Taxation and Financial Management

Tax Deductions

• Allowable deductions reduce taxable income, thus reducing tax liability
• Common deductions:
  • Business expenses (e.g., office supplies, travel expenses)
  • Charitable donations
  • Mortgage interest and property taxes (for homeowners)
  • Medical expenses
  • Retirement savings contributions
• Deductions must be supported by documentation (e.g., receipts, records)

Accounting Software

• Used to manage and track financial data, including income, expenses, and tax-related information
• Popular accounting software options:
  • QuickBooks
  • Xero
  • Zoho Books
  • Wave
• Features:
  • Invoicing and payment tracking
  • Expense tracking and categorization
  • Financial statement generation (e.g., balance sheet, income statement)
  • Tax preparation and filing integration

Tax Planning

• Strategic planning to minimize tax liability
• Considerations:
  • Income shifting (e.g., deferring income to a lower-tax year)
  • Expense timing (e.g., accelerating deductions to the current year)
  • Entity structure (e.g., sole proprietorship, corporation, partnership)
  • Tax credits and incentives
• Tax planning involves ongoing monitoring and adjustments throughout the year

Financial Reporting

• Financial statements provide stakeholders with financial information
• Primary financial statements:
  • Balance sheet (snapshot of financial position)
  • Income statement (profit and loss over a period)
  • Cash flow statement (cash inflows and outflows)
• Financial ratios and analysis help interpret financial performance and position

Filing Returns

• Tax returns must be filed with the relevant tax authority by the deadline
• Returns typically require:
  • Income statement and balance sheet information
  • Supporting documentation (e.g., receipts, invoices)
  • Payment of any tax due or refund claims
• Electronic filing options often available for convenience and accuracy
• Penalties may apply for late filing or non-payment of taxes due