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Taxes: Our Guide to the Fundamentals

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Taxes: Our Guide to the Fundamentals

Okay, so taxes are probably the least exciting part of running a small business – in fact, most business owners dread doing anything to do with! But taxes are unavoidable, and they need to get done. This guide will show you how to manage your tax affairs on the go, as well as come tax season, so that you’re prepared and confident all the way through!

Understanding the Basics

This is a repeat lesson for moth, but it bears repeating: there are three key terms you need to know when approaching your taxes: Revenue, Profit and Deductions.

  1. Revenue: This is all of the money that comes to your business from your customers
  2. Profit: The money left over after all of your expenses (usually not including tax).
  3. Deductions: Certain expenses the government allows to be deducted from revenue.

Keeping on top of your records!

It’s important to keep all of the important documents that relate to your business, because it’s possible at some point you’ll be asked questions about your business’ revenue by the tax authority. In fact, many jurisdictions actually require that you keep all of your records for a certain number of years. Find out what this requirement is where you live, so that you’re above board in all respects.

But another reason to keep all of your records (yes – everything!) is because at tax season, the records of your expenditures may entitle you to substantial tax deductions! Deductions are basically expenses relating to how you made your money that the tax authority will sometimes allow you to ‘deduct’ from the overall amount of tax that you owe.

Keep in mind that you’ll be taxed on all of your revenue, not just profit – so it’s especially important to maximize your deductions so that taxes don’t eat even further into your profit margin.

Integrate a Routine

Trying to do all of your tax at the end of the tax year is difficult and frustrating – don’t put it all off until the last moment! Instead, your tax record-keeping (or tax payment) should be part of your ordinary tax routine that you complete every week or so.

This way, you’ll be aware at all times of what needs to be done, and you won’t get hit with any painful last-minute surprises.

Streamline your payments

One way of keeping everything all together is by using a single payment system for all of your expenses. Some business owners find it convenient to use a single credit card to pay for everything – saving the need to juggle a mix of cash receipts and other payments.

Consider using tax software

Eventually, your business will grow to the stage where you’ll turn to a dedicated professional. But before then, there is another affordable option, other than struggling through your taxes alone: tax software has become affordable, effective and easy to use for the average person, making it a really convenient option for small business owners!

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