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Every year, companies and individuals lose their well-earned finances to tax penalties and interest. Surprisingly, most often the cause is just neglecting to manage returns either annually or from month to month. It’s very easy for debts to get out of control, and then harder to bring those debts under control. It’s common for individuals and companies to wait until the last minute to reconcile finances and organize payments, and this can impact on productivity and liquidity. Whether you have your own business, or just want to take the worry out of making personal income tax payments, there are ways of simplifying financial management.
Here are a few simple tips for getting on top of the monthly and annual return challenges. It’s never too late to start, when it comes to positive changes in your accounting habits:
• 7th of each month: Paye Return is due
Paye is Pay As You Earn tax, and is withheld from the salaries of employees. Making sure PAYE tax is paid on or before this date means that a regular payment schedule and expectation of expense is maintained, facilitating cash flow, and is also beneficial as this amount is then deducted monthly as opposed to a large sum deducted annually.
• 25th of each month: VAT Return is due
All businesses must pay Value Added Tax, VAT, relating to transactions involving goods and services within South Africa, including imported goods, with some exceptions being private sale of goods, salaries and wages, and hobbies and recreational pursuits. Managing the payment of VAT from month to month assists with maintaining cash flow and also helps with financial record-keeping. As VAT is added already as a standard to retail goods, it’s relatively simple to pay, and can be done at the SARS branches, via the post or at a bank, and even by electronic transfer.
• 28th February: Deadline for completion and submission of company tax
You may not have a complete financial record available until the cut-off date, but if you maintain healthy records throughout the year, this date will not make you nervous. The trick is to keep up with everything from month to month. In the end, that makes the annual submission so much easier, especially if you are using third-party bookkeeping or accountancy firms.
There’s lots of information available on the SARS website: http://www.sars.gov.za on how tax works and how to facilitate payment of different kinds of tax. It’s a useful site, too, because there are often changes to legislation announced there which could benefit you as a taxpayer. It’s even possible to download spreadsheets which can help you with record-keeping. Making a few changes to your financial management habits could help to keep you up to date and even increase the profitability of your business.
Using an Accountancy Firm:
It’s common for individuals and companies to have a third party accounting firm assisting them. When it comes to making sure that all financial matters are managed accurately and consistently, it’s a practical solution. If frequent travel or scheduling challenges get in the way of handling payments or meeting deadlines, an accounting firm can free you from having to spend your valuable time balancing the books. Accountancy firms generally offer different packages according to your needs. Here are some reasons you could consider using an accounting service:
• Travelling: You’re not in the office on the dates when tax is due, and need a trustworthy third party to make accurate payments.
• You spend too little time in the office as part of your business- you may be spending time in meetings with clients, and this is a more valuable use of your time.
• The turnover of your small business doesn’t justify employing a full time accountant.
• An accounting specialist can find ways of reducing the amounts you have to pay, and is also up-to-date with changes to tax payment systems and legislation.
• Accountants are aware of exemptions and, as practitioners, are skilled at balancing the books in a fraction of the time it would take you.
• Having a reliable service means that you will no longer have to incur penalties because of late payments.
• You prefer to give the responsibility of tax matters to someone else, without compromising the financial security of your company or yourself.
• You find it difficult to work out your own income tax or other kinds of tax.