*Why You Should File Taxes Early As Small Business
By Felix Oloyede
Small businesses stand to gain a lot by filing their taxes early.
Tax is the obligation of every working individual to the government. But this obligation is not limited to individuals; businesses also have this responsibility to the government.
A tax is the money paid to the government to enable it to provide public services. According to Investopedia, a tax return is a form filed with a tax authority that reports income, expenses, and other pertinent tax information. It allows taxpayers to calculate their tax liabilities, schedule payments or request refunds for overpayment of taxes.
Although small businesses whose turnovers are N25m and below are exempted from company income tax, which is collected by the Federal Inland Revenue Service, they are required to pay other taxes, such as withholding tax, value-added tax, pay-as-you-earn, stamp duty, capital gains tax, etc.
Principal Partner, Adeboye Kayode D & Co., Oluwakayode Adeboye, who is a chartered accountant and tax consultant, stated that a civic obligation and social responsibility for every corporate entity is to pay its taxes.
While it is compulsory to pay your taxes as a business, it is more advantageous to file them early. So, this article will highlight some of the benefits small and medium enterprises will derive from filing their taxes early to the tax authority.
The Federal Inland Revenue Service Establishment Act 2007 states that refunds can be made to taxpayers for overpayment of tax after a proper audit has been done. Other tax laws also make provision for tax refunds subject to meeting stipulated conditions. For instance, the Companies Income Tax Act gives room for a repayment of overpaid taxes within 90 days upon request.
Some of the reasons businesses or any other taxpayer could request refunds include tax remittances made with the wrong Tax Identification Number; withholding tax deductions above income tax payable; payment of excess VAT and other computation or payment errors.
Early filing of taxes as a SME will enable you to get refunds. It will give you the latitude to process the refund within the statutory 90 days after you have done a proper audit to ascertain that you qualify for a refund.
You incur more costs when the tax authority penalise you for late filing. When you file your taxes before the deadline, you avoid penalties.
According to TurboTax, a tax consultancy firm, it seems logical to file early if you’re getting a refund, but what if you owe? “It actually makes sense to file early either way. In most cases, if you owe money, you still have until the filing deadline to pay it,” it stated. Preparing your taxes early actually gives you more time to arrange your finances to cover your expenses than if you waited till the last minute and had to scramble to figure out how to pay off your tax liability to avoid being penalised.
Avoid tax extension
You eliminate the need to file an extension if you file your taxes early. Requesting for extensions of time is an indication that your business is unorganised. Many people are fond of ‘fire brigade approach’ in most of their dealings, and they extend this to their businesses. Such people wait until the last minute to file their returns, so they need time to look for additional deductions or gather receipts.
You stand the chance of incurring more costs when you wait until the last time before filing your taxes, because you may need to get the assistance of a tax professional to help you sort your finances and complete your return to enable you to meet the deadline.
If you request an extension but fail to pay what you owe, if you have a balance due, the tax agencies will charge you interest and penalties on the outstanding tax debt until it is paid in full. So, to avoid this, it is safe for you to begin the preparation of your tax return early in the year.
Room for amendment
You may discover the need for additional documents or a resolved issue while preparing your tax returns. If you commence preparation early, you will easily wiggle yourself through the challenge. But if you wait until the last minute to start, and then find that you don’t have everything you actually need, you may be forced to file an extension.
According to Adeboye, small companies are conferred with definite benefits, rights and privileges in the system, based on their tax-compliant status. For instance, you have a better chance of securing public and private contracts if you have tax-compliant status. Your tax certificate is one of the documents the government will require before giving you a contract. “Filing your taxes gives you access to business opportunities as a small business, as many government and private entities require evidence of taxes paid before engaging in business transactions. Timely filing of taxes opens doors to various opportunities,” the tax consultant enunciated.
Good corporate reputation
The small businesses that file and pay their taxes earn good corporate reputation and good standing in the business community, Adeboye told The PUNCH. Goodwill is a priceless asset to any business. You have goodwill with the government when you have a tax-compliant status.
If you are too busy to have the time to prepare and file your taxes early as a small business, you may need external help. There are tax consultants around who can help you handle that without you having to break the bank. It is better to pay
a tax consultant to get the work done than to default in filing your taxes and get penalised.
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