Startup taxes: A simple guide

As a CPA-founded startup, we know that there’s a great deal to know when it comes to taxes. Below you will find some of the more common questions we receive from our users and our answers.
 

What if my startup didn't make any money? 

Unprofitable startups still need to file both federal and state tax returns. Other than the fact that your business is required by the law to file, there may be a financial incentive down the line for your startup to reporting its losses now. The current U.S. tax code allows businesses to reference past losses as a method of offsetting future taxes. In order to effectively leverage your past losses, they need to be properly reported. 
 

What’s new in the tax code that I should be aware of? 

Mostly, the laws have remained the same with the corporate tax rate most recently being cut down to a 21% flat tax rate in 2017. This tax cut remains positive for early-stage startups as even with profit increases, the startup’s tax rate will stay at 21%. We are here to answer any other questions you may have regarding news about tax updates. 

How do I file a tax return for my startup? 

In order to start the process of filing a tax return for your startup, organizing relevant and necessary documents is crucial. Tax preparers typically require the EIN letter, articles of incorporation, along with other documents depending on your business. Another important component is the startup’s books – it is important that they are in order. We recommend using reliable accounting software like our in-built accounting system or QuickBooks Online, which allows you to upload bank statements directly. Any tax preparer will require the startup’s Profit & Loss statement, end-of-year balance sheet and general information about your startup. Get a demo and get your tax return filed!

Why do I need a tax preparer? Can I not file the tax return myself?

While it may not be required to hire a tax preparer, having a tax preparer, and especially a reliable, experienced professional tax preparer, can benefit your business tremendously. Professional tax preparers are certified and trained in understanding each aspect of the tax code and compliance requirements. By utilizing a professional tax preparation service, your startup maximizes the tax credits and savings they are eligible to receive. There are a variety of complex rules and technicalities that an effective tax preparer will understand and leverage for your startup’s success. Whether it is specific deductions unique to startups, getting the R&D tax credit, making an election for the benefit for your startup, Arbo can help you focus on your business while we handle your tax needs.