Your foolproof guide to filing taxes
Contributed by Fortis Media
26 May, 2020
As the late, great, Benjamin Franklin once said "Nothing is certain except for death and taxes". Whether you're rich or poor, small or big, there's no running from your taxes.
Al Capone or Alphonse Gabriel Capone, one of the most famous gangsters in living history was taken down on charges of tax evasion. Having built his fortune on bootlegging, prostitution and gambling, Capone was a savvy criminal who took great pains to keep his hands clean.
This along with the close ties he maintained with several high-profile government officials made it impossible to indict the mobster. Eventually however, federal agents were able to charge him with numerous accounts of tax evasion and fraud which led to a 11 year stint in prison and a fine of $50,000 (about $840,000 today).
The fact that Capone would never be charged for high-profile crimes such as the Valentine's Day Massacre is a testament to the corruption of the Chicago Police Department back then and the lengths that governments would go to in order to prosecute tax evaders.
While Al Capone may be a rather extreme department, government tax agencies should not be trifled with and great care should be taken when filing tax returns. Failing to do so can result in stiff financial penalties and possible legal ramifications.
In this article, we'll take a look at the steps that you and your business can take when filing taxes.
1. File and Pay Your Taxes On Time
The tax year refers to the 12-month period beginning from the 1st of January and ending on the 31st of December in which individuals will be subjected to taxation on income earned. During the first quarter of the following year, you will be expected to file and make payments on tax incurred on earnings in the previous year.
Simply put, taxes are incurred on income earned during the year 2020 which will then be paid to the relevant government agency in 2021. Missing the specified government deadline will likely incur a hefty fine and a visit from the tax authorities.
Some taxpayers wait up to the last minute to file and pay their taxes in order to maximize their liquidity. This is a needless risk as the penalties incurred will far outweigh any savings that you may have gained.
As a rule of thumb, always take the time to ensure that your taxes are filed and paid before the deadline is over. Remember, you are not betting on the Triple Crown horse racing events after they are finished, do you? There is a proper timing for everything.
2. Know Your Deductions
As much as anyone hates paying taxes, it cannot be denied that governments offer a variety of tax reliefs to help lighten the burden.
While it may be tempting to go overboard by filing claims for just about everything, you would do well to take the time to know what tax reliefs are recognized by your country's tax authority.
Making fraudulent or simply incorrect tax deductions can result in a costly fine being incurred and you being forced to submit to a tax audit. To be on the safe side, consult your accountant when filing tax deductions and ensure that the relevant documents are filed and safely stored for a period of 7 years or more.
3. Never Under Declare Income
With profits on the rise and a healthy cash flow, you may sometimes be tempted to under declare your income. After all, why should the government get their share of your hard-earned cash?
While it may be tempting under no circumstances should you consider tax evasion. Governments are some of the most vengeful organizations in the world and will often stop at nothing to ensure that they receive their due.
This is why tax evasion will often result in stiff financial penalties and possible jail time. Even worse, you could possibly be back taxed for undeclared income which may spell the death of your business.
4. Ensure That All Information is Accurate and Up-to-Date
From changing the address of your business to switching bank accounts, it's always good practice to keep all of your information accurate and up-to-date. This ensures that you can be easily reached should there be a need.
Furthermore, by providing the right bank account details, you can rest assured that you'll be able to receive your tax returns as quickly as possible.
Taxes are most definitely not fun, but by taking the effort to getting it right the first time, the peace of mind and convenience is most definitely well worth the investment.
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