Each business owner is required by the tax authorities to complete a declaration of capital. The purpose of the declaration of capital is to examine in depth the business owner’s annual reports and to compare the differences between them. During this comparison, investments made in different years, current expenses, acquisitions for the business and various living expenses are placed side by side in order to verify the reports. A common mistake made by many independent contractors is to confuse a declaration of capital with the annual report submitted to the tax authorities. It is important to remember that an annual report is submitted for income while a declaration of Capital is a comparison of several annual reports and many other financial data.
If, after the tax assessor’s audit of the declarations, capital differences are found, that is, any discrepancies between the declared income and the amount of capital available to the taxpayer, the business owner will be assessed and if there are high differences, it can even reach severe judgments in court.
What are the differences in capital?
- Often these are simply human errors such as incorrect filing of the forms, or the omission of any income from a tax return due to forgetfulness.
- Various gifts received.
- Getting loans.
- The most serious case is Income that is intentionally not declared on a tax return in order to evade tax payment.
How is a declaration of Capital prepared?
First, a proper record of all the independent contractor property and property registered under his family name must be made. It is then advisable to conduct a review before submitting the statement to the tax authorities, review it ourselves, and examine whether there are any differences. If we find such, we must consider the reasons for it and make difference corrections. Without good explanations for capital differences, we could absorb heavy tax charges.
Important things to consider
When calculating your expenses, keep in mind the Social Security payments. Some of this expense will not appear in your tax return because it is tax-free, but as a recognized expense, it may change the balance of the declaration of Capital significantly.
Also tax-exempt rent is an income that can easily be missed for the same reason. This is an item that may accumulate to high amounts and may be very significant for a declaration of Capital over several years.
Many business owners get in trouble for not declaring cash in their home, safe-deposit box or other means. In order to avoid capital increase without sufficient explanation, all assets must be declared, including cash.
Various gifts received are also recorded as an integral part of the declaration of Capital without exception.
Guy Dovrat’s accountant office will walk you through completing statements and all accounting needs for your business
The office located in Yehud provides service to various organizations from all sectors. Guy Dovrat has extensive experience in the field of taxation and will assist you in optimal tax planning and will guide you closely on all your needs in order for your business to have good and sound financial conduct with the tax authorities. We invite you to contact us today and enjoy quality and reliable service.