Tax preparation software is one of the basic needs for a business today to stay on top of compliances. Complex and ever changing regulations require careful evaluation to get things right for an SMB. Accounting, finances and tax returns can take up significant time and resources, if not managed well.
However, tax preparation software can help businesses to get the taxes and compliances right.
Here’s a list of crucial steps to ensure that your tax preparation software provides relevant tax services for your business.
Startup Tax Service
Tax services need preparation of accurate income statements for sales in the financial year. The incomes from all sources are recorded along with VAT and other applicable taxes.
The invoicing system and income statements can be set-up in consultation with tax experts. The tax preparation software helps a business to automate the income reporting.
Your tax preparation software is often equipped with companies that are similar to yours in location, size, funding, type of business entity, subsidies, grants and new business models.
As per the registration of your business, the tax liability is calculated by the tax preparation software. Depending on whether your busines is a sole proprietorship, LLC, C corp, or S corp, the taxes are calculated accordingly.
A good tax preparation software provides inputs and intelligence to structure corporate and employee taxes for staying compliant as well as meeting its capital needs. The tax preparation software creates an end to end workflow for reporting of finances and streamlines accounting.
The tax filing varies according to the business entity, state and location of the company. The tax preparation software creates accounting reports and the tax filing reports as needed by states & federal authorities. For e.g. Delaware’s annual report will be different compared to Texas. A good tax preparation will be able to create reports for all state, federal and city level filings needed for the business. The businesses can file these tax reports and maintain compliance. The compliance reports can be prepared with automation for multiple states, federal and city authorities.
Tax preparation software automates compliance activities saving time, efforts and penalties. It creates standard processes for companies to avoid any stumbling blocks.
A good tax preparation software is developed to create standardised reports for your industry. For e.g. companies with a large number of inventory items and warehouses need reports in a specific format. The tax software should be able to be adapted to the needs of your industry.
The company structure, location, industry practises impact your tax return and reporting. The industry reports and details may vary according to the IRS regulations.
Industry expertise and specialisation can help with the automation of your bookkeeping, accounting and compliance reporting. The nuanced reporting and finer aspects of accounting are automated by a good accounting software. In essence, the software tools assist in running your business with ease and confidence.
Tax Credits & Subsidies
The IRS provides tax credits and subsidies that can provide your business useful capital. The tax preparation software can be set-up the R&D tax credit upto $250,000 in tax savings annually.
The tax preparation software helps companies categorize expenses and subsidies as per their industry for obtaining credits. The tax credits from previous years are reconciled against outgoing taxes for the current financial year.
Startups save a lot of time on researching and applying for tax credits with automation. All R&D expenses, business losses and other credits can be accounted for with accuracy using an accounting software.
At the time of tax filing, the appropriate credits can create tax refunds or provide credits to businesses. These tax credits go a long way in overall profitability and growth of a business.
A good financial structure and sound fundamentals have a big impact on the long term viability of a company.
A tax preparation software makes claiming the tax credits easier. They simplify the return process and make it seamless for businesses to claim their refunds or credits. You also dont need special tax consultant services, but can use automation to receive your due credits.
Forms and Tax Filing
Tax preparation software helps with preparation of profit & loss reports, balance sheets, cashflow statements, trial balance and audit reports etc. Once the accounting is done, the tax returns can be filed in required formats. For e.g. an S corporation needs to fill out 1120 form, it can get the prepopulated data for this form. The return can then be submitted to the IRS portal and refund/tax processes accordingly.
The tax preparation software facilitates filling up all the data in the reports that need to be submitted to the Federal government in required formats. A free file program can then be used to complete this process.
Tax softwares can save your business accounting fees by automating most of the steps for filing returns. It can also save you hours of efforts on reconciling books, tallying accounts and providing countless documents to your accountants.
Every accountant & tax preparer will need your financial statements to accurately prepare and file your business tax returns.
The financial data set-up is done using an accounting or tax preparation software. You can get all the consolidated information you need on your software automatically by linking banking accounts. Once this information is processed, your financial reports will be set-up and they can be downloaded or emailed to you. You could use the services of a registered Tax Preparer to submit the information to the IRS or do it yourself.
Many modern tax preparation services like e file can link your financial data and information. Your tax returns and forms can be submitted with up to date information.
An IRS audit can be cumbersome and difficult for an SMB. Companies are required to maintain proper documentation, records and information related to their tax returns. The company should be ready to provide explanations to the IRS queries with proper data & clarifications. Tax preparation software provides companies peace of mind with all the data for them.
The expertise from various companies on the tax preparation software ensures a consistent framework that can help businesses answer queries with clarity. The FAQs, tax consultants and use of tax software can help businesses with audits from the IRS.