With money comes responsibility and nothing is truer for businesses. Filing tax returns is required by the law as is making regular tax payments. Failure to do so can land companies in hot water. The same applies to small businesses. If you’re recently set up a small business and the fiscal year is drawing close, abide by these to-do’s.
Get the right form
There are forms for individuals and businesses so choose the latter. As with passport forms, take the time read everything. Answer questions with the right answers and figures and make sure all financial statements are in order.
Cash or accrual?
You have two choices when filing tax returns. The cash basis means income is calculated when collected and expense is identified when paid. With accrual, the two are recognized when earned and incurred respectively. Small businesses that haven’t generated additional net income that’s greater than payables would do well to choose the accrual basis until net income exceeds payables in which case the cash basis would be chosen. This will influence the amount of tax to be paid.
All tax returns should be filed – in consultation with you – by a competent accountant or tax preparer. Income tax laws are complex and unless you’re a licensed accountant yourself, leave it to the experts.