To achieve optimal tax outcomes and meet its financial requirements, you must prepare for the tax season. The extent of preparation depends on the business. With careful planning and attention to detail, you can meet the deadlines and get through the tax season with confidence.
These tips are for SMEs (Small and Medium sized Enterprises) that rarely have tax advisers and who may struggle with both accounting and tax issues. Here are some essential tips to keep in mind.
1.Organize your data
You can improve your tax filing process by maintaining well-organized and easily accessible documents and data. Before starting the tax preparation process, ensure your financial documents, i.e., bank statements, expense reports, income statements, contracts, and agreements, are complete and accurate.
2.Update on tax laws
Staying updated on tax rules and regulations is crucial for compliance and efficiency. The best time to do this is to stay alert throughout the year for changes to tax laws that may affect you and seek the advice of a tax expert if necessary.
If you have not followed the tax laws during the year, it is still important to update your knowledge of the law before you prepare your tax filings. Where you have failed to comply with any requirements imposed by the changes, rectify what you can and factor the effect of non-compliance into your tax estimates.
3.Make the most of tax benefits and incentives
Make sure that your expenses are wholly and exclusively for achieving the business’ goals. Classify and depict expenses accurately in your accounting system. You must maintain the underlying supporting documents and ensure you can quickly retrieve them if necessary.
Be careful how you handle indirect taxes, such as VAT (Value Added Tax) and withholding taxes. Businesses incur unnecessary penalties. Make sure you correctly apply the laws, file, and make payments due on time.
When making financing and asset purchase decisions, you must consider the tax implications of your option. For example, debt financing has a tax advantage over equity financing because interest expenses are deductible for tax.
Ensure you use allowable tax deductions and tax credits in your favor. Explore tax incentives and special dispensations like tax concessions, reliefs, exemptions, and amnesty, as well as government programs and initiatives.
4.Plan for tax payments
You must plan to have the cash needed to pay tax when it is due. Do not wait until taxes are due before you look for the money to pay. You might incur penalties if you cannot raise funds to pay on the due date. Some things you can do to prepare to find the cash to pay taxes are:
- Withholding taxes due to you–make sure you chase and collect withholding tax certificates for tax withheld from you. You can use the tax credits to offset some taxes due.
- If your business is required to pay quarterly taxes, keeping up with such payments helps to reduce the tax due for payment at the end of the year.
- Cash forecasting–preparing a cash forecast is essential for ensuring that you have enough cash to run your business and pay taxes. The cash forecast also helps you predict whether you will have enough cash to pay taxes. Where the forecast is a cash deficit, you can plan to cover the deficit so you can pay taxes when due.
5.Speak to a tax expert
Because tax rules and regulations can be complex, hiring a certified tax professional or accountant can help navigate complex tax rules, identify potential savings, reduce risks, and ensure proper filing, as they possess the knowledge and experience required for an efficient tax compliance process.
Conclusion
As tax season approaches, businesses should engage plan taxes to reduce liabilities. With careful planning and expert advice, they can navigate the season and achieve optimal tax outcomes.
Should you need help with your taxes, contact us at
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James Etu
