Fortunately, here are a few tips to manage taxes better:
1. Know your deadlines and other pertinent information
Missing tax deadlines would mean penalties and charges depending on the violation you committed. Extensions may have been provided to both individual and business taxpayers in 2020 due to the pandemic. Still, you have to monitor new announcements from the Bureau of Internal Revenue (BIR) for future changes in tax payment dates.
Aside from the deadlines, you also have to figure out the right form to fill out and the proper venue to file your papers or risk getting a penalty and surcharge. The latter could translate to thousands or millions of pesos for some business taxpayers, depending on their tax due. Make sure to first verify this information with BIR before filing your taxes.
2. Prepare well ahead of time
Avoid procrastinating when it comes to managing taxes if you don’t want to miss the deadline because of network congestion. You might find yourself among those stuck in front of the computer because the eFPS facility is down. File early and watch out for BIR advisories during the tax filing season.
If you don’t rush things, you will also have the luxury of time to compute your tax due correctly. A mistake in your computation could cost a lot of money, something that you could have avoided if you gave yourself enough time to compute, check, double-check, and check your figures some more. But you can also entrust all tax-related matters to accounting professionals who have the training, tools, and experience to back them up and ensure accurate calculation of your taxes.
3. Monitor allowable deductions and other ways to legally reduce taxes
Paying your taxes is good, but doing so while minimizing how much you pay for it is part of smart business management. One way to do that is to claim as many allowable deductions as legally possible. Some of these deductions include amortizations, advertising and promotions, commissions, utilities and communication, bad debts, charitable contributions, depletion, and fringe benefits. These deductions also include losses, office supplies, fuel and oil insurance, director’s fees, depreciation, janitorial and messenger services, royalties, research and development, training and seminars, and more.
It also helps if you spend more on your employees’ medical insurance because the government classifies this as an expense. Just don’t forget to include this in your books. Not only will you be reducing your taxes, you and your team will also have something to count on during emergencies.
4. Open a separate bank account strictly for paying taxes
You can manage your taxes in the Philippines better if you have a bank account used to pay for it. This will make it easier for you to sort out where to get the money for the taxes instead of scrambling for cash when tax filing season comes. If your small business is earning more, make sure to set aside a portion of your profits for your tax dues.
5. Be vigilant in hiring an accounting professional
If you think all the things discussed above will stress you out and draw your attention away from your core business, it’s always best to call for professional help. Make sure to hire only Certified Public Accountants and ask them for a copy of the Official Receipt to verify the completion of the tax filing process. You might feel more at ease working with an established accounting firm than hiring a random independent contractor to do your taxes.
Heed these tips to manage taxes better and keep growing your business and your income without inflating your expenses due to miscalculated tax dues and penalties. Doing so will help you manage your finances better and increase your bottom line.
See infographics here.