Updated: Dec 12, 2019
Tax planning is part and parcel of an e-commerce business. It's important to have a robust strategy in dealing with your taxes for the year. The best way to prepare for tax season is to have a financial plan in place that goes hand-in-hand with taxes.
As every accountant is aware, tax planning entails dealing with your adjusted gross income (AGI). The higher your AGI is, the more you will owe. Your goal in terms of taxes is to reduce your AGI so that you don’t have to pay as much in tax. Such reduction can be possibly achieved through contributing to retirement accounts, taking advantage of deductions, and recognizing the appropriate losses. Having tax credits and rebates can also reduce your taxes. The same is true with making estimated tax payments and saving money.
To ensure all these, it helps to deal with a tax accountant who can manage your finances and prepare for your taxes. Here's what a tax accountant does:
1. Prepare financial items and paperwork
The first thing a tax accountant does is prepare all the necessary documents for taxes far ahead of time. Doing so makes the submission and filing of taxes a lot smoother. The financial items required are the following:
Financial reports (balance sheets, profit, and loss statements, and cash flow statements)
Business expenditures (rent, mortgage, utilities, travel, and operating costs)
Last year's tax returns and a notice of assessments
List of quarterly payments
Employee payroll information
List of assets
2. Obtain all necessary tax forms
After preparing all the necessary paperwork, the next thing that a tax accountant does is to get all the required tax forms needed to be filled out and submitted. Two of the key reports you’ll need to submit are your Business Activity Statement (BAS) and income tax return.
Business Activity Statement (BAS): The BAS includes several key pieces of information, including goods and services tax (GST), pay as you go (PAYG) instalments, PAYG withholding tax, and other taxes. Every profitable business should be registered for GST—e-commerce stores included. The Australian Taxation Office makes filing easy by automatically sending you a BAS when tax season comes around. Just be sure that you register for GST and an Australian business number (ABN).
Income tax return: Your income tax return is where you report your business income and claim any deductions, if applicable. Most e-commerce platforms make this easier by allowing companies to run sales reports. All you have to do is go to analytic reports and check sales reports. A tax accountant can even customize the selection and choose whether he or she wants to run reports on a quarterly or monthly basis. It's essential to keep track of your company’s expenses throughout the year in order to generate profit and loss statements, which will be included in the calculation of your income tax. These reports should include vendor invoices, receipts, and amounts collected throughout the year. Having the necessary documents readily available helps the company during the tax season. The more organized and prepared you are, the better. Not only will you save time and money, but you will also put back into your business. At the end of the day, tax planning entails careful consideration and attention to detail.
Your E-Commerce Business Can Benefit From a Tax Accountant
Every e-commerce business has to partake in tax planning. Tax planning can help companies to achieve short-term and long-term financial goals. This helps businesses grow and maintain economic stability. This helps businesses reduce their tax liability in a legal way.
That said, it makes sense to work with a professional tax accountant. Doing so is the safest and most efficient way to take advantage of the benefits of tax planning.
If you’re looking for a tax accountant on the Gold Coast, get in touch with us to see how we can help.