It’s no secret that tax season is every business owner’s least favourite time of year. Many small business owners would rather pretend it doesn't exist until the last minute. But, no matter how much we dread it, there’s no way around it. The taxman is relentless, and no one wants to suffer the consequences of late filing and unpaid taxes.
Running a business is stressful enough without having tax penalties hanging over your head. However, with a few tweaks to your tax filing processes, tax season doesn’t have to be such a burdensome annual event. Better still, the actions you take to minimize tax stress will also result in maximized returns.
So what have you got to lose during tax time?
Take a look at these five tips to get the best outcome every tax season.
1. Go Digital
The easiest way to simplify your tax filing is to put an end to paper shuffling. Going digital organizes all your accounting and tax information in one place, making it easy to reconcile earnings and tally expenses.
Many different accounting software options are available – paid or free – that ensure your recordkeeping stays up to date. We know that organized records are essential to seamless, efficient tax filing and nothing keeps you more organized than accounting software. With all your income and outgoings in one place, tax time will be a breeze, and you have a record of every deductible expense.
2. File Early
Procrastination never did anyone any good, so don’t put off filing your taxes until the last minute.
Last-minute filing can have major financial repercussions. Prepare to have a very stressful week if you’re approaching the tax deadline and you’ve still not filed. When you’re under pressure, you run the risk of omitting vital information or missing the deadline altogether.
Both scenarios can result in penalties, and there’s no way they’ll go unnoticed by the taxman.
Start your filing early and take your time to ensure you’re not tearing your hair out the week leading up to the tax deadline. Careful filing will also ensure you’ve done all you can to maximize your returns.
3. Claim Your Tax Deductions
Not all taxpayers are aware of the long list of expenses they can claim, significantly impacting their returns. From business outgoings to childcare costs, there is a wide range of tax deductions you can claim as long as you’ve kept a good record throughout the income year.
A tax deduction is subtracted from your income to reduce your total income and thus your tax liability. The lower your income, the lower your tax obligations will be, which is why it’s important to claim every last deductible expense.
Here are the expenses to itemize throughout the year to make claiming easy come tax time.
● Office supplies and stationery
● Rent and utility expenses
● Work-related travel and accommodation expenses
● Business car expenses
● Mortgage interest on workplace location
● Employee training and education
● Business insurance
● Phone and internet expenses
● Professional services expenses such as accountants and lawyers
● Charitable donations
● Advertising and marketing expenses
● Client and employee entertainment expenses
● Childcare and dependents expenses
4. Claim Your Tax Credits
Tax credits can reduce your tax bill even more than tax deductions, so it’s wise to know what tax credits you’re eligible for if you want to maximize your returns! Your total tax credits are subtracted from your actual tax bill, not your taxable income.
With COVID-19 still taking its toll on the world, governments worldwide have introduced several tax credits to help taxpayers keep their heads above water at tax time. It certainly helps to have a little extra cash in the pocket, especially when so many are struggling financially in the wake of the pandemic.
From Employee Retention Credits to Employee Sick Leave Credits, you’ll find various extra credits to claim against your tax bill. Take a look at your local tax authority website to find out what credits you qualify for.
5. Team Up With A Tax Accountant
Business tax is tricky. Sometimes it feels like no matter what you do, tax time is always complicated.
Luckily there are tax experts out there who can manage your tax on your behalf. Nothing takes away the stress of tax season quite like a tax-savvy accountant.
If you own a business, you should have an accountant. But your accountant must be well- versed in every last trick of the tax trade to ensure you’re maximizing your returns every year.
Whether you require finance for future tax payments or you simply need someone to take tax filing off your hands, a tax accountant has a range of skills essential to keeping the taxman at bay.
A good tax accountant will:
● Optimize your tax position
● Save you time
● Keep all records organized and up to date
● Provide timely, invaluable financial advice
● Prevent business owners from making costly mistakes
● Simplify the entire tax process
● Claim every deduction and credit
● Be reliable and available all year
Top accounting professionals can make all the difference.
Take Away The Stress, And You’ll Maximize Returns
Preparing for tax filing is a year-round job. Making tax filing easier on your stress levels will also result in higher returns. With solid preparation, professional advice and digital bookkeeping, the tax season will no longer be something you dread, and you’ll be on your way to seeing significant cuts in your total tax liability.
Tax time doesn't have to be tumultuous. With proper planning, it will be just another month of financial excellence.
