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Tax Dispute Cases Successfully Resolved!

Tax Feb



Many tax payers think that SARS, assessments and action cannot be challenged! Whilst most tax assessments are correct, it is a fact that SARS can, and do make mistakes. SARS will also overlook, wrong, inflated tax returns, and not audit, if the amount assessed is to their benefit.
Here follows some matters and disputes that were settled, to the advantage of the taxpayer client. For privacy, names of taxpayers are withheld.
Tax payer A- S11(a) Income Tax Act, allowable deductions
A taxpayer was assessed for R400 000.00. Deductions were not processed, we objected, corrected the return, and the tax debt was reduced to zero. In fact, the final result was a refund due to taxpayer of R20 000!
Tax payer B- S11(a) & S11(e)
The taxpayer received a final demand of R300 000.00 and a threat of legal action.We identified the following; Section 11(a)
(a)”Expenditure and losses actually incurred in production of income, provided such expenses are not of a capital nature.”
b) Municipal charges to the value of Rx, overlooked/included somewhere in the calculation. Either way it is not debatable. The municipal expenses were incurred, to derive income for the “rent collection, property investment company.
c) Project and contractual expenses.Information was furnished in this regard, but excluded, or only a portion allowed. It was not of a ‘capital nature”,
d). Wear and tear(Section 11e) read together with Practice Note 19. Completely overlooked, and “depreciation’’ used to calculate wear and tear, in complete violation of the Practice Note 19 Prescription. Our wear and tear calculation was Rx.
Taxpayer C-Judgement, unfairly obtained
A tax return was wrongly completed, resulting in a final tax, of R150 000.00. SARS obtained a judgement against the taxpayer.On perusal of the tax return, we noticed that the assessment was not relevant and the taxpayer was not liable. We duly objected and the amount was reversed! Judgement against taxpayer, rescinded!!
Tax payer D-(a) Income Tax Act, allowable deduction
A Taxpayer was assessed for R1000 000.00. All deductions overlooked, we motivated our case for deductions to be claimed, all of them were allowed, and the corrected, resulted in a nil assessment!
Tax payer E
Same scenario as above, but the amount was R500 000.00
Tax payer F-S179  of The Tax Administration Act Challenged
A bank was appointed as an agent in terms of section 179 of the Tax Administration Act.
R308 000, was debited, from taxpayers account. After Sars could not prove this debt, we advised our client to withhold taxes until SARS could explain this anomaly. Additional tax debt, shot up to R430 000.00 Total Liability, R738 000.00. After numerous letters and threats of High court action, SARS was forced to investigate its actions. The R308 000 was offset against the R430 000 debt. SARS had to concede the R308 000 debt never existed!
Taxpayer G-Capital Gains Tax
After a court settlement for a members share, the taxpayer was audited and slapped with a R3million tax bill. Our investigations revealed that ,whilst SARS correctly assessed the “capital gain” of the share gain, and understated income, SARS “double taxed the capital gain, and did not use the applicable under tstatement penalty prescriptions. Intense number crunching and negotiations resulted in SARS reversing the double taxation, and reducing the understatement penalty. Final reduction, R2000 000!

These are only a few examples. Space donot allow me to elaborate on all our cases.

If you find yourself in a similar predicament, don’t hesitate to contact us. We can take on any tax matter with the seriousness it deserves.

Outsourced Bookkeeping Can Save Your Company From Financial Ruin

How much time and energy do you spend doing your own bookkeeping? What if there was a way to shift your focus from the computer to a more constructive area, such as managing your company or building better customer relationships? What if this method saved your company thousands of dollars, and allowed your staff to focus on the most pressing needs of the organization?

What we are presenting is not some get rich quick scheme, but rather a more common sense approach of allowing well qualified professionals to focus on what they do best. Certified Quickbooks Pro-Advisors outsource bookkeeping specialists manage your bookkeeping department, providing accurate financial data so that you can make better decisions to grow your own company.

