Why Do Business Owners Lose Out On Potential Tax Saving?

Are you feeling stressed? Haunted by deadlines? Is your mind swirling with numbers? If yes, it’s probably because it’s tax season. Filing taxes is one of the many rituals of adulthood that most of us are expected to know, but struggle to grasp. And small mistakes can be costly - especially when you’re a business owner. 

SMEs with finance or accounts teams who are not tax-savvy and lack the necessary expertise could find themselves racking up the ringgit - in all the wrong ways - as they fall into the path of overpaid taxes and penalties.  Unfortunately, the buck really does stop with the business owner, and ultimately it’s the boss's responsibility to fork out that additional money.

So what are the common mistakes that SMEs fall victim to? Here are the top five things businesses do wrong when it comes to filing their taxes.

Leaving it all to your tax agent

Honestly, we get it. Running a business isn’t easy - there are so many things to manage that oftentimes you can get caught up in the daily grind of work. But this usually leads to the mad-dash of business owners closing their accounts in a rush after year-end. Many SMEs expect their tax agent to figure out how to save tax later. However this is a BIG mistake, as by the time accounts are closed and passed on to a tax agent, it will be too late to change anything.

Non-efficient tax planning 

Sometimes a little planning can go a long way, especially in the tax world. If you don’t actively plan to deal with your tax burden, you risk losing any gains that you’ve made. But this is something that many SMEs fail to properly execute. Effective tax planning covers a wide range of steps. Business owners must be aware of tax implications before entering into transactions. You should also have a firm understanding of your current and short-term tax liability before you can make long-term tax planning decisions. 

It’s also important to make sure that staff is knowledgeable on what documents must be well-kept in preparation for tax audits.

Unclear invoice descriptions

Tax deductions can take the sting out of the dreaded tax season. But one thing that could make a business lose out on all of that? Unclear invoice descriptions. Sometimes accounts staff may not know how to request clearer invoice descriptions from suppliers for tax-deductible items. While this could initially seem like a minor detail, it could lead to SMEs missing out on tax-deductible items. 

Poor record-keeping

What makes the world of tax go round you ask? Records and receipts. Keeping track of business transactions, expenditures, and receipts is one of the many essential cogs when it comes to filing your taxes. 

But a stumbling block that businesses can face is when staff doesn’t know what documents are needed for tax audits, so they don’t keep important documents around. Tax audits are usually a nightmare for business owners because of the inevitable treasure hunt of important documents. A finance team that is not tax-savvy will cause sleepless nights and additional stress for bosses rushing to meet the IRB’s deadline to submit tax audit documents.

Combining business and personal finance

Something many business owners can fall into, especially when they are just starting out, is not separating personal and business finances. Entrepreneurs invest so much money and time into their business that a mix-up is bound to happen. At best this could lead to confusion. However on the other end of the spectrum, business owners could end up paying additional taxes.  

If you’re still feeling a little overwhelmed and anxious after all that, a little professional help can go a long way. 

TaxPOD is the first online tax learning platform backed by years of experience in solving Malaysian SMEs’ tax problems. Being entrepreneurs and taxpayers themselves, they have real, practical entrepreneurial experience in tax planning; that is why the videos and webinars delivered by their tax experts are very business-focused and practical for business owners. They also leverage case studies accumulated from numerous real-life tax cases from businesses that they have helped. Head over to TaxPOD.my to learn more today.