Filing taxes isn’t fun for anyone, but it can be an especially stressful experience for small businesses. There’s a lot more to filing taxes than just assembling a pile of W2s when you’re an entrepreneur!
Of course, working with an accountant throughout the year would make the process much easier, but many small business owners don’t. As a matter of fact, nearly 50 percent of small business owners don’t have a dedicated accountant.
This can be a problem, but it doesn’t have to be. You just have to make sure you’re organized when it’s time to meet with your tax professional. The best way to make sure you have dotted your I’s and crossed your T’s is to use the right software.
Here are 3 software options that will make tax season much easier for your small business.
Automated inventory management
Managing inventory is a huge job, so why do so many business owners continue to do it all by hand? It may seem easier to create an Excel file and keep track of everything on your own, but it’s the least accurate way to keep track of your products. It can also cost you come tax time.
Small businesses need to report their existing inventory, the beginning and ending inventory dollar amount, items removed for personal reasons, materials and supplies, as well as the cost of goods sold. That’s a lot to keep track of on your own!
An automated inventory management system can keep track of every transaction as it’s made, allowing you to follow your inventory in real time. By doing this, you can move inventory more efficiently, which in turn prevents overspending on the costs associated with carrying inventory, but it can also prevent higher tax bills.
Fixed asset management
Your inventory isn’t the only thing you have to consider when it comes to tax time. You have to account for all of your assets. Assets are all of those things you purchase with the intent of increasing the long-term production of income. It could be computers, vehicles, printers, barcode scanners, and more. Keeping track of all these items is nearly impossible if you’re doing it all by hand. There’s fewer headaches if you use fixed asset management software.
The biggest issue comes into play when you have lost, misplaced, or stolen fixed assets. When something goes missing, they become ghost assets. They’re assets that you technically own, which may or may not provide you with certain tax breaks, but only if they’re being used. If you have ghost assets that you’re claiming on your taxes, you could get in big trouble.
First, ghost assets, like office equipment and machinery, could end up resulting in additional tax bills. In general, the more assets you have, the higher your taxes. That’s the least of your worries though. If the IRS finds out that you’re overvaluing assets that aren’t even functional within your business, you’re out of compliance with the Sarbanes-Oxley Act. If you’re discovered, you could be fined or even jailed.
Not only can a fixed asset management program help you keep track of ghost assets, it can help you with depreciation too. The right software can automatically calculate the depreciation of your assets, allowing you to write them off over time. Because it is considered an expense, depreciation can decrease your taxable income each year your assets lose value.
Using a software program makes it easier for your tax professional to dig through your information, ensuring that you’re sticking to IRS guidelines.
Time clock software
Wages paid to employees is something that’s likely on your mind every day, but it’s also something that should be on your mind come tax time. Without the proper software, your HR department will waste hours calculating, fixing, and finalizing timecards, which costs you more in the long run, but it’s also likely to result in errors.
As a matter of fact, failing to keep accurate payroll records, which includes timesheets, expense accounts, and copies of W-2 forms is so common that it’s one of the five payroll mistakes to avoid, according to the US Small Business Administration.
So, what makes these errors so costly when it comes to filing taxes? First, the IRS can issue penalties for inaccurate employment taxes, and they do it a lot. In 2013, they charged businesses $4.5 billion for this mistake alone.
Second, if you have an employee who feels they were wrongfully compensated, they could file a lawsuit under the Fair Labor Standards Act. By using an automated system, you can greatly reduce your chances of either of these things happening to you.
Don’t let your taxes get the best of you
It’s easy for your taxes to get the best of you if you’re still using manual processes to keep track of your inventory, assets, and payroll. If you switch to these software options, not only will you save time and money upfront, you can ensure that your fiscal year doesn’t come with any unwanted surprises come tax time.
Should you have any questions or concerns regarding the current legislation and how that may affect your personal and business taxes, feel free to give our office a call and we would be happy to talk with you at length about your situation. Contact Us Anytime