As tax computation is based on the accounting records and usually begins with the Net Profit before tax, it is important to ensure that your bookkeeping and accounting records are maintained properly before your tax agent proceed with the tax computation. It is true to say that “Rubbish in” will result in “Rubbish out”. If you provide your tax agent with messy accounting records and inaccurate information, how do you expect him or her to produce an accurate tax computation.
Therefore it is important to hire a good accountant to maintain your accounts well in the first place. You need to address the root of the problem so that it won’t lead to tax filing problem later. Many small businesses hire freelance bookkeepers to maintain their financial transactions. However, many of these freelancers may not be familiar with the business and may not update themselves on accounting regulations. Getting such freelancers may save the businesses some money in the short run but may lead to more financial burden in the long run when they need to rectify past records. With this in mind, we always inform our clients to look for more qualified accountants and reliable accounting firms to perform the financial recording.
Proper Accounting Leads to Proper Tax Filing
Once the accounting transactions are recorded properly, it sets the right direction for tax filing. Whether it is individual tax filing for sole proprietor, corporate tax filing for companies or Goods and Services Tax filing for GST registered persons, you can be assured that a qualified and reliable tax agent will be able to extract the necessary information and seek proper clarification before filing the tax returns.
Besides neglecting on maintaining proper accounting records, some businesses file their tax return based on their Net Profit without making any adjustments for tax purposes. It is important to note that accounting rules are different from tax rules and therefore some adjustments are usually required to comply with the tax rules.
In summary, hire the right accountant for proper maintenance of accounts and hire a qualified tax agent to ensure compliance with tax rules.