#5 Tips All Entrepreneurs Should Learn Before Filing Your 2020 Taxes
by Thomas Hanes on Feb 17, 2021
An essential task for every entrepreneur is to take command of their finances & taxes, which can become a big issue when left unchecked. From racing to their accountant's office to sorting through old documents, entrepreneurs have to do it all. But, to make it simpler, here's a quick checklist that every entrepreneur should go over while filing taxes.
Maintaining An Accurate Account Book
An entrepreneur needs to maintain a comprehensive company account book and keep an accurate record of their financial history. Most banks and financial institutions refer to the Income Tax Returns record these days before sanctioning a loan or credit. It would be wise to seek out professional help early on to guarantee compliance.
How To Approach Business Losses
When an entrepreneur starts their journey, they face many trials & obstacles. And usually, in the first year of their entrepreneurial undertaking, every business generates losses. However, that's completely normal. If a business does generate losses, it's essential and worthwhile to be timely and file their tax returns. Business losses are allowed to be carried forward for eight assessment years, and it is possible to set them off against the business' general income.
Setting Up Multiple Bank Accounts
When running your own business with a small team, your business and personal expenses will often get entangled. So, an entrepreneur should create two different bank accounts right from the start. This clarifies the expenses that your business can claim and the ones it cannot.
Before you decide to formally register your company, you might incur a few expenses that often go unnoticed. It's essential to keep track of these expenditures, also known as "preliminary expenses." Such expenses may be claimed as a deduction in the year that one had commenced business. An entrepreneur should maintain records of such expenses and consult with their certified accountant to claim the same expenses while filing their Income Tax Return.
Keeping Bills Is Essential
Every individual applying for a tax assessment should keep their accounting records for a period of seven years from the end of that year. An entrepreneur should ensure that all proofs and receipts of transactions are maintained accurately. Details of assets purchased, expenditure incurred, rent agreements, and all other documents must be safely kept. All these help at a later stage when the Assessing Officer (AO) asks for it.
Check for government and revenue assistance to help with COVID
All businesses have been going through trying times during the COVID pandemic. The Government and your revenue agency have been working to help you. Be sure to check with them to see what they can do for you as well.
More than ever, we need to remain informed and responsible in our personal and business activities through this unprecedented time.
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