Certainly every other department in your company is staffed by a qualified professional, so why have a spouse, friend or relative who is unskilled in accounting make critical classification decisions in a vacuum, with ramifications that could possibly bring down the firm in an audit. Are you really saving money in the long run? Disorganized financial records make it extremely difficult to obtain a loan or make any other type of decision regarding your business. Outsourced bookkeeping is a skill which is available at very affordable rates from certified Quickbooks Pro-Advisors.In some case it is cheaper to obtain bookkeeping services than it is to hire a cleaning service.

Certified Quickbooks Pro-Advisors can perform all of the data entry. They reconcile all of the accounts. In addition to mundane entries, financial statements are prepared allowing accounting firms to have access to vital information needed to prepare tax returns. The information you need will be right at your fingertips!

Some businesses may avoid using outsource bookkeepers fearing that they may be operating from another country and not be as familiar with U.S. financial regulations. While there are international outsource bookkeeping firms, many very talented Quickbooks Pro-Advisor outsource bookkeeping professionals may be found within the United States. These specialists are able to perform all accounting functions by using remote access or accounting software that generates an accurate picture of the companies solvency for very little money or investment.

Time, money, energy and effort are all saved by having an expert provide accounting services. At the end of the year, 1099s are prepared, and money is saved on compliance issues, wages, benefits, payroll taxes and vacation pay. Whatever reasons may have been holding you back from using an outsource bookkeeper, think again! During these challenging financial times, your company needs every edge possible to stay on top! Quickbooks Pro-Advisor outsource bookkeeping can save your business, offering you the advantage you need to not only stay in the game, but prosper in the long-term.

About the author:
Matthew Beck is the owner of M.Beck and Associates located at the Omni Park Office Plaza in Euclid Oh http://www.outsourcedbooks.org/

M.Beck and Associates provides bookkeeping services on a nationwide basis.

Article Source: http://EzineArticles.com/?expert=Matthew_Bec

Tips For Doing Your Own Bookkeeping

This information is for those of you who have decided to purchase a bookkeeping program, like Quickbooks, and to go ahead and do your own bookkeeping. Congratulations! You are on your way to becoming more organized with your business finances.

Taking a break from the excitement you are feeling, let’s consider that doing your own bookkeeping can be an intimidating project especially if you have never done it before. But there are some great resources out there to make sure you are doing things correctly.

One thing you can do is learn how to use Quickbooks through an instructor led class or training workshop. These are usually not very expensive, about $389.95 and up, and can get you started on the right foot. You can also take classes online or order training programs. These can start as low as $39.95. Oftentimes you can find smaller accounting firms that teach these trainings for a lower hourly fee. Quickbooks Intuit offers some great resources for finding both online, program based, and instructor led courses.

In addition to taking an official course, we suggest the following tips to help you as you begin keeping your own books:

1. Know What Constitutes a Receipt. A receipt is a cleared check, bank statement, credit card statement or actual receipt.
2. Stay on Top of It. Do your bookkeeping at least once a month.
3. Make Sure Your System Makes Sense to You. If you don’t understand it, your tax accountant won’t either.
4. Be Thorough. When recording income, make sure to include the record type, check number, date, and a copy of the payment. This will help clear up any client payment disputes.
5. Just Do It. The hardest part of bookkeeping is sitting down and doing it.

Now that you have an idea of what you need to do to get started on your bookkeeping, make sure you utilize some or all of these resources to make sure you are doing your books correctly.

Matthew P. Anderson is the Web Administrator for Soulence Tax and Accounting.

To download Quickbooks and Quickbooks training programs at a discounted price go to http://soulence.com/get-quickbooks/

To learn how to find financial peace of mind using the services Soulence Tax and Accounting provides, visit their website: http://soulence.com/

Article Source: http://EzineArticles.com/?expert=Matthew_P_Anders

What Information is My Accounting System Not Receiving?

Most small business owners understand about entering information into their accounting systems to help regulate and reconcile their business earnings and expenses. This also helps to make things easier at tax time.

However there are sometimes some things that aren’t entered into your accounting system that really should be.

