Startup Tax Experts

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Vanessa Kruze, CPA Kruze Consulting

Vanessa Kruze, CPA 
Kruze Consulting Founder
Former Startup Controller

Estimate What Your Startup’s Tax Return Would Cost

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Quote icon Brett O'Brien

Kruze Consulting is the perfect Accounting, Finance and Tax partner for Los Angeles Startups. Kruze delivers exceptional monthly reporting and financial projections. When we need help with benefits or payroll, Kruze solves our problems.

Brett O'Brien

CEO

flyrtv.com

Quote icon Casey McKerchie

As a startup, moving quickly is a top priority for us and we just needed to get our tax return done. After we uploaded our docs, we got our tax return in 3 days! E-filing was confirmed by Day 4. Super responsive and helpful!

Casey McKerchie

VP, Operations

Calm.com

Quote icon Bret O'Brien

We tried using other CPAs to prep our startup tax return only to find that they weren't startup experts. Kruze knows R&D, SAFE Notes, SaaS, and venture debt and they gave us valuable advice. We have 100% confidence in their work.

Farhad Massoudi

CEO

Tubi TV

Startup Tax Return Cost Calculator

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Over $10 million per year in startup payroll tax savings from R&D Tax Credits

Startups need startup experts – Kruze helps seed and VC funded companies creating novel technology save payroll expenses by taking advantage of R&D Tax Credits. Kruze is an expert at tax credits for startups. If your startup CPA isn't talking to you about R&D Tax Credits, then you may be missing out in up to $250,000 in payroll tax savings next year! *

Find Out if R&D Tax Credits Work For Your Startup

Our Tax Leaders

Leading a team of pros that completed 275 startup returns in 2017

Vanessa Kruze, Kruze Consulting Core Team

Vanessa Kruze, CPA

Founder & CEO

Vanessa Kruze, CPA, founded Kruze Consulting in 2012. Vanessa has helped over 650+ startups, prepared 1000+ startup tax returns, and oversees ~1 startup acquisition every month. Prior to founding Kruze Consulting, Kruze worked at Deloitte Tax and as the Controller of a startup with more than 120 employees.

Will Davis, Kruze Consulting Core Team

Will Davis, CPA

Tax Director

Over 20 years of experience in corporate taxation, with involvement in tax research, structuring, compliance, preparation of consolidated tax returns for multinational corporations and preparation and calculation of domestic and international income tax provisions.

Startup Taxes Key Terms

California Franchise Tax

Any business or startup that is doing business in California will get hit with the California Franchise Tax. So if you have employees, an office in California, or revenue in California, then you likely own this fee.

When is the California Franchise Tax due? April 15th. And don’t expect any helpful postcards or notifications from the state of California!

How much do is the California Franchise Tax for startups? If you are an early stage company operating at a loss, then it’s likely that the California Franchise Tax will only be about $800. There are a few variables that could make this a little higher, but for most startups (unprofitable companies, that is), you’ll pay $800. If you are profitable, make sure you do work with your CPA to calculate this fee correctly.

Delaware Franchise Tax

All Delaware incorporated companies have to pay an annual Delaware Franchise Tax - including startups. This expense has nothing to do with profitability, or even revenue - you have to file if you are incorporated in DE.

When is the Delaware Franchise Tax due? March 1st.

How much is Delaware’s Franchise Tax for startups? If you haven’t raised that much money, maybe half a million in seed financing, then you are likely to owe not more than $1,000. If you’ve raised $10 million in venture capital, then you likely own about $4,000. We help our early stage clients calculate their Delaware Franchise Tax, so if your CPA isn’t helping your startup with this then you should consider getting a CPA who is used to working with funded companies.

Startup Tax Return

How much should a startup expect to pay for a tax return?

After analyzing thousands of startup tax returns across many industries, Kruze Consulting developed a calculator to estimate startup tax return costs. You can find it on our website, and we invite you to visit the site and try it out.

As a benchmark, a straightforward Series A tech company can expect to spend around $2,000 for their annual return. However, your cost may vary. Startup tax return costs are generally based on four factors, which we cover below.

First, are you a seed, Series A, or Series B company? Your stage of fundraising has a direct impact on the return cost.

Second, what industry are you in? A marketplace, a SaaS, and a Fin-tech company can expect different tax return costs. For example, a Fin-tech or marketplace can be more expensive than just say a plain vanilla SaaS or tech company.

Third, where do you have payroll? Rent? Sales? The answers to these questions will determine where you have “nexus,” and the concept of a nexus is important because it determines which state or states you will need to file a tax return in. The more states, the more costly.

Last, what is your volume and complexity? Do you have a lot of transactions or just a few? Are you complex with several international components or do you have a parent or subsidiary companies? The answers to these questions determine the workload required, and the price will go up a bit as volume and complexity increase.

