sortiwa
The hassle of complying with the tax aspects of a business is as hard as running a business. New business owners face a bigger challenge since they are unaware of the tax compliance basics they must fulfill at the federal and state levels. If you want to save yourself from the annual complexities of tax aspects, several techniques are advised by experts. Adding on, they recommend that you liaise with tax professionals not only during the tax period but throughout the year.
Hire a Professional
When hiring, you must hire an accountant with the skill and experience to fulfill the business’ financial obligations, tax needs, and a lot more. A qualified accountant should be available at work throughout the year. In addition, they must possess the skill of identifying cash flow problems by monitoring the business’ income and expenses. They should be able to keep track of the net and gross profits. The accountant works closely with you from the first day of starting the business and has the right advice on the tips and tricks of driving the business to success. He or she will advise you on the appropriate amount to put on the retirement kitty, whether to invest in a small or big working space, and whether to take up a bonus or not.
Keep Track of Business Expenses
When filing taxes arrives, you will use a tax calculator Canada to help you determine the allowable tax credits and deductions depending on the expenses you qualify for. A business owner who keeps track of all the annual business expenses enjoys the leverage of taking advantage of tax credits and deductions compared to those with a poor record. Allowable business expenses include business travel costs, regular car repairs, entertainment costs, legal expenses, gas mileage, costs of a home office, etc. Another workable method is reducing the staff pay, additional benefits, and allowable awards. A well-kept record acts as a reminder when filing taxes and eliminates chances of forgetting.
Choose an Appropriate Accounting Basis
A business owner can choose two widely recognized accounting bases when preparing to file their returns. It is either the cash or accrual basis of accounting. The cash basis differs from the accrual basis in that income is acknowledged when collected and expenses when paid. For the accrual accounting basis, you will recognize income after earning them and expenses after incurring them. If you aim to work with the lenders one day, you must prepare the financial statements on an accrual basis as it is a mandatory requirement. The annual amount of uncollected income is always higher than unpaid expenses for all new businesses; hence must choose the accrual basis as it allows them to redeem the additional expenses in the form of a deduction. While the accrual basis works during the early years of the business, the owner must switch to the cash basis since the receivables are greater than the payables, and the accrual basis would have you pay more in taxes.
Maintain your Business Documents
Maintaining all the business documents in safe custody goes hand in hand with filing all the annual records correctly. The records include your balance sheets, income statements, purchase receipts, etc. Ensuring that the documents and business records tally is a step towards ensuring that the tax return filed is correct. The adverse effects of improper record keeping are so dangerous that you might end up in the wrong hands of the law when they order an audit. At the minimum, the business may return taxes that are more than expected or lose a deduction. Investing in the latest version of accounting software is a recommendation by experts. The software is easy to use, cheap, and above all, aids in helping you maintain an updated track of all the business incomes and expenses.
The tax period is one of the most important times of the year for any business. Adhering to the right tips will save your business majorly. In addition to the tax tips mentioned above, you must look closely at the set deadlines. Failure to adhere to the stipulated deadline attracts unwanted penalties and additional expenses to the business. Possible tax deadlines also include the set period for paying the employer taxes and filing the annual federal taxes for the business. Creating a tax calendar will save you immensely in terms of keeping records and beating deadlines.