Tax preparers are continuously trying to keep up with the frequent changes in tax laws and an increase in the globalization. Hence, adopting tax preparation software in the business practice can help organize your tax data and file returns conveniently. Some of the significant reasons for opting tax software include:
- Easy e-filing of returns
- Better record-keeping of expenses and income
- Improved accuracy of accounting and tax processes
- Simplified information collection process
- Faster tax refunds
However, there are several tax software in the market, and choosing the perfect fit for your small business might get confusing.
Here are some tips to consider before investing in any tax software.
1. Analyze Your Requirements
Understand what your business requires and make a list of tools and functions you expect in the tax software. Make an outline of problems you are facing, keep track of your income and expenses, and learn about the skill-sets required to operate that software so as to get a clear picture of the features needed in tax software.
Tax software should contain a library of all the necessary tax forms, customer support options, and automate most of the data entry work. Some of the tax forms required by small businesses include:
- Schedule C (Form 1040)- For sole proprietorship to report profit or loss made each year
- Form 1120- For the regular corporation to report the total income or loss
- Form W-4- For employees to report the amount that should be withheld for federal taxes
- Schedule B (Form 941)- For employers to indicate the amount withheld from employee paychecks for payroll taxes
- Form W-2- For employers to report their employees’ annual wages
It should be able to adapt to ever-changing business requirements and provide solutions fitting to your tax situation.
2. Look For User-Friendly Features
Taxes can be complicated, and many a time in small businesses, there is an unavailability of a dedicated tax preparer or an accountant. Therefore, companies need to cover up this gap to manage the accounting and filing process efficiently. Rather than investing the time and money in the training, it is preferred that the tax software you opt for should be easy to learn and use.
Tax software must have simple navigation and interface for a better filing experience. Most of the tax software offer a step-by-step guide in an interview format for the preparation of returns.
The integrated research tools in the tax software further help in better accuracy and faster filing of returns. It is advisable to opt for a version with the features that are required rather than having every possible feature, which adds to the complexity of the application.
3. Check For Integration Capabilities
The tax filing task needs financial and document management services for its completion. But, tax software might not be able to check everything on the wishlist.
Tax software should be capable of integration with different third-party add-ons like accounting software, practice management tools, client portals, and more. It further increases its functionality and helps serve clients better.
For example, Drake tax software is compatible with the following add ons.
- QuickBooks: For importing accounting data directly into the tax software
- SmartVault: For secure data storage and sharing documents online
- GruntWorx: For automating data entry and file management
Tax software you choose should be easier to integrate and require less involvement of IT experts in the matter. However, the number of add-ons integrated with tax software affects its performance.
To overcome this limitation, you can host applications such as Drake software on the cloud, which can provide options to upscale the amount of space required for a smoother workflow.
4. Consider The Cost-Efficiency
Pricing is one of the primary factors to consider before selecting the right tax software. It is essential to shortlist all the options, keeping your budget in mind. It will filter out most of the choices following which you can choose the right fit that covers all the features needed in the software.
Tax software should offer customizable plans and packages to meet your business needs. Check out for hidden charges in case of additional maintenance fees and integration of add-ons. Tax software like Drake provides an all-inclusive package, and on the other hand, UltraTax software offers tailor-made pricing depending on your needs.
Furthermore, look out for the scalability options considering the growth of the company. Opt for tax software to manage the number of accessible users and other additional features as per the requirement.
5. Take Your Team Onboard
The decision you make affects your team, as well. Therefore it is crucial to engage with your team before implementing any new strategy. If your business has an in-house accountant, CPA, or a tax preparer, take their opinion to understand which software best suites to their requirement. Recognize your team’s concerns and gain their full-support before making any decision.
Tax software you choose should be easy to learn for employees. Also, ask your team to take the trial of each shortlisted tax software using real-time data before investing your money. It will provide a better insight into the software and help in the long run.
It is essential to take the proper time to consider all your options before committing to particular tax software. According to the 2019 Tax Software Survey, some of the most preferred tax software in the market includes Drake, ATX, Lacerte, ProSeries, ProSystem, UltraTax, TaxWise, and TaxAct.
In addition to the points mentioned above, also check for customer reviews in to know the product experience from the customer’s point-of-view.
Also, check for the OS compatibility and the tax year of the software in order to avoid further inconvenience. You should be able to get support from the service provider via different channels like call, email, chat, and forum.
The tax software you choose will directly affect your workflow. Therefore, it should be a thought-out decision for a dependable and seamless tax filing process.
Author-Bio:Bhavleen Kaur is a technical writer at Ace Cloud Hosting, a well-known application hosting provider for tax software. In her free time, one can find her reading novels or watching movies.