Amazing products and services are the backbones of any business – but ensuring your business is financially in good shape is crucial. A major part of this is making sure your taxes are in order. What is often a major headache for many startup founders and small business owners can be simple and might even save some money.
Not sure where to start? Here are the answers to some basic questions about taxes, refunds and how to handle them efficiently.
Do I need to file taxes?
Don’t worry – the government will remind you that you have to pay taxes. Businesses will receive a paper form and/or an invitation to e-file taxes. However, there is often confusion among small business owners about whether it’s necessary to file taxes in the first place.
By law, businesses of any size need to file, even if they are operating at a loss or didn’t register any transactions throughout the last fiscal year. So, yes, you do need to file, and not doing so will only result in unnecessary fines.
What is deductible?
Most businesses will have assets and expenses that are deductible. These include rental costs, utility bills and the salary of staff. As it’s not the income but the company’s profit that is taxable, businesses can save a lot of money by deducting these expenses.
Tip for the future: as your operations grow, it can become difficult to keep up with expenses, invoices and what exactly can be deducted to create financial benefits. The automation of tax payments and invoicing will not only streamline your company-internal processes but can help your business to be on top of anything that goes in and out.
How do I get a tax refund?
No matter how large or small, a tax refund can be a huge boon for startups and small businesses. The unexpected cash injection can be used to pay off outstanding bills, create an emergency fund or can be invested back into the company for its development of products and services.
An immaculate record of all your business transactions and expenses is crucial when applying for tax refunds or governmental tax exemption schemes. Accounting automation software (such as Financio!) will help you reduce the time you spend calculating, managing and filing your financial records, making it simpler and faster to receive your refund.
How do I reduce my company’s taxes?
Since there are a variety of expenses that your business can write off, it’s beneficial to start thinking ahead when it comes to taxes. If your company didn’t have any major expenses over the last year, it might be worth looking into spending some extra cash in order to save more.
Though this may sound paradoxical to penny-pinching startup founders, spending truly is way to reduce the taxable company profits. For instance, if your business is planning to invest in new equipment, marketing campaigns or similar expenses, you should aim to purchase before your financial year comes to an end. Though you won’t get anything for free, it will surely reduce the amount of taxes you have to pay.