1099 IRS Forms

1099s are an IRS form due each year by January 31st.

Who your startup needs to give this tax form to depends on how much you’ve paid your cash-basis contractors during the previous year, and what type of contractor they are. Specifically, anyone who is not a corporation and was paid over $600 in aggregate will need to get a 1099.

So LLCs and sole proprietors (often contractors like marketing contractors, some lawyers, and landlords), paid over $600 during the previous year, will require a 1099. If you are unsure what type of contractor you have been working with, have your startups send them a W-9 to complete.

Remember, 1099s are due by January 31st, and your startup must provide one to any non-corporation you paid over $600 in the previous year.

1120 IRS Forms

Most folks only think about the annual Form 1120 Tax return, but there’s actually a ton of taxes and tax deadlines for Delaware C-Corps.

And Yes, even bootstrapped pre-revenue startups must pay taxes. You might not be subject to Income Taxes (which are based on profitability) but you will still be subject to a wide variety of other taxes which aren’t always connected to Revenue.

1120 IRS Forms

5471 IRS Forms

One tax requirement that’s complicated and hard to understand is for US citizens and residents who have ownership in a foriegn corporation. These people are required to file IRS Form 5471, Information Return of US Persons with Respect to Certain Foreign Corporations.

5471 IRS Forms

5472 IRS Forms

More and more businesses are operating on a global level, even small businesses and startups. In recognition of that fact, the IRS requires US businesses that have foreign ownership, or foreign businesses that do a significant amount of business in the US to file Form 5472. The form discloses information about reportable transactions, and is submitted along with IRS Form 1120, your annual tax return. Form 5472 differs from Form 5471, which is used for US citizens that have ownership in foreign corporations.

5472 IRS Forms

6765 IRS Forms

Form 6765 is an IRS Form, under IRS tax code U.S. Code § 280C, that is the “Credit for Increasing Research Activities” - and informally known as the R&D Tax Credit Form.  This tax form can help startups save up to $250,000 on their payroll taxes. The Research and Development tax credit basically rewards companies for conducting research and development activities within the United States. 

6765 IRS Forms

W-8 and FATCA IRS Forms

The Foreign Account Tax Compliance Act (FATCA) places significant tax filing requirements on startups with foreign assets, employees, and contractors, and that’s the reason for Form W-8. FATCA is an extremely complex piece of legislation that was designed to fight tax evasion by Americans with financial assets held outside the U.S. Enacted in 2010, FATCA requires all U.S. taxpayers, even those living abroad, to report foreign assets to the IRS if they exceed specific thresholds. In addition, foreign financial institutions (FFI) and non-financial foreign entities (NFFE) are required to report the assets of any American clients, or they’ll face a 30% withholding penalty on some payments from the U.S.

W-8 and FATCA IRS Forms

Tax Reporting for ISO and NQSO

In December and January of each year, startups often start to wonder what they should be doing with all of those employees and contractors to which they’ve given incentive stock options and non-qualified stock options (“ISO” and “NQSO”).

There is a very important deadline for companies that have granted ISO’s or NQSO’s. The ISO and NQSO forms are due by January 31. Businesses only have a short window after the end of the previous year to make sure that you have the form for your employees and your contractors who have received this type of stock incentive.

Then, you need to know the difference between the two types of stock options—incentive stock options and non-qualified stock options.

Incentive stock options (ISO’s): Your startup can only give ISO’s to employees! And if you have, you’ll need to fill out Form 3921. Your CPA can complete the form for you, or if you have a special subscription on Carta or Capshare, they can assist as well.

Non-qualified stock options (NQSO’s): NQSO’s can be given to either employees or contractors. For employees, you will want to adjust box 12 on their W-2 Form, and provide it to them by January 31st. You’ll. need to work with your payroll provider, perhaps Gusto or TriNet, to make sure the W-2 adjustment is done. For contractors, you’ll need to file Form 1099 Miscellaneous.

That is tax reporting for ISO’s and NQSO’s! Again, for ISO’s must have a Form 3921 filed, and for NQSO’s you want to adjust employee’s W-2 for and file Form 1099 Miscellaneous for contractors.

R&D Tax Credits

There have been major changes in how R&D tax credits work in the United States recently, and now many unprofitable startups are eligible to actually save money on their payroll taxes by taking advantage of these changes! The maximum amount an unprofitable company can save is $250,000 per year in payroll taxes - so that means that an unprofitable startup could theoretically save up to a quarter of a million dollars next year! It’s a big deal.

Kruze Consulting has conducted R&D tax credit studies that are going to save our clients over $3 million in the coming year. Talk to our experts to see if your startup can cut its burn with these credits, and you can learn more about R&D tax credits for startups here.

