9 Steps to Determine Taxes for Small Businesses

Written by
Zachary Pestana
Last Modified on
June 5, 2024

Every subject in this country is taxed and this also applies for businesses. However, determining the amount of tax is not easy because it is imposed based on many things, not only on a business’ profits.

Taxes are also imposed on loans for business capital including online loans. Taxes also serve as a business’ obligations to the government.

Tax can also be seen as a contribution by the citizen to the country, which is intended for the development of the country itself like the development of infrastructure and so on. For small businesses, there are several steps to take so tax determination can be easier. Here is the important information for you to know!

Steps to Determine Taxes for Small Businesses

1. Hire a Tax Accountant

A tax accountant that you hire to handle taxes can provide many constructive feedbacks for your business.

The tax accountant has several functions, which include:

  • As a designer of tax strategy employed by a company.
  • As the party in charge of analyzing and predicting the potential value of taxes that must be paid or borne by a company.
  • As the party in charge of implementation of accounting for all business activities. Then, it is also necessary to prepare all required financial informations in both fiscal and commercial forms.
  • As the party in charge of tax documentation so that a company has a proper tax calculation to be used as an evaluation material.
  • As the party in charge of processing quantitative data that will later be used in preparing financial reports.

In summary, the tax accountant has several main responsibilities, which are making the tax plan and strategy for the business, providing analysis and estimates of potential taxes to be paid, making tax records and documentations, and applying the accounting treatment of taxes.

2. Claim income in one accounting period

Income is always reported per accounting period. The reported income after profit can be determined by calculating the right income, then the tax can be calculated by an accountant.

3. Record reports as accurately as possible

Never lose any reports. Financial reports, mainly reports of changes in assets, income statements which can be determined by calculating the right net income, and reports of changes in capital, are necessary to determine the right amount of tax.

A material value is very meaningful for a company because it affects the tax value that must be paid in one year by the company.

4. Separate personal from business expenses

Your business must have the right financial directions. You should never mix personal finance with business finance because it can impact the health of both your personal and business financials.

Report all business expenses correctly and have a business account that has nothing to do with your personal expenses. If you have urgent personal needs, there should be a "prive" account inside the financial statements which can affect the change in capital.

5. Understand company's gross profit and net income

Many small business owners do not differentiate gross profit from net profit though both are completely different.

Gross profit is the difference between revenue and sales minus the cost of goods sold. While net income is the profit after deducting all costs borne by the company.

6. Understand the business’ financial health

A company can be said to be healthy financially when the company does not have much debt. The opposite is of course true; an unhealthy company is one that has bigger debt than the profit earned.

The company can also be said to be unhealthy financially if it faces losses for some accounting periods, while there is no solution to save the company from such losses.

7. Manage employee salaries well

A healthy business is a business that can manage its employee salaries well. There should never be late payment for salary.

If necessary, you can assist the employees to participate in government programs to calculate the amount of employee salary tax. You can calculate and help deposit income taxes through PPh 21 account in the financial statements.

8. Look for an advisory accountant

In order to grow your business, you must have an advisory accountant. The accountant can provide inputs on what is lacking in your business and how healthy your company's finances are. This can be analyzed from the company’s cash flow and income statement.

An advisory accountant can also provide inputs on what to buy to further develop your business and what expenses to pend or rule out because it is not urgent.

9. Take advantage of capital changes

You can of course get some profits for yourself, there is nothing wrong with this. But it must be separated. You need to have a prive account to use as the owner's personal retrieval account. That way, your finances can be managed better and tax calculation can be done easier.

With well directed and calculated taxes, it is easier for a company to find and get loans. However, most loans for businesses require a collateral.

Maybe there are some business owners who look for an unsecured loan? Aspire can be the solution!

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About the author
Zachary Pestana
is a seasoned writer in market trends and business thought leadership. With a writing history at Incorp Global, MOQdigital, and AIESEC Australia, Zachary leverages his broad range of experiences to stimulate industry conversations and engage audiences.
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