Tax Filing 101 For Startups
Is this your first time filing taxes for your company? If so, this article is perfect for you! Here are three simple steps for you to follow to ensure you have a smooth and cost-efficient tax season!
Step 1: Know your deadlines
· State and Federal taxes for LLCs & S-Corps: March 15, 2019
· State and Federal taxes for C-Corps: April 15, 2019
· Delaware Franchise Tax: March 1, 2019 for all LLCs, S-Corps and C-Corps incorporated in the state of Delaware. Here is the link to file the Delaware Franchise Tax: https://www.delawareinc.com/payft/
Step 2: Review and clean up your 2018 data
Do you want to leave all the cleanup work for your CPA? It will cost you. The most cost-efficient way to do cleanup your 2018 accounting book is to hire someone experienced with financial reviews and bank reconciliations – for example, an experienced accountant or financial analyst.
The obvious mistakes that you could avoid are: duplicated revenue, pre-earned revenue, unpaid salaries/payroll-related expenses, asset depreciation, and more. You want to record the revenue and expenses that have incurred for 2018 and defer the revenue and expenses you received/paid in 2018 but belong to 2019.
Needless to say, cleaning up your 2018 book is very beneficial to having an accurate tax return.
Step 3: Make tax payments on time, even if you have an extension to file the paper later
Are you thinking about filing the tax in a later day? The deadline to file for an extension is March 15 for LLCs and S-Corps, or April 15 for C-Corps.
Filing for an extension gives you an extra 6 months to file your tax return, but it does not give you an extension to pay any taxes you owe. No matter what, you must estimate how much taxes you owe and pay that amount by the due date. If do not pay your balance on time, you will be penalized and forced to pay interest on any unpaid taxes owed. So remember, make your payment on time!
Most common tax scenarios:
Scenario 1 - If your company did not have any sales for 2018:
Do you still need to file taxes if your company did not make any sales in 2018? The answer is yes!
The IRS requires you to file taxes regardless of whether any sales have been made. Actually, it is to your advantage for you to file taxes! Why? When you initially started your company, you paid for company incorporation fees, attorney fees, CPA fees, banking fees, etc. All these expenses are tax credits that you can claim and carry over to the next year.
Scenario 2 - If your company is a foreign-owned company, you will need to obtain your Individual Taxpayer Identification Number (ITIN) number first.
When you are a foreign citizen who does not live in the U.S. and does not have a Social Security Number (SSN) or ITIN, you have two options to obtain a tax payer ID to do the tax filing:
1) Mail your passport in to the IRS to get an ITIN number
2) Find an ITIN- certified accepting agent to verify your passport and apply for an ITIN for you
If you read all of the steps above, you have now obtained all of the fundamental knowledge on tax filing for companies! For any further questions, feel free to contact us – Advisori Finance Team.
