Tax Timing: Why December Decisions Cost You in April

Every December, my phone rings off the hook. "Adam, what can I do to lower my taxes? I just found out I'm going to owe $80K."

The honest answer? In December, your options are limited. The best tax planning happens in June, not December. By year-end, you're rearranging deck chairs.

Here's why timing matters—and what you should be doing throughout the year.

The December Scramble: What's Left

By December, most of your tax picture is already locked in. Your revenue is what it is. Your expenses are what they are. You've got maybe 30 days to move the needle, and here's what most people try:

Buy equipment. "I'll get a new truck before year-end." Sure, Section 179 lets you deduct it. But you're spending $60K to save maybe $15K in taxes. That's not tax planning—that's panic buying.
Prepay expenses. Pay January rent in December. Prepay insurance. This shifts deductions forward but doesn't create new ones.
Max out retirement contributions. Good move, but you could have been doing this all year.

These aren't bad tactics. But they're reactive. You're playing defense with the clock running out.

Tax planning in December is like cramming for an exam the night before. You might pass, but you won't ace it.

The Mid-Year Advantage

Here's what proactive tax planning looks like:

Q2: The Projection

By June, you have half a year of actual data. You can reasonably project where you'll land for the year. This is when you should be sitting down with your tax person and asking:

What's my projected taxable income?
What bracket am I heading toward?
What strategies make sense given my situation?

With six months of runway, you can actually implement strategies—not just scramble.

Q3: The Adjustment

By September, you're refining. Maybe that big project closed earlier than expected. Maybe a job went sideways and you're down. Adjust your estimates. Adjust your quarterly payments. Adjust your strategy.

This is also when you should be making equipment decisions. Need a new truck? Buy it in Q3 when you know your tax situation, not in December when you're guessing.

Q4: The Execution

By October, you should know almost exactly what your year looks like. November and December become about execution—implementing the plan you made in Q2 and refined in Q3. No panic. No scrambling.

Specific Strategies That Need Time

Some of the best tax strategies can't be implemented in December. They require months of lead time:

Entity Structure Changes

Should you be an S-corp? Should you have a separate holding company? These decisions need to be made early in the year to be effective. Changing your entity structure in December creates a mess.

Retirement Plan Setup

Want a SEP-IRA, Solo 401(k), or defined benefit plan? The best plans require setup before year-end (sometimes before October). And the contribution amounts depend on knowing your income—which requires mid-year projections.

Income Timing

For cash-basis contractors, you have some control over when you bill and collect. If you're having a monster year, maybe you delay that big December invoice to January. If you're having a down year, maybe you accelerate collections. But this requires planning—you can't decide on December 28th to push income to next year.

Cost Segregation on Real Estate

If you own your building, cost segregation can accelerate depreciation and create massive deductions. But the study takes time. The implementation takes time. This isn't a December decision.

The Quarterly Tax Trap

Here's another reason timing matters: quarterly estimated taxes.

Most contractors I meet are either massively overpaying quarterlies (because they're using last year's income as a proxy) or massively underpaying (because they're not paying attention until April).

The penalty for underpayment isn't huge, but it's annoying. And the cash flow hit from overpaying all year—then waiting for a refund—is real money you could have deployed in your business.

Mid-year projections let you dial in your quarterly payments. Pay what you'll actually owe. Not more, not less.

The Calendar You Should Follow

Here's a simple tax planning calendar for contractors:

January: Review last year's return. Identify what worked and what didn't.
April: File or extend. Set baseline estimates for the year.
June: Mid-year projection meeting. Identify strategies. Adjust quarterlies.
September: Refine projection. Make major purchase decisions. Finalize entity/retirement decisions.
November: Execute year-end strategies. No surprises.
December: Button up. Confirm all moves are complete.

Notice how December is "button up," not "panic and scramble."

The Bottom Line

The best time to start tax planning is January. The second-best time is right now.

Stop treating taxes as a once-a-year problem to solve in December. Start treating them as a year-round opportunity to optimize.

The contractors who pay the least (legally) aren't the ones with the cleverest December tricks. They're the ones who plan ahead, project often, and make decisions with full information.