Let’s face it; taxes are a necessary evil that often distracts founders from focusing on core business activities and cause undue stress. Your startup’s taxes are also more complex than personal taxes. Founders often miss deadlines, deductions, and credits that result in lost money and in some cases, real consequences.
It doesn’t have to be that way!
This startup business tax planning guide will walk you through everything you need to know so you receive the credits your CPA probably missed last year and ensures your business finishes the 2023 tax season more prepared than ever.
Get your financial records out! We're about to ace tax season with these startup tax preparation tips. And if you'd like to just be done worrying about your business' taxes get an annual tax quote from Zeni here.
What Startup Tax Return Forms Do I Need?
Before gathering your financial records, it's important to make sure you have the right tax *forms. Submitting the wrong forms to the IRS is a waste of time, and you may not receive money your startup is entitled to. So, here's the nitty-gritty on a few of the most essential types of federal U.S. tax forms based on your startup’s business structure:
*For a complete list of forms, download our 2023 Master Startup Tax Planner & Calendar
For C-Corporations:
- Form 1120 – Reports the income, gains, losses, deductions, credits, and figures the corporation's income tax liability.
For S-Corporations:
- Form 1120S – Reports the income, gains, losses, deductions, credits, and other domestic corporation or entity information for any tax year covered by an election to be an S-corporation.
- Schedule K-1 – Reports the income, losses, and dividends for a business or financial entity's S-corporation's shareholders; multi-member LLCs might also use this form.
For Partnerships or LLCs
- Form 1065 – Reports the income, gains, losses, deductions, credits, and other information from the operation of a partnership.
- Schedule K-1 – Partnerships and LLCs give the same form to their partners to complete before filing Form 1065.
When Are Business Taxes Due In 2023?
How you formed your startup will help you mark the right deadlines on your 2023 business tax calendar and give you time to start gathering materials. Don’t take these dates lightly. If you miss a date, the IRS can penalize you 5% every month for taxes owed. 60 days after the filing date, the minimum penalty is either $210 or 100% of the taxes owed.
Below are the income tax-related filing deadlines for US-based companies in the 2023 calendar year:
January 2023:
January 31, 2023:
- Form 1099-MISC must be sent to recipients for the 2022 calendar year
- Form 1099-NEC sent to IRS and contractors for the 2022 calendar year
- Form 3921 sent to employees for 2022 calendar year
February 2023:
February 28, 2023:
- Form 1099-MISC (paper file to IRS)
- Form 3921 (paper file to IRS) for 2022 calendar year
March 2023:
- March 1: 2022 Delaware (DE) Annual Franchise Tax Report & minimum payment due
- March 15: 2022 S Corp/LLC Income Tax Return/Extension
April 2023:
- April 15: 2023 CA Minimum Franchise Tax payment
- April 18: 2023 Federal/State Q1 estimated Income Tax payment
- April 18: 2022 C Corp/Individual Income Tax Return/Extension
June 2023:
- June 1: 2023 DE Franchise Tax Estimated Payment (40%, if applicable)
- June 15: 2023 Federal/State Q2 estimated Income Tax payment
September 2023:
- September 1: 2023 DE Franchise Tax estimated payment (20%, if applicable)
- September 15: 2023 Federal/State Q3 estimated Income Tax payment
- September 15: 2022 S Corp/LLC Income Tax Return (if extended)
October 2023:
- October 16: 2022 C Corp/Individual Income Tax return (if extended)
December 2023:
- December 1: 2023 DE Franchise Tax estimated payment (20%, if applicable)
- December 15: 2023 Federal/State Q4 estimated Income Tax payment
2023 Business Tax Deadlines For Fiscal Year Filers
While most businesses follow the standard calendar year, you may have a startup operating under a fiscal year or your startup dissolved on a particular date. Tax filing due dates for startups in this category will vary.
If that’s you, download our Master Startup Tax Prep Checklist & 2023 Tax Calendar for a complete list of deadlines.
Small Business Tax Planning Top Questions:
1. What Financial Records Does My Startup Need?
When you're unorganized, taxes are an even longer process. The key to success is staying on top of daily bookkeeping and "gathering as you go." Make sure you have a copy of every invoice and receipt for every purchase.
