Separate Your Personal & Business Taxes: Here’s How to Do It
As a small business owner, you need to understand how challenging it is to separate your personal taxes from business taxes. However, this is a must so you can closely monitor how your business is doing and formulate an effective solution in case there is an issue. Handling finances will be a lot easier if everything is organised and things are simplified.
Advantages of Keeping a Separate Business Tax and Personal Finances
It saves money and time
Auditing will be easier and more seamless when your business tax is organised separately from your personal money at the end of the financial year. When they are combined, it may result in confusing financial records and may even require you to spend more time fixing them. To solve such accounting issues, you may hire several accountants or pay for tools to organise taxes, personal expenses and other financial matters.
Better business tracking
It would be difficult to manage your overall finances when purchases for office supplies and groceries are recorded under one bank statement. That is why using a separate account for personal expenses and business operations are highly advisable.
Another benefit of having an account for your business that is separate from your personal account is that you can avoid possible financial troubles due to unorganised record entries.
Accounting becomes easier
You will also be disciplined to avoid withdrawing money from the business account to spend on some home items. During the accounting and auditing process, you can readily refer to the business bank account without the need to separate personal information. It will be stress-free to justify individual expenses by referring to the transaction in detail.
Excellent Tips on Separating Your Business Tax and Personal Money
Here are some of the tips to keep your business tax separate from your personal finances:
Have a separate business account
Make sure to open a bank account for your business finances and another one for your personal money. With that, you can have peace of mind that every transaction will be properly accounted for. No more worries about messing up your expenses and income since there are separate records to where you can refer to.
You can be more organised if you will manage two distinct bank accounts and avoid unexpected tax problems when it’s time for tax payments. This will also ensure that you will set aside some money to be allocated to your GST liabilities and income tax.
Set a separate budget for your business
In some cases, small business owners borrow money from their personal account to aid business operations during a tough time. Although it is inevitable in some circumstances, these instances can be avoided. Make sure to set a clear budget for your business based on your current income and business status. It will prevent you from borrowing money from other accounts too often. You may also implement some precautions and measures to keep your business operations stable even when facing difficult times.
Have separate boxes for the receipts
There should also be separate storage boxes for your receipts, especially if you’re making cash payments for both business and personal expenses.
When you work with an accounting services firm, you will be advised to prioritise your business receipts. This is because most tax auditors are highly concerned with the status of your business expenses. You should keep all the receipts and organise them properly to make it easier for you when tax season comes.
Get the assistance of a finance or accounting professional
For some business owners, hiring an accountant may sound unnecessary. However, this is merely a myth. A good bookkeeping service will be a big help in organising your income, expenses and other business processes. An accountant or finance professional will help you become more organised and systematic with your financial records. They can do the tedious tasks for you and the whole business.
Every business organisation must recognise the advantages of having a separate record of your personal and business tax. This will not only avoid confusion, but it will also become beneficial in making every process of running a business more efficient.
Are you looking for a tax accountant on the Gold Coast? Make sure to get in touch with our professionals at New Wave Accounting. We are always dedicated to providing accounting and bookkeeping services to small business owners in different industries.