5 ms·

Ask HN: Joined a startup? Your taxes are about to get complicated. Questions?

8 points by brntsllvn 3y ago

I'm a tax nerd and software developer. What startup tax questions would you like answered? Example: what the heck is 83(B) and will it save me money?

infamouscow 3y ago
I'd be interested to learn more about if or how stock priced exclusively in BTC (i.e., never in USD) affects taxes. Any info you could share would be appreciated :)
- brntsllvn 3y ago
  I'm assuming you are US-based. If you receive compensation in stock, no matter the currency denominator, it is income and is therefore subject to income tax. Your employer should produce a W-2, and your share grant will be included.
momofuku 3y ago
Actually, I'll be joining a startup-ish in about 1.5 months. I am an immigrant and this will be my first job out of school. What do you mean taxes are about to get complicated :eyes:
- brntsllvn 3y ago
  When you're compensated in private shares, you still owe tax on them. With public companies you typically "sell to cover" when you vest, but this isn't possible with private shares. The workaround is the 83(B) election.
  - yuiotyu 3y ago
    [flagged]
ThrowAway0127 3y ago
What are some great resources to learn personal taxes and all of the forms, deductions, exemptions, etc? What are some resources for understanding business taxes? (LLCs) I have a small single member LLC and want to understand more about how/when I need to file, what I can add to the list for deductions, etc.
- brntsllvn 3y ago
  Great resource: https://www.linkedin.com/in/markjkohler/ https://www.linkedin.com/in/markjkohler/ follow him and learn Biz tax is a deep topic. Short answer is the LLCs are passthrough, which means you'll receive a k-1 from your accountant that you include in your personal return. Quick strategy tip: have your accountant apply for S corp status for your LLC. You'll pay less tax right away.
  - jawmes8 3y ago
    Can an S corp be single member? What are the drawbacks to using an S corp as opposed to an LLC?
    - brntsllvn 3y ago
      S Corp is just a tax filing status. Your legal entity remains an LLC. The benefit of S Corp tax status is that you pay yourself a dividend in addition to your income. They are taxed differently. The drawback is you now have a payroll obligation. An LLC can be single member. An LLC with S Corp tax status cam also be single member. There's a lot of info about S Corp status online. Hopefully this puts the strategy on your radar for more investigation.
      - jawmes8 3y ago
        Thank you! That is helpful to know.
  - psyklic 3y ago
    Note in CA, there are additional reporting requirements. This is not tax advice, but I believe passthrough single-member LLCs (including no-income) must file Form 568 by March 15 and pay a mandatory $800 annual fee by April 15. (Other types/taxation methods could have slightly different requirements.)
yellow_lead 3y ago
Is there any way a pre-IPO startup can give equity without imposing a tax burden on employees? For instance, if an employees options vest, I believe they are required to pay taxes on the computed value of the shares. But in i.e a pre-seed company, there may be further dilution, so you end up paying tax on something that is lost in the end.
- brntsllvn 3y ago
  > Is there any way a pre-IPO startup can give equity without imposing a tax burden on employees? Answer: ISOs are one way. Although I'd clarify that employees will pay tax, it's just a matter of when. Learn about ISOs here: https://turbotax.intuit.com/tax-tips/investments-and-taxes/incentive-stock-options/L4azWgfwy https://turbotax.intuit.com/tax-tips/investments-and-taxes/i...
  - yellow_lead 3y ago
    Thanks, yes eventual tax is inevitable!

8 points by brntsllvn 3y ago

I'm a tax nerd and software developer. What startup tax questions would you like answered? Example: what the heck is 83(B) and will it save me money?

infamouscow 3y ago

I'd be interested to learn more about if or how stock priced exclusively in BTC (i.e., never in USD) affects taxes. Any info you could share would be appreciated :)

brntsllvn 3y ago
I'm assuming you are US-based. If you receive compensation in stock, no matter the currency denominator, it is income and is therefore subject to income tax. Your employer should produce a W-2, and your share grant will be included.

momofuku 3y ago

Actually, I'll be joining a startup-ish in about 1.5 months. I am an immigrant and this will be my first job out of school. What do you mean taxes are about to get complicated :eyes:

brntsllvn 3y ago
When you're compensated in private shares, you still owe tax on them. With public companies you typically "sell to cover" when you vest, but this isn't possible with private shares. The workaround is the 83(B) election.
- yuiotyu 3y ago
  [flagged]

ThrowAway0127 3y ago

What are some great resources to learn personal taxes and all of the forms, deductions, exemptions, etc? What are some resources for understanding business taxes? (LLCs) I have a small single member LLC and want to understand more about how/when I need to file, what I can add to the list for deductions, etc.

brntsllvn 3y ago
Great resource: https://www.linkedin.com/in/markjkohler/ https://www.linkedin.com/in/markjkohler/ follow him and learn Biz tax is a deep topic. Short answer is the LLCs are passthrough, which means you'll receive a k-1 from your accountant that you include in your personal return. Quick strategy tip: have your accountant apply for S corp status for your LLC. You'll pay less tax right away.
- jawmes8 3y ago
  Can an S corp be single member? What are the drawbacks to using an S corp as opposed to an LLC?
  - brntsllvn 3y ago
    S Corp is just a tax filing status. Your legal entity remains an LLC. The benefit of S Corp tax status is that you pay yourself a dividend in addition to your income. They are taxed differently. The drawback is you now have a payroll obligation. An LLC can be single member. An LLC with S Corp tax status cam also be single member. There's a lot of info about S Corp status online. Hopefully this puts the strategy on your radar for more investigation.
    - jawmes8 3y ago
      Thank you! That is helpful to know.
- psyklic 3y ago
  Note in CA, there are additional reporting requirements. This is not tax advice, but I believe passthrough single-member LLCs (including no-income) must file Form 568 by March 15 and pay a mandatory $800 annual fee by April 15. (Other types/taxation methods could have slightly different requirements.)

yellow_lead 3y ago

Is there any way a pre-IPO startup can give equity without imposing a tax burden on employees? For instance, if an employees options vest, I believe they are required to pay taxes on the computed value of the shares. But in i.e a pre-seed company, there may be further dilution, so you end up paying tax on something that is lost in the end.

brntsllvn 3y ago
> Is there any way a pre-IPO startup can give equity without imposing a tax burden on employees? Answer: ISOs are one way. Although I'd clarify that employees will pay tax, it's just a matter of when. Learn about ISOs here: https://turbotax.intuit.com/tax-tips/investments-and-taxes/incentive-stock-options/L4azWgfwy https://turbotax.intuit.com/tax-tips/investments-and-taxes/i...
- yellow_lead 3y ago
  Thanks, yes eventual tax is inevitable!