You are legally obligated to make contributions to the federal government in the form of taxes, and despite the harsh economic times, defaulting tax payment often results in accrued penalties. You should also take steps to ensure that your business is tax compliant since compliance is an essential part of growth and business survival.
The process of tax compliance involves monitoring, planning and organizing your finances to beat tax deadlines. When you are tax compliant, you stand a better chance of gaining a competitive edge, you get to manage your resources effectively, and in the long run, you will achieve financial stability. Tax compliance should be an integral part of your lifestyle or business operations, and although the process might appear to be confusing or complicated, here are ten tips that will help you enhance your tax compliance.
Use the Right Technology to Monitor your Accounts
On most occasions, you might find yourself preoccupied with office matters that you forget to file your tax returns. The right software will help you manage time and evaluate your productivity. It will help you identify sectors in the business that need improvement, and it will help create a culture of cooperation and trust that will facilitate voluntary tax compliance. There are several types of technology to embrace; cognitive services, business process automation, collaboration tools and cloud servers.
Most tax authorities have taken the initiative, and they offer cognitive benefits such as voice assistants and chatbots that you can use to make inquiries or navigate the complex tax system. Also, you might find it challenging to fill hard copy tax forms, and by infusing digital online forms in your office setup, you can save on the time spent when filing tax forms. Besides, most people have gone digital and are currently seeking online services as opposed to the traditional face to face services. With a cloud server, you can easily monitor your income, submit tax returns and seek advice at the convenience of your home setup.
Have Detailed Records and Receipts of all Transaction
You must keep an accurate record of all transactions that you can use when punching numbers. Tax authorities often advise taxpayers to ensure tax compliance by having detailed documents of all business transactions. Most business owners experience difficulty in filling their taxes since their records aren’t in order. They often struggle on the last minute in their attempt to beat deadlines, and they find it difficult to lodge the right returns. Ensure that you have a detailed record of your annual accounts, all invoices, import and export documents, bank statements, among other relevant documents.
Besides, ensure that you don’t have backlogs and you can achieve this by conducting regular account reviews to confirm that lodging taxes doesn’t overwhelm you at the last minute. Tax authorities haven’t set any restrictions on the types of documents to have. Ensure that you have a summary of all documents that are VAT related, such that they are accessible any time tax authorities need to peek into your financial records.
Consult Professionals on Tax Matters
With a professional by your side, you are confident that someone will handle the tax arrears on time. First, you should consider hiring an accountant who will provide insight into tax solutions for the business. It’s also important to note that the expenses that you incur when you hire an accountant to sort tax issues, can be claimed on the taxes. Secondly, consider hiring an experienced tax attorney to help you resolve your IRS headaches and tax issues. Financial advisors at Silvertaxgroup.com would advise you to find an experienced attorney, especially when your wages, property, and financial future are on the line. You deserve experienced, qualified representation to get you the outcome you deserve. Besides, an experienced attorney will provide emergency tax services, they will protect your offshore assets, they provide IRS audit defense, and you can get professional business tax advice from business tax attorneys.
Handle Financial Matters Immediately they Arise
Tax issues might be tough to handle, but you should ensure that you have the right people by your side to provide advice that you can implement immediately. It would help if you considered taking the suitable measures to settle all debts and improve cash flow in your business. Also, it would be a smart move if you sought the right finances for your business. Managers often make financial errors when they seek funds that are not suited to their business.
It’s important to note that different funds are suited to different business needs. Startup businesses often rely on personal funding and business overdrafts when handling debts or taxes, and this might hinder your efforts in reconciling your tax arrears. It would help if you considered taking a loan from a bank or have a business partnership to ensure that you have enough funds that will settle taxes. Remember that taxes always accrue penalties, and if you don’t have enough funds, you will end up with a huge lump sum that you cant settle.
Ensure that The Business Abides By All State Laws
One of the greatest mistakes that most people make is assuming that they are law-abiding citizens and that they haven’t broken any tax laws. It’s important to note that the smallest error you make when filing your tax returns could end up being costly, and in the worst case, it could cripple your business. Businesses have different licenses, and it would be a smart idea if you went ahead and consulted your attorney on the licenses that are necessary for running your business.
Also, some people fail to make proper declarations on their property to reduce the deductions. The chances are high that you will get into trouble when tax authorities realize that you made dubious tax claims. To be on the safe side, ensure that your business is tax compliant and that all your records are frequently updated. Keep in mind that state laws are always changing; therefore, it would be appropriate to constantly seek legal counsel to ensure that you don’t break any law when filing your tax returns.