The core entries are usually the same for most businesses. These include accounts receivable and accounts payable, billing, stock or inventory and sales orders. Your business may also record things like purchase orders or keep a cash book, where your business records collection and payment.

Some businesses may also require entries for expenses, electronic payment processing, payroll tracking for employee salaries, taxes and superannuation payments, and purchase requisitions.

But many businesses don’t consider entering in many of the very small expenses they see each month that could really add up to a substantial amount by the end of the year. These can include bank fees and charges and other similar charges you may not have entered.

You should also consider entering such things as debt collection, bad debts and any overdue bills. In some businesses, these can be written off prior to tax time as bad debts. In other cases, you may also incur fees related to your debt collection efforts.

It’s important you also ensure your personal expenditure is kept separate from your business records. Even if you’re a sole trader and your personal income is intermingled with your business earnings, you should still make an effort to keep your records separated, entering your business information into your accounting systems and keeping a separate track of your own personal drawings.

If you keep up with entering your business information into your accounting systems on a regular basis, you’ll find it much easier to keep up throughout the year. You’ll also find that you’re much less likely to miss important information when you keep up with it regularly.

If ever you’re unsure about what you’re supposed to enter into your accounting systems, it’s important you speak to your accountant about your options. This can make it much easier for you to always know what you should be entering and what you should be keeping track of.

For more information see Reid Maddison Brisbane Accountants, Your partner in Financial Management

Article Source: http://EzineArticles.com/?expert=Julie_Sultmann

Financial and Managerial Accounting Are Not One and the Same

As a business owner, you’re constantly jugging a host of decisions. Is it time to move your business to a new location? Do you need to expand your staff? Is it time to increase your advertising budget? Is it time to add a new product or service to your business’ offerings? These are not easy decisions. Fortunately, business owners can rely on financial and managerial accounting to help make them.

These two accounting methods are quite different. When you hire an accountant to perform managerial accounting tasks, that accountant will report directly to you and the other managers in your business. The goal here, is for accountants to study your business’ financial health and prepare a report that summarizes the findings in language that is easy to understand. You can then study this report to help decide if moving to a new location will boost your company’s bottom line or place undue financial stress on it.

Financial accounting is a different entity, but one that is just as important. This time, you’ll hire a certified public accountant to again study your business’ finances. This time, though, the accountant will make sure that you are correctly filing your taxes, are properly balancing your books and have a cash-flow projection that is accurate and realistic.

In short, managerial accounting helps you make the big decisions for your business. Financial accounting helps you make sure that your small business is operating in a fiscally sound way on a day-to-day basis.

The difference may sound minor, but it’s actually not. Financial and managerial accountants have vastly different jobs to perform. The end result of their reports, too, is extremely different.

If you’re debating whether it’s time to expand your business, you might consider hiring an accountant to perform some managerial accounting for you. If you’re just hoping that your books are balanced and that your expenses are totaled correctly, you’ll be fine hiring an accountant to concentrate on financial accounting instead.

James enjoys helping new accountants make decisions about their careers. He believes that managerial accounting provides accountants with a rewarding career where they get to use some of the skills that not ordinarily associated with accountants. Management accountants get to offer consulting advice and be involved in the strategic decisions of a company.

Article Source: http://EzineArticles.com/?expert=James_Wallace

Not All Accountants Are Created Equal – What to Look For When Choosing an Accountant

Not all accountants are the same. There are many different reasons why you should choose an accountant that is right for your needs and will suit your specific requirements. These could include whether you’re a sole trader, a company or partnership or just an individual wanting to maximise your tax return for the year.

You could also find that some accountants specialise in certain areas. A good example of this might be specific investment types or foreign income as part of your regular turnover.

Here are some things to look for before you choose an accountant:

Qualifications and Accreditations

Always check the qualifications of the accountant you’re considering. A tax agent isn’t always going to be the same as a fully qualified CPA. In fact, there are several official accounting bodies within Australia. Be sure the accountant you’re considering is a member of either CPA Australia or ICAA.

