Even though tax season has ended, many small business owners and private practitioners haven’t stopped thinking about their tax strategies. Some are thinking about what they can do differently moving forward, while others are still waiting to put 2025 behind them. According to Internal Revenue Service data, more than 30% of business partnerships file for an extension each year.
Relying on tax extensions or pushing filing into September or October can at times be necessary, but also can become a difficult habit to break, says Cliff Higgs, a commercial banker at Arvest Bank – Central Oklahoma. Looming deadlines and potential penalties can add unnecessary expense and stress to business owners, as well.
“This habit can make cash flow unpredictable,” Higgs explains. “It may also reduce financing opportunities from investors and lenders who require the most recent tax return.”
For many businesses, the fourth quarter represents the final window to impact the year’s bottom line, he says. It can be one of the busiest seasons, depending on the industry, and it’s ideal for strategic year-end actions such as upgrading equipment or replenishing inventory. Avoiding tax extension concerns provides greater peace of mind.
Higgs says that adopting a year-round approach to tax strategies can help business owners maintain the flexibility and focus needed to drive future growth. “Many of the financial headaches felt with tax filing can be minimized with consistent planning,” he adds.
Adopt a Pay-as-You-Go Mindset
Extensions offer more time to file, not to pay. Penalties and interest begin accruing immediately when taxes aren’t paid by the April deadline. “Setting a goal to pay on time creates predictable financial habits and prevents a last-minute cash crunch,” Higgs says. “Some businesses have separate accounts that hold their estimated tax, adding to it as the taxable income is recognized.”
Forecast Tax Liabilities Early and Often
Use your previous year’s tax bill as a baseline, Higgs says. For most filers, that means 100%, or 110% if your adjusted gross income exceeded $150,000. Divide the total into manageable quarterly payments. Revisit your projections whenever revenues spike or expenses shift. “The earlier you update estimates, the smaller any year-end catch-up needs to be,” he adds.
Stay Organized Year-Round
Automated accounting systems, digital receipt capture, mileage apps and integrated reporting tools make it easier to track expenses accurately. “Better records can lead to better decisions, especially when planning investments or adjusting budgets late in the year,” Higgs says.
Plan for Strategic Year-End Actions Now
Don’t wait until December to think about reducing taxable income. Start evaluating potential retirement plan contributions, equipment purchases, or prepayments for rent and insurance now, Higgs suggests. For those using cash-basis accounting, consider how the timing of client invoicing late in the year might impact your overall liability.
Treat Your Tax Advisor as a Year-Round Strategic Partner
As your projected tax liability changes, so can the timing of large purchases for your business. Plan accordingly and work with your tax advisor. Regular check-ins with your tax professional help ensure you’re optimizing deductions, complying with federal and state rules, and avoiding rushed filings that lead to extensions. “Tax-efficient strategies don’t just help you avoid penalties, they build financial discipline that translates into faster refunds, greater liquidity and access to investment capital for future growth,” Higgs says. “While habitual extension filers may still be sorting through old paperwork, small business owners who prioritize year-round tax efficiency can spend their time finalizing budgets, making smart investments, and operating with confidence and clarity.”
Arvest and its associates do not provide tax or legal advice. Arvest is an Equal Housing Lender and Member FDIC.
