Get Your Tech Company’s Books Ready for Tax Time in 6 Steps

Feb 23, 2022


By Kacie Goff

With 2021 behind us, your startup is probably launching into 2022 goal-setting and strategic planning. But 2021 isn’t put to bed just yet. You still need to get all of your taxes squared away. 

Prepping for doing your taxes isn’t most founders’ idea of a good time. But putting in a little extra work before April rolls around can save you a major headache — and some money. If you’re organized heading into your tax filing meeting with your CPA, things go more quickly and smoothly. That can help you minimize expenses when it comes to getting your taxes filed, from billable hours with your CPA to extra costs for your bookkeeper’s troubleshooting services.

If you’re ready to put in a little effort to minimize frustration and spend, here are six steps you can use to get your books ready to file your 2021 taxes. 

Gather up the necessary documents

Fortunately, this is getting easier all the time. You don’t need to dig through some shoebox full of receipts anymore. The bank and credit card statements you can access online should do a good job of aggregating all of your expenses. 

If you use accounting software, you’re in even better shape. Tools like QuickBooks should pull everything into one place. Still, though, it’s important to check that all of the documents you’ll need are reflected in the platform(s) you’re using. 

As you’re gathering up tax documents, don’t stop there. It can also be helpful to dig out a copy of your 2020 tax returns to use as a point of reference. 

Also, make sure your team has everything submitted so that you can feel confident your December books are accurate. Specifically, make sure employees submit any remaining 2021 expense reports in a timely manner. 

Get everything entered

Now that you’ve got everything gathered up, make sure it’s all captured in the appropriate place. If you have any receipts that aren’t reflected in your accounting software or expenses spreadsheet, enter them manually. 

Beyond that, there are a few other areas to ensure are properly recorded:

  • Any business expenses you made with a personal account
  • Year-end inventory (record any surplus, for example)
  • Payroll reconciliation (note any uncashed checks, for example)

Assuming you’re using some kind of automated accounting software, this step should be a relative breeze. 


Now, it’s time to go through and make sure each transaction is appropriately categorized. This will make it easy for your CPA to see what might be a tax-deductible business expense, helping you maximize your net gains for 2021. 

Some common deductible categories include:

  • Payroll (i.e. Gusto/Justworks etc)
  • Employee benefits (i.e. Guideline 401k etc)
  • Website and software (i.e. AWS, Github, etc)
  • Advertising (i.e. Google/Facebook ads etc)
  • Insurance (i.e. D&O, Liability – Foundershield, Workers Compensation Insurance)
  • Legal & Professional – (i.e. Fundraising, Terms of Service, CPA/Bookkeeper fees) 
  • Dues and subscriptions (i.e. Loom, Linkedin, Amazon Prime, etc.)
  • Rent (i.e. WeWork/Co-working spaces etc.) 
  • Utilities (i.e. Internet / Phone etc)
  • Business meals and travel (Meetings with your team, investors, clients, etc.)
  • Equipment/machinery (i.e. Computers, Laptops, Phones, etc.)
  • Office supplies (i.e. Amazon, Staples, etc)
  • Taxes (i.e. Delaware Franchise Taxes etc.)
  • Business loan interest
  • Vehicle (including gas, insurance, and maintenance)
  • Training/education

If you want to do a deeper dive into which expense categories you can potentially claim as deductions, you can refer to IRS Publication 535, Business Expenses. Right now, the 2021 version is still just a draft, but it will give you a good idea of what you can expect. For a more in-depth look at what qualifies as a meal expense, you can check out our blog on Meals and Entertainment Deductions.


Balance and Reconcile

Once you’ve got everything gathered up, entered, and categorized, it’s time to make sure it all checks out. That means balancing and reconciling your accounts.

To start, reconcile what you’re showing in your 2021 spreadsheet or your accounting software with your account statements. Your bank records should match what you see wherever you’ve collected and organized all of your expenses. 

Then, make sure everything balances. Basically, the amount in your business bank accounts should match your 2021 gross profits minus your expenses. To check for balance:

  • Start by adding whatever was in your business bank accounts at the start of 2021 to your gross 2021 profits
  • Subtract all of your expenses, including payroll
  • Confirm that the number you’re left with matches the amount in your bank accounts at the end of 2021

If things don’t check out, now’s the time to find out why. It’s much better (read: more affordable) to troubleshoot this on your own than to discover you have an imbalance when you’re already sitting with your CPA. 


Figure out the forms

To make sure you’re getting your books properly prepared, it can be helpful to look into the tax forms you’re going to be required to file.

Federally, the paperwork the IRS wants depends on your business structure. As a C corp, you’ll use Form 1120.

Also, be prepared to file W-2s for all of your employees and 1099s for all of your contractors. 

If you’re not sure who you need to 1099, you can use this guide

Finally, look over whichever forms your state will require, too. If you’re operating in multiple states, make sure you’re clear on each. Remote work has made this more complicated so your CPA can help you determine your exact requirements.

Don’t get too overwhelmed here. Remember, your goal is to get your books ready, not to fully fill out the forms. Right now, you just need to glance over them to make sure there aren’t any glaring areas that need your attention. 

Talk with your CPA

Last, set up a tax planning session with your CPA. Meeting with them in January or February can help you pinpoint any potential headaches with your 2021 filings while you still have plenty of time to sort them out. 

During this meeting, your CPA can help you clean up your books, sort out any confusing areas, and project your tax liability for 2021. 

Not only does this mean your actual filing meeting will go a lot more smoothly, but it also helps to set you up for success in 2022. Knowing roughly what you’re going to owe to the IRS and your state tax agency ensures that you set aside ample cash. Then, you can use whatever’s left to drive your tech startup forward in the new year. 

Getting your books ready for tax filing requires some work on your end, but your CPA should be a big help here. If you want to talk with a certified tax professional with expertise in helping tech startups thrive, get in touch