Tag Archives: Tax

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 Judgement against taxpayer, rescinded!!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.
sgafc@mweb.co.za

Making Taxes Easy for Small Business

Many economic scholars see small businesses, to be the largest contributor to economic growth and employment creation on the planet. The ratio of small business, to big business in different countries varies. It is predicted that small business as a collective, will eclipse big business as a force in the economic landscape in future years. Be that as it may, fact remains that small business, is crucial to every countries economic development.

Limited research however, has been conducted on a variety of issues affecting small business. The global small business failure rate remains high, at an unacceptable rate of 80%(some say 95%), within the first year of formation. Common concerns about small business are confined to only cash flow problems, and under capitalization. Whilst these two, are major culprits in business failures, they not the only factors. Weak marketing, skills shortages, bad management, capacity are other factors, contributing to business failure. Taxes can also be added to the list as a cause of business failure.

Since many start-up businesses cannot afford to procure the services of a tax consultant/ advisor, they eventually fall foul of the taxation requirements of their respective tax authorities.
A small business is treated no different from a huge multinational corporation in many tax regimes around the globe. This treatment comes with its own set of problems. The one being the failure of the small business. Tax authorities, vigorously pursue errant taxpayers, be they big or small. In fact, it can be proven that harsher enforcement by tax authorities are reserved for small businesses!

Governments have yet to honestly acknowledge the role of small business and stop paying only lip service to its promotion. The current tax system for small business, in most countries will have to be revisited. No one is suggesting that tax authorities should grant small businesses “special treatment” forever. Just a breather, so as to enable them to grow at a faster pace.

To accommodate a small business and its growth, whilst being fair, a concept known as “thresholds tax”, can be implemented for small business. It is in place for individuals, and also known as progressive taxation. Simply put, it means, the more someone earns, the more they taxed. Many countries levy a fixed percentage tax on “profits” of businesses, big or small. This tax is not fair, and fairness is a prerequisite for a good tax system. Even the slightly different tax regime for “Small Business Corporations”, in most countries still does not address the problem.

The controversial “profit” in business accounting, especially small business has not been thoroughly researched by tax lawmakers. Profit does not always equate to positive cash flow.
The working capital factors tied into profit, results in severe cash flow setbacks for small business. It is therefore unfair to tax the small business on profit, like the bigger companies,

Fixed Assets and Depreciation

Both accountants and business people are grappling with the controversial accounting term known as depreciation. When financial statements are prepared the depreciation figure can be confusing. It can be too high at times, or too low, or just not properly done at times.

What is depreciation?

It is the accounting term used to describe the wear and tear of assets over a certain period of time. Depreciation is written-off against the income statement, based on a certain rate, and reduces assets on the balance sheet. Since it affects the bottom line, profits, it should be reasonable and fair. When profits on the disposal of assets are measured, the depreciation rate can affect that profit as well.

To derive maximum benefit from the business assets, the services of experts have to be considered. Depreciation percentages are easy to grasp, but it is with the implementation where businesses can encounter many problems.

Be selective with the accountant that will deal with your assets and taxes.

The accountant or tax consultant, should not only be conversant with the basic bookkeeping entries, but also with the fixed assets register, as well as complex developments in International Financial reporting Standards and changes in tax laws.

Mistakes and neglect with the fixed assets of a business’s, can result in losses running into thousands.

In as much as the services of outsiders are encouraged, there is just no getting away from the fact, that the business owner should become more hands on in the management of the businesses assets.

An expert can help, but he/she is not on your premises on a daily basis.

Since fixed assets, create economic benefits, the management and utilization of your assets to derive further economic benefits, in these precarious economic times, cannot be overlooked. Also take note of the provisions that propose depreciation on buildings. Land however appreciates, and rarely depreciates.

With the changes in International Financial Reporting Standards, radical changes from these bodies have been proposed. Useful life and economic life, in depreciation, is not necessarily the same thing. We furthermore have to look at prescribed statutory tax rates, which differ vastly from normal depreciation rate, and how that would affect the bottom line in a business.

No transaction for depreciation will pass through your physical books. The depreciation amount will be based on prescribed guidelines to determine the amount. The entry is based on no source document, and is known as a “book entry. What makes depreciation more contentious is the fact that it is a book entry. So even if the books are neatly prepared and balanced, the “depreciation factor”, leaves room for manipulation. Tampering with the depreciation rate/amount can result in either a loss or profit depending on the circumstances.

Even if strict International Financial Reporting Standards (IFRS) guidelines are followed, the carrying values and residual values can be tampered with.

A reasonable estimate could be 25% on machinery, but what if the machine is used for more than four years? Or alternatively, a computer can be used for 1 year whilst a depreciation rate of three years was provided for.

The following points are crucial for depreciation;

· Depreciate on a systematic basis
· Review depreciation methods annually
· Review residual values and useful lives annually.

Apart from IFRS, guidelines, the business should have clarity of the exact amount of years the asset will be used for.

Before calculating depreciation figures, thorough research should be performed on the fixed assets, its true values, residual values, useful life and economic life. Since these concepts are vital when final calculations are performed.

