Tax Accounting and How It Relates to You
Businesses spend a lot of time computing for and filing taxes annually. In the US, the average time businesses spend is 20 hours, with 10 hours allotted to record-keeping alone. This is assuming you have a proper understanding of tax accounting.
With a tax accountant, you can get things done more efficiently and accurately.
What Is Tax Accounting?
Tax accounting is done to track funds and involves tax returns and payments. It’s a requirement for individuals, businesses, and even entities who are exempted from tax. However, tax accounting is different for each entity.
Types of Tax Accounting
For Individuals
General accounting for individuals covers all income and expenses regardless of its purpose or tax implications. However, if you’re talking about tax accounting, you focus on things like income, qualified deductions, and other transactions that affect your tax burden.
Employees and pensioners typically get their income tax taken out automatically with the help of their company’s human resource department.
For Those Who Are Self-Employed
If you’re self-employed and your business is growing, there is a chance the Australian Taxation Office will require you to pay income tax quarterly. This is known as pay as you go (PAYG) installments.
You can find out how much you need to pay with their PAYG calculator.
Accounting Tips for the Self-Employed
1. Hold on to all financial documents
It would be wise to keep your records for a minimum of five years if you’re self-employed and handling your own taxes. There is always the chance that you will need to submit extra information, such as inventory or balance at the end of the year.
When your business gets investigated or audited, you will be asked to present documents like bank statements or invoices. If you can’t procure the needed documents, you might get in trouble with the law.
2. Log all your income and expenses
Having a detailed log of your funds is the best way to stay on top of your financial situation. You can check your assets conveniently through a mobile banking app, but this isn’t enough; it doesn’t let you know how much you’re earning and where your money is going.
If having a traditional spreadsheet is too tedious, we can’t blame you. Luckily, there is an abundance of bookkeeping software available today to help you track your finances.
3. Educate yourself with finance and taxation
Knowing things like finance and taxation can help you grow your business. On the other end of the spectrum, lacking knowledge in the matter can lead to your company’s downfall.
You can educate yourself with books and other resources. Alternatively, you can hire a seasoned tax accountant in Sydney to provide guidance on your company’s finances, accounting, taxes, and other related matters.
For Tax-Exempt Entities
Tax-exempted organizations still need to do tax accounting to ensure that they adhere to all laws and regulations governing the proper operation of a tax-exempt entity.
They need to provide information, such as incoming funds like grants and donations, as well as how the funds are being used.
However, not all nonprofit bodies are exempted from taxes automatically. They need to meet the requirements and register as a charity to be legally exempt from taxes.
For Businesses
When it comes to businesses, tax accounting is more complex since you need to ensure the company complies with all tax laws.
Just like tax accounting for individuals, you need to track all funds going in and out. However, there’s more information that needs to be analysed and audited for companies. This includes tracking business expenses, funds directed to shareholders, and deciphering which of them are taxable.
Large companies typically hire an accountant tax agent to accomplish these tasks since tax laws are complex. Having a tax accountant isn’t required, but it is incredibly beneficial for businesses. Their responsibilities include:
- Providing Guidance – Some accountants offer tax planning advice to businesses and individuals to save money on taxes
- Tax Return Preparation – Tax accountants meet with their clients to assess their financial needs and gather the important documents, investment income statements, and other financial documents. They look for tax deductions and determine how much tax is owed.
- Tax Planning – Business decisions have tax-related ramifications, especially if these involve international transactions. The tax accountant’s role is to assess the company’s financial situation and minimise the income tax.
Hire a Tax Accountant in Sydney, Australia
Ensure all your company’s tax accounting requirements are met with AY Accounting. Our tax specialists make sure your business stays on top of all tax-related matters.
With our corporate tax preparation services, you can fret less about managing your company’s tax accounting and focus more on running the business.
Contact us today to get a free consultation.