TL;DR — Act Before December 31
Year-end tax planning for contractors isn't about filing your return — it's about the moves you make before December 31st that determine how much you owe. Equipment purchases, retirement contributions, S-Corp salary adjustments, bonus payments, and charitable giving all have to happen before year-end to count. This checklist covers 12 things Iowa contractors should do before the calendar flips.
Why December 31 Is the Most Important Day of Your Tax Year
Most contractors treat taxes as something that happens in April. That's a costly mistake. By the time your CPA starts preparing your return, the tax year is over. Every decision that could have reduced your tax liability had to happen before December 31st.
We are Performance Financial CPA, Accounting & Tax — a Des Moines firm specializing in construction contractors across Iowa and the Midwest. We do year-end tax planning sessions with every contractor client in Q4, and those conversations routinely surface $5,000–$25,000 in savings that only exist because we looked before the year closed.
If you haven't had a year-end review with a CPA yet this year, book a Tax Reduction Analysis now — while there's still time to act.
Here are 12 things Iowa contractors should check off before December 31.
1. Review Your S-Corp Salary for the Year
If you operate as an S-Corporation, your W-2 salary and owner distributions need to be in the right ratio before the year closes. If you've had a stronger year than expected, you may need to increase your salary and payroll taxes before December 31 to maintain a defensible "reasonable compensation" position with the IRS.
Conversely, if revenue came in lighter than planned, you may have an opportunity to reduce distributions and capture more income at the lower salary rate. Either way, this decision has to be made before year-end. Our S-Corp optimization service includes mid-year salary reviews for exactly this reason.
2. Accelerate Equipment Purchases Before December 31
Section 179 expensing and bonus depreciation (currently 60% for 2024) allow you to write off the full or partial cost of qualifying equipment in the year of purchase. A truck bought on December 30th gives you the full 2024 deduction. A truck bought on January 2nd doesn't help your 2024 taxes at all.
If you've been thinking about buying a new truck, trailer, skid steer, or any other equipment — and your projected tax liability supports it — December is the time to act. Our team does year-end tax projections for every client to help them decide whether accelerating purchases makes sense based on their specific numbers. See our resource on smart depreciation planning for contractors.
3. Fund Your Retirement Plan Before Year-End (or Before Tax Deadline)
Retirement contributions are one of the most powerful year-end tax tools available. The deadlines vary by plan type:
- SIMPLE IRA: Contributions must be made by December 31 for the current year
- SEP-IRA: Can be funded up to the tax filing deadline (including extensions) — so up to October 15th of the following year for S-Corp filers
- Solo 401(k): The plan must be established by December 31, but contributions can be made until the tax filing deadline
If you don't have a retirement plan, establishing one before December 31 is a year-end move that preserves your contribution options. A maximum SEP-IRA contribution of $69,000 (2024 limit) saves approximately $20,700–$24,150 in federal taxes for a contractor in the 30–35% bracket.
4. Pay Outstanding Vendor Bills and Subcontractor Invoices
On a cash basis, expenses are deductible in the year they're paid. If you have outstanding vendor bills for materials, equipment rentals, or subcontractor work — paying them before December 31 moves those deductions into the current tax year. This is a simple but often overlooked year-end accelerator.
5. Review Accounts Receivable and Write Off Uncollectible Balances
If you have outstanding invoices from customers who are unlikely to pay, writing them off before year-end creates a bad debt deduction (for accrual-basis taxpayers). Review your accounts receivable aging report and identify any balances that have been outstanding for 90+ days with no realistic collection path.
This also applies to any deposits or advance payments made for projects that were never completed. Identify these before year-end and document the write-off properly with your bookkeeper.
6. Make Bonus Payments to Employees Before Year-End
If you're planning to pay year-end bonuses to your crew, paying them before December 31 makes them deductible in the current year. Bonuses are fully deductible as compensation expense for the business and also show your crew that strong years mean something tangible for them — which matters for retention.
Note that S-Corp owners can also take a year-end bonus through payroll, which may be appropriate depending on your salary/distribution balance for the year.
7. Evaluate Prepaying Business Expenses
Some prepaid business expenses can be deducted in the year paid if the benefit period doesn't extend beyond 12 months past the payment date. This includes items like:
- Prepaid insurance premiums
- Software subscriptions paid annually
- Professional dues and licenses renewed in December for the following year
- Advertising commitments paid before year-end
Prepaying these expenses in December can pull forward deductions that would otherwise be claimed in January.
8. Check Your Estimated Tax Payments for Q4
The Q4 estimated tax payment is due January 15th, but it's calculated based on your 2024 income. If your income came in higher than expected this year, you may owe underpayment penalties unless you pay enough by January 15th. If income came in lower, you may have overpaid and should reduce your Q4 payment.
Your CPA should be projecting your full-year tax liability in November or December to give you an accurate Q4 estimate. This is a core part of our year-end process at Performance Financial. See our article on Q4 tax preparation for construction business owners.
9. Verify All Subcontractor W-9s Are Collected
January 31 is the 1099-NEC filing deadline. Before year-end, make sure you have a completed W-9 on file for every unincorporated subcontractor you paid $600+ during the year. If any are missing, December is the time to chase them down — not January 30th when you're scrambling.
Missing or incorrect 1099s create $250-per-form IRS penalties and can put your subcontractor deductions at risk in an audit. Our team manages 1099 compliance year-round for all construction clients — so this is never a last-minute scramble.
10. Review Your Business Vehicle Usage Documentation
Vehicle deductions require documentation of business use percentage. Before year-end, review your mileage logs (physical or app-based) to make sure they're complete, accurate, and will support the deduction you plan to claim. Mileage logs should include date, destination, business purpose, and miles for each business trip.
For fleet-intensive contractors with 4–6 trucks, vehicle documentation is one of the first things an IRS auditor looks for. Get your documentation clean before December 31.
11. Maximize Health Insurance and HSA Contributions
If you're an S-Corp owner, confirm that your health insurance premiums are correctly reflected in your W-2 wages — this is required for the deduction to be valid. If you have a Health Savings Account (HSA) paired with a high-deductible health plan, you can contribute up to $4,150 (individual) or $8,300 (family) for 2024, and contributions can be made until the tax filing deadline.
Both of these are deductions that have to be set up and documented correctly to work. Our team verifies these annually for every S-Corp contractor client. The IRS provides guidance on S-Corp health insurance treatment that guides our setup process.
12. Schedule a Year-End Tax Review with Your CPA
Everything on this list is most valuable when your CPA does the math behind it — projecting your actual 2024 tax liability, identifying which strategies make sense given your specific numbers, and prioritizing the moves with the highest return before December 31.
This is a year-end tax review, and it's one of the most important meetings a contractor can have all year. If you haven't had this conversation yet with your current CPA, and the year is closing in fast, book a Tax Reduction Analysis with Performance Financial now. We work with Iowa contractors year-round and we'll come prepared with specific savings opportunities based on your numbers.
Work with Performance Financial — Iowa's Construction Tax Specialists
We are Performance Financial CPA, Accounting & Tax, a Des Moines firm that specializes in tax reduction planning and accounting for construction contractors across Iowa and the Midwest.
We serve contractors in Des Moines, Ankeny, West Des Moines, Grimes, Johnston, Pella, Cedar Rapids, and throughout Iowa.
Download our free resource: 5 Ways to Reduce Contractor Taxes. Or book your year-end Tax Reduction Analysis today — before December 31 runs out.
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