SARS Audit Procedures and The Tax Administration Act(“TAA”)

Herewith a perfect example of the blatant disregard of South African Revenue Service to the rights of taxpayers, as enshrined in the PAJA Act, as well as the Constitution.
In this real example, we give you an excerpt of a real objection, to an audit from which we quote the relevant legislation.
The Tax Administration Act, is a vicious piece of Tax Legislation, and I do not in any way encourage falling foul of this act. But please be vigilant, and know your rights.
(Names and amounts not included.)

OBJECTION TO THE ASSESSMENT AND PENALTY IMPOSED ON XXXXXXXXX CC
CASE/REFERENCE XXXXXXXXXX

You are referred to Chapter 2.3 of the Tax Administration and PAJA. It relates:
“The right to administrative justice under the constititution is given effect to in the Promotion of Administrative Justice Act(PAJA). In short this regulation mandates in the context of tax administration, that tax administrative actions that materially and adversely affect taxpayers right must-give clear grounds for the decision.”
Various emails were send requesting clarity, and nothing has been forthcoming. Herewith an excerpt of one of the emails, with the relevance to this case;

Objectionable points;1. Deductible expenses(Rx) totally overlooked.
2. The Rx reversal and the Rx “ deduction” was may I respectfully point out to befuddle and confuse. Refer to(PAJA clause in Tax Administration Legislation), “ that tax administrative actions that materially and adversely affect taxpayers right must-give clear grounds for the decision.”
3. Section 11(a)”Expenditure and losses actually incurred in production of income, provided such expenses are not of a capital nature.”
a) 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.
b) Rental, Agents commission, deliberately overlooked, and “hidden” in findings.
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”,
4. 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.
5. Total deductible expenses Rx.We acknowledge that SARS could uncover other “non deductible” amounts, but the difference between Rx and X) is just too huge, and warrants serious attention.

Concluding remarks
Whilst we co operated fully with the audit procedure(that arrived at these questionable amounts) we are extremely concerned that this will be the trend of TAA.

Let SARS pay for consultation, Not YOU! Were you overtaxed, but your cash flow is low?Solution:  Service at No COST to You. We negotiate a % of Tax refund!Email: info@sgafc.co.za

 

 

If you ,the taxpayer, feel at any time, that your rights have been violated, or you aware of unfair practice, on the part of SARS. Kindly drop us a mail. info@sgafc.co.za

TRUSTS

Don’t depend on what lawyers tell you. Find out from books.

Off shore bank accounts and foundations are the most common way for people with lots of money to keep it safe from taxation.

There are books on avoiding probate. Irwin Schiff wrote one 40 years ago. There must be more today. If you have a rock tight Will, the state can’t involve itself in the estate unless it’s contested. If there are no estate assets to go after, there can’t be probate.

You can keep cash and valuables in a safety deposit box, if you are worried about security, but still have instant access to it.

Keep your money in cash and you will be the only one who knows about it and have access to it. You can also invest cash in tangible assets like land or buildings and deed control/full ownership to your kids upon your passing.

Tangible assets are always better than keeping money in a bank, in my opinion. The US dollar will continue to inflate as the World Bank and IMF Zionist schemers shift over to embracing the Chinese yuan, which will happen more and more in the months and years to come.

While a well constructed trust may fit your needs, there are many other, perhaps more sophisticated ways, to protect your assets-and keep the money out of banks.

I haven’t had a bank account for a long time and I never will have one again. I stopped using credit cards in 1989 and never looked back.

The reason that banks charge you a monthly fee for the privilege of allowing them to use YOUR money, interest free, in THEIR “checking account” (which they will tell you is YOUR checking account) is because TOO MANY PEOPLE give them their money. And therefore, there is NO INCENTIVE for the banks to pay you interest on checking or savings (beyond the pitiable , token 0.0003% interest rate they might allow for savings).

If people POOL their assets and form PRIVATE ASSET MANAGEMENT UNIONS OR COOPERATIVES, that is operated, managed, and supervised by the participant/owners themselves, then you now have an effective way to grow your money in a trusted environment where all share mutually in the profits gained, thus by-passing the banksters entirely.

The same sort of pooling of assets could take place with property (homes) acquisition as well and avoid the banksters mortgaging industry.

The fastest way to end the control over your life exerted by the banking industry, their “credit markets” (which just HAD to be “saved” by the American taxpayer in October 2008), and their government cohorts like Bernanke and Paulson, is to STOP doing business with them on ANY level.

Credit Unions offer loans, have ATM machines and allow electronic transfer of funds, yet they aren’t part of the banking system. You can expand that sort of application to privately operated asset management clubs, unions, cooperatives, etc.

Armani suited criminals in banking, brokerage, government, etc. can only control your life when you ALLOW them to control you by COOPERATING with their enslaving devices and tactics. Withdraw your cooperation and they are DEAD in the water.

Ken Adachi

Website:  http://educate-yourself.org

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

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.

Reputation

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.

Specialisation

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!