By Kmar Henry (CEO, BIZcare)
With the dreadful COVID year coming to an end, many business operators are now in disarray as it relates to submitting their tax return for the said year. As we all know, the struggles faced due to the drastic and vast decrease and cut in revenue, as certainly mounted stress levels as it relates to taxes. Thus, many will surely wrongfully opt to put aside or suspend the Filing of taxes until they feel that some leverage or ease has been sustained.
What does Filing at a LOSS means?
Simply put; a ‘LOSS’ means that no profits where made throughout a year of operation. Thus, your expenses have comprehensively out matched your revenues and you have therefore operated at a negative (-). This is primarily a nightmare for all business owners, especially if there isn’t much cash reserves to fall back on. As such, this forces entrepreneurs to cut back on operating costs which mostly involves that of salaries. Hence why we see so much persons go unemployed throughout a crisis or recession. Business owners are then also forced to implement various pricing strategies that involves amending and cutting final prices in order to facilitate customers who also experience major problems or decrease in spending power.
Submitting a Tax Return with a LOSS or NIL
Firstly, it is important to understand that although a Loss was made, this does not gives business owners the subsequent right to NOT file a Tax Return on or before the 15th of March. As this will still leave the proprietor liable or obligated to pay late penalties of $5000 per month based on how long the Tax Return is or was out for. Hence, it is far cheaper to ensure that all revenues and expenses are compiled properly and given to your accountant on time to complete your Financial Statement in order to submit your Tax Return. This sincerely gives you the ease of mind to know that you are early and freed of all penalties. Submitting your tax return with a subsequent loss which should or will be shown as a negative will thus give the proprietor marginal ‘Tax Credit’ which can be transferred to previous or proceeding years to leverage tax payments. As the ‘carry forward’ rule will now be applied. Also, it is also important to note that this ‘Loss or Tax Credit’ can also be refunded. But bear in mind that this may or can lead you to getting audited by the Tax Administration. However, once you have everything in order as it relates to invoices and accounting operations, you should have nothing to worry about.
Does the New Tax Credit and Capital Allowances still apply?
Many are still wondering what does this new Tax Credit of 375,000 means of taxpayers or business operators of small, medium and micro businesses. Simply put; a tax credit is applied to therefore ease the burden of taxes and can be seen as a figure that is credited to an amount after Income Tax figures were or are calculated. Thus, this amount will mainly affect the notion of ‘Income Tax’, which is great for Limited Companies that earn below the $500M revenue quota, that was stipulated by the Government. Hence, this will therefore lead to additional losses or tax credit for business owners, with the added submission of capital allowances for or from assets owned.
The COVID year has flipped the whole normality of business operations, as we now see a vast increase in online presence via social media platforms and website launches. Also, there as been an upsurge within the transportation industry, as the birth of many couriers can be seen. Hence, let’s not brush aside the lessons learnt and positive gains that the business year of 2020 has plunged onto us. With the added fact that many businesses within the field of food, groceries and chemical supplies have seen high increase in revenues and profits also. Thus, implementing the proper tax filing procedures for this year will certainly be one that should be seen as an epidural and break mortar for greater things to come in the near future.