How to Prepare for the Tax Rush a Year in Advance

In his more than 30 years in the legal profession, first as corporate attorney, now as CEO for sales tax compliance service firm Exactor, Jonathan Barsade said he's seen it all: last-minute small business filers making math errors, using incorrect industry codes, forgetting filing deadlines, and omitting signatures. They depend on the US Mail to deliver urgent papers on short notice and depend on themselves, often in error, to wade through the complexities of the US and local tax codes. This needs to stop.

How can we "balance our natural tendency to procrastinate and the need to make some sense of those large pools of information necessary to produce tax returns that will withstand the scrutiny of tax authorities?" Barsade asked. "We know what to do, yet somehow it always gets delayed to next year, which will always make the next filing season as painful as the current."

But all those mistakes could be avoided, and tax deadlines could be less stressful for all involved, Barsade said, if taxpayers would simply "leave the mindset of the 20th century behind, and avail themselves of the tax technologies that are out there that can make the effort of complying, including generating and filing, less onerous."

He asks tax accountants to make it clear to their clients, especially small businesses, that it's important to automate and outsource. "Many businesses are using the latest technologies in terms of their customer service and revenue generation systems, but when it comes to taxes they are still doing things manually."

Barsade said accountants shouldn't view tax technology solutions as competition for their expertise. Tax technology solutions simply provide "a process that automates the task CPAs are already doing, making it more efficient so they can do more of it."

"Tax technology is just a tool," Barsade said. It doesn't replace the "personalized expertise" that the professional tax preparer develops from direct interaction with clients and their clients' businesses. The accountant is familiar with the nuances of the business, and will use this knowledge to know which buttons to press in order to best use the tax technology.

Barsade believes small business owners delay upgrading their tax technology for several reasons: Tax is an afterthought to many business owners who are most concerned with generating profit and revenue; like everyone else, they dread doing taxes, so they avoid anything tax related; and they may, mistakenly, believe they can't afford to outsource the processing of their taxes.

This dilemma is not unique to "mom and pop" operations—scores of small-to-midsized businesses are still managing their taxes manually as well, he said.

But if businesses automate and outsource their tax processes throughout the year, they can streamline their tax compliance efforts, avoid costly mistakes, and reduce their tax anxiety, Barsade said.

According to Barsade, automation and outsourcing can help businesses in the following ways. Accountants should stress these:

  • Manage ongoing tax tasks throughout the year, especially those leading up to major filing deadlines.
  • Meet the numerous federal, state, and local tax deadlines they are subject to each filing period (monthly, quarterly, or annual).
  • Insure tax documents are processed correctly.
  • Track documents once they have been filed.
  • Manage and respond to questions from the tax agency about the filing.
  • Manage the sales tax process with its complex maze of tax rates, rules, and jurisdictions.

Today's online, cloud-based compliance services are also readily available to help with the last-minute tasks of compiling the data, then generating and filing the returns. Said Barsade, "Modern technologies enable cloud-based services to provide highly secure, low-cost compliance services that meet state certification standards."

Barsade said today's tax technology is affordable and accessible to even the smallest company, and something every business should invest in.

"When we manage our communications and entertainment, we use the most advanced technologies out there. But when it comes to the tedious task of complying with taxes we still use an outdated mindset and tools," Barsade said. "No one does payroll manually anymore. They outsource the processing of payroll and they should be doing their taxes the same way as well."

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