This can be an important step, as accountants who are members of these professional bodies are required to meet minimum standards of education. They are also required to keep their knowledge up to date and must also hold professional indemnity insurance.

However, only agents registered with the Tax Agent’s Board are allowed to charge a fee for preparing a tax return for you. Be sure you understand what accreditations with which officially recognised bodies the agent holds.


Where possible, try to ask other people in similar financial situations to your own to recommend an accountant they use. Asking for referrals is a good way to locate accountants who may have experience dealing with your specific needs. A sole trader working on sub-contract for one or more companies is going to have very different accountancy needs to that of a larger exporting company.


Some accountants specialise in certain areas. If your own income is a little different to a normal income from an employer, you might want to consider finding a specialist accountant who understands your particular needs.

Additional Services

Will you need additional services on top of just tax preparation? Some accountants are able to offer extra services for such things like incorporating your business, financial planning advice, expanding your current business operations, retirement advice, estate planning, risk management, wealth creation or investing advice.

Finding the right accountant can help you add considerable value to your business and can also help you manage your own financial future much better. It’s worth taking the time to be sure you find the right one to suit your particular needs

For more information see Reid Maddison Brisbane Accountants, Your partner in Financial Management

Article Source: http://EzineArticles.com/?expert=Julie_Sultmann

Profit or Cash Flow 2

A previous article, showed the differences between profit and cash flow. Many business people understand the difference, but my previous article highlighted the importance of CASH MANAGEMENT! I will attempt to provide more detail, with regard to cash management, in this latest offering.

The thrust of my articles, attempt to explain the difference between profit and cash. The cash building strategy outlined below, will reflect differently in the books of account of a business. In fact, these reserves will nor reflect on the Profit and Loss/ Income Statement accounts, and yet, it is the most crucial aspect of the finances!

People are tempted to always spend more money than they make. We see the constant pursuit of higher earnings from working and business people alike. But after earning that increase in income, people remain deeper in debt than before. Expenses chase income, and wins the race most of the time. We remain trapped in the illusion, that more money, is the only way out of the mess.

Look at families taking extra jobs, employees who receive the promotions with the salary increases, businesses who secure additional contract, but they remain short of cash, or more in debt. When people earn more, they spend more. Simple as that. The strategy is to save cash before it is spent. The excuse that there is not money to save, is not valid. The sooner its implemented, the better.Discipline and dedication is required. It can work.

Bank Savings Accounts:

Open three different accounts, at three different banks, in three different areas. Reason? it limits the temptation to withdraw cash from these accounts. The account type does not matter(preferably interest bearing), but designate as described in previous article.

1. A building/ expansion fund

2.Tax fund

3.Emergency Fund

Commit to savings by signing a monthly transfer of say;

1.Building fund@ 2% of Average Monthly cash deposits

2.Tax fund@1% of Average Monthly deposits

3. Emergency fund@ 1% of Average Monthly deposits

Let it run, for three months, and gradually start to up the percentage by 0,5% a month.
See savings as an additional expense, and factor the savings into your monthly budget.Credit Card/s:

Credit cards are controversial and problematic, but you can make this device work, for YOU and YOUR business, instead of the other way around.

Don’t destroy your card, but put it out of reach. If repayments on a card is say $500.00, commit yourself to pay an additional $250.00, on the card.Dont make any arrangements with the bank, just pay the card direct.No bank fees on cash deposits made in a credit card.
What happens, is that the bank draws their arranged amount, and it is augmented by an additional payment, resulting a a rapid reduction of debt on the card over a six month period.
After twelve months, the credit card could swing into a positive balance.The interest on cards with a positive balance vary, but is higher than some savings accounts.

If you committed to the savings program outlined above, the percentages and transfer arrangements for your savings accounts and credit card, you will detect a notable increase in cash, and reduction of expenses. You not compelled to save more, and can spend available cash as you please, if all your bills are paid.

