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Final Call: What to Do Before December 31 to Cut Your Tax Bill
The clock is ticking, and if you’re a law firm owner, these next few weeks could mean the difference between a manageable tax bill—and a painful surprise.
While most people think tax season starts in April, the truth is that the real work—the strategic decisions—happen in Q4. And once the year closes, your options shrink dramatically.
At Prestige Accounting & Consulting, we specialize in helping attorneys reduce their tax liability legally and ethically—but only if they act before December 31. Here’s what law firm owners need to be thinking about right now.
🔍 Why Q4 Tax Planning Is So Powerful
Think of Q4 tax strategy as your last shot to reshape your taxable income. Once January hits, you’re in damage control mode—not strategy.
Lawyers in high-earning years can easily owe six figures in taxes if they don’t take advantage of accelerated deductions, deferred income, and tax-deferred savings tools.
And remember: most of these strategies must be completed before year-end to count.
✅ 1. Make Final Estimated Payments (Or Adjust Withholdings)
If you’ve had a profitable year, don’t assume your Q1–Q3 estimated payments were enough. Underpaying can trigger penalties and interest.
- S Corp owners: review your W-2 salary and consider a final payroll adjustment to match reasonable compensation.
- Solo firms: adjust final estimated payment based on Q4 projections.
📌 Tip: Use your YTD profit and tax liability to recalculate what’s owed before January 15. Overpaying isn’t ideal—but underpaying could cost you more.
💸 2. Max Out Retirement Contributions
One of the fastest ways to lower your tax bill? Contribute to your retirement. Contributions are typically tax-deductible, and compound growth benefits you long-term.
Options include:
- Solo 401(k) – Up to $70,000 for 2025 if you’re over 50 (employee + employer portions combined)
- SEP IRA – 25% of compensation up to $70,000 (check the exact numbers with your CPA)
- Defined Benefit Plan – For firms with significant income and few employees
These must be set up by year-end for Solo 401(k) plans, even if contributions happen early next year.
🖥 3. Invest in Equipment, Software & Tools
Section 179 allows firms to fully deduct the cost of qualifying business equipment and software placed in service before year-end.
Examples:
- New laptops or monitors
- CRM systems
- Billing platforms or case management tools
- Office furniture
The key? The item must be purchased and in use by December 31 to count.
🧾 4. Prepay 2025 Expenses
If you’re a cash-basis law firm (which most small firms are), you can deduct expenses when paid, not when incurred.
That means you can:
- Prepay rent (1 month in advance)
- Prepay software subscriptions
- Make early vendor payments
- Lock in marketing retainers
It’s a legit and powerful way to shift deductions into this year—if done correctly.
✏️ 5. Review Your Entity Tax Strategy
Depending on how your firm is structured, you may benefit from:
- Adjusting your S Corp salary and year-end distributions
- Considering LLC vs. S Corp tax treatment for 2025
- Timing your bonuses and draws for maximum tax efficiency
📌 Pro Tip: Don’t let your draw outpace your cash flow. We help law firm owners project safe draw amounts based on real-time financials, not guesses.
🧠 6. Don’t Forget Charitable Giving
If your firm (or you personally) supports nonprofits, donate before 12/31 to get the deduction this year.
Even better? Donate appreciated assets (like stocks) to avoid capital gains taxes and deduct the full value.
Note: Contribution limits apply based on your adjusted gross income—ask your CPA for the latest thresholds.
🛑 What You Can’t Fix in January
Once the calendar turns, you can’t retroactively:
- Make equipment or tech purchases
- Defer income
- Pay Q4 estimated taxes on time
- Start a Solo 401(k)
- Adjust your W-2 salary or run late payroll
This is your reminder: the window is closing.
📅 Bonus: Final Week To-Do List
- Schedule a meeting with a CPA
- Review profit-to-date
- Confirm all trust account reconciliations are up to date (for compliance!)
- Set up your retirement plan if you haven’t already
- Make a list of prepayable expenses
- Ensure your bookkeeping is clean and up to date
💬 Final Word from The Lawyers’ CPA
You’ve spent all year building your firm—don’t give away more to the IRS than necessary.
October and November are for planning. But December is for action.
We’ve helped dozens of law firm owners save tens of thousands in year-end tax moves. Don’t wait until it’s too late.
Let’s make sure you close out 2025 with a plan—and not a panic.
