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Frequently Asked Questions

Do I need monthly bookkeeping?

It's good practice (but not mandatory with inkle).

In our experience, many founders tend to just "leave it to the deadline" - and then rush or miss the deadline. And they have little visibility into their books at any given time.

If you come to us days before the deadline, it's really tough for us to catch up your books if you have lots of transactions and missing invoices. And almost impossible to use Accrual method. So we'll be forced to used Cash method accounting, which isn't ideal for you.

Many US tax filing services compel you to pay a high monthly bookkeeping charge of more than $500/month and subscribe to Quickbooks, even if you have low activity at the start. We have fair pricing and nudge you for monthly bookkeeping because it's better for you, and it will cost you about half of the total monthly cost over 12 months in terms of annual cleanup anyway. Why not have monthly visibility instead.

Accrual Method or Cash Method?

inkle strongly recommends Accrual Method (over Cash Method,) because:
- it's gives a much truer picture of your finances.
- prevents you from getting any nasty surprises.
- it is easier for forecasting.
- it is GAAP-standard, and most VCs will ask for it.
- you will eventually have to do Accrual Method anyway after you cross $25mm in revenue (by law) or sooner, so why not start with it.
- the IRS does not permit you to switch to Accrual (from Cash) in the middle of a year.
- restating and translating prior years' Cash books into Accrual method would be a nightmare, if you want to compare later.

Cash Method is possibly OK if you have very little activity, or just started out or have no real revenue operations in US, but consult us for a discussion on this.

Because Accrual Method is more complex, we can only offer this to monthly customers. Trying to do Accrual Method once per year would just be too difficult for you and us, as we would have to discuss every transaction and invoice.

Do I need to file a State Filing?

It's best to do a tax consultation with our certified professional tax experts who can help you determine the answer.

As a general rule of thumb: if you don't have a formal physical office, permanent employees in attendance, stock or inventory and business operations, then you won't need to file a State return. This is even if your US company address is located in that state. Basically: it depends on what you're doing in the state.

Do I need to file a Delaware Franchise Tax & Annual Report?

If you have a Delaware C-Corp which was in existence during any calendar tax year (1st January to 31st December), then yes you must file the Annual Report and pay the Delaware Franchise Tax. This is going to cost you a minimum of $400 tax + $50 government filing fee, and possibly much more if you've raised in the millions.

How do I update the IRS with my company address

Just put your new address on your new Tax Filing, and they'll update their systems. Or see here for other methods: https://www.irs.gov/faqs/irs-procedures/address-changes/address-changes

What is a nil return?

Nil return means your US Corporation has no transactions in the concerned tax year.

Do I need to file a Form 5471 ?

Yes if your US corporation had a foreign subsidiary at any time during the concerned tax year.

Do I need to file a Form 5472 ?

Required if US corporation did any reportable transactions at any time during tax year AND has any 25%+ foreign shareholder. See here https://www.irs.gov/instructions/i5472

Do I need to file a Form 1099?

If you have paid a US resident contractor or an LLC as a contractual payment or rent, during the Concerned Tax Year, then yes you must file a Form 1099 by 31st January of the following year annually. One filing per person/LLC. If you've missed the deadline, discuss with us how to proceed.

Do I need to file a Form 7004?

Your chosen tax year dates are normally Jan-Dec unless you specific asked for it to be something else in your EIN application (SS-4). - for example Apr-Mar is common for those with Indian subsidiaries to match the underlying India tax year. You can check your chosen US dates in your SS-4 (field 12)or your EIN issuance letter (paragraph 3). Depending on your chosen tax year dates, and only if you want a 6-month extension to your corporate tax deadline, you will need to file the Form 7004 either by 15th April (if your tax year is Jan-Dec) or 15th Jul (if your tax year is Mar-Apr). This buys you a 6 month breather.

What is the difference between Form Form 8938 and FBAR?

You may need one, the other, or both. FBAR is filed with the Financial Crimes Enforcement Network (and is based on calendar year), whereas Form 8938 goes to the IRS as part of your federal tax filing (and is based on your chosen tax year). FBAR is judged based on foreign balances controlled by your US entity's foreign accounts or its controlled entities foreign accounts, whereas Form 8938 is judged based on a threshold of specified passive income. See here for more details: https://www.irs.gov/businesses/comparison-of-form-8938-and-fbar-requirements