My clients, and most micro entrepreneurs I meet are terrified of the accounts
I don’t know why but they seem to think that there is some kind of a black art to actually doing the accounts so when it comes to taking the step up doing the tax return they turn into gibbering wrecks, utterly terrified of ‘the tax man’. (I think some of them would prefer a Halloween AXE man). Some think an accountant is some kind of witch doctor and perhaps they are right in some cases. Me I think it’s all over complicated. It spawns a whole industry to deal with the pain and fear faced every Halloween and it really is like a horror movie to see the state into which some people can get.
I have learned something over the years. The taxman (or woman) is actually just another human being whose job it is to collect your share and being another human means he or she is just trying to do his or her best to do the job with the minimum of hassle. One person in the tax office told me that all they actually want is ‘compliant customers’
While that might be something of an oxymoron there is something of a clue to the attitude of individual tax officials in the phrase.
In years past tax officials were something of a figure of fear and while an audit today is still a scary prospect, if you have played fair, paid what you believe is right, then you have very little to fear. I have found that for the most part, if you are trying to do the right thing then tax officials treat you like a compliant customer and they are more than helpful even though they are under huge pressure at this time of year. If you explain what you don’t understand they are no end of help.
If tax is to be easily dealt with there are a few things you need to do all year round.
- Keep receipts and invoices in an orderly manner using some kind of a numbering system so that you can find a particular document easily. The key word is Keep. Not get someone else to do it. Get all the invoices every month and keep them in a date ordered file, either paper or electronic. If you organised the system then you understand it and can find everything. That makes step 2 easy for you to do.
- Enter all the transactions into a book or a spreadsheet every month – while you still remember what each transaction was about. Then do a total and see how you did each month. How much came in? How much went out How much was left? Enough? More than Enough? Not enough. Numbers never lie. They are the gauge of the health of your business. Trust them.
- Do the tax return online and early. ROS does almost everything for you.
- Claim all the allowances you are entitled to:
Capital allowances for equipment you bought for the business, all personal allowances for you and / or your spouse or partner including medical expenses, dental expenses, etc etc
- If you don’t have enough to pay a tax bill do the return anyway and make contact with revenue to pay the tax in instalments. They are very open to that. And you keep your tax clearance cert.
- There are a few things that I haven’t dealt with the detail of here like preliminary tax, special start up tax relief, PRSI and USC but that’s for another day
Really though they key thing to remember is that the people in Revenue are just people. They really want to help you to keep on top of things. As long as you keep communication open everything else will sort itself out over time. The truth is the tax return due now is for 2017 and we have had 10 months to get things into shape. If I put it off till the last minute then there is something to learn.
The mentor’s advice:
Do the 2018 tax return next February or March and be the one pointing and laughing at all the people who left it to the last minute next October.
You’ll know in plenty of time how much money you need and can go about earning it.