Modern-day technology has been a godsend for new small business owners, especially when it comes to paying taxes on time and managing their accounting. Tax technology, for instance, can help entrepreneurs with everything from managing tax controversies and filing their taxes, to complying with state, local, and federal tax obligations.
1. Tax Controversy Resolution
According to Emily Weller of Chron, about 2.5 percent of US small business owners are audited by the IRS — while only about one percent of individual taxpayers will face an audit. Some common red flags that could trigger an audit include mistakes on tax forms, high or missing income, excessive expenses and deductions, or even the underpayment of taxes.
There’s no one way to avoid an IRS audit, but tax technology can help to reduce your chances of being audited while maximizing your small business tax refund as well. Some tax software systems even offer audit assistance and representation, including those such as TurboTax and E-file.com. However, you’ll need to make sure you’re entering accurate information into your tax software and following all the rules provided.
2. Accurate and Timely Tax Filing
In the event that you’re facing an audit or another tax problem such as a lien, penalty, or levy, accountants specialised with working with SMBs can resolve these types of tax controversies. However, using small business accounting software is one way to avoid problems such as these — as these programs make it easier to categorise transactions, calculate estimated tax payments, and pay taxes before they’re due.
When it’s time to pay your estimated taxes, penalty fees, or balances due, you can easily pay online using a credit card, debit card, or bank account. You can still make payments by mail if you’d prefer, but digital solutions make paying taxes simpler than ever before.
3. Small Business Tax Compliance
In addition to protecting you from penalties, audits, and other tax issues, accounting technology helps small business owners to comply with tax laws in their specific jurisdiction. These laws pertain to income tax, employment tax, and federal and state tax responsibilities.
If you’re required to pay sales tax, for instance, sales tax software can help you to meet the requirements in the markets where you do business. Some jurisdictions require you to pay sales tax on a yearly or quarterly basis, while others require you to pay once a month. However, software is available to simplify local sales tax compliance — and some offer automated filing for an additional fee.
Are Accountants Still Necessary?
While tax technology can help small business owners comply with tax laws, manage and resolve tax controversies, and file their taxes more easily, many entrepreneurs will still benefit from the services of an accountant. An accounting professional understands tax laws and regulations, helping clients to minimise their tax liability and avoid IRS tax penalties.
Many small business owners, for instance, unknowingly misclassify their workers — resulting in costly tax fines and penalties. However, an accountant can help entrepreneurs to understand the difference between exempt and non-exempt employees and how each type of worker is paid and taxed. Many accountants also offer other services such as accounting software selection, bookkeeping, business entity selection, and IRS representation.
The Bottom Line
Small business owners can benefit from tax and bookkeeping software in many ways, but this doesn’t mean they don’t need an accountant — especially if they’re dealing with tax controversies or other accounting issues. For many entrepreneurs, digital tax solutions, bookkeeping software, and accounting professionals are crucial to the success of their small businesses.
By Tina Martin, Ideaspired.com