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Running a startup keeps founders busy, but as the year comes to a close, it’s critical to get your financial records in order, prepare for upcoming tax and compliance deadlines, and position your company for success in the year ahead. This checklist is designed specifically for venture-funded C-corp startups and covers everything from new 2025 tax law changes to bookkeeping best practices.

Year-End Startup Checklist at a Glance

  • Review your R&D tax credit eligibility and update documentation, because major new rules apply for 2025.
  • Understand the Section 174A changes: domestic R&D is now fully deductible again starting in tax year 2025.
  • If you’re a small business (under $31M in average gross receipts), consider amending 2022-2024 returns to recover over-paid taxes.
  • Send contractors their Form 1099-NECs by February 2, 2026 (the $600 threshold still applies for 2025 payments).
  • Confirm your payroll provider will issue W-2s to employees by February 2, 2026.
  • Finalize all year-end financial statements.
  • Conduct employee reviews and distribute bonuses.
  • Reconcile your capitalization table.
  • Update or create your financial model for the upcoming year.
  • Present your financial plan to the board of directors for approval.
  • Review performance against your prior year’s budget and KPIs.
  • Confirm your Delaware Franchise Tax is being tracked (due March 1, 2026 for most C-corps).

Tax Checklist

R&D Tax Credit & the Section 174A Change: Big News for 2025

This is the most significant tax development for VC-backed startups in years. The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, reversed the controversial Section 174 amortization requirement that had been in place since 2022.

What Changed?

Under the Tax Cuts and Jobs Act of 2017, a rule went into effect in January 2022 that required all R&D expenses to be capitalized and amortized over five years for domestic research (and 15 years for foreign research) rather than deducted in the year incurred. For many VC-backed startups spending heavily on R&D, this dramatically increased their tax burden.

The OBBBA fixes this. The new Section 174A restores full, immediate expensing of domestic R&D costs, starting with tax years beginning on or after January 1, 2025. Foreign R&D costs continue to be amortized over 15 years.

Retroactive Relief for Small Businesses

If your startup had average annual gross receipts under $31 million for the three years prior to 2025, you may be eligible to retroactively elect full expensing of domestic R&D costs for tax years 2022, 2023, and 2024. This could mean filing amended returns and generating meaningful refunds. The IRS has issued Revenue Procedure 2025-28 with guidance on how to implement this relief, and the outer deadline for most amended return filings is July 6, 2026 (though earlier deadlines may apply in some cases).

Larger businesses (over $31M in average gross receipts) cannot amend prior returns, but they can still “catch up” by deducting any remaining unamortized domestic R&D costs from 2022-2024 either all in 2025, or spread across 2025 and 2026.

What You Should Do Now

  • Determine whether your startup qualifies as a “small business” under Section 448(c) (average gross receipts ≤$31M for the three prior years).
  • Compile your R&D spending data for 2022-2024: wages for technical employees, contractor costs, equipment, and project documentation.
  • Model the tax impact of amending prior-year returns versus taking a catch-up deduction in 2025 or 2026.
  • Note that the Section 41 R&D tax credit itself is unchanged – this is only about how the underlying R&D expenses are deducted.
  • Coordinate with your CPA on the Section 280C reduced-credit election, which interacts with these changes.
  • Start building detailed R&D documentation now: Form 6765 reporting requirements will be stricter starting with the 2026 tax year.

Your Kruze Consulting accountant can help you evaluate your eligibility, model the financial impact, and prepare any necessary amended returns.

R&D Tax Credit Documentation

The R&D tax credit (Section 41) provides a dollar-for-dollar reduction in federal tax liability for qualified research spending. For startups, the credit can be applied against up to $500,000 in payroll taxes annually, making it valuable even for pre-revenue companies. Unlike the Section 174 change, the credit rules themselves were not altered by the OBBBA.

Qualifying R&D expenses include: wages for employees involved in qualified research activities, costs for third-party R&D contractors (65% of contractor costs), and supplies consumed during research. Activities must meet the IRS four-part test: business component purpose, technological uncertainty, process of experimentation, and reliance on hard sciences (including software development).

Important: The IRS is significantly tightening Form 6765 documentation requirements. While Section G of Form 6765 (requiring project-level detail) is optional for the 2025 tax year, it becomes mandatory for most businesses starting with the 2026 tax year. Begin tracking R&D activities, employee time allocations, and project costs in detail now so you’re ready.

File 1099s for Contractors

Any contractor, freelancer, attorney, or other self-employed individual you paid $600 or more during 2025 must receive a Form 1099-NEC. The key deadlines for the 2025 tax year (filed in early 2026) are:

  • February 2, 2026: Deliver Form 1099-NEC to recipients AND file with the IRS (no automatic extension available for this form).
  • Note: January 31, 2026 falls on a Saturday, pushing the deadline to Monday, February 2.
  • E-filing is required if you file 10 or more information returns in total (aggregated across all form types). This threshold was lowered from 250 to 10 in 2024.
  • The $600 threshold applies for 2025 payments. A new $2,000 threshold takes effect for payments made in 2026 and beyond.