What documents are needed to complete a startup’s tax return?

You will need the following documents in order for our accounting team to complete your return:

  • EIN Letter from the IRS (this is the Employer Identification Number letter that the IRS created for you when you requested an EIN for your company.)

  • Vital Business Statistics

    • Business Address
    • Shareholder SSN/Address info

  • Prior Year Tax Returns (Federal and States)

  • Local Tax Returns (if any)

  • Financials

    • Full year Balance Sheet
    • Profit & Loss Statement
    • General Ledger

  • Capitalization Table

Our web application makes it easy for you to share these files with us; simply login and upload the documents as you go through our tax software onboarding flow.

What documents are needed to complete a startup’s tax return?

What is an R&D tax credit and what does it mean for startups?

New tax laws now allow pre-revenue startups and unprofitable startups to save money on payroll taxes with R&D tax credits. That means you can cut your startup’s burn with an R&D tax credit study!

How do you get these tax credits and cut your burn? We recommend that you do an R&D tax credit study with Kruze. We are a specialized CPA that only works with funded startups. Our clients are collectively saving almost $5 millions this year in payroll taxes - that’s a lot of burns saved.

How much money can you save with the R&D tax credit?

We recommend a full study to determine the actual amount that your startup will save, but here is the rough math that you can do to estimate your potential savings. Multiply your qualified R&D costs by 10%. The maximum savings possible per year is $250,000 - so if you have $2.5 million in qualifying R&D expenses you can save up to a quarter of a million dollars in payroll taxes.

Do Startup Investors Get K-1 Tax Documents

Since most startups are Delaware C-Corps, the answer is NO, the company does not provide K-1s to the investors. More detail:

K-1’s are the tax documents that reflect gains or losses from entities like LLCs, S-Corps, or partnerships. Those entities are nicknamed “pass-through entities” because they pass the gain or loss onto their investors and owners. So if you’re an investor in a local coffee shop, that’s probably structured as an LLC and they made some money this year or last year, you will get a K-1 because of the LLC corporate structure. And it’s a pass-through entity and you will have to report the earnings from the K-1 on your tax returns.

Now, the good news is most startups are Delaware C-Corps. They are incorporated in Delaware and they do business in California, New York, Texas, Massachusetts, etc. But they’re usually incorporated in Delaware because like Business Case Law is really well known in Delaware and Delaware C-Corps hold the gain or loss at the corporation level. They do not pass on that gain annually to their investors. Now you do experience again in a Delaware C-Corp when you have a realization, meaning the company was sold so the shares were sold or maybe you do a secondary transaction sell some of your shares to another investor, or you get a dividend or if the company goes out of business you get a tax write-off for that.

So that’s when these kinda things come into play for the owners or investors of a Delaware C-Corp but you are not gonna give those investors in a Delaware C-Corp a K-1 because again, the gain or loss is held at the entity level.

Best Time to Send a W9 if a Vendor Needs a 1099?

First, a W9 is a taxpayer information form that is on the IRS website. Technically, you should send this to all of your vendors. However, not all may need a W9. You really just need to worry about the vendors that are independent contractors, sole member LLCs, partnerships, etc. You don’t have to worry about S corps or C corps.

So when is the best time of the year to send out the W9 so that you can determine whether the vendor gets a 1099 or not?

I recommend sending the W9 out at two times:

Right when you start working with the vendor and you are about to pay them.

  • Vendors are more responsive if their check is being held up for tax compliance.
  • A good practice is to bundle it with any contract you sign, especially with an Independent Contractor who you are almost positive needs a 1099. Often vendors are not responsive, or you want to batch W9’s for efficiency. There is a tradeoff between stopping what you are doing every time you start working with a new vendor to send a W9.

January 1-10

  • This is a good practice to send out W9’s to those for whom you do not have an up-to-date W9.
  • This allows you to batch the process and achieve some operational scale.

Qualified Small Business Stock

Qualified Small Business Stock, or QSBS, is a tax benefit that can have substantial advantages to startup investors. Investors in companies that qualify can save up to $10M a year, or 10x their investment, in capital gains.

Basic QSBS requirements are:

  • The company needs to be a Delaware C-corp company.
  • It must have less than $50 million in net assets on a tax basis.
  • The business must be in a hard science or innovation space.
  • The stockholder must own the stock for at least 5 years.

There are some other nuances, so you need to consult with a qualified tax CPA for both the company and for the individual taxpayer.

Employee Retention Tax Credit for Recovery Startups

The ERC for Recovery Startups is a tax credit for companies founded after February 15, 2021 that can reduce payroll taxes by up to $100,000. This tax credit is a great tax incentive that startups should be using if they were recently founded. It was authorized under the American Rescue Plan Act of 2021, and is designed to help companies that were founded during the COVID crisis. If your startup tax accountant isn’t talking with you about this incentive, reach out to us ASAP!!

