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

8 pointsbrntsllvn2y ago13 comments

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?

13 comments

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.

brntsllvnOP2y 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/i...

yellow_lead2y ago

Thanks, yes eventual tax is inevitable!

ThrowAway01272y 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.

brntsllvnOP2y ago

Great resource: 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.

psyklic2y 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.)

jawmes82y ago

Can an S corp be single member? What are the drawbacks to using an S corp as opposed to an LLC?

1 more reply

momofuku2y 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:

brntsllvnOP2y 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.

1 more reply

infamouscow2y 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 :)

brntsllvnOP2y 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.

j / k navigate · click thread line to collapse

13 comments

yellow_lead2y ago

Is there any way a pre-IPO startup can give equity without imposing a tax burden on employees?

brntsllvnOP2y 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/i...

yellow_lead2y ago

Thanks, yes eventual tax is inevitable!

ThrowAway01272y 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.

brntsllvnOP2y ago

Great resource: 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.

psyklic2y ago

jawmes82y ago

Can an S corp be single member? What are the drawbacks to using an S corp as opposed to an LLC?

1 more reply

momofuku2y 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:

brntsllvnOP2y 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.

1 more reply

infamouscow2y 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 :)

brntsllvnOP2y 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.

j / k navigate · click thread line to collapse