Collect W-9s from all contractors before year-end. A “no W-9, no payment” policy is a best practice that prevents compliance headaches in January.

W-2s for Employees

Your payroll provider will handle most W-2 preparation, including wages, withholding, and benefits. Confirm they have everything needed before year-end. W-2s must be furnished to employees and filed with the Social Security Administration by February 2, 2026.

If your employees or founders exercised stock options during 2025, there are additional filing requirements. Incentive stock option exercises require Form 3921; employee stock purchase plan transfers require Form 3922. Your Kruze accountant can help ensure these are handled correctly.

Key 2026 Tax Deadlines for C-Corp Startups

Stay on top of these dates for the 2025 tax year:

  • February 2, 2026: 1099-NEC due to recipients and IRS; W-2s due to employees.
  • March 1, 2026: Delaware Franchise Tax report and payment due for most C-corps.
  • March 16, 2026: S-corp (Form 1120-S) and partnership (Form 1065) returns due.
  • April 15, 2026: C-corp (Form 1120) tax returns due; also deadline for Q1 2026 estimated tax payment.
  • September 15, 2026: Extended S-corp/partnership returns due.
  • October 15, 2026: Extended C-corp returns due.

Kruze Consulting maintains a full calendar of C-corp tax deadlines.

Financial Checklist

Finalize Your Year-End Financial Statements

Closing your books cleanly sets the foundation for tax filing, board reporting, and any future fundraising or M&A due diligence. This includes:

  • Record all banking, credit card, and investment transactions through December 31.
  • Close out outstanding accounts receivable and write off any confirmed bad debt.
  • Reconcile your balance sheet: total cash, receivables, fixed assets (and any accumulated depreciation), and your capitalization table.
  • Review your income statement: verify revenue and expenses and confirm net income (or net loss) for the year.
  • Accrue any unpaid expenses (bonuses, vendor invoices, etc.) that belong to the current year.

Employee Reviews and Bonuses

Year-end reviews help your team reflect on the past year and set expectations for the year ahead. If bonuses are tied to annual reviews, aim to complete them early enough to reduce end-of-year stress. Accrue bonuses in your books for the year they are earned, even if payment occurs in January, to ensure accurate year-end financials.

Reconcile Your Capitalization Table

Your cap table is as important as your balance sheet. Review it for any equity events that occurred during the year: new financing rounds, option grants, exercises, repurchases, or conversions. Every transaction should have corresponding legal documentation. A clean, accurate cap table is essential for investor relations, 409A valuations, and M&A due diligence.

Build or Update Your Financial Model

Your financial model is the numeric representation of your business strategy. If you don’t have one, now is the time to build it. If you do, review and update it with the following in mind:

  • Spending constraints: Start with your burn rate and runway, then work backwards to revenue targets. This eliminates budget iterations and keeps expectations grounded.
  • Gross margins: Review your unit economics. Even early-stage companies benefit from understanding how margin improvements translate into extended runway.
  • Headcount plan: Your team is typically your largest expense. Build a hiring plan that supports your growth targets without over-spending.
  • Go-to-market costs: Budget for sales, marketing, and customer acquisition. These costs tend to be underestimated in early models.
  • Fundraising milestones: Identify the metrics you need to hit to justify your next raise, and build a timeline with at least 18 months of runway cushion.

Get Board Approval for Your Plan

Finalizing and presenting your budget in December or January gives your board confidence and sets the tone for the new year. Board-approved targets also help align hiring plans, sales quotas, and product roadmaps from day one. Startups that delay board approval often find themselves behind on hiring early in the year, which creates a compounding effect on missed milestones.

Review Financial Performance vs. Assumptions

A rigorous year-end review of budget vs. actuals gives you insight into where your model was right, where it was wrong, and what to do differently going forward. Specifically:

  • Run a budget-versus-actuals (BVA) analysis for the full year. Identify categories where variance was largest and understand the drivers.
  • Review your fundraising strategy. If you’re within 12-15 months of needing more capital, begin preparing your data room and investor materials now.
  • Assess your runway. Using updated actuals and a refreshed forecast, recalculate how many months of cash you have left.
  • Check your unit economics. CAC, LTV, churn, payback period, and gross margin trends are all metrics investors scrutinize.

How Kruze Consulting Can Help

Year-end is one of the most demanding periods for startup finance teams. Kruze Consulting specializes in accounting, tax, and CFO services for VC-backed startups. We can help you navigate the new Section 174A rules, maximize your R&D tax credit, file accurate 1099s and W-2s, close your books cleanly, and build a financial model that resonates with investors. With over $15 billion in funding raised by our clients, we understand what it takes to keep VC-funded companies compliant, efficient, and investor-ready.