The Importance of Tax Return Accuracy

The key to becoming a successful entrepreneur is smart thinking and allocation of resources. Before making any decision, entrepreneurs weigh the pros and cons and draft feasibility reports to see if the decision will benefit the business in the long run.

Since new entrepreneurs don’t have too many funds to invest, they seek solutions which provide maximum output for minimum input.

Taking these measures improves business efficiency while also ensuring compliance with the regulatory and legal frameworks that the business operates in. One of the most important aspects of this legal framework is taxes!

Why do businesses pay taxes?

Just like your personal income, you’re supposed to pay taxes on the income that’s generated through business activities. At the end of every business cycle, companies calculate their taxable income and pay a certain amount of it as tax liability.

The exact nature of the tax depends on the law of the state where the company operates. Some states also require businesses to pay payroll taxes on the income of their employees. This involves many complex calculations and accounting tasks.

Corporate taxes are important for several reasons. If businesses are not taxed, business owners would keep on reinvesting their earnings and would find a way to avoid paying out dividends.  Also, taxes are a mandatory contribution to the government treasury, which the government then invests in public welfare. By paying taxes, businesses play their part in helping the government carry out effective administration and good financial management on a macroeconomic level.

If businesses aren’t taxed enough, the government’s ability to serve its people will be greatly hampered, and so will economic growth.

Bookkeeping

The lowdown on tax accounting for businesses

While a general accountant focuses on the formulation of financial statements and tracks expenses for the fiscal year, a tax accountant’s job is to carry out calculations concerned with the process of taxation.

From determining the exact amount of taxes to filling in forms and filing tax returns, the accountant caters to all such tasks. Tax accounting in the United States is regulated by the Internal Revenue Service (IRS), which makes sure that all taxpayers comply with tax laws and submit the right documents.

Apart from the core components, the one thing that matters the most in the case of tax accounting is tax deductibles. These are expenses that a company can subtract from its EBIT to reduce total taxable income ad gain an advantage.

Other than accounting itself, it’s also the company’s responsibility to ensure that taxes are paid on time.

Tax return accuracy: Why does it matter?

The accuracy of your tax returns is largely determined by the processes your company employs. The efficiency of your accounting software and the diligent effort put in by accounting personnel have an important role to play here.

All businesses, irrespective of size and scale, are subject to audits. The more discrepancies there are within tax reporting, the higher the risk of facing an audit. If your tax reporting is inconsistent with the rules set out by the IRS, audit firms will give you a tough time.

On the other hand, by keeping your tax records as accurate as possible, you can avoid this risk and save time. It ensures that your business procedures are compliant with all regulations and keeps your conscience clear. There’s no need for you to constantly worry about getting a phone call from a tax agency, telling you that you’ve misreported.

At times, businesses miss out on tax deductions and end up overpaying, resulting in a loss of income. Businesses are all about profitability and making the most revenue. At such a stage, overpaying taxes can greatly hinder the company’s growth.

Other than that, when your tax returns are filed accurately, you get a clear picture of where the company stands in terms of its financial position. By looking at accurate tax returns, you can judge where expenses are heading. This way, you can make more informed decisions about the business’s future course of action.

How can QuickBooks help?

Self-employed business people often find it financially unfeasible to hire a team of accountants to attend to tax-related tasks. In such cases, QuickBooks can be a godsend, since it enables them to manage tax accounting processes on their own.

With the help of QuickBooks, you can file your quarterly tax amounts without putting in too much effort. The software extracts all the necessary information from your tax profile, which includes income, expenses, and tax deductions. The software also makes projections for the rest of the year. After the tax report has been generated, you can also directly email it to the accountant to get it cross-checked.

To make sure you’re on the top payments, QuickBooks even sets out reminders, so you don’t miss out on tax deadlines. As far as accuracy is concerned, QuickBooks helps you organize your accounting data in the most orderly and well-structured way possible. When you have accurate accounting data to begin with, your tax filings are error-free to a large extent.

To avoid overpayments and troubles with the tax authorities, always stay on the top of your tax payments! gotomyerp is a leader in QuickBooks hosting solutions. Other than comprehensive setup, we will also assist you with all the technical support that you need. We specialize in several QuickBooks versions including QuickBooks Desktop and QuickBooks cloud. For further details about how QuickBooks can help you file taxes, contact us now!