Start the Year with a Clean Slate – Tax and Accounting Compliance

Life can become a blur when you are devoting so much time to a start-up business or to a new product release. As accountants, our job is to keep recordkeeping as up to date as possible while engineering and marketing move quickly to make sure the product hits the sales window at just the right time. Recordkeeping is especially critical at yearend. Now is a good time to take a minute to make sure all your company’s compliance requirements are being handled. To assist you in this assessment, here is a list of items that should be addressed in the next couple of months to make sure your company’s recordkeeping is maintained at the level expected by investors or other third parties.

Yearend Compliance:

  • Payroll tax filings are due 1/31/18 and should be handled by your payroll service or PEO. Issues can arise if multiple payroll services were used during the year. If this is your company’s situation, it is time to inquire that W-2s are going to include the full year of wages.
  • Typically, CA Sales tax filings are due 1/31/18. Sales tax requirements vary by state so there is no one size fits all for sales tax. If you sell outside California, you will need to inquire with the appropriate jurisdictions to determine all the filing requirements.
  • 1099s are required to be mailed both to the recipients and the tax authorities by 1/31/18. Your company may be missing tax ID numbers for some of your contractors, attorneys or landlords, so now is the time to make sure you have the appropriate W-9s and if not, start requesting them.
  • Exercises of incentive stock options are required to be reported on form 3921 which should be provided to the employees by January 31. Your company’s attorney typically prepares this form but a best practice would be to confirm the forms have been distributed and filed with the IRS.
  • The due date for income tax filings depends on the type of entity. S Corporations or LLCs must file or extend by 2 ½ months following yearend. C Corporations are required to file or extend the corporate tax returns by 3 ½ months after yearend.

In addition to the above items, there are other compliance filings that are common with technology companies including Delaware franchise tax reporting and the CA Secretary of State Statement of Information. A common mistake is to ignore notices related to these types of filings. To avoid penalties, call your CPA or tax advisor if you receive an unfamiliar notice.

Compliance Filing Due Dates

Yearend Accounting:

Investors and those charged with governance of your company assume that the accounting records are being maintained. They are relying on the accounting information presented in internal financial statements to make decisions. Yearend is the time to make sure that bank accounts are properly reconciled, bank card activity is recorded, and employee reimbursements for expenses are current. Detail of subledgers (like accounts payable and accounts receivable) should agree to the control account in the general ledger.

Annual Valuation:

Companies that issue stock options need to assess if a 409A valuation is needed. Establishing an annual practice of having an external valuation of the company makes sense for a company that is in growth mode.

Often times when the company is raising financing or going through acquisition due diligence, management gets a wake-up call if they have been lax regarding compliance and accounting. Don’t wait for that wake-up call. There are resources available to make sure that you are proactive and start the year with clean records.