Receiving a financial award through a program at The Garage or another University class or program is a great way to fund the early stages of experimentation and development for your entrepreneurial project. Check out some of the funding opportunities at The Garage and around campus that are available to Northwestern students. However, there may be tax implications for receiving money or an award. Here are four best practices for preparing to manage business income and expenses:
You may be wondering: Are these funds taxable? Do I, or does my company, owe money to the IRS, or to the State, or both? These are great questions and there are many variables to determine the answer. The first consideration is the type of award:
If you completed an expense report and were reimbursed for a purchase that you made from your own money, in general, this payment is not taxable. (Examples: awards received through Propel or Little Joe Ventures Fellowship expense reimbursements).
If you or your company received a check or a direct deposit into your bank account, these funds may be taxable. Whether or not you or your company owe money to the IRS and the State will depend on many factors. Some examples of these factors include: other income received over the year, any offsetting expenses, available deductions, etc. (Examples: awards received through Wildfire)
The Garage provides free Office Hours with Certified Public Accountants (CPAs) for Northwestern students during the academic year. It is highly recommended and encouraged that you meet with a CPA to discuss your business, taxes, and any income, including awards provided by The Garage.
Six Things to Bring When You Meet With a CPA About Your Business:
Accounting and taxes can be complex and overwhelming. However, with a little advanced planning and targeted advice from experts, it should be a manageable process.