Nobody likes tax season – even unprofitable startups have to file returns. And that means paperwork, competent financials, and answering lots of detailed questions … all of which take time that startup CEOs would rather spend growing the business. The good news is that a few hours of prep before year‑end can save days of stress in March and April, reduce your tax bill, and cut the risk of costly penalties.
Having helped prepare thousands of returns for venture‑backed startups, the Kruze team has a clear view of what actually makes tax season easier for founders. Use this 10‑step checklist to get ahead of tax season.
1. Review your financials and close the year cleanly
Review your year‑to‑date financials and make sure your books are ready for a clean annual close. Answer any open questions from your bookkeeper or controller, and clean up any “uncategorized” or “ask my accountant” expenses before year end. Confirm that all bank and credit card accounts are reconciled, payroll is posted correctly, and major contracts or one‑off transactions are booked to the right accounts and periods. The more accurate your P&L statement and balance sheet are on December 31, the faster and cheaper your tax prep will be.
2. Confirm who is filing what (and when)
Don’t assume your tax preparer is handling every filing. Confirm exactly which returns your firm will prepare (federal, state income/franchise, city filings, 1099s, etc.) and which ones you or your payroll provider own. Kruze maintains updated federal and state deadline lists for Delaware C corps and key startup hubs like San Francisco and New York – use those to build your calendar so nothing slips. If you need extensions (for example, Form 7004 for your corporate return), decide that early so there’s time to prepare them correctly.
3. Prepare sales‑by‑state revenue reports
Your tax accountant needs a clean breakdown of revenue by state to calculate apportionment and file accurate state returns. Before tax season, pull sales‑by‑state reports from your billing or revenue system (for example, Stripe, Chargebee, Shopify, or your ERP) and make sure they tie back to your general ledger. This step is especially important if you’ve added new states, remote employees, or significant customers in new jurisdictions in the last year.
4. Confirm your core business information
Companies change more than founders realize. Before your CPA starts your returns, send an updated “company profile” that confirms legal entity name, EIN, address, state of incorporation, any fiscal year changes, and any major ownership or cap table changes that occurred during the year. Misaligned entity details can cause notices, delayed refunds, or rejected e‑filings.
5. Have employees update their details with payroll
W‑2 season is not the time to discover that someone’s name, SSN, or mailing address is wrong. Ask employees to log into your payroll system and confirm their personal details (legal name, address, tax elections) before year-end. This helps avoid corrected W‑2s, frustrated employees, and messy follow‑up with payroll and your CPA. If you have remote employees in multiple states, verify that each person’s work location and state tax setup are correct as well.
6. Collect W‑9s from U.S. contractors
If you paid U.S. contractors or vendors who should receive 1099s, you need W‑9s on file. Make a list of all service vendors and independent contractors, confirm who needs a 1099‑NEC or 1099‑MISC, and collect missing W‑9s now instead of chasing them in late January. Your CPA and/or payroll/1099 platform will use these to generate and file information returns with the IRS and send copies to payees.
7. Collect W‑8 BEN / W‑8 BEN‑E from international vendors
If you work with international contractors or vendors, you’ll typically need W‑8 forms (for example, W‑8 BEN or W‑8 BEN‑E) instead of W‑9s. These forms help document the foreign status of the payee and determine whether any U.S. tax withholding or reporting applies. Getting them early keeps you compliant and reduces last‑minute friction with your tax preparer.
8. Get ready to claim the R&D tax credit
For many unprofitable, venture‑backed startups, the R&D tax credit is one of the most valuable levers to reduce burn. Unprofitable startups can often cut their cash burn by claiming a federal R&D credit that is typically worth 5-15% of qualified research expenses and can be used to offset payroll tax. To support an R&D study, start now:
- Estimate how much of your engineering and product team time was spent on qualified R&D.
- Gather documentation (project specs, Jira tickets, Git history, design docs) that shows what work was done.
- Tag R&D‑related expenses in your GL so that your CPA can identify eligible costs efficiently.
Kruze also offers an online R&D tax credit calculator to help you estimate potential savings before you commit.
9. Prepare foreign subsidiary financials and international reporting
If you have foreign subsidiaries or operations, your U.S. tax return will likely require additional international reporting. Your tax preparer will need local books for each foreign entity to complete forms like Form 5471 (information returns for certain foreign corporations) that attach to your Form 1120. Give your international accountant or local firm an early heads‑up so they can close their books and provide financials in time.
Also remember that certain foreign bank and financial accounts must be reported separately via the Report of Foreign Bank and Financial Accounts (FBAR) and potentially Form 8938. Failing to file these can lead to significant penalties, so flag any non‑U.S. accounts to your CPA early.
10. Plan ahead for FBAR and other high‑penalty filings
If your startup holds overseas bank accounts, custodial accounts, or certain foreign financial assets, you may have FBAR and related reporting obligations. These filings live outside your regular income tax return but are triggered by account thresholds and ownership structures, so your CPA needs a complete list of foreign accounts, maximum balances, and ownership details. Treat these as “must‑do” items, because the penalties for non‑compliance can be severe even if your startup is losing money.
Bonus: Centralize your tax documentation
One of the simplest ways to make tax season easier is to gather documents as you go, not the week before your deadline. At a minimum, create a shared folder (by year) that includes:
- Year‑end financial statements (P&L, balance sheet, cash flow, GL detail)
- Bank and credit card statements for the full year
- Payroll reports and W‑2 summaries
- Cap table exports and equity/SAFE/convertible note documents
- Major contracts (large customers, loans, leases)
- Prior‑year tax returns and any IRS/state notices
Your CPA will ask for most of this anyway, so having it ready shortens the tax prep cycle and reduces back‑and‑forth.
Why work with Kruze for startup taxes?
You can make tax season much easier by working with a firm that lives and breathes venture‑backed startups. Because Kruze handles both your startup’s books and taxes, we can catch issues earlier, structure your financials in a founder‑ and investor‑friendly way, and make sure you don’t miss valuable credits and deductions like the R&D tax credit.
We only work with venture capital and seed‑funded startups, which means we understand Delaware C-corps, SAFEs, complex cap tables, multi‑state payroll, and the unique tax questions investors ask. If you want your tax season to be as painless as possible, contact us today or check out our startup pricing and resources to get started.
Vanessa Kruze, a seasoned CPA, has an impressive track record prior to establishing Kruze Consulting. Her experience includes pivotal roles at Deloitte Tax and as a controller for a substantial startup with over 120 employees and $20 million in revenue. Under her leadership, Kruze Consulting has emerged as a distinguished CPA firm, recognized on the Inc 5000 list for five consecutive years, illustrating rapid growth and success in the competitive accounting landscape. Vanessa's unique approach, combining deep industry knowledge with advanced automation and software solutions, has positioned her firm as a leader in providing comprehensive accounting services to startups across the United States.
