With the New Year upon us, it is time for businesses to prepare their 2015 annual tax returns that are due in less than 60 days. Business tax returns can be very complicated, especially in the ever-increasing technology sector. It is prudent to engage a tax professional cognizant of compliance requirements and adept in this fast paced industry.
Below is a list a list of questions or comments you should expect to hear from your accountant as they prepare your 2015 business tax return:
- Have there been any changes in your ownership this year?
Emerging technology companies often will go through several rounds of financing, usually in a combination of debt and equity. It is important that your accountant understands the terms of these deals, particularly if there is an equity shift involving a more than 5% shareholder or if there is an international investor in the business.
- In what states do you currently own property of have employees?
Technology businesses can hire employees to work remotely in multiple states or will often lease technology equipment in states outside of their domicile. By having employees or leasing property in a new state, a business creates nexus in that state and may have additional business tax and sales tax requirements.
- What kind of research and development projects are you currently undertaking?
With the passing of the Protecting Americans from Tax Hikes (PATH) act, the increasing research activities credit is now permanent. Startup technology companies can benefit greatly from this credit, particularly as a shield against tax and future profitability.
- What kind of Capital Expenditures did you do in 2015? What do you have planned for 2016?
The PATH act also permanently extended Section 179 expensing, allowing businesses to deduct up to $500,000 of capital expenditures immediately. In addition, they should advise you about the changes in the de Minimis safe harbor for deducting expenses up to a certain dollar amount, which increased to $2,500 for the 2016 tax year.
- Where do you want to go? What are your goals?
Your advisors should always have your goals and best interests in mind, and want to understand your business goals. By making sure they understand what you want to do, they can help provide their expertise to help your company achieve such goals.
If your intuition is telling you that your current accountant only looks in the rearview mirror, then 2016 is the year to find a better driver. Time and time again, due to erroneous advice during the fragile business growth phase, potential acquisitions or financings are disrupted based on inefficient tax structures caused by non-compliance with tax requirements. Finding a tech-based accountant to ensure compliance and demonstrate forward thinking strategies is vital to your business plan. Before you test drive any new talent, be sure to check references, recent testimonials, and above all the firm’s reputation.
Edward McWilliams, CPA