You know the saying prior planning prevents poor performance? This applies to getting ready for tax time…and there is no time like the present. While we are in the thick of the tax season, you have a little breathing room to get organised and prepared for when your trusty accountant prepares your business or personal income tax returns. Here are five things you can do to make it easier for yourself and for your accountant:
1. Have all your information ready
a) Keep your receipts – if you want to claim a deduction, you will need to support the deduction with a receipt. For income tax purposes, records need to be kept for a period of 5 years after you lodge your tax return (exceptions apply such as capital gains tax records which you may need to keep longer). You can check out what records you need to keep here.
b) Prepare logbooks and diary entries to support your work related or business use – in order to claim deductions such as motor vehicle expense, mobile phone and home office expenses, you need to keep a diary or logbook. Rough estimates will not be adequate evidence if your expenses are reviewed or audited by the tax office.
c) Check your prior year return for income and expense items that you claimed last year – do you have these items this year?
d) Purchase, sale and settlement documents for asset transactions – If you’ve sold an asset, you may have to pay capital gains tax. You need to keep copies of settlement statements as well as purchase and sale contracts.
We are always being asked what can I claim a tax deduction for? As your accountant, we are here to guide you and happy to provide you with advice. However, it really helps if you have the details of the expenses you think may be relevant for claiming, so we can say yes or no knowing the details. Check out our blog post What can I claim?, for more information regarding tax deductions.
If you are not sure if you’ve provided all the necessary information for your personal tax return download and review our tax deduction checklist.
2. Summarise your information
That shoebox filled with receipts folded over seven times and mixed in with all the other receipts; a bonus tip, that’s not an accountant’s favourite way to do your taxes. Summarising your receipts will save your accountant time in preparing your return and save you money. You can use an Excel spreadsheet to keep track of your receipts – keeping track also helps you budget and see how much you’re actually spending.
3. Digitise your information
Many accountants now run paperless offices. Providing information already digitised saves your accountant time as they don’t have to do it, this means more savings for you.
If you are a business, consider using accounting software such as Xero, with Hubdoc to keep track of your income and expenses, and store your invoices electronically with each transaction.
You will still need to keep your receipts for 5 years after your return is lodged, even if you have a summary. Taking photos of your receipts not only saves space, your thermal receipts tend to fade overtime, which means they are useless if you are audited. Taking a photo straight away also means there’s less chance of the receipt being lost. Make sure you rename the file names for the receipts so you can easily find them later. Use a system which includes the date of the receipt and what you purchased.
Many other documents needed at tax time are emailed to you either as part of an email or in PDF format. Save paper and print the email to PDF. Save the PDFs to a dedicated tax folder on your computer or better yet, onto a secure drive in the cloud such as Google Drive, Dropbox or iCloud. Saving files in the cloud means if your computer crashes or is stolen, you still have a copy of your documents.
Accounting Heart clients can upload summaries and other tax documents to our secure Client Portal. They can be uploaded when you are ready to do your return or throughout the year, so we have everything at tax time. By providing your digital information through a portal you are eliminating the risk of your email being hacked and your sensitive information being stolen.
4. Keep it contactless
COVID-19 has shown us how easy and efficient it is to meet online. If you’re time poor or concerned about Coronavirus transmission consider a meeting via Zoom or Skype. We acknowledge that there are some conversations that are just better had face-to-face, so just ask your accountant if that can be accommodated.
5. Don’t leave it until the last minute
If you’ve left the preparation of your return to the last minute, chances are other clients have too. This doesn’t give your accountant enough time to prepare your return by the due date. If you’re leaving it to the last minute because you have a tax liability, your return earlier can be prepared earlier and locked to be lodged on the due date. You can then be certain of the liability and plan for payment.
If you’re a business, keep your business records up to date on a regular basis. This will not only assist you with meeting your GST and income tax obligations, you can also track how well your business is doing and make decisions based on numbers not gut feel.
If you would like specific advice tailored to your business and circumstances, Accounting Heart offers affordable service packages where you can work with Sonia one-on-one to help you get with your business and personal taxes. Book your FREE Discovery Call to find out more.
Disclaimer: This is general information only and is not advice of any sort. No warranty or representation is provided by Accounting Heart Pty Ltd as to the accuracy, currency or completeness of the information contained in this blog. Readers of this blog should not act or refrain from acting in reliance upon any information contained herein and must always obtain appropriate taxation and / or other advice as may be appropriate having regard to their particular circumstances.