In our last publication, we gave some vital nuggets on how to stay calm and save lots of money during the tax period. Here is part two of our earlier publication helping you manage your tax period effectively.
You should Consider Setting up a Retirement Plan:
A retirement plan can give several tax benefits to your business, and employees. Some of the benefits include;
*Employer contributions are tax-deductible;
*Assets in the plan grow tax-free;
*You are able to attract and retain better employees.
You must Choose the Right Business Structure:
How your business is structured can have a vital impact on the taxes that you pay. For example, Limited Liability Companies are pass-through entities which means that your profits will be taxed at your ordinary tax rate, while shareholders of a C corp are taxed at the corporate rate and then again when they report distributions on their tax returns, this is known as double taxation.
E-file Your Tax Returns:
To have confidence that your tax return is received on time, you should file electronically. By filing electronically, you will save the money and time that you would have spent to send your returns via the usual process.
Filling Your Taxes on Time is very important:
Do your best to file your tax return on time. If you fail to file your tax return on time and pay any taxes that are owed (in addition to interest), you may be assessed the following penalties:
*Failure to file on time – the penalty can be as much as 5% of your unpaid taxes each month up to a maximum of 25%.
*Failure to pay on time – This is based on the amount of tax you owe, and it will continue to accumulate until the tax bill is paid in full.
If you are able to file your tax return on time but you do not have the money to pay your tax bill, go ahead and file the return. By filing the return, you can at least avoid the failure to file a tax return penalty. There are several penalties that may be eligible for relief.
Be accountable for Your Return:
If you do hire a CPA or tax specialist to prepare your tax return, have them go over the return with you. Ensure that you understand and concur with the data they are reporting and take responsibility for the income and deductions you claim. Your signature at the bottom return means that you agreed 100% with what is being reported about your business. At the end of the day, the FIRS will hold you (not the tax expert) responsible.
You should Consider Working with a Tax Professional:
Even if you think you can manage to prepare your taxes on your own, a CPA or other tax professional is usually more affordable than you think. A seasoned tax expert has seen everything and knows how to get you the most beneficial tax deductions and benefits. This often saves the taxpayer or business at least as much as the fee the tax expert charges, plus you get the added benefits of being sure that your returns were prepared and filed properly.
You should Maintain Good Accounting Records:
- Keep good records during the year so, at the end of the year, you can make informed tax management decisions that lessen your tax liability. To make sure your financial information is accurate, reconcile all your bank and credit cards each month. When done, make sure you don’t have any uncleared items or undeposited funds.
- Donate Unused Inventory:
If you have unsold or unused inventory, donate it and get the tax deductions instead of spending cash to store it. Company donations of money, supplies, and property are all considered deductible expenses.
We believe the above piece has been highly informative and insightful, watch for the concluding part, soon.