Let's be real. Nobody likes filing taxes. (At least, I've never met anyone who does).
Taxes can eat up a good chunk of your time. Keeping up with all the necessary tax documents, meeting deadlines, and worrying about tax compliance can be stressful. (Believe me ... I get it. I've done it myself).
However, I've found that knowing what to expect — and preparing your financial reports ahead of time — makes tax filing easier. So I've put together a checklist of all the documents and information you need to file next year's taxes.
Year-End Tax Checklist for Startups
This year-end tax checklist includes everything you need before filing your taxes. To simplify things, I've divided it into two parts:
- Reports to check before the end of 2022
- Reports to check at the beginning of 2023
Let's get started.
Reports to Check Before the End of 2022
Get ahold of the following documents before the end of this year:
1. Tax Returns (2021)
Have your Federal, State, and Local tax returns for 2021 assembled and ready. You need to file last year's tax returns — even if your company lost money. Why?
The current tax code lets businesses use past losses to balance out future taxes. So if you make a profit in 2022, you can use your 2021 losses to offset some of your tax liabilities.
Need help?
Feel free to reach out to us. Our team understands the ins and outs of business taxes — including deductions and credits for startups. We'll help you file your tax returns, so you know that (a) they're correct and (b) you're getting the maximum benefit.
2. Financial Statements (2021)
Gather last year's financial statements (from January 1 to December 31, 2021). These include the following items:
- Profit & Loss Statement
- P&L statements show your company's income, expenditures, and profitability over time
- Balance Sheet Statement
- A balance sheet shows your company's financial position — including its assets and liabilities — and the owner's equity
- Cash Flow Statement
- A CFS summarizes how your company generated and managed money to pay its debt obligations and fund its operating expenses
But we're in 2022. Why do 2021 financial statements matter?
They help you offset your capital gains against your losses and determine your tax liabilities.
Don't have one of the documents listed above? No worries. Our accountants can help you access them.
3. Employer Identification Number (EIN)
Know your Employer Identification Number (EIN). The IRS assigned this unique number to your business.
Not sure what your EIN is? Find your EIN letter. The IRS sends this letter in Form CP 575 within 8-10 weeks of assigning your Employer Identification Number.
If you can't find your letter, Fondo can help you request it from the IRS.
4. State Tax IDs
Next, you need your State ID number for the state where your business is registered/has full-time W-2 employees during 2022.
- A W-2 employee is a permanent employee who receives a W-2 tax form from their employer (before January 31 of each year)
- Employers withhold taxes from their wages, pay employment taxes for them, and provide benefits like Social Security and Medicare
If your business is registered or has full-time W-2 employees in more than one state, keep records of the states and their ID numbers. You'll need all this information when filing state taxes.
5. Docs for Your 1099s
If you work with independent contractors, you need to dig up their completed W-9 forms.
Why?
Well, you'll have to fill out Form 1099 for each independent contractor before January 31, 2023. But before you can do that, you need more details from them. W-9s provide those details:
- Each form includes the legal name, address, and taxpayer identification number (TIN) or Social Security number (SSN) of an independent contractor, freelancer, or self-employed person
- They also show tax info for all the non-corporations (e.g., law firms, landlords, contractors paid via ACH or wire, etc.) you paid more than $600 during 2022
In other words, gathering necessary info about each of your independent contractors or freelancers is a major preparatory step in filling your 1099s.
Reports to Check at the Beginning of 2023
Finish your tax filing prep by checking these documents at the start of next year:
1. Financial Statements (2022)
Gather your 2022 financial statements. These include the following:
- Profit & Loss Statement
- This statement shows your revenue minus expenses for 2022
- Balance Sheet
- This includes total cash, accounts receivable, inventory (if applicable), depreciation for fixed assets, and your capitalization table. (See details on obtaining your cap table below)
- Trial Balance
- Your 2022 trial balance shows the debit and credit balances for all general ledger accounts
- General Ledger
- This is a record of your company's past debit and credit transactions for each account
- It includes each transaction's date, amount, and description
2. 1099s
You must issue Form 1099 to each independent contractor before January 31, 2023.
You've already prepped some work by obtaining your W-9s. Now, you just need to:
- List all non-corporations to whom your business paid more than $600 during 2022 — including (but not limited to) law firms, landlords, and contractors paid via ACH or wire
- Note the total amounts paid with Tax IDs
3. Capitalization Table
Obtain an updated cap table (updated as of December 31, 2022). Your capitalization table shows the following info:
- The breakdown of your shareholders’ equity
- Each type of equity ownership capital, the individual investors, and the share prices
- Details on potential new funding sources, mergers and acquisitions, public offers, and other speculative activities
You need an updated cap table to reconcile your financial statement — especially the "equity" section. It also helps you show details (e.g., share count and ownership) when filing state, municipal, or Delaware Franchise taxes.
Ticking Off Your Year-End Tax Checklist
In summary, here's everything you need to have ready before you file your taxes:
- Tax returns
- Financial statements (2021)
- Employee Identification Number
- State Tax IDs
- Docs for your 1099s
- Financial statements (2022)
- 1099s
- Capitalization table
Note: Depending on your specific business demands or operations, you may need to add items to this list.
If you're unsure about the specific requirements for your business or are unfamiliar with corporate taxes and their deadlines, reach out to our team at Fondo. We'll guide you through the process, gather any missing financial documents, and help you file your taxes accurately and on time.
