Atlas just released my favorite feature yet: tools to help companies incorporated with us navigate tax season. https://stripe.com/blog/atlas-taxes … Unsurprisingly for someone who filed five tax returns last year in two countries, I was very enthusiastic about getting this done. Thoughts:
-
-
Virtually no entreprenur really loves the experience of paying taxes. At small scales of a business, the best way to ensure that you're paying only what you owe is to make sure you capture all business expenses in your books.
Show this thread -
One year the assistant who I had doing my books for me dropped one page of credit card statements on the floor while doing data entry. It had ~$14,000 of expenses on it (a business trip). If they hadn't been calculated in our P&L, that would have cost us $5,000.
Show this thread -
"How would you not notice your profit figure being off by $14,000?" That is *very easy* to do if you do not have your systems and processes set up to effortlessly keep accurate records. Your business will *very quickly* outrun your working memory.
Show this thread -
You've probably kept up a household before. This is harder. Speaking of which: separate your household expenses from your business expenses.
Show this thread -
In the beginning, like many entrepreneurs, I was using my own checking account, Paypal account, and credit card for the business. This is very suboptimal.
Show this thread -
Credit cards are available like candy. Get a new one; religiously use it for anything business-related. This helps you default to success: the credit card statement is a record of most business expenses and no non-business expenses; no expenses sneak onto your personal card.
Show this thread -
If you inadvertently use it for something you shouldn't have, your accountant or bookkeeper can correct that for you. This discipline will prevent you from having to walk through literally every transaction you made last year trying to find the ones that were business related.
Show this thread -
In general, my peers and I are relatively conservative with regards to having the business pay for things. This is a great thing to discuss with your accountant; they can help you calibrate a division appropriate for your jurisdiction, industry, and comfort level.
Show this thread -
Revenue is so much easier to track for Internet businesses than expenses are, principally because you're probably using a payments processor which keeps really good records as a matter of course.
Show this thread -
In Japan we have to produce a record of revenue per month, which (back in the day) I had to write Ruby scripts to get out of my Stripe account. Pro-tip: sometime between then and now Stripe added a monthly report; you can find it in Business -> Data at https://dashboard.stripe.com/account/data
Show this thread -
(You can *also* use Sigma to write SQL directly against your Stripe account. Which is probably overkill for most small Internet businesses but it's a really gloriously fun kind of overkill. Yeah, nothing like tax season to make me think that SQL is a fun diversion.)
Show this thread -
Anyhow, back to taxes. You can, and should, have conversations with your accountant well in advance of tax season (which is approximately January through April). They've got lots of free time the rest of the year, and you have some planning to do.
Show this thread -
I generally talked to my accountants roughly quarterly when running a business, and before major moves like e.g. preparing to sell it. This is partly to let them give you early warning of things like "So Patrick you do realize that Japan is your 60% equity cofuonder right?"
Show this thread -
(I, uh, did not, but I'm really glad I found that out prior to spending 60% of the proceeds of the sale on e.g. a downpayment on a house.)
Show this thread -
Another reason is to get the help of a money-savvy professional who is outside the day-to-day of the business, to sanity check things for you. My accountants consistently picked up on e.g. impending cashflow issues or general health-of-business things when my head was in weeds.
Show this thread -
There's a complicated decision tree of how long to keep financial records, but explaining it would be accounting advice. "You should have a Dropbox account" is probably not accounting advice. I have never, ever, ever said "Man I am glad I threw away that business record."
Show this thread -
For really boring reasons, I had to show the State of Missouri (n.b. last set foot in it in 2004) a piece of paper issued in 2004... in 2016. Which I was trivially able to do because hard disk space is cheap and Dropbox / Tarsnap work very, very well.
Show this thread -
A surprisingly useful thing that I've done is wrote a one-pager "What happened this year" for each line of business, for consumption by the accountants. (In my case, heavily sourced from my public end of year review blog posts.) These get more valuable each passing year.
Show this thread -
"What should I do if I get audited?" You email your accountant and say "Hey a low-probability routine event has happened. What should I do about this?"
Show this thread -
I was audited by the State of Hawaii one year, because one of my companies had registered to file a bid with one of their agencies, and then they didn't get a business privilege tax return from us the next year. Responding to the audit took 45 minutes.
Show this thread -
General flavor of the interaction: "How much revenue did you have in Hawaii last year?" *SQL query* $180. "Wait, what. OK, you're done."
Show this thread -
In general, exuding professionalism will make many, many interactions with government (and other bureaucracies) go better for you. You want to be polite, compliant, and armed-to-the-teeth with well-organized records. And, again, this is why you pay your professional advisors.
Show this thread -
Accountants generate immediate ROI at any scale of business larger than a bake sale. My Japanese accountants, for example, caught that I had filed an exemption from consumption tax because all of my sales were exports of software. That was not an optimal filing.
Show this thread -
The optimal filing was to file a consumption tax return, saying that we had $0 of sales subject to consumption tax. And then claim back all the consumption tax our business had paid (on business expenses). Resulting in a tax refund of several times what I paid accountants.
Show this thread -
"Wait you can get radically different results from the same facts with just tiny changes in what you type on your return?" You sound very surprised, hypothetical person who probably has programmed before.
Show this thread -
If you read this far, you might want to check out our guide to business taxes: https://stripe.com/atlas/guides/business-taxes … If you're an Atlas company, we've got a quick survival guide for tax season here:https://stripe.com/atlas/guides/tax-season …
Show this thread
End of conversation
New conversation -
Loading seems to be taking a while.
Twitter may be over capacity or experiencing a momentary hiccup. Try again or visit Twitter Status for more information.