Dealing with a lot of documents can be confusing and exhilarating at the same time. Documents are necessary and important when it comes to make the business process flows smoothly and documented accurately. However, for a beginner who just started his business, this department of docs & taxes 101 can get a little too complicated if not learnt properly.
Below are provided tips for basic learning about what kind of documents and how to handle taxes.
Types of Documents
There are several types of documents to know.
- a. Identification Documents
The first type of document is identification documents. The documents in this category show identity and complete profile of a certain person or a company. They can be identification cards, passport, birth certificate and other identification documents. Also, the document usually is necessary for business owner when they want to legalize their company using their name. ID documents are important to verify the ownership and the citizenship of the owner who is registering their company.
- Tax Documents
The next document in the docs & taxes 101 is the tax document. Any kind of tax documents include tax returns, 1099s, and W2S tax. Tax return is the type of tax where individual or business to file on tax report to the government, it is usually in the form of annual report. While 1099s document is the type of document specific in United States for freelancer, investor, and non-employee tax report. These types of tax documents are necessary to learn especially for tax specialist to handle and regulate the tax process in the company.
- Financial Documents
Another type of document that is crucial for an owner to know is financial documents. Financial documents include invoices, receipts, bank statements, and credit agreeements. Invoices help to track all the transactions daily in a company. Also, it helps to document the cashflow on a daily basis. While invoice tracks transaction, receipts are the documents that show any kind of outflow transaction within a day. Bank statement is also important to understand especially the monthly one to see the record of all banking activities within a month.
After learning about all kinds of documents crucial to know for building a company, let’s learn about docs & taxes 101 about basic taxes management and how to understand it.
Basic Taxes Management
The most basic part of learning tax is to know its definition. Tax is a mandatory payment that any individuals or companies need to pay to the government. Its function is as a supply for public facilities, services, and public infrastructures. Therefore, they need to follow tax regulation in a country where they reside.
There are several types of tax, here is the list:
- Income Tax
Income tax is the type of tax to report annual income of individuals or businesses. Money earned by them should be reported and charged with tax as per regulation. For individuals under the required salary usually have zero tax to pay.
- Sales Tax
The second type of tax is sales tax. This type of tax is applied for products that are being sold to customers. They usually charge additional tax as part of mandatory to include some of the profit into tax that benefits the public. People usually find the tax on products, hotels, restaurants, and any other kinds of business.
- Value-Added Tax (VAT)
Value-added Tax or known as VAT is similar to sale tax. The difference is while sales tax is from the whole transaction, the VAT is from each product on sale. Therefore, the price of the products should include the tax as well. This kind of docs & taxes 101 is common and should be on calculation before setting a price to our products.
- Property Tax
The next tax is the property tax. Anyone who owns property should pay tax according to the value of the property they own. Any kinds of property include house, villa, hotels, are all included in this. If someone owns a business, they also need to pay tax based on the value of their business buildings.
After knowing about documents and taxes, let’s learn about how to manage both of them for efficient business process.
How to Manage Documents and Taxes
Understand document and tax is not enough, people also need to know how to manage them, especially for business owners. There are several ways to manage both aspects.
- a. Organize Documents
Organize all the documents based on the type. After that, compile them and make it into one category. Anyone can save and see the file based on the category on the book shelves. Also, as a way to keep any crucial or private documents, they should be saved properly in a safe or vault with special codes. By organizing the documents, it will make it easier to sort and find them in the future.
- b. Digitalize Documents
In an era where technology is tightly linked to business process, digitalizing the documents is a safe way to avoid getting documents lost. Some documents can be scanned and saved on a cloud storage. Make sure only choose the safe and secure storage to keep all the digital documents inside. By digitalizing documents will also help to make offline storage more efficient and save some space.
- Schedule Tax Filling
Tax report and tax filling have their own schedules. Some or monthly while others are annual reports. In order to know which the correct time to fill on the tax report, make sure to create schedule as reminder to give the report before the due date. Reporting tax before due date is also important to make sure that the companies follow the country’s regulation well. By filling tax report, people are entitled to give the report as scheduled by the government.
Conclusion
Understanding docs & taxes 101 is necessary in order to build a solid foundation for our business. Moreover, the knowledge will help the company to possess good profile and help to establish healthy image within the company and across the country. Make sure to report everything and follow the regulation in a country where the business decides to reside in.