The closing of the financial year is when most business owners become occupied in tax matters and unsurprisingly, this is also the period spent on closing your books. . So how do you juggle bookkeeping and tax during this busy season?
Understandably, bookkeeping and tax compliance are two tasks that bring a lot of confusion to business owners. But if you can get your books in order way before the set deadline for filing, this could significantly help you in addressing compliance issues.
Think about it – if your books are in disarray, closing your books come tax season will likely become a more tedious task. You have to go over your receipts and invoices from the current financial year – and even further into the previous financial years if you are filing late. In contrast, having everything ready will keep you at ease, knowing that you won’t likely get in trouble with the Internal Revenue Service (IRS).
Between bookkeeping and tax, are you still confident that you can keep your wits about you? Here are more reasons why you should keep your books up-to-date in time for tax season:
Handling VAT returns and official VAT books
Dealing with taxes is all about adhering to strict compliance issues imposed by the IRS. At the top of the list: VAT returns and official VAT books. When your invoices and receipts are organized, preparing critical business numbers that relate to VAT becomes practically effortless.
Managing withholding tax returns
One of the general rules in taxation in the US is that a certain amount of your business revenues are withheld. The specifics of the actual income dictate the computation for the tax withheld. More often than not, the computation is based on a fixed rate or percentage. Going over these numbers and making sure that the withholding tax filed is accurate means having a withholding tax record to refer to – and this is why it is necessary to keep tabs on your books.
Settling corporate income tax returns
The structure of your business has everything to do with the income tax return you are expected to file to the IRS. In a nutshell, all businesses are expected to do income tax bookkeeping and file their income tax returns every year. However, if your business is a partnership, the IRS will not oblige you to file an annual income tax return. What you will file, instead, is an information return. An information return is a report of the income, deductions, gains and losses of the partnership without paying for taxes upfront.
Read Next: Corporate Tax Laws to Check Before Starting Your Business in Australia
The impact of your well-kept bookkeeping and tax cannot be emphasized enough. Not to mention the incentive you’ll get if you can find legitimate tax deductions – something you can do more of if your critical business numbers are on track.
Eager to start consolidating your books? D&V can help! We offer bookkeeping and tax services for CFOs, accounting firms and professional services all over the world.
To find out more, you can download our paper The D&V Difference: Solutions for Australian Accounting Firms and learn how we can add value to your firm. Get in touch with us today!
This post was first published 2 October 2014 and edited 26 October 2020.
Edited by: Maria Katrina dela Cruz
