Business tax returns can be complicated, and they vary based on the business structure.
Running a small business often requires you to perform a wide variety of tasks you might not have to perform at a large business, one of which is filing small-business taxes.
A business is a Provisional Tax payer thus income taxes are declared twice a year. Which is every 6 months. We therefore have IRP6 and ITR14
IRP6 (Provisional Tax) is the tax liability for the first 6 months of the financial year. The ITR14 is the final income tax liability declaration to close off the financial year end.
Enlist Professional Tax Preparer
If you’re completely clueless when it comes to small-business accounting, you’ll probably be best off hiring a tax preparer. There is a wide range of tax preparers from enrolled agents, to tax preparers, to certified public accountants (CPAs).
Make Sure You Get the Right Advice
If you don’t understand something, consult an expert. Consulting an unqualified individual can lead to costly mistakes later on.
If you are going to pay a professional tax preparer, make sure you can ‘interview’ them before committing to a relationship. You want to make sure they are a good fit for you personality-wise, as well as understanding your business.
Know Your Accounting Process
If you use a firm to file your taxes, chances are that they will help you get prepared for tax season before it actually hits. Many Accounting firms send out tax checklists to make sure you send everything they need to prepare your tax return. You can use these checklists to gather the necessary information and get ready for the firm to prepare your taxes.
Accounting firms also offer bookkeeping services. If you hate keeping up with your books and outsource this task to a firm, the accountants will likely have most of the necessary information to file your return already.
If you’re going to have a tax preparer fill out your tax return for you, do yourself a favor and don’t wait until the last minute. Tax preparers get busier as tax season moves on. If you get in early with organized documents, you’ll likely have a much easier process from start to finish.
Check the business Tax Compliance status on SARS e-Filing
It is important that you check if you have an active e-Filing profile for the business so you can be able to check the tax status of the business. This will ensure that you are aware of which tax periods are outstanding and file on the correct period.
Pay Attention to Timing When Filing Small-Business Taxes
Business owners like their customers to pay them in a timely fashion. Well, you and your company are the SARS (South African Revenue Services) customers. What do you think the tax institutions expects from you when it comes to tax payments? Timeliness.
Entrepreneurs often forget to pay estimated taxes during the year, especially during their first year in business. Most taxpayers focus on the year-end tax returns. In doing so, they forget that states require quarterly estimated tax payments where taxable income exists. Know what is due, to whom, and when.
Don’t Forget Sales Tax!
Sales tax can be a huge penalty hole for entrepreneurs. Don’t start creating a presence in a state and selling your products without ensuring that you’re in compliance with that state’s sales tax requirements. Find out what they are early on to avoid problems later.
Payroll Taxes
While payroll taxes are another biggie, they’re also easily outsourced. Many entrepreneurs outsource them to professional payroll providers whose services include the proper withholding and remittance of payroll taxes. This will not only make life simpler for you, but it will also ensure your taxes are done right the first time.
Establish a Sound Record-Keeping Process
When it comes to documentation and retention of receipts and invoices, there’s no such thing as overdoing it. Every deduction or credit that you take can be challenged by the IRS or a state during an audit. If you have the supporting documentation and can prove that the deductions were business-related, there’s a good chance that you’ll prevail.
As scary as taxes may sound, many others have been in your shoes before you. Learn from their mistakes and successes. Arm yourself with information — and with the support of tax professionals whenever appropriate.
The Bottom Line on How to File Small-Business Taxes
In the end, you’ll have to decide whether it’s worth your time to try to fill out your small-business tax return yourself, pay for tax software, or hire a tax preparer to do it for you. While buying software or hiring a preparer may cost you more money, it can save you a ton of time, which you know is valuable as a small-business owner.
Compiled by Ms. Dikeledi Seoloane on behalf of Matsobanemetja Business Consulting (Pty) Ltd
If you need a consultation with us with regards to your business, any type of business – please reach out to us on email PA@matsobanemetja.co.za
For more information: enquiries@matsobanemetja.co.za
“The hardest thing in the world to understand is the income tax.”
Albert Einstein
Matsobanemetja Business Consulting Pty Ltd 