3 Small-Business Tax Worries and Ways to Eliminate Them
A tax (from the Latin taxo) is a financial charge or other levy imposed upon a taxpayer (an individual or legal entity) by astate or the functional equivalent of a state to fund various public expenditures.
When you become a small business owner, you acquire a responsibility for making tax payments that you didn’t have as an employee. Although you probably didn’t realize it, your employer was transmitting those taxes withheld from your paycheck to the government. The company was also matching your Medicare and Social Security taxes and filing information returns with the IRS.
There are three tax-season worries going through the heads of small-business owners. Fortunately, there is new technology to alleviate all of the anxiety and worry, so small-business owners can dedicate more of their time to what truly matters most: their customers.
In fact, a recent Score survey found 40% of small business owners say bookkeeping and taxes are the worst part of owning a small business.
To be sure, a recent survey of accountants indicates that the latest tech tools may be underutilized: Tax preparers have reported that two out of five clients lack up-to-date financial records at tax time.
When small businesses don’t use technology to organize financial records, receipts remain scattered in back-office shoeboxes, employees’ laptop bags and email archives. Getting all of these important documents into the same place is the first step to processing the important data hidden in the paperwork; and one of the best technologies for this task is a smart scanning and organizational software system.
Technology can make it easy for any team member to add important documents to a central digital location simply by scanning papers or emailing files. Smart identification software extracts important information from scanned and uploaded documents (including amounts, vendors and dates) and makes creating tax reports easy.
Tools like Neat allow items to be tagged with the same tax categories that the IRS uses. Thanks to cloud-based delivery models, it’s also easy to integrate data with other tools, such as QuickBooks Online and Dropbox.
For small-business owners who spend much of tax season worrying, one of the biggest benefits of digitizing important records in a smart organizational system may be the alleviation of some of that stress — and the fact that they’re no longer burdened with the following three worries:
1.Accuracy of data entry
It is important for businesses to set realistic data accuracy goals to improve accuracy in data entry. By eliminating manual-data entry and automatically extracting important data from documents, smart organizational software eliminates the opportunity for human error.
2.Not missing any tax deductions you deserve
Millions of taxpayers overpaid their taxes every year by overlooking just one of the money-savers listed here.
Not only does a habit of scanning bills into smart organizational software help ensure that all deductible expenses are tracked and accounted for, but technology can also enable easy itemization of costs by tagging them with the same tax categories that the IRS uses.
3.Help if audited.
“Technology enables entrepreneurs to search a cloud-based system by amount, vendor, date or other keyword instead of searching through papers by hand.
Meanwhile, experts urge small-business owners that tax preparation should be a year-long process, not just a scramble and sprint exercise in the days leading up to April 15.
“Overall, the single biggest mistake SMBs can make is only talking to their accountants during tax time. Nearly three-fourths (65 percent) of accountants recommend collaboration throughout the year, with 44 percent suggesting business owners should meet with their accountants once a month,” Rieva Lesonsky reported for Score.
As for what common errors lead to audits, faulty deductions head the list. Excessive deductions (36 percent) and mixing business and personal deductions (35 percent) are the main cause of audits, say accountants; misclassifying workers was cited by 14 percent of accountants.