The problem is that as entrepreneurs sometimes we do not have the time or knowledge to follow up on taxes.
Are you afraid to think about the taxes, fines or fiscal surprises that may arise in your business? I’m not going to lie to you, me too. The problem is that as entrepreneurs sometimes we do not have the time or knowledge to follow up on taxes.
However, carelessness in tax management can be catastrophic for your business since, in addition to generating charges, it also takes away your peace of mind. You feel like having a bomb in your hand without knowing when it will explode.
But don’t worry, in this article I share 6 tips that will help you keep your taxes under control.
Tip #1 — Invoice against payment
Always try to generate the tax invoice when the client is ready to make the payment. This is because the moment you generate a formal invoice you already have the commitment, before the DGII, to pay that ITBIS, whether your client pays you or not.
So you have an idea; If you invoice a service for $10,000 + $1,800 of ITBIS in the month of January, but your client will pay you in April, you will have to assume the payment of that ITBIS in the January declaration and wait until April to receive it from your client.
To avoid this I recommend:
1) Avoid long-term accounts receivable
You should avoid having long-term accounts receivable, because if you invoice and cannot collect on time, you will soon end up paying an ITBIS that you have not even collected. This is a quick formula to fall behind on paying taxes or run out of working capital.
2) Request advances from clients
If you offer services that require delivery time or manage projects, you can request advances from your client without having to issue an invoice. Once the service is completed or the project is delivered, you can generate the formal invoice and settle it with the progress received.
3) Use sales orders before invoicing
If you need to use a document to generate a commitment with your client that is not an invoice, you can use sales orders and once your client is ready to pay, you convert them into formal invoices.
The central idea of this Tip is to try to get the billing date as close as possible to the collection date, and if you can achieve it within the same month it would be a success.
Tip #2 — Report all your expenses
Be sure to record and report all expenses in your business to the DGII. Categorize all your expenses well and don’t leave anything out. Includes all formal, informal and minor expenses.
Any unreported expense increases your tax commitment
Any expense that you fail to report to the DGII in one way or another will increase your fiscal commitment. If you do not report an expense invoice with ITBIS paid, you will not be able to offset it with the ITBIS collected in that month and therefore your ITBIS payable will increase.
Likewise, this will not be admitted as an expense incurred in the operation of the company for the purposes of calculating the profit at the end of the year. For any expense not reported or not admitted in the income tax return (IR2) you will have to pay 25%*.
* The % of income taxes (ISR) will depend on the year of the declaration.
Be careful with informal purchases If you need to buy something from an informal supplier, that is, one who is not properly registered in the DGII, generate an invoice for the informal supplier and withhold the required taxes.
In these cases, you either retain the taxes from the supplier at the time of payment or you assume them by adding them to your supplier’s price. It is very common that neither you nor your supplier want to assume this tax, and therefore, in order not to assume it yourself, you will want to leave them out of your return.
Avoid saving money in this sense, if you do not report these expenses with their withholdings to the DGII, in the end it will cost you 25%* more at the end of the year.
* The % of income taxes (ISR) will depend on the year of the declaration.
Tip #3 — Do not use the collected ITBIS
As entrepreneurs and micro-entrepreneurs we tend to think that all the money billed and collected is ours. Many complain that they have to pay ITIBS at the end of the month, however, this is because they have not yet accepted the idea that the ITBIS is not from their company, it is from the DGII and it is not the company that pays it, it is your customer.
This is where all the problems arise with delays in the monthly payment of the ITBIS (IT1). If you spend the collected ITBIS money that does not correspond to you, you will be out of balance at the end of the month and will not be able to pay it to the DGII.
That is why the recommendation is, do not spend the money you receive for ITBIS collected . It is better to reserve this money separately until the moment of filing and paying it.
ProTip If you manage multiple bank accounts in your company, you can use a non-operational account to transfer and reserve the ITBIS collected until the moment of the declaration. This way you avoid using that money in your daily operations.
Tip #4 — Make your statements on time
Always file your declarations and pay taxes on time. Avoid at all costs making late declarations or payments, the interests generated by the DGII are similar to those of a modest lender.
There is nothing more frustrating than paying unnecessary interest and surcharges for something that does not generate any progress or benefit in your business. Avoid this, file and pay your taxes on time.
And yes, I already have arrears and I don’t have money to pay?
If you already have arrears with the DGII, consolidate everything pending and make a payment agreement. Although you still have the commitment to pay, you avoid high interest and surcharges.
ProTip
If you do not have the cash to pay but you have financing options available at a lower cost than the DGII interest, use a loan to pay off your tax commitments.
Tip #5 — Automate Tasks
Use technology as a tool to automate tasks and simplify work. Manual work is long, tedious and expensive, if you can automate part or all of it you will save time, money and have peace of mind.
But, how can I automate tax tasks?
Use accounting software that provides you with tools to simplify the most repetitive tax tasks.
Look for tools like:
- Definition of taxes, fees and automatic assignment.
- Automatic configuration and assignment of tax receipts in each transaction.
- Tax categorization of income and expenses
- Generation of sending formats in TXT (606, 607, 608).
- Management of minor expenses with tax receipt.
- Invoices, vouchers and withholdings to informal suppliers
- Registration of tax withholdings.
Electronic billing
Although it is in its infancy and mass implementation has not yet begun, in the coming months electronic invoicing will come into operation in the country. Once implemented and fully operational, it will replace many of the tax tasks that are performed manually today.
Tip #6 — Delegate tax tasks
If you want to keep your taxes under control, you must first have your accounting organized and up to date. To achieve this, you must delegate accounting and tax tasks. Because unless you are an accountant, as an entrepreneur and businessman the most important and priority thing is to grow your business.
Trying to do everything yourself is a quick formula for physical and mental exhaustion and therefore a direct route to failure. You have to avoid investing time in tasks that, although urgent, do not directly contribute to the growth of the business.
However, you cannot delegate your accounting and tax management to just anyone; an oversight in this regard could cost you your business. You will need to hire trained staff or the services of an independent professional with the experience to carry out the entire process.
Some of the tasks you will need to delegate:
- General Accounting
- Monthly ITBIS declaration (IT1, 606, 607, 608, IR17)
- Annual income tax return (IR2)
- Payroll Registration in the TSS & SISALRIL
- Professional advice and representation before the DGII
ProTip
If you do not have the budget to hire staff with the necessary experience to carry out these functions, you can hire the services of an independent professional. Many times the cost of hiring an independent professional is much lower and you do not have the work commitment.
If you apply these 6 tips in your business, I assure you that you will avoid surcharges, fines and you will no longer be afraid of tax surprises. I would highly recommend H&R Block, they have the expertise that can help you save taxes.
