Will There Be Tax Cuts?

In the struggling economy more and more attention is being given to budget deficits. The amount of debt is staggering and according to recent reports it does not appear to be getting any better. Many states have suffered declines in revenue not seen since the last World War. A record number of states had to combat deficits by cutting costs wherever they could and raising taxes to boost their revenue. A frightening statistic reveals that between 2009 and 2011 a mere eight states implemented tax cuts. 24/7 Wall St. investigated six states that reported a significant increase in revenue. They found that cutting expenditures rather than bringing in higher revenues was more important to try to combat the deficit.

While the media focused on the increase in revenue from taxes, an expert, Tracy Gordon, revealed that the figures actually showed an increase less than those during recessions in previous decades. However, it is possible that the government may misinterpret those figures and decide to increase 2012 taxes yet again. Many government services had to be cut and this was true even in the states which reported high revenue. Unfortunately those cuts affect education, public health, the elderly and the disabled. It appears that simply cutting costs and raising taxes is not a solution to the economic crises, but with a lack of options it seems unlikely that we will see tax cuts in the coming year. Instead 2012 taxes will likely be raised and government services will suffer more cuts.

Tips For Small Business Owners

For many sole traders or small businesses it can be difficult to find the time to maintain all paperwork on a regular basis, meaning a large amount of admin is left until it is absolutely necessary to sort out.

If this sounds like you, then you will need to make some changes to the way you work because the Inland Revenue  is set to investigate two million small businesses – slapping many with big fines if records have not been kept in order. Here are 5 tips to help your business in 2012…

Receipt
Receipt (Photo credit: BreakfastPirate)

1) Get organised, get in a routine and get sorted

Under the HM Revenue and Customs initiative ‘Business Records Checks’, small businesses and sole traders will be subject to inspection to ensure all paperwork and bookkeeping is up-to-date and correct. If they find that your business isn’t hitting their standards, you’ll be fined £3,000. And as the HMRC have been given a target of £600 million to hit over the next four years, you can be sure they won’t be taking a lenient approach when it comes to handing out fines.

Getting organised seems like an obvious first step, but if you’ve set your admin duties to one side for quite some time, you’ll have your work cut out! Admin is part of your business, so set some time aside either at the start or end of the week (or whenever your quiet period is) and focus on your paperwork and bookkeeping.

Consistency and routine are key to ensuring you stay on top of this task.

2) Keep all receipts

It is essential you keep all receipts so that you can back up business expenses. You could get 12 envelopes and write the name of each month on them and store your receipts according to when you purchased goods / paid bills. Alternatively, you could separate receipts according to source, for example ‘rent’, ‘tools and supplies’ ‘stationery’ ‘miscellaneous’.

This also applies to documentation for purchases you want to claim the VAT back on.

3) Bank and building society documentation

It’s easy to see a letter or statement from a bank or building society and think ‘I know what that is, I’ll open it later’ and before you know it, you have a stack of unopened letters to sort through. This is a habit you need to break – open the letter, check payment transactions are correct and file it away. It only takes a few minutes at the most and means you’ll save yourself a great deal of time and effort later on.

4) File your tax return on time

If you’ve kept paperwork up-to-date as outlined in the points above, you’ll find that filing your tax return will be much more straightforward to complete on time – helping you to avoid fines for being late.

5) Don’t throw anything away!

We’re not suggesting that you become a compulsive hoarder and never throw anything away; we simply mean that at the end of every tax year, you box away important financial documents like receipts, invoices and bank statements, and keep them safe in case you need them in the future. You should keep documentation of this sort for at least six years.