Dividend Tax Documentation

The process for distributing dividends to private company shareholders is fairly simple - if you understand the tax documentation process for dividends. When it comes to the correct process for the IRS, big points to remember include not forgetting to send 1099-DIVs to shareholders, and making sure you fill out the correct box on the form. Watch our video or read our in depth article on tax documentation for dividends.

Kruze Startup Tax Returns

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2022 
Startup Tax Compliance Calendar

Concerned about your 2022 Tax Deadlines?
We've done the work for you with these 2022 Tax Compliance Calendars.

Check our 2022 Tax Deadlines For C-Corp Startups or Click for your customized compliance calendar by city

Atlanta

Atlanta
Austin

Austin
Boston

Boston
Mountain View

Mountain View
New York

New York
Palo Alto

Palo Alto
Salt Lake City

Salt Lake City
San Francisco

San Francisco
Santa Monica

Santa Monica
Seattle

Seattle
Washington DC

Washington DC

2022 Tax Deadlines For C-Corp Startups

Best TAx Accountants Near Me

Kruze is a leading preparer of startup tax returns to startups near you. We serve all of the United States from our locations.

Santa Monica

1515 7th Street #363 Santa Monica, CA 90401
(424) 610-8594

San Jose

75 East Santa Clara St San Jose, CA 95113
(408) 831-3221

San Francisco

600 California St. 12th Floor San Francisco, CA, 94108
(415) 322-1610

New York

145 W. 30th Street FL 7 New York, NY 10001
(646) 846-5801

Austin

10900 Research Blvd Ste 160c-3024 Austin, TX 78759
(512) 488-1540
(415) 322-1610

* NoteS: Starting prices are estimates, companies with unusual complexity, high transaction volumes or multi-state/international operations will result in additional fees (which will be discussed with the client prior to Kruze beginning the engagement); R&D Tax Credit analysis and preparation is not subject to the COST or timing estimate for a regular tax return. Please contact us if you have questions.

About Us

A CPA Firm Specialized in Startup Accounting & Finance

A CPA Firm Specialized in Startup Accounting & Tax

Startups are our niche and our passion. Our clients have raised over half a billion in venture capital financing in the past 12 months. We are one of only a few accounting firms that specialize in funded startups - we only offer financial and tax services to fast-growing startups in the Seed, Series A, Series B, and Series C stages.

A Startup Tax Expert

A Startup Tax
Expert

Nobody knows startup taxes better than our CPAs. Each year, we help hundreds of funded startups prepare federal and state taxes. Our firm has executed over $10 million per year in startup payroll tax savings - that means we help our startup clients each save up to $250,000 in payroll taxes each year. Our founder is a Deloitte Tax alumni.

Trusted by Top VC’s for Their Startups’ Taxes

TRUSTED BY TOP VC’S FOR THEIR STARTUPS’ TAXES

Top angel investors and VCs refer Kruze because they trust us to give the right tax advice. Our clients are portfolio companies of top technology and Silicon Valley investors, including Y-Combinator, Kleiner, Sequoia, Khsola, Launch, Techstars and more. With us, your taxes are in order when it’s time to raise another round of venture financing.

A Leader in Cloud Accounting Software

A LEADER IN CLOUD ACCOUNTING SOFTWARE

Our practice is built on best of breed cloud accounting software like QuickBooks, Xero, Netsuite, Gusto, Zenefits, Expensify, Avalara, Brex and Bill.com. Technology makes us more efficient, saving our clients money and letting us offer higher value services like FP&A modeling, 409A valuation, and venture debt consulting. Startups deserve to work with CPAs using modern software.

Be Ready for Your Startup’s Next Venture Capital Round

BE READY FOR YOUR STARTUP’S
NEXT VENTURE CAPITAL ROUND

We know how to de-risk your startup’s next venture capital round. When we do your startup’s tax returns, we make sure you are ready to fly through your next VC’s tax due diligence checklist. And when you use us as your bookkeeper, we maintain a due diligence folder so you can quickly respond to your next investor’s accounting questions.

Accounting, Finance, Taxes, & Payroll - All for Startups

ACCOUNTING, FINANCE, TAXES, & PAYROLL - ALL FOR STARTUPS

Startup CFO services, startup accounting, and bookkeeping services, startup annual taxes, expense reports, payroll, 409a, venture and venture debt consulting, FP&A, benefits: we’ve got your startup covered. And because we are leaders in cloud accounting software, we can deliver it all to startups at an affordable cost. Take your startup’s finances to the next level with Kruze!

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