Tax Preparation For US Startups

Early-stage companies get tax wrong in expensive, avoidable ways: a missed 83(b) election, an R&D credit left on the table, a blown S-election deadline, foreign founders triggering 5472 reporting nobody mentioned. Next Tax Source prepares your federal (1120 / 1065) and state returns with full workpapers, flags every election and credit you're entitled to, and routes the final return to a licensed CPA for review and signature before anything is filed.

Who This Is For

Startup tax preparation is not the same exercise as filing for an established small business, and treating it that way is where most early companies lose money. The decisions you make in your first two filing seasons — entity classification, accounting method, how equity was issued, which credits you claim and preserve — compound for years. This page is written for the founders we most often work with:

• Delaware C-corporations that have raised, or are about to raise, a priced round and need investor-grade returns and a clean cap-table-to-books trail
• Pre-revenue or pre-profit companies that assume they have nothing to file — and are wrong
• Founder-owned LLCs and partnerships deciding whether and when to convert to a C-corp or elect S-corporation status
• Non-US founders who incorporated a Delaware entity remotely and have never been told about Form 5472
• Companies with engineers, contractors or sales staff across multiple states who have quietly created income- and sales-tax nexus

If any of those describe you, the cost of getting it right the first time is a fraction of the cost of unwinding it during due diligence. You can book a private consultation to talk through your specific structure before your next filing deadline.

What's Actually Involved In A Startup Return

A complete startup engagement runs well beyond the federal form itself. The federal return — Form 1120 for a C-corp, 1120-S for an S-corp, or 1065 for a partnership — sits on top of a stack of supporting work, and the supporting work is where credits are won or lost.

We start by reconciling your books for the full year so the numbers on the return tie exactly to your accounting platform and bank statements. From there we layer in the elections and positions that matter at your stage: capitalisation versus expensing of research costs, depreciation and bonus-depreciation choices, organisational and start-up cost amortisation, net operating loss tracking, and the research credit study where you qualify. We then prepare state returns and registrations everywhere you have nexus, plus the Delaware franchise tax report if you incorporated there.

The research credit is frequently the single most valuable item for an early company. Under IRC Section 41, qualified small businesses can elect to apply a portion of the credit against the employer share of payroll taxes rather than income tax — which is exactly what a pre-profit startup needs, since it has no income-tax liability to offset. We assess eligibility, build the supporting study, and prepare Form 6765, then route the whole package to a licensed CPA for review and signature.

The Mistakes That Cost Startups The Most

Almost every expensive startup tax problem we are brought in to fix traces back to one of a handful of avoidable errors. The pattern repeats because founders are heads-down building, and the tax consequences of early decisions are silent until they aren't.

• Missed 83(b) election. A founder receiving restricted stock generally has 30 days to file an 83(b) election with the IRS. Miss it and you can face tax on appreciation as the shares vest — a window that cannot be reopened.
• Assuming a dormant company files nothing. A Delaware C-corp must file Form 1120 and pay franchise tax even with zero revenue. The IRS treats non-filing far more harshly than a return showing a loss.
• The foreign-owned LLC 5472 trap. A US LLC with a foreign owner is generally required to file Form 5472 with a pro-forma 1120. The penalty for failing to file is substantial and per-return — and most affected founders have never heard of it.
• Blown S-election timing. The deadline to elect S-corporation status for a given year is strict; founders who decide in March that they "want to be an S-corp this year" have often already missed it.
• Ignoring state nexus. A single remote engineer or a stock of inventory in another state can create income- and sales-tax filing obligations. Discovering this in diligence is far more painful than registering proactively.

How Next Tax Source Handles It

Our process is built so nothing falls through the gap between "the books" and "the return." A specialist prepares the full workpaper set; our cross-border desk handles any non-US-founder exposure directly; and a licensed US CPA or Enrolled Agent reviews and signs every return before it is filed. No figure goes onto a form that hasn't been verified against your documents or current IRS guidance — anything uncertain is flagged for human confirmation rather than assumed.

We also keep your books reconciled monthly through the year, so the return is a formality rather than a fire drill, and so an investor's diligence team finds a clean trail. Where elections like the 83(b) or S-election carry hard deadlines, we calendar them the moment we learn of the triggering event. You can see how engagements are scoped and priced on our pricing page, run the numbers yourself with our calculators, or read more founder-focused guidance in the Next Tax Source Journal.

What To Prepare Before We Start

The faster you can hand over a clean information set, the faster we can identify every credit and election you're entitled to. Before your first filing season with us, gather:

• Your certificate of incorporation, EIN confirmation (Form SS-4 / CP 575), and any state registrations
• Your cap table and records of every equity issuance, including any 83(b) elections already filed
• Full-year bookkeeping or access to your accounting platform, plus year-end bank and credit-card statements
• Payroll reports and contractor 1099 records, and a list of every state where staff or contractors work
• Documentation of research and development activity if you intend to claim the research credit
• For non-US founders: passport, ownership details, and any prior 5472 or 1120 filings

Questions People Ask