How Cloud Accounting Makes Tax Season a Breeze
With winter now in full force, many small-business owners face the annual challenges associated with tax season. While some still utilize outdated, poorly structured accounting systems, others are concerned about staying compliant with the ever-changing tax laws. These challenges snowball into one of the greatest disruptive forces: time. A survey performed by the National Small Business Association found that 40 percent of small businesses spend more than 80 hours per year filing their federal taxes. With almost half of small businesses devoting two full work weeks to this annual tradition, how can innovative entrepreneurs utilize cloud accounting to alleviate their tax-preparation struggles this upcoming season?
The Most Common Tax Concerns
For the majority of small-business owners, staying compliant is a major tax concern. According to the Taxpayer Advocate Service by the Internal Revenue Service (IRS), a total of 4,680 changes have been made to tax codes since 2001. That's an average of about one modification per day. Though you may have had a good grip on your taxes last year, those specifics may no longer apply.
The lack of an organized accounting system can also lead to problems, such as misplacing receipts and not properly recording payments made to independent contractors for 1099 preparation. Eventually, a disorganized system may have you questioning the total revenue received during the tax year, the amount you paid in estimated taxes, and if your tax deductions such as depreciation, payroll taxes, and employee benefits have been properly recorded.
Four Benefits of Cloud Accounting During Tax Season
The use of a cloud accounting system can take the uncertainty and guesswork out of your tax filing. When you are ready to begin your taxes, keep the following benefits of cloud-based accounting in mind:
- Cloud accounting allows business owners to get organized and store all invoices, receipts, and customer deposits in one place. When these receipts and digital copies are tied directly to the transaction, your accountant is able to quickly validate and substantiate that transaction.
- The real-time nature of cloud accounting puts you in closer connection with your accountants and tax preparers. You can set yourself at ease knowing they have updated tax laws in mind and your most recent financial data in hand.
- Data and financial reports can be readily accessed at anytime from anywhere with an Internet connection, which is an added bonus for teams that work remotely.
- Many cloud-based accounting systems can pull immediate reports formatted for IRS tax law compliance. Because it is cloud-based, you don't need to download additional software updates to know you are getting the most recent report structure.
Most of the pressures associated with tax preparation come from being ill-prepared and uninformed. By using a cloud-based accounting system to properly manage your financial data, you may be able to regain some of that time lost each year to tax preparation. What would your small business do with an extra two profitable weeks of business this year?