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Financial Adviser: 5 ways to prepare for income tax filing

Know the things that you should prepare prior to filing your income tax returns.
By Henry Ong |

Q: My startup business has just started operations last year and I will be filing my income tax this April. What are the things that I should prepare for so I will not have any problem with BIR (Bureau of Internal Revenue) later on? Can you please advise? – Buenaflor, by email

 


 A: Many startup founders, when they began their businesses, tend to pay more attention to building the business by getting clients rather than taking care of their accounting records. But without understanding the legal impact of non-filing of tax remittances or incorrect payments, many of these businesses will end up financially problematic with the tax authorities a few years after starting operations.

 

 

1. Organize your records.

As this is your first year to file your returns, it is important that you organize your accounting records early on. Income tax preparation time can be significantly reduced if you develop a good system for organizing your records. On a monthly basis, check your summaries of revenues and expenses and make sure all your value added taxes (VAT), withholding taxes, and other taxes are properly reported. These items will have a great impact on your annual tax activities by year end.

 

 

2. Know what you are doing.

Do not make the mistake of relying on your retainer for all your tax filing and reporting to the BIR. Your retainer might be too busy handling so many clients at the same time and that may cause you to miss some tax remittances or file erroneous disclosures. In the end, it is still you who will pay for all the mistakes committed.

 

Doing your tax returns will be much easier if you understand the basic process, particularly if your tax situation is not a very complicated one. Try to understand the procedures so you can help monitor and evaluate if the proper tax remittances have been paid already. Perhaps it will be helpful if you can take some short courses on taxation in order to get you familiarized with the system. When you are knowledgeable about taxation, you can ask the right question from your retainer and plan properly.

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 3. Do not procrastinate.

Annual tax filing deadline is only weeks away. It will be good to start preparing as early as possible. Since tax preparation covers all transactions for the year, start from the very first month and not at year-end. Most of the submissions and filing are now done using the BIR online system. To avoid the hassle of experiencing traffic on the online submission and other unnecessary mistakes, resist the temptation of delaying tax preparation until the last minute.

 

 

4. Ask for professional help.

If your accounting records are in such a mess, perhaps you need to get some help to organize your tax records. Depending on your situation, getting a professional accounting firm or a tax-preparation practitioner to help you in your tax planning can be well worth the expense. It will not only save you time but also help you plan on how to save on your taxes legally.

 

Hiring a professional can help spare you from all the stress of last-minute, touch-and-go tax preparation. And because accounting and taxation can change from time to time, it is better to have experts on your side to keep you always in full compliance with the tax laws.

 

When you get professionals to help you, make sure that you understand what they want to recommend. How will their recommendations impact your tax payments for the year? Are there other alternatives to their recommendations? What should you do next time to avoid this situation? When you try to study your tax situation, you will tend to ask questions from your accountant and, in the process, you will also learn.

 

 

5. File your tax returns properly.

Sometimes, mistakes are committed at a time when it really matters. Make sure that your accountant has verified all the required information to be properly filled out. The figures reported must be correct and all filings must be attached with the required schedules. All tax returns must be properly signed and dated.

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Henry Ong, CMC, is president of Business Sense Financial Advisors. You can follow him at @henryong888 or email hong[at]businesssense.com.ph.

 

Photos from Shutterstock and Thinkstock

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