Accounting for tax returns when in a small business needs to be divided into what is personal tax payable and what is business tax.

Too many small business people make the mistake of not keeping their personal earnings separate from their business earnings. This can make accounting for tax payable more difficult.

When running a small business, particularly when a business first starts up and the earnings are very small, it hardly seems worthwhile dividing a ‘wage’  as a regular payment from the cash flow as a separate entity but for the purposes of accounting for tax it is essential.

Every small business has a cash book of one kind or another. These days with so many great software accounting packages readily available, life for the small business owner is made considerably easier.  In a column in the cash book, make sure that there is a column in there for ‘drawings’ or “wages” or whatever you choose to name it; but one that is only there for paying living expenses or wages to yourself and to any casual staff that you may employ from time to time.

By having a dedicated column just for wages or ‘living expenses’, you will always have proof of correct accounting procedures for tax records available, in an easily proven system, in case you ever get a tax audit.

Tax audits are no fun and the tax auditors will expect to see proper accounting records.

Without having them readily available, you could end up in strife with your country’s taxation office.

The other reason you will need to have proof of your income from your small business will be for you to submit your own personal tax return which is separate to your small business tax return. When it comes to taxation, you would be well advised to find yourself a good accountant to submit your returns for you and your small business.

The real advantage to having an Accountant do your accounting for tax returns is that each year there are changes to the taxation laws and an Accountant’s job is to know exactly and precisely what they are.   There is absolutely no point in paying more tax than you have to and an Accountant will be able to advise you on what you can and can’t claim for in your business.

Besides, whatever they charge you to do your accounting for taxation records is tax deductible anyway so you may as well use this to your advantage. After all, being in business has to have some advantages!