SMALL business owners face challenges every day. Trying to be tax compliant is often not at the top of their list and tax deadlines often come and go while they are struggling to keep the business afloat.

When small business owners do get around to completing their tax returns, they often go at it alone, not realising that business tax returns are a bit more complicated than individual returns. They often do not get professional help when submitting their annual tax returns and may therefore be missing out on some deductions available to them.

Small businesses, like other taxpayers, have to complete their annual tax returns within 12 months of the end of their financial year.

Here are some helpful hints to help make the process a little smoother:

• Record every cent earned or spent. While it may sound like an administrative headache, keeping an accurate and up-to-date record of your business’s income and expenses, allocated to their various categories, is critical to ensuring a smooth tax return. The nature and size of your business will determine whether you would want to look at investing in an accounting software package or if a basic spreadsheet recording system will suffice.
• Keep all your slips. Keep all documents relating to income and expenses, such as invoices and receipts, and file them in a logical order. Should Sars request verification on your business’s tax return, you will easily be able to supply these. Scrambling around to find slips from the past year can then easily be avoided.
• Make copies of documents. It’s best to keep both a hard copy and electronic version of documents. Scanned copies can be stored online using cloud services like Google Drive or Dropbox, which ensures they’re safe, even if the originals get lost or if your computer is damaged or stolen.
• Store documents for five years. Don’t toss away your documents once you’ve filed your business tax return. Legislation requires that taxpayers keep all relevant documents for a minimum of five years.

Sars may request a review of previous tax returns and you don’t want to be missing vital documents that impact your business’s tax liability.

Use the correct rates for depreciation. If your business owns assets that devalue over time, be sure to use the correct wear and tear rate from Sars’s list of different asset types. For example, computers depreciate at a different rate to vehicles. Also, check whether your business qualifies for the special wear and tear allowances available.

Know all the allowed deductions. There are numerous deductions and allowances available to small medium enterprises (SMEs).

It is in your best interest to familiarise yourself with them to ensure you never pay more tax for your business than necessary.

Provide properly for provisions.

Remember that accounting provisions are treated differently for tax purposes. Ensure you reverse the provision for leave pay and provision for employee bonuses in your business’s tax calculation as these are only deductible for tax once they’ve been paid.

Submitting your annual tax return can be stressful but if you are unable to do it correctly or need help filing then asking for help is the best tip that can be offered.

Contact any one of Nexia SAB&T branches nationally for assistance in your tax affairs.

Please note that the above is for information purposes only and does not constitute tax advice. As each individual’s personal circumstances vary, we recommend they seek advice on the matter. Please note that while every effort is made to ensure accuracy, Nexia SAB&T does not accept responsibility for any inaccuracies or errors contained herein. If you are in doubt about any information in this article or require any advice on the topical matter, please do not hesitate to contact any Nexia SAB&T office nationally.