We've never met a business owner who likes doing their taxes (even if working with an accountant). Phil Astley has some encouragement to help you get through this stage, and some suggestions to help you get more out of doing the books, and to make tax time easier for both you and your accountant, now and in future.
Running a business is fun. Of course it has challenges - but if business is destroying your joie de vivre something needs to change. When it come to tax time, it isn't fun - but it needn't and shouldn't be a big deal. (Just like going to the dentist.) You have an accounting system in place to manage your business. Tax returns are just an extension of that (if it's done well during the year).
Tax returns are not an enjoyable part of business. I am an accountant, and I don't particularly like this part. I do it as part of the bigger picture - helping clients get more out of their business. That I do enjoy - keeping the books straight is just part of that.
Business owners either don't worry because they don't understand what can go wrong), or they worry too much. People have been bankrupted (and worse) by failing to manage their accounts and taxes correctly, so it can be serious if mishandled.
Tax rules are complex, and as people find loopholes IRD closes them. They're not always successful at making realistic laws. A classic case affected everyone involved with FBT on vehicles. IRD lost the case - but subsequently had the law changed to meet their view, rather than follow normal accounting conventions.
Recent legislation has some effect from April 2017 - but IRD cannot yet tell us how this works in detail. Other laws they've recognised as deficient - but have taken years to correct.
Basically we have to return all income, and there are two that basic rules covering expenses. We can claim the costs of whatever we sell, and we can claim the cost of running your business. There are many (very many) more rules than these three, but even those raise lots of questions. To make life more complex, GST rules are not the same as tax rules.
Tax rules are generally (but not always) based on conventional accounting principles. People often have little appreciation of accounting fundamentals but the responsibility is still yours. Make sure you understand how the rules apply to you. But getting a degree in accounting isn't feasible - and over time things change.
- Rather than deal with your accountant once a year, get them involved as you come across new things. You may find they provide a better solution that way than is available after the fact.
- When they review your accounting system, make sure you understand the changes they make - learn for the future. Don't worry too much about the details of things that happen only every blue moon (e.g. trading in for a new car on H/P), but understand the big picture.
- Finally when they've done your accounts, make sure your system matches the accounts and tax returns.
These three things can reduce problems (for both of you) both now and in following years. Accounting and tax might not be fun - but they needn't be painful.