Five reasons why keeping records will benefit you
THE March 15 Income Tax filing deadline is fast approaching and businesses should be finalising arrangements to submit their final income tax return for 2009 and estimated return for 2010.
While filing returns are important, businesses are also reminded that it is critical to keep records of their business activities, such as sales receipts, purchases invoices, payroll records, utility bills, transportation expenses, rent receipts, bank statements, and all other business and administrative expenses. Whether you operate the business as a company, self-employed person, partnership or any other type of organisation, you should adopt good record-keeping practices for five main reasons:
Well-kept records may shorten the length of time that an audit takes to be completed.
If a business is selected for an audit, the business operator would be asked to produce records to verify the information filed on the income tax return(s). Once the business person has proper records, then the tax auditor would be able to quickly examine the records produced and make a timely determination on the accuracy of those records.
Well-kept records can mean tax savings for you.
Records can be used as a reminder of a person's deductible expenses and credits. It is only by keeping proper records of your business expenses that you will have proof of the expenses incurred in carrying out the business operation. By doing this, you will not have to rely only on your memory. This means that you will only pay what is due -- no more, no less -- as your records would remind you of all the expenses that you are entitled to claim against your income.
Good records can help verify all income and business expenses for tax audit purposes.
Without proper records, a tax auditor may have to make a determination based on his or her "best judgement" of what value income and expenses may be, based on the size, type and location of a business. Also, in the absence of proper records, industry standards may have to be used as a guide in the audit.
Proper books and records provide an accurate picture of your business operations.
If this is the case, the Tax Administrator may not have to use an indirect method, such as your lifestyle or net worth, to estimate your income and expenses. Your own books and records would be able to provide the auditor with a true picture of your business operations.
Records will keep you better informed about the financial position of your business.
With proper records, a business operator can identify areas for improvement and/or expansion. This will also aid a business person to secure financing for their business. In addition, through an analysis of your records, it could help you to make an informed decision that you may need to change your business focus.
In filing income tax returns, business persons do not have to submit their records. However, it should be noted that under the Income Tax Act they are required to maintain proper records, in English for a minimum of six (6) years. The records should then be made available to the tax authority, if the person's income tax return is selected for an audit.
More information on record keeping and other tax issues may be obtained by calling the Tax Administration Customer Care Centre at 1-888-TAX-HELP (1-888-829-4357) or visiting the website www.jamaicatax.gov.jm
Sixth of the special eight-part series running up to the March 15 due date for the filing of income tax returns.