Avoid Sales Tax Hassles with 5 Tips for Selecting Tax Software
Most business owners don’t go into business with the dream of tracking their bookkeeping and sales taxes. However, these are essential duties for any business. Modern technologies can help business owners manage their sales taxes and bookkeeping practices more effectively. If you’re still using spreadsheets, manual accounting logs, or keeping your sales receipts in a pile for accounting at the end of the month, it’s time to upgrade to a modern system.
Completing Tax Returns
If you don’t start tracking your taxes now, it can take you much more time when you need to complete your tax return. Poor organization and using antiquated methods can turn what should be a couple of hours each year filling out forms into a marathon tax event. As a business owner, nobody expects you to be a tax expert. Learn to use technology effectively, so that you don’t have to waste valuable time trying to understand tax codes.
Determining the Correct Tax Rates
One surprising find is that business owners underestimate how many tax jurisdictions there are in the United States. When you sell products or services, you have to charge sales tax appropriately based on the laws in the taxed jurisdiction. With over 17,000 different tax jurisdictions, it’s simply impractical to expect any small business owner to be able to keep track of all the laws and tax codes.
Using a Fully Automated System
If you can’t afford to hire a full-time accountant, you need to take advantage of a complete system that helps business owners manage their taxes through the year. A few moments each day can save time, and prevent the possibility that the IRS will impose penalties for incorrectly filing taxes. Businesses need to send timely payments several times per year, and missing these deadlines can cause additional interest and penalties. A fully-automated tax system can help with these issues.
Automatically Detect and Input Tax Rates
Many of these systems can automatically detect and update tax tables for customers in every state, city, country and special district. This can greatly reduce the hassle when it comes time to pay taxes. It also ensures that you aren’t paying and charging taxes in districts where you don’t have to. Just because a state charges tax, doesn’t mean that your business has to charge tax in every state and locality. The rules change depending on where you live, and where the customer has their orders shipped.
Five Common Features to Look For in a Tax Package
1) Tax Calculation Service:
The first feature to look for in any automated package is whether or not the software can handle multiple tax jurisdictions. Tax tables should be updated automatically, and preferably integrate with your e-commerce system. In this way, when you take an order, the appropriate taxes are automatically applied. The system should also keep clear records in case the IRS decides to audit your company.
2) Keep Up With Developments:
Look for a package that has a high level of support. This can make it easier to keep up to date with changes. If you choose a software package that doesn’t provide regular updates, then the tax codes and other laws won’t stay up-to-date either. The system you choose should automatically backup and update your system.
3) Simple Interface:
Tax software can be overly cumbersome making it difficult to use. If the system doesn’t have a setup wizard, or it takes several hours to set up, then move on and look for a more effective system. Any software package that doesn’t take you through the setup process in less than an hour is likely going to cause you more pain that it’s worth.
4) Files Tax Forms:
There are several tax forms that need to be filed. Many programs simply file the main tax form, and won’t allow you to easily attach supporting documentation or explanations. Providing the IRS with the necessary forms is a good way to stay on their good side, and it may even reduce your chance of an audit. A fully automated solution should calculate the taxes, complete invoices and integrate with your shopping cart in addition to filing your returns.
5) Support for Audits:
In the event of an audit, you’re going to need some professional help. A good system provides a guarantee that if you get audited, they will provide support or even represent you. Without audit protection, look elsewhere for another product or service.
Run Your Business More Efficiently and Effectively
Tax time doesn’t have to be a confusing or frustrating experience. As a business owner, you should be able to file your taxes in a single afternoon provided you kept up with your records and maintained accurate data. Spend more time focusing on your business and less time worrying about taxes by choosing the right software package for your needs.
Hopefully, this article got you thinking about how to advise clients properly on the topic of sales tax simplification. With all this in mind, if you’re not already doing electronic tax filing, you should think about it. If you efile 1099 and W-2 tax forms, you’ll notice results faster than using the paper format.
When running a CPA practice, or just helping a few clients, this season should be about time management. Like most tax pros, your clients have a few employees and outsourced staff helping them.
I strongly recommend you follow my lead if you’re spending lots of time printing and mailing tax docs. I use eFile4Biz.com to file 1099 online (as well as W-2 and other tax docs), and focus on generating clients, instead of mailing tax forms. This industry leader connects to the major accounting software brands, on top of printing and delivering the tax forms for me. The video above will tell you more.
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