Two of the key focuses of my blog are Financial Literacy and Money, and Business and Entrepreneurship. No matter what your business idea is, navigating the tax laws is critical to give your enterprise every chance to thrive. Likewise not understanding this component of your business plan can make things harder. The following contributed post is thus entitled; Everything a Small Business Owner Needs to Know About Tax.
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Chances are that when you first set up your small business, you’ve never had to deal with taxes yourself before. The majority of people spend most of their lives in employed positions and their employer automatically deducts taxes from their pay and pays them to the government on their behalf. But when you are running a business and become self-employed, working for yourself, you gain a whole lot more responsibility. Now, as long as your business is making money, you’re going to have to pay a whole host of taxes – there’s’ no choice in the matter, as it is a legal requirement of you. So, it’s something that you’re going to have to get to grips with relatively quickly. Here are just a few sage pieces of advice to help you along the way!
What Are Your Taxes Used For?
Seeing as you’re paying taxes, you’re going to want to know exactly where they are going. Generally speaking, governments take taxes as a percentage out of all of their citizens’ pay. Most countries use a graded scale, so the more money you earn, the larger the percentage of tax that you pay. The money taken is then put towards improving the country, its services (such as healthcare systems, emergency services, and educational systems), its transport, its infrastructure, and its defence.
What Happens If You Don’t Pay?
As we have mentioned, paying taxes is a legal requirement. If you do not declare how much you are earning, and / or do not pay the percentage of tax required of you, you could be in for a whole lot of trouble. If you file your return late, you may be charged an extra five percent of your overall owed amount for every month that your return remains unsubmitted. If you fail to pay your taxes, you can face a failure to pay penalty, which amounts to an extra 0.5 percent of the money that you owe being added to your bill on a monthly basis until you have forked out the full figure.
In terms of corporation tax, you may also find yourself incurring:
● Delinquency fines
● Accuracy related penalties
● Information reporting fines
● Protestor, preparer, or promoter penalties
Paying Your Taxes
Using a Professional Accountant
Perhaps the easiest way to file your taxes correctly is to work hand in hand with professional accountants like Brown Smith & Wallace. Accountants have received extended educations and have trained for years specialising in all things related to tax. They know the system inside out, so will be certain of what you need to pay, what you don’t need to pay, and when you need to pay. This helps to minimise chances of errors and mistakes on your yearly fiscal report and prevents problems from developing down the line. This is generally recommended for any small business owner, as not only does filing the wrong sum of money, filing the wrong return, or filing the wrong receipts and other papers pose the potential of lumping you with fines or even jail time, but tax scandal can have an extremely detrimental effect on your business’ image to the public.
Doing It Yourself
While you will generally find yourself having a much easier time using professional services such as accountancy, you don’t necessarily have to engage with accountants and can complete and file your tax return yourself. If you have only just started out in business and are looking for an area to save money, cutting accountancy fees can be a good area to save. However, you do need to ensure that you know what you’re doing and that you follow the process properly.
● Take a short course – there are many short courses out there surrounding accountancy for small business owners. They are not as thorough as degree programmes which qualify you to become a fully chartered accountant, but they are extremely effective in endowing you with an understanding of the basics. They are also a lot cheaper and less time consuming than a full time degree. Consider enrolling on a course in your local area to get to grips with everything that you have to do in order to correctly file a tax return.
● Research deadlines – information regarding the deadlines for returns that you need to file are generally available through government help websites. Make sure to put these dates in your calendar and make sure to start filling in your return well in advance of the deadline. There will probably be too much work to do to get away with leaving filling things in until the day before the deadline.
● Follow instructions – most tax return forms come with a full list of instructions. So make use of them. Follow each step through and complete the return in the order that it is presented to you. This will help to simplify the process for you. If possible, complete the return online. This tends to make things easier, as you can generally click for further information if you feel that the questions asked of you are unclear.
● Use helplines – most governments also provide helplines that you can contact to speak to someone about any issues you are having with filing your return. If you feel confused, do not hesitate to call and ask for a little help.
● Consider expenses – if you have forked out for any tax deductible expenses, seek out receipts and add them to your return. This can help to minimise the amount of money that you owe, saving you a little extra money as you go along.
As you can see, there’s a whole to learn and bear in mind when it comes to completing your taxes at the end of each fiscal year. Sure, it’s a little dull. It may well be complex. Chances are there are a thousand other things you’d rather spend your time doing. But, it is a legal requirement of you and your business, so you might as well make the inevitable process as simple as possible for yourself. Hopefully, the above pieces of advice will help you to achieve this!