Nobody likes tax season - even unprofitable startups have to file returns. And that means paperwork, competent financials … all of which take time that startup CEOs could be spending growing their businesses.
Thankfully, a little preparation at the end of the year can make your taxes less painful. Having helped prepare thousands of returns for venture capital-funded startups, I’ve compiled 10 tips to help make taxes a bit easier for founders.
- Review your financials. Answer any open questions. Clean up any uncategorized expenses. If your bookkeeper or controller had ANY open questions for you in 2023, address them now. You are going to have a ton of real work to do in January, so get your financials ready for a clean yearly close.
- Confirm which filings your tax preparer will handle next year. We have tax deadlines listed on our site here for Delaware C Corps, as well as individual deadlines for startups in cities like San Francisco or New York.
- Get your Sales-by-State Revenue Reports ready. Your tax accountant needs this for apportionment, so that your state returns can be done correctly.
- Confirm your business information with your tax preparer. Your business might have moved, changed its fiscal year, or changed its name, so make sure your tax preparer is aware of any changes.
- Have your employees confirm their vital stats with your payroll provider. People change names, move, etc.
- Get W9s from your contractors.
- Get W8 BENs from international contractors.
- Get ready for Research and Development Tax Credits. Be prepared to estimate and support with documentation how much time your engineers spent on new R&D efforts. Don’t know what this is? Unprofitable startups can often cut their burn rate by getting an R&D credit study done – by up to $250,000 a year! That’s a massive cash burn reduction. Our online R&D Tax Credits calculator can help you find out how much money you can save.
- Get your foreign subsidiaries’ financials ready. Your preparer will need them to report 5471 on your 1120 tax return. Give your international accountant a heads up now.
- And watch out for your Report of Foreign Bank and Financial Accounts (FBAR). If you have overseas bank accounts, you’ll need to report this or you’ll face big penalties.
You can make your tax season even easier by working with an expert like my team at Kruze Consulting! Because we handle both your startup’s books and taxes, we think we are the ideal unified tax and accounting partner for VC-backed founders. We only work with venture capital and seed-funded startups. Contact us today, or learn more about our competitive tax pricing here.
