Small-business accounting software necessary for compliance
August 26, 2013
The difficult economy has forced many small-business owners to do more with less, and this means some companies may be going without business accounting software they need to comply with regulations. Small businesses need to comply with accounting legislation, and it can be difficult when they have fewer resources and employees.
The Internal Revenue Service recently sent letters to small-business owners requiring them to reassess their 2012 taxes to confirm they accurately reported income, according to Accounting Today. It can be very challenging for small-business owners to keep track of changing tax regulations and run their companies.
Because of the recent recession, part-time employment has been at a high, which has continued through economic recovery, the Federal Reserve Bank of San Francisco stated. Many small-business owners are still reluctant to boost hiring plans due to economic uncertainty, and it has created a long-term trend away from full-time positions. Many people who work part time do so because they cannot find full-time employment. Pat-time work used to be more common among older workers, but there is a growing number of these employees in the 25 to 54 age group.
Changing business conditions require accounting compliance
As companies take on a greater number of part-time employees, their tax accounting could change. Small-business owners need to maintain accurate records of who is an employee and who is considered a contractor. Taking these steps can help small organizations avoid difficulty with the IRS, Accounting Today said. Small businesses also need to monitor where they have a physical preference because they could be subject to different state tax regulations.
Owners should be careful not to use funds they set aside for payroll, which is another reason companies need accounting software to manage finances. One of the biggest tax challenges for small businesses is estimated taxes, including paying them on time, calculating the amounts correctly and understanding safe harbors that can protect against underpayments. If small-business owners make a mistake during any of these steps, it can be a major hassle to fix.
One of the best ways small businesses can comply with tax regulations is by investing in business accounting software that tracks records and regularly provides updates with new IRS rules. Since owners have many management concerns and accounting may not be their expertise, having tools in place can help them protect themselves from underpayments.