For salaried employees, year-end tax prep is largely passive. Their employer sorted out withholding. They wait for a T4 or W-2, hand it to someone, and get a refund or write a small check. If you need a baseline, start with our subscriptions you forgot to cancel.
For self-employed workers, year-end is an active event. Money you spend before December 31 may be deductible. Contributions you make by specific deadlines reduce your taxable income. Your Q4 estimated payment is due in January. And the amount sitting in your tax reserve account either lines up with your actual bill -- or it does not.
Working through this checklist before year-end means no surprises in April. Ignoring it means finding out in March that you owe $8,000 you spent in December.
Step 1: Reconcile Your Total Income for the Year
Before you can do anything else, you need to know what you actually earned. Pull your income records and total every payment received from every source this year. Include:
- All freelance or self-employment payments received (by date, not invoice date)
- Employment income if you have a part-time job alongside freelance work
- Any other income: rental, investment, government benefits
- Outstanding invoices: payments you expect to receive before December 31
The total is your gross income picture. Now subtract your business expenses to arrive at your estimated net self-employment income. That net figure is what you owe income tax and self-employment tax or CPP contributions on.
This number also tells you whether you want to accelerate any income into this year or defer it to next year -- and whether to accelerate any planned deductible purchases before December 31.
Cash basis vs. accrual: Most self-employed individuals use cash basis accounting, which means income is counted when received, not when invoiced, and expenses count when paid, not when billed. If you are on cash basis, an invoice sent December 28 that gets paid January 5 is next year's income. Keep that in mind when making timing decisions.
Step 2: Review and Capture All Deductible Expenses
Year-end is the time to make sure you have documented every deductible expense from the past twelve months. Expenses you fail to claim are money you leave on the table -- they reduce your taxable income, which reduces your bill.
Common deductions to verify you have records for:
- Home office: Calculate your workspace square footage as a percentage of your home. Gather utility bills, rent or lease agreements, or mortgage interest statements for the year.
- Vehicle expenses: Either total your mileage log for the year (business trips only), or gather fuel, insurance, maintenance, and loan interest records if using the actual expense method. You must have a mileage log either way.
- Equipment and technology: Any hardware, tools, or equipment purchased for business use. Check for items you bought but forgot to log.
- Software subscriptions: Annual or monthly plans used for your business. Pull your bank or card statements and look for recurring charges you may have missed.
- Professional services: Accounting fees, legal fees, consulting you paid for in relation to your business.
- Professional development: Courses, books, workshops, conference fees directly related to your work.
- Banking and transaction fees: Stripe or PayPal fees on client payments, bank fees on your business account, wire transfer fees.
- Business insurance: Premiums paid for liability, professional indemnity, or other business coverage.
- US only -- health insurance premiums: Self-employed workers can often deduct premiums paid for themselves and their dependents, subject to limits.
Purchases to make before December 31
If you planned to buy business equipment, upgrade your software, take a course, or pay for professional services, doing it before December 31 means the deduction lands in the current tax year. Waiting until January pushes it to next year's return. This is one of the clearest and simplest year-end tax moves available.
Be careful not to spend money you do not need to spend just for a deduction. A tax deduction saves you your marginal rate on the amount spent -- typically 25-40% of the purchase price. You are still paying the other 60-75% out of pocket. Only buy things you actually need for your business.
Step 3: Check Your Tax Reserve Against Your Estimated Bill
This is the most important financial check of the year-end process. Open your tax reserve account. Write down the balance. Now estimate your tax bill using your projected net income.
A rough calculation:
- Start with your estimated net self-employment income (gross income minus expenses).
- Add any employment income for a combined total.
- Calculate estimated income tax using your country's brackets at your combined income level.
- Add self-employment tax (US: ~14-15% of net self-employment income) or CPP contributions (Canada: ~11.9% of net self-employment income up to the maximum).
- Subtract any estimated tax already paid (quarterly installments, employer withholding).
- The result is your estimated balance owing.
If your reserve covers the estimated balance with some buffer, you are in good shape. If it falls short, you have two to three months to address it.
Check if your tax reserve is on track before year-end.
The calculator estimates your monthly tax set-aside based on your income and expense patterns. Run your year-to-date averages through it to see whether your current reserve rate is covering your projected bill -- before you run out of time to adjust.
Try the Irregular Income Calculator to verify your reserve →Step 4: Make Your Q4 Estimated Tax Payment
If you make quarterly estimated payments, Q4 is the final one for the year.
| Country | Q4 Deadline | Covers |
|---|---|---|
| United States (IRS) | January 15 | September 1 -- December 31 income |
| Canada (CRA) | December 15 | October 1 -- December 31 income |
In Canada, the December 15 deadline means your Q4 installment is a year-end task, not a new-year task. If you missed Q3 (September 15), the CRA will charge interest from that date. Paying Q4 on time limits the damage, but does not erase prior interest.
In the US, if you pay at least 100% of last year's tax liability in equal installments (or 90% of this year's liability), you avoid the underpayment penalty even if you owe a balance on filing. If your income grew significantly this year, the 100% of prior-year figure is the safer safe-harbor target.
If you have been under-withholding all year: A year-end lump-sum estimated payment is better than no payment. It reduces your balance owing at filing, which reduces both the underpayment interest and your April financial shock.