If the cash in reserves grow, you can utilise it as follows,( preferably after twelves months)

1. Tax Fund, to pay any unexpected taxes

2. Emergency Fund, any expenses not covered by normal insurance, staff incentives. Vacation.

3. Building fund, should be accessed after two years, but can be used to purchase capital equipment.

Use the credit card for purchasing additional equipment, when the need is there.And start replenishing the card balance at your soonest.Be careful, don’t go on a spending spree. Put the card away, as soon as it is utilised for emergency funding, don’t leave it in your wallet.

Create a separate spreadsheet, for your accounting for Cash In, Reserves, Cash out. Don’t use conventional accounting software(will just confuse the process). Maintain stats on a monthly basis, and start forecasting your cash flow.

Don’t wait until sales improve, start saving now, even if it is just 1% of cash. Look at savings after a year. Maybe you can indeed go on that dream vacation after three years!


Profit Or Cashflow

The word in business is profit. The word is simple to understand. Companies are considered a success, if they generate profits. For small business, however, profits do not necessarily equate to healthy cash flow or even success.

The accounting definition of profit is sales(including credit sales), less expenses. The oversight of the important aspects of “profitability”, leads to numerous problems for business owners.The problem with accounting is that assets purchased cash, will reside on the balance sheet, and inflate the profits, artificially,by the very same amount, that the asset was purchased for.

Invoiced credit sales are recorded in sales journals, and a corresponding debit(debtor), is raised for those credit sales. Value Added Tax or general sales tax is charged on that invoice as it is processed.

One major shortcoming in small business, is the lack of credit control. Many business owners lack the skills to collect outstanding debts. Where VAT or GST has been charged, it become payable, regardless of whether the debtors invoice was paid or not. Businesses also pay tax on profits.

Business owners(on the advice of their accountants) are profit driven, and not cashflow driven. This leads to certain interpretations of their finances. If assets exceed liabilities(solvency),current assets, exceed current liabilities(liquidity), they happy. Business owners consider the available amount on their overdraft or business credit card facility as CASH AVAILABLE! Its not available cash, but debt!

Solvency or liquidity should be measured by the amount available cash(bank and cash on hand), exceeding liabilities. All other assets should be be excluded. The reason is that assets ,could be sold far below their market value, if the business had to be liquidated. Cash is the only asset that can be used, without incurring a cost or loss, on conversion.

What about the cash flow statement? The cash flow statement is not compulsory for small businesses, but is viewed is an important tool, for analyzing the business’s cash flow. Many tax authorities accept only the income and expenses account. But even the cash flow statement has its flaws. Loans advanced will reflect as “cash from financing activities”, thus creating the illusion that the “healthy Bank Balance”, means the business is healthy. In an environment of high interest rates, the loan can be risky, and that aspect has to be factored into the reporting. A note on the financial statements, is not sufficient.

Many accountants might not agree, with the above. But its my firm belief that thorough cash management is lacking in most small businesses. Accounting financial statements should only be used for tax or statutory purposes.

A cash flow driven business would operate as follows:* Collect outstanding debtors as soon as possible(The most difficult and problematic, I agree)

* Take substantial cash deposits from customers, before commencing a project

* Bank cash promptly, since cash gets lost or spent very quickly

* Stall creditors, as long as possible

* Start investing 5 to 10% of cash received in a particular month, in different bank savings accounts

* These banking accounts also known as reserves, can be called:

a) A Building Fund(For future expansion)

b) A Tax fund and lastly an Emergency fund (Any emergencies that may occur).The reserves can also be augmented by additional sales, the value of credit card payments, that have been paid up. (Would not hurt, since you used to those monthly credit card payments)

* Before spending cash on any expense, apart from salaries, funds should be set aside for the “reserve accounts”

* The benefits of the reserve accounts are two fold, 1) It creates a buffer, between income and expenses(will exert pressure on overheads/spend less), and 2) The business will gradually build capital in reserves, that the business would have had to source somewhere else, if the need arose.The reserves would grow rapidly, if it remain untouched, for say ,twelve months. This exercise requires discipline, for it to work.

