Your Tax Year Is Already Over
By late October the year is already written. A November or December tax meeting can only move timing at the edges, and most of those moves lower the earnings a buyer and a lender will price. The planning that matters happens before the year starts: structure, how the owner is paid, and what the year should look like on paper. Set 2027 in January.
Sometime in the next six weeks, your CPA is going to call about year-end tax planning. The meeting will run an hour. There will be a list.
Here is the problem with the meeting. By the time it happens, your tax year is already over. The revenue is booked or it is not. The margins are what the year made them. Your own pay has been drawn for ten months. Nothing on the list can change any of that, because nothing can. What the list can do is move timing at the edges, and timing is the one thing that costs an owner money without feeling like it.
This is not an argument against your CPA, who is doing exactly what the calendar allows. It is an argument about when the conversation happens.
What a December meeting can actually do
Strip away the vocabulary and the year-end list has four items on it.
Buy something before December 31 so the deduction lands this year. Prepay an expense that belongs to next year. Pull a bonus forward so it is paid in December rather than January. Hold a few invoices so the revenue lands in the new year.
Every one of these is legal, ordinary, and in isolation sensible. Every one of them does the same thing: it takes earnings that happened in this year and makes them look smaller on paper. That is the whole mechanism. A lower number on the return is a lower tax bill, and in a year when nothing else is at stake, that is the right trade.
The question is whether nothing else is at stake.
Which of these a buyer forgives, and which a buyer does not
Issue #23 explained how a tax return becomes a price, so I will not repeat the mechanism. The short version is that a buyer and a lender work from your reported earnings, adjusted for items they can see and document. That word, document, is where the four moves separate.
The equipment purchase is the one a buyer is most likely to forgive. Depreciation is added back in nearly every analysis, and a lender does the same, so the deduction that lowered your return does not usually lower your price. If you needed the equipment, buy it. If you did not need it, you have spent cash to save a fraction of that cash in tax, and no buyer pays you for a truck you did not need.
The prepaid expense is harder to recover. An insurance premium or a lease payment pulled into this year sits inside operating expenses, and most buyers will not go line by line through a year-old return to find it. It lowers the year's earnings, the year's earnings get averaged into the record, and the record is what gets priced.
The pulled-forward bonus is the same. Owner compensation gets normalized to market, but employee bonuses do not. A December bonus that belongs to next year is a permanent reduction in this year's earnings as a buyer reads them.
The held invoice is the one that surprises people. Revenue that moves from December to January does not disappear, but the trailing twelve months a buyer reads at any given moment is a different window from your fiscal year, and a lender's two-year average treats each year on its own. Move enough revenue around and the record stops matching the business, and a buyer who notices a mismatch stops trusting the rest of the record.
So of the four, one is harmless if you needed it, and three come off the price. Not at a multiple of the tax saved. At a multiple of the earnings removed.
The arithmetic nobody runs in December
Put numbers on it. An owner three years from a sale prepays $40,000 of next year's expenses, pays $30,000 of bonuses in December that would have been paid in January, and buys $50,000 of equipment that could have waited. Tax saved, at a blended rate of a third, perhaps $40,000.
Earnings reduced on the return, before anyone adds anything back: $120,000. A buyer adds back the depreciation on the equipment and reaches the other two. Call it $70,000 that stays out of the record for that year.
If the business sells on a multiple in the range most privately held companies see, that is somewhere between $200,000 and $350,000 of price, removed from one year of the record, to save $40,000 of tax. And a lender's two-year average means the year keeps counting against the owner for a second year after it closes.
Do that every December for the three years before a sale and the owner has quietly built the discount a buyer would otherwise have had to argue for.
The planning that is actually planning
Real tax planning does not happen in December. It happens before the year starts, and it is about three things.
Structure. What entity you are, how it is taxed, and whether that still fits a business that may be sold. The right structure for a company that will be held for twenty years is often the wrong structure for a company that will be sold in three, and changing it takes years to season.
How you are paid. Salary, distributions, benefits, rent on a building you own, and what the business does for you personally. Every one of these is a choice made at the start of the year and lived with for twelve months, and every one of them is normalized by a buyer later. Set them once, at market, so that normalization has nothing to find.
What the year should look like on paper. An owner who has decided to sell in three years knows what a buyer's accountant will read in three years. That reader wants three clean years, each one closed the same way, with nothing in them that needs explaining. That is a design decision, made in January, not a list of adjustments made in December.
None of this is exotic. Most of it is a conversation your CPA would be glad to have, if it were asked for in January rather than squeezed in at year end.
What to do in the next six weeks
Take the meeting. Go through the list. Then, before agreeing to anything on it, ask one question about each item: does this change what the business earned, or only when it shows up?
If it only changes when, ask what it does to the record a buyer will read. Your CPA may not have been asked that before. It is not a criticism. It is a different question from the one the meeting was called to answer.
Then put a second meeting on the calendar for January, and give it a different agenda: not what can we still do about 2026, but what should 2027 look like on paper, given where the business is going.
Where to start
If you are not sure what your last two returns say about your price, the value gap estimate is the cheapest place to begin. You answer questions about the business in plain language, it takes about fifteen minutes, and it asks for no financial statements. I review every one personally and send you the result.