A year-round tax-planning checklist for California small business owners

Tax preparation is what happens in the spring, and by then every decision that could change your bill is already made. Tax planning is the work that actually saves money, and it has to happen during the year. Here’s a simple rhythm for a California small business, quarter by quarter.

This is a general checklist, not advice for your specific situation — the right moves depend on your entity, income, and goals.

First quarter (January–March)

• Confirm last year is closed cleanly. You can’t plan on numbers that aren’t final. Reconcile through December, book depreciation, and lock the prior year.
• Review your entity. Are you still a sole proprietor or single-member LLC when an S-corp election might now make sense? The answer changes as profit grows. This is also the window to make an S-corp election effective for the current year.
• Set your estimated-tax plan. Both the IRS and the California Franchise Tax Board expect quarterly payments. California’s schedule is front-loaded — a larger share is due earlier in the year than the federal schedule — so a plain “divide by four” approach can leave you short.
• If you have a California LLC, budget the $800. California charges an annual $800 minimum franchise tax on most LLCs and corporations, plus an additional LLC fee once gross receipts pass certain thresholds. It’s predictable; it shouldn’t be a surprise.

Second quarter (April–June)

• Do a mid-year projection. Annualize your year-to-date Profit & Loss and estimate where you’ll land. This is the number every other decision keys off of.
• Check your estimates against reality. If income is running ahead of plan, adjust the next payment up now rather than catching up in January with a penalty attached.
• Plan large purchases deliberately. Equipment and vehicles can often be expensed in the year placed in service, but the timing and the business-use percentage matter. Decide based on the projection, not a year-end scramble.

Third quarter (July–September)

• Hold a real planning session. This is the most valuable 60 minutes of the year. With three quarters of actual data, you can still change the outcome.
• Consider the Pass-Through Entity (PTE) elective tax. California lets many S-corps and partnerships elect to pay state tax at the entity level, which can turn an otherwise-limited state tax deduction into a federal deduction for the owners. The election and payment have deadlines during the year — miss them and the option is gone.
• Review owner compensation. If you’re an S-corp, your salary has to be “reasonable” for the work you do. Too low invites problems; too high wastes payroll tax. Look at it before year-end.
• Fund or set up a retirement plan. Some plans have to be established before December 31 even if you fund them later. Know your deadline.

Fourth quarter (October–December)

• Finalize the projection and act. Accelerate or defer income and expenses where it makes sense, make the final estimated payment, and complete any planned purchases.
• Make retirement contributions up to the plan’s limits.
• Get your books current through November so January is calm and the return is fast.
• Gather documents into one place. New equipment, new loans, entity changes, big customer or vendor changes — your preparer needs to know.

The point

None of this works without books that are current all year. That’s the connection: when the same person keeps your bookkeeping and does your planning, the projection uses real numbers and the plan actually shows up on the return.

If you’re doing this alone and it feels like guesswork, book a free consultation and we’ll walk through where your business stands and what the next quarter should look like.