Category: Industry

Press Release: Accountalent and eTaxConnect Join Forces to Offer R&D Studies to Software Startups

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Accountalent is excited to announce its acquisition of eTaxConnect, an R&D study firm.  Leading up to the acquisition, Accountalent has been providing income tax compliance for thousands of startups. Accountalent is excited to be joining forces with eTaxConnect to offer income tax compliance and an R&D study, all under one roof.

“With the eTaxConnect acquisition, Accountalent is looking forward to offering our clients a startup-friendly, end-to-end combined product that includes our unBookkeeper service, tax returns, and an R&D study,” said Accountalent founder Joe Faris. “The eTaxConnect Study is far superior and more IRS-compliant than the studies offered by the ‘usual suspect’ R&D study firms. It is also the only study that is offered at startup-friendly prices. Accountalent’s clients received $20M in PATH Act refundable R&D Credits for tax year 2020.”

eTaxConnect specializes in R&D studies for software companies and is looking forward to bringing its expertise in the space under the Accountalent umbrella. With the addition of R&D studies, Accountalent is now offering a combined, flat-fee product that will include its core income tax, unBookkeeper, and an R&D study for just $4,950.

“For the past three years, eTaxConnect has been proud to pioneer audit-ready and startup-friendly R&D studies for software companies,” said Michael Melia of eTaxConnect. “We have been privileged to help hundreds of startup companies get access to millions of dollars of refundable R&D tax credits. We are excited to be joining forces with Accountalent to help a broader network of software startups. We share Accountalent’s mission to give startup companies access to best-practice tax compliance with upfront prices and a tax team that has our clients’ backs.”

In addition to the new, combined product, Accountalent will continue to offer its traditional tax compliance and accounting service for $1,950, and an R&D study for $3,450. Current and future clients who take advantage of the combined package will save $450.

Visit Accountalent.com to view our packages, learn more about the R&D Credit, and schedule your free consultation with our team of experienced CPAs.

About Accountalent Management Corp.: Accountalent is the ‘go-to’ tax and accounting solution for startups, providing best-practice, fixed-price services to startups. Accountalent has worked with 3,000+ startups across the U.S., including ClassPass, Casper, BollyX, and more.

About eTaxConnect: eTaxConnect pioneered affordable, quality R&D Studies for software startup companies, providing comprehensive and detailed studies for a flat fee.

Stimulus Bill Quiz: PPP and ERC

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Over the past few weeks, Accountalent has been sharing the latest updates on the most recent stimulus bill, including:

If you’re still wondering if you qualify for PPP2, ERC 2020, or ERC 2021, continue reading to find a simple “Yes or No” quiz on whether you qualify for any of these. If you have any other questions on the stimulus bill, Accountalent is here to help.

Stimulus Bill Quiz: Do I qualify for a PPP2 loan?

Do I qualify for the 2020 Employee Retention Credit?

Do I qualify for the 2021 Employee Retention Credit?

Strategies to maximize PPP2 and Employee Retention Credit

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The new stimulus bill includes a fresh round of PPP, but the MOST important part of the bill is allowing businesses to take both the new PPP2 and Employee Retention Credit, so how do you maximize the benefit of the two?

Below, we’re breaking down some of the key parts of both benefits, including threshold/eligibility, amount of credit/loan, start and end dates, maximum benefit amount, and more.

ERC
(2020)		ERC
(2021)		PPP2
Threshold/Eligibility1. 50% Reduction in Quarterly Sales for any quarter in 2020 vs. 2019, or
2. Shut down by government order		1. 20% Reduction in Q1 2021 and/or Q2 2021 sales vs. same quarter in 2019, or
2. Option to use the quarter immediately preceding calendar quarter and comparing to corresponding 2019 quarter		Demonstrate at least a 25% reduction in gross receipts in any quarter of 2020 relative to the same quarter in 2019
Amount of Credit/Loan50% of Quarterly Wages up to $10k per year, so maxes out at $5K Refundable Credit per employee for 202070% of Quarterly Wages up to $10K for Q1 2021 and Q2 2021, so maxes out at $14K Refundable Credit per employee for 20212.5 times the monthly trailing 12 month payroll up to $2M. 3.5 times if in the hospitality industry.
What are “Wages”?Salary + Employer-paid Health InsuranceSalary + Employer paid Health InsuranceSalary + Group Health Insurance + Certain Payroll Taxes
What are the start and end dates?Wages from 1st Quarter of Threshold qualification to end of Quarter when 2020 Quarterly Sales are 80% of corresponding 2019 QuarterWages from 1st Quarter of Threshold qualification to end of Quarter when 2020 Quarterly Sales are 80% of corresponding 2019 QuarterUnknown
What happens if I incorporated in 2019 or 2020?Compare the 2019 quarter you incorporate in to the corresponding 2020 Quarter. Estimate full quarter 2019 sales if did not incorporate on first day of quarter.If incorporated in 2020, compare Q1 of 2021 to Q1 of 2020 and/or Q2 of 2021 to Q2 of 2020.Need additional guidance if not incorporated in 2019
Maximum Amount$5K per employee for 2020$14K per employee for 2021$2M
CommentsLanguage in new bill is conflicting on process of claiming retroactive credit and does computation include wages and health insurance or just health insurance costsCannot use wages for both ERC and R&D Credit.Forgiveness now can be payroll (not less than 60% of total forgiveness); SW for cloud computing, HR, accounting, etc.; essential suppliers; property damages.

