END-OF-YEAR REPORTING
A Checklist For Your Startup
Lisa Johnson, Director of Tax, FintechForce
Another year is coming to a close! It’s a good time to take stock of your company’s past 12 months and get your ducks in a row for 2024. Year-end reporting is always more involved due to annual filing requirements. Businesses must look at financial “housekeeping” every month, but the end of the year demands a closer look at the financial reports and performance assessments before diving into a new year.
All U.S. entities are required to report worldwide transactions which include those conducted in digital currency and through foreign accounts. Neglecting to report these can result in substantial penalties, so here are some highlights of the transaction reporting requirements to stay compliant in the coming year.
Year-End Reporting
Tax information returns for the calendar year are due to recipients by January 31st, 2024. Forms 1099 for Nonemployee compensation and other Miscellaneous Payments are due if a business pays at least $600 to a U.S. recipient for services or events other than sales of tangible assets. A best practice to comply with this requirement is to ensure that all recipient information including name, address, and tax identification numbers are up to date in your files before the reports are due. Form W-9, Request for Taxpayer Identification Number and Certification, is used to request this information from vendors throughout the year.
The U.S. government attempts to keep companies honest about worldwide transactions by requiring any U.S. individual or entity who has financial interest in accounts outside of U.S. borders to report information via the Foreign Bank and Financial Accounts Report (FBAR). This report is required for entities with accounts of an aggregate balance of $10,000 at any time during the calendar year. The report is due by April 15th and must be submitted electronically through the FinCen system. Filing late or not at all is subject to civil and/or criminal penalties. It is important to note that if an individual has signature authority over a business account outside of the U.S., both the individual and the business must file this annual report.
Additional Year-End Reporting For Corporations
Corporations have additional filing requirements for information returns when specific stock transactions occur with U.S. employees. When an employee exercises an Incentive Stock Option, Form 3921 is due to the recipient and to the IRS. When an employee becomes owner of an Employee Stock Purchase Plan, Form 3922 must be filed and delivered to recipients by January 31st. The sooner this is handled, the sooner you can go from looking back to looking ahead.
Continuous Reporting
Any business who accepts physical cash payments over $10,000 has an important filing which is due year round. The Report of Cash Payments Over $10,000 (Form 8300) is filed electronically through the FinCen system within 15 days of receiving these funds in a single cash payment or a series of related payments by a trade or business. The business must also provide a statement to each party included on a report during the calendar year by January 31st of the following year. Beginning January 1st, 2024, this requirement is extended to include virtual currency transactions.
These are just some of the things to keep in mind as you wrap up 2023. As the end of the year approaches, it’s natural to reflect upon how far you’ve come and look at where you’re headed. Whether you’re handling matters yourself or reaching out for assistance, getting your year-end financials and reporting ready now for the new year deadlines will put you one step closer to starting 2024 on a high note.
CHARTING THE COURSE TO FINTECH SUCCESS
Financial Planning: How the Big Picture + the Details Can Help Navigate an Everchanging Industry
Maulik Nagri, Senior Manager, FP&A
In the fast-paced and competitive landscape of fintech, the notion of focusing solely on cash runway months can lead down a perilous road to failure: by looking at the gas gauge and not the road. Runway is undoubtedly important, but it should not be the sole determinant of your fintech business’s success, and it should not represent your plan. By neglecting comprehensive financial planning and failing to chart a clear course for the future, you run the risk of hitting the ultimate dead end in this challenging funding environment.
THE LANDSCAPE. The fintech industry is facing rapid evolution, technological progress, wide adoption, and regulatory changes. To be successful, a company needs a roadmap like a financial plan that amplifies strategic foresight and adaptability, assists in avoiding business failures, and charts its growth. Many statistics from the Small Business Administration (SBA) highlight the significance of financial planning in the highly competitive fintech landscape. SBA Data reveals that approximately 20% of small businesses fail within their first year, and around 50% fail within their fifth year. According to another survey, a staggering 83% of fintech CEOs who had a financial plan strongly recommended it to their peers. A solid financial plan is a suggested best practice but it’s also an instrument to increase the odds of business success. Investors in fintech companies are looking for more than just survival; they seek innovative solutions, scalability, and clear paths to profitability. Generally, companies with robust plans not only maintain healthy cash reserves but also attract greater funding opportunities and foster investor confidence.
TOOLS TO NAVIGATE THE LANDSCAPE. Would you travel in the Amazon jungle without a map? Would you drive through the mountains without a full tank of gas? Hopefully not. A well-laid out financial plan is a map for your business, and its runway is the gas. This comprehensive plan generally includes key elements such as a go-to-market strategy focusing on customer acquisition and profitable revenue growth, a deep understanding of unit economics, an accurate calculation of the cash required to reach crucial milestones, and a thorough analysis of sources and uses of funds. These components will not only provide a solid foundation for growth but also enable you to make informed decisions amidst the everchanging fintech landscape. What if you get lost in the jungle or the mountains – would you use your map or GPS for course correction? Absolutely. Like a map, a thoughtful plan lets you see the full picture and pivot to help ensure the achievement of planned outcomes.
THE BEAUTY OF THE LANDSCAPE. Contrary to common misconceptions, building a financial plan for your fintech company is not an expensive endeavor; rather, it is an investment in your business’s future. The true costs lay in the consequences of starting over from scratch when faced with unforeseen challenges. By dedicating time and effort to create a comprehensive financial plan, you equip your fintech venture with the tools necessary to navigate uncertainties, secure funding, and position yourself for sustainable growth.
Embrace the power of financial planning, and steer your fintech venture toward a bright horizon, and a future of innovation and prosperity. In the end, journeys are most pleasant when looking at the view rather than staring at the gas gauge.