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The approach of tax season can be a source of dread for many business owners. Even when businesses use tax preparation software or a professional tax preparer, all the tasks associated with providing accurate information can be daunting and time-consuming. It’s no surprise that the vast majority of business owners surveyed by advocacy group NFIB in 2021 said the administrative side of federal taxes was a significant burden.
But there’s good news: Automating certain tax-related tasks can help streamline tax preparation and reduce the stress and headaches of tax season. Here are five ways that business automation tools like those Square offers can help cut down on the time, labor, and worry of tax preparation.
1. Automate record keeping.
The process of filing taxes and ensuring compliance with tax laws can be time-consuming and complex for business owners. “Much of the tax stress I see from business owners comes from not knowing where to find the information being requested,” says Keila Hill-Trawick, CPA and owner of small business tax firm Little Fish Accounting. Keeping thorough financial records throughout the year will make your life much easier come tax season.
The easiest way to do this, according to Forbes, is by going paperless and managing your finances electronically. Square payment processing tools allow you to automatically track and record sales transactions electronically. This feature simplifies the task of collecting and organizing sales data, ensuring accuracy when calculating sales tax liabilities, and reporting income.
2. Calculate sales tax more accurately.
Having accurate sales tax calculations helps businesses determine the total amount of sales tax liability that needs to be reported on tax returns. Square helps businesses calculate sales tax by applying the designated tax rate you enter for your location. You can leverage this information to collect sales tax. . By tracking sales tax accurately throughout the year, you can avoid underpaying or overpaying sales tax, minimizing the risk of penalties or audits during tax preparation.
3. Simplify tax reporting.
Accurate sales reports are a key source of data for tax preparation (and vital evidence in the event of an IRS audit). Square Dashboard gives you the ability to easily generate detailed sales reports, including transaction summaries and tax-specific reports that break down taxable and non-taxable sales, making it easier for you to report sales.
This capability can also help simplify the important task of business account reconciliation, the process of comparing two sets of records to uncover and reconcile any possible discrepancies in your data. These reports can simplify the process of income reporting and increase accuracy during tax preparation.
4. Streamline tax prep with system integration.
Software integration allows for the seamless transfer of financial data between commerce platforms and accounting apps. This enables business owners to access up-to-date and accurate financial information, which is crucial for making informed decisions and preparing accurate tax returns. Square integrates seamlessly with many apps and software, such as QuickBooks and Xero. This integration enables you to automatically feed your sales transactions into your accounting software, eliminating the need for manual data entry and reducing errors in financial record-keeping.
Other helpful apps that can be integrated with Square include Bookkeep, which can provide automated revenue accounting and sales tax filing for QuickBooks and Xero, and TaxJar, which pulls in sales tax collected across all sales channels, compiles the data into return-ready reports, and can even autofile sales tax returns in 26 states.
Check out Square App Marketplace for more information on how to link your Square account to these and many more apps and software designed to help you run your business. You can connect apps to your Square account with just a few clicks.
5. Put tax savings on autopilot.
Taxes can be a significant financial burden for small businesses. Corporations must make quarterly estimated payments if they expect to owe $1,000 or more when filing their taxes. The cost of paying taxes, along with the additional expenses of tax preparation and compliance, can put a strain on your finances.
One way to lessen this burden is to save up for taxes throughout the year. Square Savings enables you to automatically set aside a percentage of daily sales in a dedicated savings folder for taxe , so funds are ready for quarterly and income taxes. It’s easy to designate the percentage of sales you want transferred into savings and what portion should go into the tax folder. You can set a savings target amount or save indefinitely.
Let automation be your tax prep assistant.
By automating repetitive tasks, increasing accuracy in records and reports, and making it simpler to save up for taxes, Square can help you breathe easier as tax season approaches. It also eliminates hours of work gathering information and doing calculations, freeing up time for you and your team to focus on nurturing your business.
It’s important to note that while Square and other automation tools can streamline tax preparation, it is still recommended to consult with a qualified tax professional for guidance and to ensure compliance with tax regulations specific to your business. Tax laws and regulations can change frequently, and keeping up with new requirements and figuring out how they apply to their specific business can be frustrating and confusing. Remember, every business is unique, and a tax professional can provide personalized guidance on tax laws, regulations, and potential deductions based on your specific circumstances and requirements.