Every small business is required to file taxes at the end of the fiscal year. However, filing taxes is often a complex and confusing process for many small business owners. The process involves dealing with a lot of paperwork and complex tax rules and regulations. If it’s your first time, you may not know the correct forms to use, how to prepare your financial records, or even how to file taxes as a business.

These things may make you more likely to file your taxes late, inaccurately, or even abandon them entirely. Not lodging your returns on time or incorrectly filing your taxes may lead to an ATO audit, leading to hefty penalties, high-interest charges, and even legal issues. Hiring the services of a reputable tax specialist like Pherrus Financial can help ensure your returns are all in order and correctly lodged, reducing the risk of an ATO audit. It’s also worth noting that you’re responsible for any omissions or mistakes on your tax returns.

Here are a few things you can do to prepare and file your small business taxes correctly and ensure you pay the correct tax.

1. Collect your receipts and organize your records

Keeping your financial records organized makes filing your small business returns easier. In case of an audit, the ATO may want to assess your financial records for the past five years to ensure your tax affairs are in order. These records include bank and credit statements, sales receipts, employee records, invoices, and more. So, once you’ve filed your tax return for the current year, you should start preparing for the next one. Collect all receipts and other documentation for business-related income and expenses for at least five years.

Today, you can leverage accounting apps to stay on top of your business expenses and manage invoices. Tax software makes tracking your business transaction easier than trying to gather the information at the end of the fiscal year. Ensure you store your records safely so the information can’t easily be changed or damaged. Having all your financial records organized in one place can make your life easier during tax season or when the ATO asks for it. Also, you’ll have the necessary documentation to back up your claim in case you encounter an audit.

2. Get your income and expenses right

Another great way to prepare your financial documents for tax filing and reduce your risk of an audit is ensuring that your expenses and income are accurate. Providing accurate income and expenses figures can also come in handy to support your return in the event you’re audited. On the contrary, overstating your expenses or hiding income can easily increase your risk of an ATO audit.

Ensure you report all your business income, whether paid into a private account or in cash. ATO uses benchmarking to check the performance of your small business against others in your industry. This way, they can quickly identify when you’re not reporting all your income. Your figures must be accurate, so it’s essential to have all your financial records well-documented. Try not to round numbers to hundreds or tens since it appears you’re making them up. Your deductions must be business-related, and you should have the necessary documents to back up your claims.

3. Find a great accountant

While you might be tempted to complete your tax returns on your own, this can be risky since you could make costly mistakes. Also, tax rules and regulations that often affect most small businesses can be complex and downright confusing to navigate yourself. Hiring a certified public accountant or a registered tax agent can help ensure your finances and tax affairs are running smoothly and are in order.

A financial professional can help support your filing practices and financial administration. They can give the expertise and guidance you need to meet your tax obligations. They help conduct regular reconciliation by cross-checking figures with your source documents and bank statements. Properly managing and organizing your finances can reduce your tax ability and avoid being subjected to an audit, saving you lots of money in the long run. Check online sources for a registered accountant or tax professional near you.

4. Know your deadlines and Extensions

Missed or late filing of your business returns can result in penalties. Knowing your deadlines for filing returns is crucial to ensure timely tax payment. During certain tax seasons, the deadline for lodging your business tax return may be on a weekend or a holiday. In such cases, your new deadline becomes the following business day.

Staying organized and managing invoices, inventory, payroll, employees, and everything else makes work easy when it comes to the due date of business taxes. As a small business owner, you must lodge a tax return at the end of each fiscal year. If you fail to lodge or pay a tax return on time, you will likely face prosecution. This can be in the form of criminal charges, fines, interest charges, and debt recovery.

The type of return your small business should complete mostly depends on the structure of your small business. Taxes such as fuel tax credits, GST, and pay as you go (PAYG) withholding are typically reported on business activity statements (BAS). If you feel you can’t meet the original deadline, you can request a tax extension. This way, you can lodge your business tax much later and won’t pay penalties. The time extension is usually for filing your paperwork, but tax payment is still due on the initial deadline.

You can use the ATO app to know your due dates for filing taxes and meet your tax payment obligations. You can set the app to notify you when the due dates are close to avoid missing or filing your returns late.

Endnote

Paying small business taxes is a mandatory bill you must handle as a business owner. While navigating on your own might seem confusing and complex, following the above tips can help you prepare and file your taxes correctly every fiscal year. This can give you peace of mind during tax season and help avoid any accidental triggers that can bring undue scrutiny that will interrupt the everyday running of your small business.