Tax time can be stressful for sole traders, but with the right approach, it can be manageable.
This blog offers guidance to help sole traders navigate tax obligations effectively.
Understand Your Tax Obligations
💼 Sole traders must file annual Individual Tax Return (IR). Depending on the business activity being undertaken, they may need to register for GST if their turnover exceeds $60,000. Understanding your tax obligations early can help you prepare.
Keep Detailed Records
🗂️ Maintain accurate records of income and expenses. Keep all receipts and invoices for at least seven years, as required by the IRD.
Using accounting software can simplify record-keeping and reduce the amount of paper piling up in the shoebox in the corner.
Plan for Tax Payments
📅 Set aside money regularly to cover your tax obligations.
Open at least one transactional account and two savings accounts; the first savings account for GST (if you’re registered) and the second savings account for Income tax.
Next top tip: Make it a habit to set aside 15% of every sales income deposited to your transactional account to your GST savings account, and 20% of every sales income deposited to your INC tax account. That way you won’t be caught out short at tax time.
Need help getting ready for tax time?
Our team can help relieve the stress so you can be ready for tax time.
Get in touch with us to learn how.
