Income Tax
Generally speaking Income Tax has nothing to do with operating and running of a small business which is operated and run by family members.
If we take a mum and dad business who is undertaking landscaping and lawn maintenance there is no way to record income tax within the accounting structure. As you look at income tax it has nothing to do with the profit and loss of the business entity as income tax is a personal liability.
When you think of income tax it cannot be recorded as an expense as it is not, a wage may be an expense, but you would not normally record income tax as a separate entity. Yes depending on your business structure you may elect to record the income tax component that you remit for employees as an expense as it is part of wages.
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Mum and Dad Businesses
For most mum and dad businesses you are the business, all the income and expenses make up the profit, and the profit actually becomes your taxable income. So in this instance its not possible to record the income tax as an expense of the business.
Depending on how you run your business and depending on how your business structure is setup you may have to deduct the income tax component from any money you take out of your business. AS for the mum and dad business mentioned above they would most likely be required to deduct and remit the income tax component of any money they take form the business.
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Income Tax and EasyAs
EasyAs have a neat section within the program where you can record and keep track of monies you remit to government departments. In the past this was always something that was done separate from the accounting structure as it was not a component of the business.
This section of the software is simply titled “Tax”, so this allows you to manage and keep track of money you have set aside for income tax, money you have remitted, and can even double up as a recording area for recording amounts of sales tax you remit to the government.
As this area is a separate entity within the program it will not effect any other area, in fact you can enter whatever you want into into this area of the program and it will not effect any other area, it will not effect your profit or loss or anything.. This offers a great advantage for the average small business owner as it allows you the ability to keep all your information within the one simple accounting program.
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