Tax Preparation Checklist for Startups

Company Information

1. EIN – A document issued by the IRS to confirm the unique Employer Identification Number for a new business.
2. Articles of incorporation – Formal documents filed to legally create a corporation.
3. List of states in which your business has nexus – Payroll by state, Sales by State, and Rent/Property by State should be maintained throughout the year.
4. Last year’s returns – Collect copies of last year’s federal, state, and local tax returns.
5. Estimated payments made – Document the amounts and dates of any estimated tax payments you’ve made throughout the year.
6. Organizational chart – Showing the owners’ relationships between legal entities in the corporate family. Foreign subsidiaries have special filing requirements, and failure to file can result in hefty penalties (of $10,000 per form), as discussed below.

Shareholder Information

1. List of shareholders – Create a list with the name, address, and SSN or EIN of each shareholder.
2. Stock ownership – Document each shareholder’s stock ownership.
3. >20% Foreign shareholders – Document any transactions (direct or indirect) between the entity and the foreign shareholders. Failure to disclose such transactions can result in hefty penalties (of $25,000 per form), as discussed below.

Financial Records

1. Year-End Balance Sheet – Review fixed assets for disposals or obsolete items before year-end to simplify depreciation schedules.
2. Income Statement (Profit & Loss) – Categorize expenses consistently each month to reduce cleanup time during tax prep.
3. Cash Flow Statement – Use this report to spot cash shortfalls early and plan for quarterly tax payments.

International Taxation

International taxation adds a layer of complexity, especially for startups with foreign subsidiaries or foreign shareholders. U.S. companies with foreign subsidiaries generally must file Form 5471 with their corporate tax return, which requires detailed financial information for the foreign entity. That information often needs to be restated under U.S. GAAP, even when the local books were prepared using different accounting standards. Reconciling those differences can be time-consuming, and mistakes can trigger scrutiny or penalties. This is one area where working with seasoned tax professionals can pay off quickly, helping ensure filings are accurate and issues are caught early.

Burkland’s tax experts are here to help you navigate through these issues and save you time. Contact us to streamline your startup’s tax preparation and avoid potential penalties.