The Treasury and SBA will be releasing additional guidance and application process information for both PPP2 and Employee Retention Credit this week. As always, we will keep you updated as this becomes available.

It’s important to note, when companies are able to apply for both, there will probably be a mad rush. PPP1 was $521B, and PPP2 is only $284B. Also, if you plan to apply for the new PPP and/or the Employee Retention Credit, you should be dusting off your 2019 and 2020 quarterly financial statements. They will be needed to determine if you are eligible.

So You Sold Your Startup for $50M – Why You Netted $19M, and How You Could Have Netted $32M

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Congratulations! This is it. Every entrepreneur’s dream is now your reality. You built your business from scratch and now, after 2 years of hard work, you’ve been bought out to the tune of $50 million.

Don’t pop the champagne just yet. Somehow, your shareholders are only receiving $20 million from that $50 million sale – less than half of what your business was acquired for. What happened? Did the Brinks truck driver decide that this was his time to make a break for it down to Mexico? Did someone take a pen and some white-out and change the “5” to a “2” before your check made it to the bank?

No, it was taxes. Depending on where you live and how you negotiate the acquisition, you could end up with as little as $19.1 million of a $50 million sale, due to taxes. But if you play your cards right, you can keep as much as $31.9 million from that same sale.

It all comes down to selling your assets vs. selling your stock.

When a corporate juggernaut like Google or Microsoft goes out to acquire a startup, they do their best to acquire the assets of the company rather than the stock that belongs to the shareholders. Like many business decisions, this is because of taxes. When a company buys assets, they can write off the purchase price over the next 15 years, and they know they’re not inheriting any undisclosed liabilities. When a company buys stock, they get no tax write-off and they acquire all liabilities, known and unknown.

Naturally the acquirer wants your assets rather than your stock, but selling your assets is going to take a big bite out of your side of the sale. Sell your assets and you’ll be taxed twice: once for the gain you make from the sale, and then again when you distribute the remaining amount to the stockholders.

You’d be better off selling your stock to the acquirer, because in that case you only have to deal with a single capital gains tax.  Of course, the tension here is that the acquirer will fight for an asset-based sale, as that’s what benefits them the most.

This is an argument worth having while negotiating with your acquirer. If you’re not yet convinced, just take a look at how wide the gap between how much you make from an asset sale and how much you make from a stock sale can be:

(Note: The chart below assumes a 2-year-old startup initially received $2.5M in seed funding, spent $2M developing their product in those first 2 years, and was then acquired for $50M at the end of the second year.  It’s also a C corporation, and we did different scenarios for California, Massachusetts, and New York/NYC to illustrate how state and city taxes can be a significant factor.)

Shareholder Net
Location Sale Amount Asset Sale Stock Sale
California $50M $19.6M $31.7M
Massachusetts $50M $21.9M $35.6M
New York/NYC $50M $19.1M $31.9M

Those numbers should put it into perspective – you must do all you can to get the acquirer to buy your stock rather than your assets. It helps to manufacture some incentive for the acquirer that plays to your advantage. You may be able to convince your buyer to go the stock route if you reduce the sale price of buying your company through stock, but leave the cost of buying your company through assets at full price.

The main takeaway here is sellers, beware. Don’t let your guard down just because someone’s throwing enough money to lay down in at you. Understand the tax implications of your decisions and favor selling your stock over selling your assets, or you might make a $10 million mistake.

 

Boomer: Millennials Will Be the Next Greatest Generation

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I know Millennials very well – my tax practice has exclusively serviced 1,500+ tech startups that are all founded by Millennials.  I have Millennials that work for me, that I mentor at Harvard, MIT and other local Boston area colleges and have children that are Millennials.  I am part of the Baby Boomer generation.

When it is all said and done for, the Millennial generation will prove to be the next Greatest Generation.  Yes, this is contrary to the view of all of the idiots in my generation that say that Millennials have no work ethic, are selfish and all of the other self-righteous claims made by my contemporaries.

From my experience, I find Millennials to be extremely hardworking, gobble up responsibility and challenges, have very high morals and ethics, want to develop products to improve the world (often, to the detriment of their personal bank accounts), loyal to their family, friends, institutions but open to others (much unlike us Boomers) and idealistic, yet very practical.

They will be the generation to find a cure for cancer, to finally get this Washington, DC BS straightened out (we Boomers did a great job on that one, right?), greatly reduce the existing 50% divorce rate, say “screw you” to employers that want them to work 80 hours per week to the detriment of their health and families, develop great technologies and business models (don’t you just love what Uber and Airbnb are doing to the traditional industries that refused to become user-friendly?).

Will not bore you with the million examples that I can give you to support this claim.  Will wait for history to prove this point.

Just my opinion, but the more that I work with Millennials, the more optimistic I become that we are in good hands as we Boomers grow old.

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