The quote by Benjamin Franklin that says “Nothing in this world can be said to be certain, except death and taxes” has got to be the most precise quote in the accounting history according to my opinion.
Taxes are inevitable, whether you are running a business, are an employee or even unemployed. You will always have to end up paying some form of tax.
When it comes to businesses; every business must file returns and pay taxes to the South African Revenue Services (SARS). Your business may also be responsible for collecting taxes paid by others and remitting those to the government.
There are plenty of upsides that come with running a business. When it comes to taxes, one of the biggest perks is being able to reduce your taxable income, and therefore your tax bill by deducting legitimate business expenses through SARS registration.
Whether you’re set up as a sole proprietor or a company in South Africa, every cost you incur that directly relates to operating your business could be tax-deductible.
Some of the Business Taxes You May Claim:
● Material and equipment costs
● Employee costs and administration costs
● Business/office rental costs
● Office supplies
● Phone costs
● Travel and transport, including business vehicle costs
● Uniforms (if needed)
● Wholesale purchase costs for goods resold
● Financial charges (such as bank fees), utilities
● Legal fees
● Insurance fees
● Marketing , advertising and promotion costs
As much you can claim for the above business expenses from SARS, you are still expected to pay your taxes such as Provisional tax, Employees tax, Directors’ remuneration or Turnover tax.
Failure to pay taxes as a business, you may face harsh consequences from SARS such as paying fines or facing jail time. You may think you can get away from them, but you actually cannot.
Take, for instance, the story of Al Capone. Capone’s reputation as a ruthless mobster had captured the fascination and horror of the country. Alleged to be the mastermind behind at least 30 deaths, government agents spent years trying to bring Capone down, but he avoided convictions by bribing officials and intimidating witnesses. Ultimately, it would be the US Treasury Department that brought an end to the man dubbed “Public Enemy No 1”. Capone was known to enjoy a lavish lifestyle and was worth $100 million before he was 30 – yet he had never filed a tax return.
On 17 October 1931, he was found guilty on five charges of tax evasion and later sentenced to 11 years in prison.
Al Capone’s story is a clear indicator that you can ditch a lot of crimes in this world, but not your tax evasion crimes.
Tax Compliance Tips
1. The first step to ensuring your business is staying compliant with corporate tax, and reporting requirements are to choose the correct legal structure for your business.
2. In addition, make sure you are registered to pay taxes at the right time. Not paying taxes when they are due can lead to fees and penalties. Registering when you don’t need to means you’re spending unnecessary time and energy on compliance.
3. Documentation is a crucial part of staying compliant. Keep timely, complete, and accurate records. If there’s a problem in the future, you’ll need to refer to those records to determine where the issue started and the best course of action to correct it.
4. Know how your employees and vendors affect your taxes. Classifying someone as an independent contractor can save a business money, but labelling an employee as a contractor will create financial issues such as adjusted back taxes. Understanding both the Affordable Care Act and pending overtime changes from the Department of Labor will help you determine how to classify those supporting you in your business.
5. To avoid unnecessary penalties, plan your estimated tax payments. Estimate on the high side to avoid coming up short when these taxes are due.
6. Seek expert advice. Work with a professional who can help you keep on top of inconsistent and constantly changing state income tax and withholding rules.
Staying on top of corporate tax registration doesn’t have to be complicated. The best way to ensure you’ve registered to collect the correct taxes is to find a partner. The right compliance partner will help you track requirements, submit your applications in the proper format, meet application deadlines, and provide confirmation and status updates.