Anything to do with income tax fills most people with trepidation. It doesn’t matter whether one is simply an individual who has to complete an annual income tax return, or an owner of a small / medium enterprise (SMME) who has to do a provisional tax return for a business. The fact that government revenue services, like the South African Revenue Services (SARS), offers professional help in these aspects, as well as often extending their deadlines for submitting income tax returns, is proof positive of this. If one has an effective cloud based accounting system, income tax becomes a lot easier. Consulting a registered tax practitioner at an organisation like Strategic Accounting Solutions can most effectively take care of individual, or company income tax issues.
Tax is not a single term which can be applied to everyone. The most general distinction is between direct and indirect tax. Direct tax is levied on persons and tax entities, e.g. income tax. Indirect tax is levied on transactions, through taxes such as value added tax (VAT) and fuel levies.
Who should submit Income Tax Returns?
The general rule for any country is that everyone must register for income tax purposes, and anyone who earns any form of income pays tax. In countries like South Africa, employers have to register all employees as taxpayers regardless of tax liability. Special instances which legally require the completion of tax returns most commonly include:
- Carrying on any trade
- Receiving an allowance (e.g. travel, subsistence or being an office bearer)
- Income from foreign sources
- Capital gains
Businesses and Individuals with Multiple Sources of Income
A SMME often finds it difficult to do its taxes because it can’t necessarily employ an accountant or tax specialist. Tax not only takes into account income, profits losses and running costs to determine how much tax is to be paid. This necessitates accurate and consistent bookkeeping.
All courses of financial action have some tax consequences. The purpose of tax planning is to align all the other elements of a financial plan so as to most effectively minimise tax liability. An income tax strategy can take into account one or more of the following actions.
- Reducing Income: Income tax calculations are based on Adjusted Gross Income (AGI). You may choose to earn less, or postpone taking profits from a business venture in order to lower your tax.
- Increase Your Tax Deductions: You may have personal or business expenses which may lower your AGI. Most governments offer some tax deductions for expenses such as tax preparation fees, training and development, health care, and government approved donations.
- Take Advantage of Tax Credits: In some cases governments give refunds for education, adoption of children, starting a new business in a particular area.
Making use of the services offered by Strategic Accounting Solutions will ensure the best use of the latest opportunities.
Preparation and Review of Tax Returns
Part of an individual’s duties is to complete an annual income tax return. In spite of the publicity this receives in the media there are still people who think that this does not apply to them. They think that their employer takes all responsibility for this, because income tax is deducted on a monthly basis. Younger people are particularly prone to this misconception. In most cases there are minimum criteria which specify level of income, and criteria for exceptions.
Minimum Criteria for Submitting Income Tax Returns
Most often these depend on the level of income earned. Most governments specify a minimum level of income at which it is required to submit tax returns. This information can be obtained via the internet, or calling one’s revenue services. These criteria vary from year to year as economic conditions change.
Exceptions: People who don’t have to Complete Tax Returns
Generally the exceptions have to do with age-related criteria. Usually minors and senior citizens (most commonly those above 65 years of age) who earn less commonly don’t have to submit tax returns.
Doing income tax as an individual, or for a company, is like hitting a moving target off a moving platform – both tax requirements (the target), as well as your personal life and/or your business operation (the platform) change. An organisation like Strategic Accounting Solutions can help to eliminate much hardship. Their cloud based financial systems form part of an ongoing service which makes it easier for companies to focus on core business, and individuals to get on with enjoying life.
- National Treasury and the South African Revenue Service (2013-10-21) Tax Statistics. http://www.treasury.gov.za/publications/tax%20statistics/2013/TStats%202013%20WEB.pdf