So, I realize another tax year is now in the books. We as business owners have just spent a significant amount of time going through our yearly records, organizing documents, making appointments with accountants, etc. Tax season is a busy time of year that most of us dread. There are many different ways, however to make this time of year one to not only survive, but to look forward to. It’s like a new beginning, closing out last year while continuing on with the business at hand. We are making plans for a better and better future. Things will be different this year…
Ok, so maybe that goal is a little lofty. There are a few things in life that are meant to be survived and taxes, for you, could be one of them. There is, however, one important, small task that can make a huge impact on the bottom line of your business and could put a positive spin on taxes for you.
If you are in the retail business you know that you have to pay out sales tax. When you pay out sales taxes, it is with money you don’t have to pay taxes on. Forgetting to deduct sales tax from each sale increases your total sales amount. This increase in total sales in turn increases the amount of taxes due.
This oversight can be easily fixed in your accounting software by simply inputting a tax rate on sales categories. According to Xero.com “The Sales Tax Report in Xero is a summary showing sales tax charged or paid by your organization for the tax period being reported. It is made up of a Sales Tax Summary and a Sales Tax Audit Report. Sales tax for the period is calculated based on when and how you have entered transactions into Xero and what tax rate you applied to each line item. It can be tracked using the Sales Tax Audit Report. If you have set up your sales tax rates to match the rates (and individual rate components) you are required to file based on the tax return or other document from your country or state, it is likely that you will be able to copy the figures calculated for a tax period from Xero onto your tax return.”
So, making this small change in the way you run your business day-to-day could greatly reduce the amount of work to be done around tax time as well as increase some of your tax benefits. In future posts I will be talking more about the importance of working with a good accounting software package. I am a Xero certified bookkeeper and would love to answer questions you might have about getting started down this road.