Here's a solid start to the financial documents to set aside for startup taxes. There may be other required records, but this should give you a healthy start:
- Profit & Loss Statement - Your profit and loss (P&L) statement indicates how much income you took in and how much your business lost through expenses.
- Bank & Credit Card Statements - Even though you detailed all your gains and losses, you still want to assemble monthly bank statements for all accounts.
- Invoices & Receipts - Yes, your bank statements will outline every dollar that went in and out, but you still want to provide more "evidence" of business transactions. Be sure to submit every invoice and receipt for business expenses over $75.
- Payroll Sheets - If you have employees, this is another major expense. Use your payroll software to indicate everyone's wages, deductions, and payroll taxes.
2. What Deductions Or Credits Can I Claim?
Common Business Startup Deductions
The best CPAs and tax professionals will quiz you on all the areas they think you'll be able to score a few tax deductions based on your business startup costs. Still, you should come to the table armed. Here are some common business startup deductions you might want to earmark:
- Cost Of Goods Sold – COGS covers all expenses tied to producing products or services. Use Form 1125-A to calculate and deduct COGS for certain entities.
- Depreciation and Amortization – Two methods of expensing the cost or value of business assets each year over the period of time the asset generates revenue. Take a more in-depth look here in our overview of EBITA. Use Form 4562 to claim deductions for depreciation and amortization.
- Home Office, Supplies, and Internet – This includes a percentage of square footage from the cost of your home, business-related office supplies, or a portion of your monthly home Internet bill used for business purposes.
- Payroll Expenses – Service fees paid to your payroll provider and workers' compensation insurance. Payroll taxes are also important to understand.
- Education – If you took any courses to improve your business.
- Utilities – Any overhead expenses used to fuel your business – heating, air conditioning, electricity.
- Business Insurance – Costs of general liability insurance, cyber liability insurance, commercial property insurance, or loss-of-income insurance.
New Business Tax Breaks
If this is your first year filing taxes for a new business, you may qualify for tax breaks specific to essential startup costs. Qualifying startup expenses fall within three key categories:
- Creating the business – Includes market research, product analysis, travel related to location selection, and more.
- Launching the business – Costs of hiring and training employees, travel expenses related to suppliers and distributors, marketing expenses, legal fees, and accounting fees. This does not include the cost of equipment, which depreciates under standard business deduction rules.
- Organizational expenses of forming the business – Incorporation paperwork, legal fees, state organization fees, accounting fees, and more.
R&D Tax Credit For Startups
Your company may be eligible for a Research & Experimentation Tax Credit (R&D Tax Credit) of up to $250,000 if your business spends money on research and development in the United States. Many tech companies are inherently eligible due to the nature of their business.
To see if your business qualifies, follow this 4-part test:
1. Do you have a permitted purpose? Your business must be designing and developing a new product or process, seeking to improve functionality, reliability, or quality.
2. Is your project technological in nature? The activities surrounding your project rely on engineering, biological, physical, or computer sciences principles.
3. Is there technological uncertainty? At the project's onset, the taxpayer must be uncertain about the method, capability, or design. Further uncertainties may occur during the project.
4. Is there a process of experimentation? There must be an evaluation of one or more alternatives to eliminate the technical uncertainty mentioned above.
To claim the credit, Partnerships and S-Corporations fill out Form 6765. All other businesses fill out Form 3800, General Business Credit. In either case, you submit the form along with your tax return.
3. Do You Have A Simple Business Tax Preparation Checklist?
Yes! We covered a lot of information today, so put everything together for you in one easy-to-use checklist. From a list of all required corporate and financial documents to making sure you have a growth plan for after you finish your taxes, we’re here to help.
Download our 2023 Master Startup Tax Planner to get started.
Expert Startup Tax Advisors Will Maximize Your Return
Zeni understands that missing key forms or deadlines on your business taxes can put you in real jeopardy when it comes to compliance and, ultimately, business growth.
Our tax planning strategy entails ensuring that your books are in order from day one and before critical due dates. We simplify this process by giving you access to an entire finance team under one roof. The Zeni Tax team and your dedicated financial controller work together to deeply understand your startup’s finances and streamline a complex process typically operated in silos.
Additionally, by helping you maintain accurate records for your business year-round, all the legwork is done by the time tax season comes around. No more scrambling or missing out on the money you deserve.
Interested in learning more? Book a 1-1 consultation to see how Zeni can help you make this tax season a breeze.
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