Business taxation

Generally, the tax paid out depends on the form of business operation. Record keeping basically forms a basis for taxation. The tax law requires business to keep proper records explaining all the business transactions carried out as it operates. The following are the general types of business taxes:

Income tax

Tax law requires that all business except partnerships to file an annual income tax. Partnerships usually file an information return. The form used purely depends on how the business is organized. The federal income tax states that you pay as you go; it means paying taxes as you earn or receive income during the financial year. It is calculated on assessable income less any allowable deductions. The assessable income refers to the income the business earns. It usually does not include Goods and Service Tax payable on sales made or on credits. The allowable deductions refer to certain expenses which are necessarily incurred in relation to the business.

Employment taxes

A business is usually run by employees, and when you have employees, the employer has some certain employment tax responsibilities that he/she must pay and the relevant forms which are required to be filed. The common employment taxes include; social security and Medicare taxes, federal unemployment tax, and federal income tax withholding.

Value added tax (VAT)

This is a tax which is levied on consumer spending. It is collected via VAT-registration traders on their supplies of goods and services effected within the state for consideration to their customers. Each trader in the chain of supply through a retailer charges the tax on the sales and is also entitled to deduct from this amount the VAT paid on the purchases.

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Exercise duty

This is the tax which is charged on specific goods, or the tax on goods produced for sale which are particularly sold within a country or licensed for specific activities. It is considered as an indirect tax meaning that the seller or the producer who pays the tax to the government is expected to try to recover the tax paid by increasing the price at which the buyer gets the goods.

Customs duty

This is a type of tax which is charged on goods when they are transported across international borders. Custom duty helps authorities of a country to raise the state revenue and also protect their domestic industries from more efficient competitors from other countries. The custom duty is normally in a percentage form and is determined based on value of goods or upon the weight, dimensions, size, and some other criteria.

Corporation tax

This is the tax charged on all the profits of business resident in a country, with some exceptions, and the non residents businesses that trade in the state through a branch of agency. The tax is charged on the company’s profits which usually include both chargeable gains and income. The business income for tax purposes is calculated based on the income tax rules and principles. The chargeable gains are calculated in accordance with the capital gains tax rules.


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3 Tax Audit Tips Every Business Owner Should Know to be ready for the taxman

When most business owners imagine going through a tax audit they panic and stress out. They fear that the taxman is going ti find a mistake that may be costly or they may end up in jail.

there is nothing to worry about if your records are clean and and tax payments are up to date. An audit is an thorough look at the records and receipts of a business.records. That should always be done and letting the taxman look at them shouldn’t be an issue.

Several businesses carry out audits yearly to ensure that the records are updated and everything is accounted for and to make sure there isn’t any internal theft.

Some 3 Tax Audit Tips Every Business Owner should know before being audited. These tips will help the tax audit process run smoothly but they wont prevent your business from being audited.

1. Have your accountant carry out internal audits yearly

Depending on your accountant’s method, ask them to carry out a thorough audit of the records and receipts. Ask them to make sure that everything is in order and tax submissions are up to date and recorded. This is a quick look at your records to clear out any errors and update any payments. A government audit will however, be more thorough.

2. Be consistent in your books

This is where it’s very crucial. If you’ve there is a small error and you can explain why it is that way, the government official might be lenient but if your tax submissions are not up to date, it might not be that simple.

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3. Organization is key to audits

If your records are in order and well organized, it is easy to trace everything and will save you a lot of time of searching for everything that is required. If you don’t have an all-in-one system to track your money and clients it is highly recommended you purchase one. This will make the audit process simpler, faster and less stressful.

If you get a letter from the government or tax authority read it keenly and follow the instructions. Respond on time to make things easier and less stressful during the audit. Get in touch with your accountant and inform them. They may have some advice for you before the taxman arrives. It is also recommended that you become familiar with your business and its finances.

With these 3 Tax Audit Tips Every Business Owner Should Know, you should not panic and the taxman will always find you prepared to check your books.


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