Taxation is basically a levied or compulsion imposed by the government on the individuals or citizens to carry out the expenditures of the government. Tax is imposed everywhere in the world and every government does so because without tax a government cannot work and perform its duties. The primary purpose of taxation and its collection is to gain revenue and serve various purposes and duties. Tax is imposed on the individuals on a specific percentage basis. Income tax is calculated on the income of the citizens. Taxes are deducted from the salaries of employees, houses and properties, gains from capital investment and profit from businesses. Tax basically lessens the profit on gains from its business or work and collected by the government Modern digital agencies can utilise various techniques and tactics to do tax planning in such a way to minimise the amount of tax paid to the government as eventually increase the revenue gain. Modern technology has revolutionised the businesses and can also further help the owners to lower the tax deductions.
The use of the Web, smart applications, social media, browsers, mobile phones and other platforms to reach customers is known as digital marketing. Digital marketing agencies use digital ways to market their products and services, although they are using efficient ways to gain profit, yet they have to bear the taxation cost too. So the firms should take necessary measures in order to minimise the taxable amount paid to the government and maximise their profits. There are 7 tax tips for based digital marketing agencies presented in this article that these agencies can utilise.
- Accruals:
You don’t recognize any payment or revenue as gain until your customer pays you or you receive your payment. The debts you have to receive should not be added as income to your financial statements. If accruals are added to the financial statements this will manipulate the data and amount and will eventually show wrong results. The calculated amount on the statements will represent the income more than actual. The tax calculated will be higher if we add accruals too. So the accruals should not be added by the digital firms on their financial statements to lower the amount of tax paid and increase the profit.
- Home office deductions:
As the digital marketing agencies are working online to market via blogs, emails, social media etc. Thus, they are not providing traditional services. So, such agencies work from home and do not have a brick and mortar model. The digital marketing agencies working from home or online should deduct a portion of your mortgage, rent, insurance and utilities from their income as the expenses incurred. The reason to perform action is that, this work is utilising these resources. The Internal Revenue Service (IRS) has particular rules for deducting home office costs. Your tax advisor can assist you in determining what percentage of your home costs can be deducted for business purposes. One of these requirements is that the home office be a separate room in the house dedicated only to business activity.
- Online transactions
All the expenses related transactions should be made via online payments and electronic funds transfer , this will generate invoices that will add up to the expenditures and minimise the tax payment by adding up all the expenses and nothing will be left behind that is not included in the statements. This will add up all the actual amounts paid and received, all the prepayments will be tackled in this way. Check Stub is basically an online paycheck that is provided to an employee with each paycheck and indicates the amount of cash earned as well as the amount deducted for taxes, insurance, and other expenses. Check Stub Maker will automatically handle all of the calculations for digital marketing organisations, ensuring that no errors are made, which might result in not all costs being disclosed in the case of human labour.
- Equipment:
In order to carry out business an agency has to use various equipment in this regard, mostly agencies do not understand the fact that the equipment undergoes depreciation thus this depreciation is a non-cash expense but still an expense so it should be deducted from the taxable amount every year. If you use your Internet marketing company equipment more than 50% of the time for business purposes, you may be able to deduct a portion of the purchase and maintenance costs on your taxes. If your equipment has a longer life expectancy than one year, the deduction should be spread out over several years. Consult a tax expert to see if the equipment is immediately deductible or if any costs require a depreciation plan.
- Selling Digital Products:
The modern digital agencies should start marketing digital products because on sale of electronic data products for example pdfs, e music, digital images, software, digital books (eBooks) and mobile applications one has not to pay tax, i.e. these products are not generally taxable. Thus, selling digital products will not add up the profit gain by these products as it is not regarded as taxable income.
- Hiring costs
The professionals are when hired a process is conducted to hire the professionals. Thus, all the cost bearing the services to hire these professionals must be deducted from the income statement.
- Advertising costs
The advertisement cost for the need of new employees, the marketing of products and advertising services should also be included in this regard. All the procedures of advertisement the marketing agencies went through while this process should be added up. Most importantly all the advertisement cost borne by the agencies should not be ignored.
The ratios of performance of the company and agencies can help to determine the performance of them. Effective tax administration will lack accountability and transparency, without such a sales performance management system, achieving company goals and objectives will be nearly impossible. The key performance indicators help to determine the sales and eventually the profit gain. Identifying key performance measures and specifying all related details regarding establishing a baseline against which future performance is evaluated; analysing and reporting results, and establishing organisational responsibility for the sales performance management framework is all part of a tax administration.
