Six simple steps small business owners can take to get ahead on their 2022 taxes
The secret to successful filing is not leaving things to the last minute, writes Xero South Africa’s Colin Timmis.
The South African Revenue Service (SARS) 2020 revenue outcome highlighted the severe economic impact of Covid‐19 on a struggling economy. As a result, expectations of tax base growth have deteriorated since the 2020 Budget.
Effective tax collection and expanding the taxpayer base are key ingredients to fostering economic growth. That’s why it’s more important than ever for SMBs to file their taxes correctly and on time to avoid a nasty fine.
The secret to successful filing is not leaving things to the last minute. As tax deadlines approach, SARS becomes busier and waiting times get longer. That’s why now is the perfect time to start laying the groundwork for your company’s 2022 taxes.
Here are a few simple steps you can start taking now:
1. Get smart about eFiling taxes
Tax was one of the nine areas we outlined in our Time to Rebuild Manifesto, which set out recommendations for the government.
One of these was making the tax process more streamlined and encouraging tech adoption to close the tax gap. Xero research shows that 27 percent of SMBs find submitting tax returns to be one of the top challenges they face.
The good news is that the process is already improving for small businesses. The introduction of eFiling options and integrations with popular technology solutions have made filing taxes with SARS simpler than ever.
Most businesses – 81.2 percent in the 2019-20 financial year – have already adopted eFiling (according to SARS), but if yours hasn’t, now is a great time to make the switch
We’ve integrated VAT eFiling directly into Xero so that SMBs can create, store and submit returns in a few simple steps.
2. Organise what you can now
Get ahead of the crowd by ensuring that you have all your registration details correct now. SARS issues penalties for incorrect details, but it only takes a few minutes to check that everything is in order. Businesses that eFile can check their details online on the SARS website.
3. Keep your accountant or tax expert close
Our research shows that the pandemic has caused almost half of small businesses – 49 percent – to value their accountant as a business advisor, not just a number cruncher.
Almost a quarter of SMBs, 23 percent, have received a penalty fine because they did not understand the tax rules.
Accountants are a valuable resource when it comes to understanding regulation and avoiding fines, and small business owners should use their knowledge to ensure they remain compliant.
Your accountant can help you to maintain a healthy relationship with SARS and ensure that you’re confident about which exemptions apply.
4. Automate painful processes with technology
Constant engagement with finances isn’t just about taxes. There’s significant value to adopting an accounting system that takes in data at regular intervals and provides a deep understanding of how your business is doing throughout the year.
That’s why many businesses choose to adopt cloud accounting software, which can automatically share data through bank feeds. Bank feeds automatically and securely import your banking transactions into your accounting software each day.
This ensures that you can maintain a clear view of your financial position in the lead up to tax season and beyond. This will save you hours of time manually reconciling transactions at the last minute.
5. Go paperless
Technology can also free you from mountains of paperwork. The age of boxes of receipts, expense paperwork and invoices is over.
Managing lots of paper documents is inefficient and introduces opportunities for human error, but fortunately there are plenty of tools that enable businesses of all sizes to go digital.
Modern accounting software, for instance, enables business owners and employees to simply take a picture of a receipt and upload it directly to their accounting platform. This will then automatically pull across all the information ready for efficient tax filing.
6. Stay informed
As we all know, circumstances can change quickly and nobody knows what’s around the corner. That’s why it’s important to listen out for updates from SARS and tips from the small business community.