Have Detailed Invoices
Most states that implement VAT would require that a business owner should gather all their company invoices to facilitate tax compliance. All the invoices that your company issues or receives when doing business should have evidence of VAT that was paid; thus, it would be easier to analyze whether all taxes were remitted. Also, you will muse the detailed invoices to claim VAT if you overpay. Keep in mind that a proper record of invoices will enable you to recoup on what the government owes you. Also, have a history of unit prices of commodities, the VAT rate that was charged and customer VAT numbers, that you will need for future reference.
Be Efficient By Controlling Stock and Overheads
If you are running a business, you should have the right amount of stock such that your capital investment is never tied at any one time. Ensure that you set up systems that monitor the amount of stock, and this will enable you to have some free cash that you can use to settle tax arrears, and above all, you will have the right amount of stock at your reservoir. Also, it would help if you made an effort to control overheads, and in the process, you will save on energy and money spent on running daily business operations.
It would help if you considered using equipment more efficiently to limit your expenditure, and therefore, reduce your taxes. Besides, it would help if you changed your spending patterns, and in the process, you will cut down on unnecessary costs. Some areas to implement changes in the office setup include the air conditioning system, office equipment, expensive lighting, heating elements. You can save on taxes by using your resources more efficiently.
Create a Business Plan
With a business plan, you can set goals and assess where you are and where you intend to be in years to come. A good business plan has details on how you intend to handle business finances, and you will outline the dates when taxes should be addressed. Also, a business plan outlines all your sources of income and where you will get funds to facilitate the daily operation of your business. It’s also essential to keep track of your daily expenditure. It would help if you kept in mind that the most established companies encounter problems when they lack funds to cover their day-to-day operations such as taxes, wages or even rent.
Ensure that your plan allocates enough funds to all sectors of the business, such that you can cover your taxes during an economic crisis. Financial advisors would also advise on monitoring your financial position. Make it a priority to watch all the strides that your business has made. Make an effort to save some money for covering taxes and keep track of your stock levels and the sales that you make each day.
Have Procedure Manuals, Policies and HR Software
Make good use of software development by installing software as a service application on your laptop or phone. The software will enable you to store all essential financial records, employee data and market trends safety. Also, you get to monitor market trends and news on tax compliance. For a startup business, you can handle the HR software by yourself, but as your business grows, you might need a dedicated HR assistant to help with running the software.
It would also be a smart move to come up with procedure manuals and come up with policies on tax compliance. Some startup businesses often don’t see the need for systems, HR software or procedure manuals, but the strategy goes a long way in ensuring that you are tax compliant. Matters such as the acceptable use of company resources, employee data storage, personal conduct in the business premises, awarding incentives and security matters, should be outlined in the business manual for everyone to read and comply. By having policies and business manuals, you will avoid legal issues with the taxpayer soon.
Have Separate Accounts For Running a Business
Having separate bank accounts isn’t a legal requirement, but it could help in managing your finances and ensuring that you are tax compliant. With a different bank account, you can easily monitor your expenses, income, and you can control all the finances. Besides, you will have all the information at your disposal when tax agents come knocking since all the details will be in one place.
Also, it would be advisable to do research on tax legislation and all other legal requirements required of you by the state. You will understand what’s required of you and make the necessary adjustments. It’s a legal requirement for businesses to have a tax file number, therefore, ensure that you have such details to facilitate tax payment. Also, ensure that you register for Pay as You Go if you have employees who are eligible for salaries.
Most people often dream of starting a business and being tax compliant. However, very few have the experience to know how to maneuver the system and ensure that they comply with government regulations. Filing tax returns is a significant problem facing people in business and regular citizens and it’s sad to note that millions of Americans end up paying fines due to defaulted taxes or lack of information on ways to be more tax compliant. Irrespective of whether you are a small business owner, you run a big industry, or you are a commoner, it’s your duty to ensure that you are tax compliant.
The above tips will protect you from penalties, and you get to run your daily operations smoothly. It’s also important to note that everyone requires help every once in a while and as such, you should consider seeking professional assistance from accountants, employees and tax attorneys whenever you encounter challenges when filing taxes. Tax compliance is also a job on its own that comes with several benefits. By consulting tax experts, you will get to share your burdens and the right counsel.