Focus on the cash balance and savings, will ensure a rapid (almost magical) growth of cash! The business will also become less reliant on loans, credit and capital from outsiders.


Double Check Your Annual Payroll Figures and Tax

Payroll administration is a specialized section of accounting. Payroll software lightens the burden on many employers significantly. If used properly, a payroll system can add value to the business.

The biggest source of revenues for tax authorities is employee tax. Tax regimes are mindful of this, so regular audits and inspections are conducted on the payrolls of businesses.

A common discrepancy is the variance in total salaries for a year, in the income statement of the business, and the actual salaries paid. When business tax returns are furnished, the salaries amount may differ from payroll salaries declared for tax. The relevant tax office could identify this anomaly, and demand an audit. Stiff penalties could be levied.

Since software makes life easy, many users may be unfamiliar with the double entry that should integrate with the accounting system, which in turn is relevant for tax returns. A manual process of double-checking payroll totals and how it relates to the accounting system should be performed.

Please note that cash or bank payments to employees do not constitute total salaries. This is a common mistake and leads to numerous problems later on. I will expound by way of this example below,

Salaries and wages DR Taxes and other deductions CR Bank/cash (difference between the two above) CR

Taxes and deductions DR Bank/cash CR

Analyze payroll schedules carefully, and determine if it conforms to the above sequence. If it does not, than that explains why your payroll does not balance with your ledgers and/or salaries expense.

For a large payroll, the help of a payroll accountant will be needed. The software supplier should ensure that the payroll software interfaces with the accounting software, or alternatively, produces accurate reports that enables bookkeeper to post the transactions to the accounting books.

A majority of audits on small to medium sized businesses targets tax, salaries and special perk discrepancies. Annual reviews of payroll figures will go a long way in addressing the above-mentioned shortcomings.






Contact the Author
Sean Goss

Accountants Cannot Be Unpaid Agents Of Authorities

Apart from the financial and accounting services that accountants provide, many people are oblivious to the fact that accountants are just serving a host of government departments with the work that they render. Tax, statistics and labor related issues are areas where accountants are compelled to comply.

It is believed that governments would collapse if accountants in practice were to stop submitting all the taxes on behalf of their business and individual clients. Hence, tax and legal subjects are compulsory for any accounting student.

Like all sectors of the economy, accountants play a vital role in developing society, and their services to their respective countries should be acknowledged. Their skills enable states and countries to prosper.

The statistics generated in tax forms, labor etc. is an important barometer of economic and employment growth. Accountants contribute to the formalization of businesses that would otherwise have been outside of the system. Their assistance, ensures that more businesses are established, bringing in more tax revenues for governments.

Where do we draw the line? Are accountants obliged to co-operate in every arena? The accountant carries a huge responsibility in complying with the law at all times. The laws of democratic dispensations, however, entitle the accountant to privacy. Accountants are NOT at liberty to divulge certain information that is regarded as confidential. In their haste to appease authorities, they loose sight of the importance of accountant-client privilege.

Authorities, in western countries, as well as other democracies, are passing numerous laws that effectively “coerce” accountants and financial advisors to report irregularities and “suspect” transactions in tax, share dealing and financial instrument trading. After Enron and WorldCom, authorities are keeping a close eye on financial advisors. These regulations are welcomed, but places advisors in a precarious position.

Honest mistakes can me misconstrued, as serious transgressions. Accountants lack the capacity to scrutinize every transaction in their client’s books. The hosts of laws being passed in many countries are turning advisors into bloodhounds, when they should be “watch dogs”.

A fine balance should be struck between the requirements of the law and the needs of business owners. Clients pay for the services, after all, and their opinion matters most. Of course, unethical or illegal behavior can never be countenanced.

It is advisable that recourse should be sought in those laws that demand court orders or search warrants before information is obtained illegally by authorities. Many “demands” circumvent basic, common law principles.

Accountants should act like attorneys, and defend their client’s interests, first and foremost.






Contact the Author
Sean Goss