Step 5: Maximize Retirement Contributions
Retirement accounts are one of the most powerful tools available to self-employed workers for reducing taxable income. Contributions made before deadlines directly reduce your net income for tax purposes.
United States
- SEP-IRA: You can contribute up to 25% of your net self-employment income (calculated after the deduction for half of SE tax), up to a maximum of $69,000 for 2024. SEP-IRA contributions can be made up to your tax filing deadline, including extensions -- giving you until October 15 if you extend. However, you must open the SEP-IRA by December 31 of the tax year.
- Solo 401(k): Allows higher contributions than a SEP-IRA in many cases, with both employee and employer contribution slots. Must be established by December 31 of the tax year. Employee contribution (up to $23,000 in 2024, or $30,500 if over 50) is made by December 31. Employer contribution can be made until the filing deadline.
- Traditional IRA: Contributions of up to $7,000 ($8,000 if over 50) can be made until April 15. Deductibility depends on your income and whether you have a workplace plan.
Canada
- RRSP: Contributions are deductible up to your available RRSP room (18% of prior year earned income, up to a maximum). The deadline is 60 days after December 31 -- typically March 1 or 2. So you technically have until late winter, but the contribution still reduces your current year's tax. Contributing before December 31 gives you more flexibility in how you use the deduction.
- FHSA (First Home Savings Account): If you qualify (first-time buyer) and have not opened one, contributions are deductible and the room does not carry forward if the account is not open. Consider opening one before year-end even if you do not immediately contribute the maximum.
Step 6: Get Your Records Ready for Filing
Year-end is the time to organize what you have, not hunt for it in February. A filing-ready state means:
- Income log finalized and reconciled with bank deposits
- All expense receipts saved digitally (a phone photo is fine, as long as it is legible and stored somewhere you will find it)
- Mileage log totaled and backed up
- Home office measurements documented (square footage of workspace and total home)
- All estimated payments made during the year logged (date, amount, confirmation number)
- US: list of clients expected to issue 1099s so you can follow up if they do not arrive by late January
- Canada: prior-year NOA (Notice of Assessment) on hand to confirm RRSP room and installment history
Step 7: Book Your Accountant Early
If you plan to work with a tax professional, book them in November or December. January through April is their busiest window and availability shrinks. An accountant who knows your situation from a pre-season meeting can also flag any year-end moves you should make before December 31 -- not after.
If you file independently, late December is a good time to run your numbers through tax software and see a preliminary return. You are not filing yet, but you are confirming whether your reserve covers your bill and whether any last-minute contributions or purchases are worth making.
A Note on Tax Filing Deadlines
Year-end prep is distinct from actual filing -- you have months after December 31 before the filing deadline. But the actions available to you shrink after December 31. Most deductions and income-timing choices are locked at year-end. The exception is certain retirement contributions, which have filing-deadline or February/March deadlines depending on your country and account type.
The filing deadlines to mark:
| Country | Filing Deadline | Balance Owing Deadline |
|---|---|---|
| United States | April 15 (extension to Oct 15 available) | April 15 (extensions do not extend payment) |
| Canada (self-employed) | June 15 | April 30 |
In Canada, the extended June 15 filing deadline for self-employed individuals does not extend the payment deadline. If you owe money, it is still due April 30. Interest accumulates on unpaid balances from that date, regardless of when you file.
Frequently Asked Questions
What should self-employed workers do before December 31 for taxes?
Reconcile all income from every source, purchase any planned deductible business equipment or supplies before year-end, maximize retirement contributions with December 31 deadlines (Solo 401(k) in the US must be established by year-end), review your tax reserve balance against your estimated bill, and make any final estimated tax payment. In Canada, your Q4 installment deadline is December 15.
When do self-employed workers have to file their taxes?
In the US, the deadline is April 15, with an extension to October 15 available on request. Taxes owed are still due April 15 regardless of extensions. In Canada, self-employed individuals and their spouses have until June 15 to file, but any balance owing is due April 30. Filing late when you owe results in interest on the unpaid balance from April 30.
What receipts do self-employed workers need to keep?
Keep receipts for all business equipment and software, professional services, business insurance, home office expenses (utility bills, rent or mortgage interest statements), vehicle expenses (mileage log plus fuel and maintenance if using actual costs), professional development, and any other deducted expense. In Canada, keep records for six years. In the US, generally three to seven years depending on circumstances. Digital photos of receipts are acceptable.
Can self-employed workers deduct home office expenses?
Yes, if you have a dedicated workspace used regularly and exclusively for business. In the US, use either the simplified method ($5 per square foot, up to 300 sq ft) or the actual expense method (pro-rate utilities and other home costs by the percentage of your home used for business). In Canada, calculate your workspace square footage as a percentage of total home area and apply that to eligible home expenses. The space must be your principal place of business or used exclusively to meet clients.
How do I know if I have set aside enough for taxes?
Before December 31, estimate your full-year tax bill: total your net income, apply your country's tax brackets to calculate estimated income tax, add self-employment tax or CPP contributions on your self-employment net income, and subtract quarterly payments already made. Compare the result to your tax reserve account balance. If you are short, make an additional estimated payment, purchase deductible expenses before year-end, or plan to pay the shortfall on filing. If you have a surplus, it rolls forward as next year's buffer.