Well, the final declaration season has come close.
The 2018 income tax return filing is accepted from February 18th (January 4th as for the filing for refund claim) until March 15th.
Let’s take advantage of the experience for the 2018 filing and make better use of it for coming 2019 tax declaration about one year later.
The theme of the first blog of this year is the problem which is likely to be revealed at the time of the tax declaration and its countermeasure in advance.
Although it is premised on the individual business operator, there are some common points applicable to the corporate tax payers.
Business and private should be distinguished firmly in terms of cash flow.
Otherwise, you will be in trouble when you calculate business profit and prepare tax return.
If possible, it would be better to separate the wallet so that you can segregate the balance of funds for business.
Often revenues and expenses do not agree with actual increase and decrease of the funds over a certain period of time.
In such a case, it is suspected that the some receipts are missing, business funds had been used for private purpose (private expenditure can not be claimed as business expense), etc. , however, if private and business funds are commingled, it is quite difficult to detect the cause of mismatch.
If you are an individual business operator, it may be acceptable to certain extent, but such sloppy funds management is out of the question.
Not only becomes a problem at the time of year-end settlement and tax filing, it would give banks negative impression for credit assessment when you apply business loan.
Let’s settle receivable and payable through the bank account as much as possible.
Transactions recorded in passbook may be used as a minimum proof when you cannot find any evidence of payment or receipt.
Also, if you use Internet banking, it will improve “efficiency of administrative work” described later.
Cash book is a must-have item if you are doing COD (Cash On Delivery) business.
You won’t able to know accurate profit, expense and cannot do proper tax declaration without it.
Some receipts may be defaced after a period of time due to the paper quality.
Also, some handwritten receipts of copy type are difficult to read due to faint letters.
It is like this. This is no longer readable.
Human memory also fades with the passage of time.
A timely bookkeeping may refresh your memory.
But receipts piled up for a long time may no longer help you when they are needed.
Using a credit card for business use only may a good solution.
Taking a look at transaction report, you will know when, at where and how much you spent.
If you proceed monthly routine work like; the report arrival –> reconciliation of the report and receipts –> expense booking, you can reduce the risk of missing receipts and losing your memory.
Any event has unpredictable issue you will never know beforehand.
Such is the way of the world.
You should spare much time for preparation of financial statements and tax filings.
You may notice that the data is missing, research or advice is required after you get started.
For that, I recommend that you do bookkeeping on a regular basis.
If possible, please book transactions everyday after business hour or once a week.
You should do the bookkeeping at the end of the month or by the beginning of the next month at least.
Once a year does not work.
An accountant may not be able to help you if you ask help after it has become uncontrollable.
There is no problem as long as you keep books in good manner such as a daily basis, but it is hard to tidy up the work you’ve postponed at once.
Even in the season of account settlement and tax declaration, your business goes on as usual.
It means you can not afford the time to do the postponed work.
Moreover, you would not suddenly become able to do something you have not been able to do.
After all, you will realize that you cannot handle it in terms of time and capacity.
Such situation should be so stressful and easily induce mistakes.
Making the best use of software and technology, you will have more time and more accuracy.
It is common to the time management aforesaid.
As for bookkeeping, there are many tools enables you to save your energy and improve efficiency.
Combining cloud accounting with Internet banking, scanner, etc. can greatly reduce manual work.
Most accounting software can read data of CSV file.
By keeping books such as cash book, sales and purchase ledger with spreadsheets such as Excel, you can create journal ledger from such books then let the software import the journal easily at once.
It is much easier than entering journal data into software manually one by one.
However, you should get accustomed to these tools to make the best use of it.
Day-to-date bookkeeping is the best way to master how to use the tools.
Honestly speaking, filling in tax return form by handwriting is the worst thing to do from a tax accountant point of view.
Calculation is troublesome, and there is no margin to correct even if we make a mistake.
Every year, each tax accountant association holds consultation session for tax return preparation (for free), but you may not be able to get necessary advice there because the schedule is tight and every session is so crowded.
Besides, at the session, the accountants do not help filling in the tax return form for you. You should prepare it by yourself after the consultation, i.e., the accountant will give you just advice.
Although it is available for only personal income tax, you can prepare a tax return and financial statements with “Final tax return preparation corner” portal site on the National Tax Agency’s homepage.
If you enter necessary information, the site automatically computes taxable income, tax due amount and prepare tax return forms.
The completed tax return forms can be printed with a color printer and used as it is for filing at the tax office and you can also file them in electronic from if you have ① user identification number for electronic filing, ② IC card for electronic certification such as My Number Card, and ③ “IC card reader”.
Once the tax return form is completed, it must be submitted to the tax office by the deadline.
There are three ways to submit the tax return; hand delivery, mailing, electronic filing (“e-Tax” and “eLTAX” for national taxes and local taxes respectively).
You do not want go all the way to the tax office when you are busy.
Around the filing due date, you probably have to stand in long queue just for lodging some pieces of paper.
Mailing is also troublesome if there is no post office nor post in your neighbor.
Besides, you must enclose a return envelope with mail stamp affixed, if you want keep copy of tax return with a official receipt stamp.
Without them, the tax office will never return your copy.
As a result, you have no evidence of tax return filing at hand.
Also, the tax return submitted at the tax office or by mail will be stocked in the tax office for a while, and it will take time until it is actually handed over for internal process.
In the case where you file tax return to get tax refund, you would have to wait for a while until the refund is actually transferred to your bank account.
If you file personal income tax return, e-Tax is convenient.
The refund will be processed earlier than filing at the tax office or by mail.
However, a PC connected to the Internet and ① a user identification number, ② an IC card for electronic certification such as my number card, and ③ IC card reader are necessary.
In order to obtain the user identification number, an application to the tax office (mailing permitted) is required.
From January 2019, it is also possible to file an electronic tax return by using a password instead of a user identification number, but in order to acquire a password, you must visit the tax office.
In any case it is necessary to prepare in advance to file an electronic filing.
① ~ ③ are not necessary if you delegate preparation and filing of tax return to a tax accountant who can take care of electronic filing.
When you have tax due amount, you must pay it by the deadline (March 15th).
Occasionally, some people forget tax payment after filing the tax return.
There are also people who lose payment slips handed down from tax accountants.
Tax payment after the deadline is subject to delinquency charge.
It is unnecessary burden. Besides, delinquency charge is not tax deductible expense. It is really waste of your money.
You can pay tax by direct debit (advance procedure is required at tax office).
When you file the tax return by e-Tax, you can pay the tax using Internet banking or “Direct Tax Payment”.
Payment by internet banking must be initiated by taxpayer. It means there is still risk of forgetting tax payment as same to the case of using payment slips. However, as you do not have to go to financial institutions such as banks, you can pay tax at any time you want (even on Saturdays, Sundays, public holidays, late at night).
“Direct Tax Payment” requires prior procedures at the tax office, but you can eliminate the risk of forgetting tax payment since the payment instruction is automatically processed, without internet banking, once the electronic filing is done.
You can also delegate tax payment to a tax accountant.
I used to do bookkeeping once a year just in tax filing season.
It worked well for me because I was a company worker and had only little revenue and expenses for side business at that time, but it never work now.
I habitually keep book with cloud accounting, Internet banking and a scanner or a smartphone but seldom entry data with keyboard.
I would like you to experience this easy operation.