requirements, and state filings.

• Entity information: legal business name, EIN, address, ownership details, entity type, and any state registration details.
• Prior-year business tax return and any IRS or state notices received.
• Year-end financial reports: profit and loss statement, balance sheet, general ledger, and trial balance if available.
• Bank, credit card, loan, merchant processor, and line of credit statements for the year.
• Payroll reports: year-end payroll summaries, Forms W-2/W-3, payroll tax filings, and owner compensation details.
• Contractor records: Forms W-9, vendor payment totals, 1099 filing support, and contractor agreements if available.
• Sales tax records: filings, payment confirmations, taxable/non-taxable sales support, and exemption certificates.
• Fixed assets: equipment, furniture, vehicles, leasehold improvements, purchase invoices, financing documents, and disposal details.
• Vehicle and travel records: mileage logs, tolls, parking, travel expenses, and business-use documentation.
• Owner activity: contributions, distributions, draws, reimbursements, personal expenses paid by the business, and shareholder/partner loans.
• Bookkeeping cleanup items: uncategorized transactions, unreconciled accounts, duplicate entries, and missing receipts.
• Major contracts, leases, debt agreements, or legal documents that may affect tax reporting.

Choosing a Business Structure

Choosing a business structure is not just about taxes. It can affect compliance, liability considerations, payroll requirements, bookkeeping, state filings, ownership flexibility, and how owners take money out of the business.

Common structures include sole proprietorships, LLCs, S corporations, and C corporations. Each structure has different administrative responsibilities and tax considerations. The right choice depends on your facts, including income level, ownership plans, state rules, business risk, payroll needs, and long-term goals.

• A sole proprietorship may be simple, but it may not provide the structure or flexibility a growing business needs.
• An LLC can provide legal structure and flexibility, while tax treatment depends on elections and ownership.
• An S corporation may provide planning opportunities in the right situation, but it also adds payroll and compliance responsibilities.
• A C corporation may make sense for certain businesses, but double taxation, shareholder planning, and state rules should be reviewed carefully.
• Coordinate entity choice with bookkeeping, taxes, state filings, and long-term business plans.

Bookkeeping Cleanup Checklist

Messy books can create tax issues, missed deductions, and unclear business reporting. A cleanup process helps organize the financial records before tax preparation or ongoing bookkeeping begins.

• Reconcile all business bank and credit card accounts.
• Review uncategorized transactions and duplicate entries.
• Separate personal expenses, owner draws, contributions, and reimbursements.
• Confirm loan balances, credit card balances, and major asset purchases.
• Review accounts receivable, accounts payable, payroll, and sales tax balances if applicable.
• Compare bookkeeping reports to bank statements and tax documents.

Tax Payments and Online Account Setup

Tax payment tools can be confusing because different agencies and tax types use different systems. The right tool depends on whether you are paying federal taxes, New York State taxes, business tax deposits, estimated taxes, or checking account information.

• Use IRS Direct Pay for many individual federal tax payments directly from a bank account.
• Use an IRS Online Account to review federal balances, payment history, notices, and certain account information.
• Use EFTPS for many business federal tax deposits and payments.
• Use NYS Online Services to manage New York tax account access, notices, payments, and filings.
• Keep confirmation numbers and screenshots for any tax payments made online.
• Confirm that the tax year, tax type, and taxpayer information are correct before submitting a payment.

What to Do If You Cannot Afford Your Tax Bill

If you owe tax and cannot pay in full, do not ignore the balance. In many cases, it is still better to file the return on time, pay what you can, and review available payment options rather than delaying the filing entirely.

• File the return or extension on time when possible, even if you cannot pay the full balance immediately.
• Pay as much as you reasonably can to reduce penalties and interest.
• Review whether an IRS payment plan or installment agreement may be available.
• Review New York State payment plan options if you owe New York taxes.
• Keep copies of notices, payment confirmations, and any agency correspondence.
• Ask for help if you are unsure whether the balance is correct or how to respond.

Penalties and interest may continue until the balance is paid, and payment plan approval depends on the taxpayer's specific facts and agency requirements.

Key Tax Deadlines to Know

These are common calendar-year tax deadlines that individuals and business owners often need to keep in mind. Actual deadlines can vary based on weekends, holidays, extensions, fiscal-year entities, disaster relief, and state-specific rules.

• 1/15 — Q4 individual estimated tax payment generally due.
• 1/31 — W-2s and many 1099s generally due to recipients; Form 1099-NEC is generally due to the IRS.
• 3/15 — Partnership and S corporation returns generally due for calendar-year entities; extensions are also generally due.
• 4/15 — Individual returns generally due; C corporation returns generally due for calendar-year corporations; Q1 estimated tax payment generally due; IRA/HSA contribution deadlines generally fall around this date.
• 6/15 — Q2 estimated tax payment generally due.
• 9/15 — Extended partnership and S corporation returns generally due; Q3 estimated tax payment generally due.
• 10/15 — Extended individual returns generally due; extended C corporation returns are often due around this date for calendar-year corporations.
• 12/31 — Common year-end planning deadline for many deductions, income timing, business purchases, retirement planning decisions, and other tax planning items.

Confirm the applicable deadline before filing or making payments, especially if a deadline falls on a weekend or holiday or if a state-specific rule applies.

Multi-State Tax Basics

Multi-state tax issues can come up when an individual moves, works remotely, earns income in more than one state, owns rental property, or operates a business across state lines. State tax rules do not always follow federal rules, and each state may apply its own filing, withholding, nexus, and sourcing rules.

• Moving during the year may create part-year resident filings in more than one state.
• Remote work can create state withholding and filing questions depending on where the employee works and where the employer is located.
• Business activity in another state may create income tax, sales tax, registration, or annual filing obligations.
• Rental property or investment activity in another state may require a nonresident state return.
• State credits may help reduce double taxation, but the rules depend on the states involved.

Multi-state situations should be reviewed early because registrations, withholding, estimated taxes, and filing obligations may be easier to manage before year-end.