How Technology Can Help You Maintain Business Tax Compliance

One of the most critical aspects of owning a business is staying on the right side of the IRS. Just the name Internal Revenue Service will strike fear in the hearts of even the most seasoned entrepreneur. Thinking about tax laws feels overwhelming and scary, but there are tools to help you manage those fears and the seemingly infinite number of tax laws that sometimes seem to have been written in a foreign language. 

It’s smart to hire a professional to manage your payroll and taxes for you, but it's equally wise to keep up with it yourself. No one likes a surprise when it’s about your business’s finances. This is where tech can help. In this article shared by consultant Shoeb Lodhi we’ll start with the basics:

A Review of the Different Payroll Taxes

● Federal Income Tax: This is a tax on an employee’s gross income and is taken out of their paycheck.

● FICA: This is the tax that goes toward Social Security and Medicare and is paid by both employer and employee.

● Federal Unemployment Tax or FUTA: A federal tax that is loaned to states in case of disaster.

● State Taxes: These vary from state to state. 

Tax laws and regulations change rapidly, especially when it comes to small businesses. StartupNation notes that entrepreneurs who decide to navigate planning for and filing their business taxes alone risk making costly mistakes. Fortunately, several technology options are available to help keep track of the numbers and ensure a smooth tax experience.

Importance of Business Tax Compliance

Every small business should consider tax compliance a top priority. Making mistakes when it comes to filing and payment deadlines, or even simple math errors can result in hefty penalties and fines at the federal and state level. Business owners who are confident in their understanding of the tax obligations they face may still make mistakes that cost the company time and money. TIME magazine points out that penalties and fees for tax errorscan increase dramatically over time.

The time it takes to ensure compliance can also be burdensome for a small business that may need that time to further its company goals. For this reason, choosing to use one of the many applications and programs available to help track and verify your accounting is worth the investment to keep your books accurate. Even when utilizing a business tax program, it’s still a good idea to work with a tax professional to provide an extra layer of protection.

Accounting Software for Business Taxes

Software for your bookkeeping has made it easier than ever to track your business's finances and stay on top of tax obligations. For a fee, business tax software is available to help maintain accurate financial records, calculate payroll tax, remind you of relevant tax code changes, and ensure you meet upcoming tax deadlines. Some software also allows you to maximize deductions by taking snap-and-store photos of your receipts. A few popular programs include:

• Quickbooks

• Sage

• Zoho Books

• Xero

• Freshbooks

• Bonsai

Technology can help you if you’re ever audited by the IRS. Your professional accountant will be able to assist you with that, but he or she is only as good as the information you provide to them. A list of records the IRS may request in an audit can include loss and theft documentation, or travel and expense receipts, so having those stored electronically in one place means you can access and share them with your accountant and the IRS auditor.

Familiarize Yourself with Property Taxes

Paying attention to and learning about property taxes is crucial for any homeowner, especially those who operate a business from home. Property taxes are paid on an annual basis. Failure to pay could result in penalties, fines, or even foreclosure of the property. Nowadays, technology can help make it easier for homeowners to stay compliant with property tax regulations. 

There are various online tools and apps available that can help homeowners calculate their property taxes, track payment deadlines, and even automate payment processes. By using such tools, homeowners can ensure they are always up to date with their taxes and avoid any unnecessary late fees. Additionally, staying informed on changes to property tax laws and regulations can also help homeowners plan and budget accordingly.

Running a business means a lot of juggling for you as an owner, but tax compliance is one of the balls you really cannot afford to drop. Take advantage of all the tools out there to help you manage, because thanks to today’s technology, staying compliant has never been easier.