Regardless of the industry, business owners need to be aware of the tax laws implemented for their business type. In the absence of tax knowledge, if they file wrong taxes, it may lead to penalties, costing a considerable amount of money. However, since tax laws often change and taxes are not the niche expertise of business owners, they face numerous tax challenges that we will discuss in the article.
Following are the key tax challenges faced by businesses and their solutions:
Cindy Corpis, CEO of SearchPeopleFree.net
The US manufacturing industry possesses ingenious tax requirements, such as mustering up correct use tax on inventory movements and ascertaining the taxability of mixed-use items. Withdrawing items from inventory for consumption creates a tax liability. Likewise, moving inventory items throughout geographical locations can subject you to a wide array of taxes.
This challenge would be implementing a tax accrual procedure to identify such transactions and calculate tax correctly to reduce audit exposure.
A business case is required that will convince IT and finance to overcome unique manufacturing tax challenges. Tax automation is important to stay compliant, eliminate overpayments, and protect operational spending.
The solution to overcome this challenge would be calculating the labor spent on taxes such as sales and use tax, value-added tax, and vendor-charged tax. Additionally, you can add up the extra payments because of overpayments and errors.
Brent Hale, Chief Content Strategist
A frequent tax challenge faced by small businesses globally is held due to poor book-keeping practices. Since small businesses engage in transactions regularly, it gets hard to record all of it efficiently. Undisciplined accounting can lead to paying incorrect taxes, usually underestimating the tax amount. That, in turn, can cause businesses to pay fines and penalties to the Government.
The only solution to the problem is to maintain proper accounts and ledgers. You can take the help of online accounting tools to rule out possibilities of error. The good idea is to run a verification check through your accounts on a weekly or monthly basis. That will help you maintain the accuracy and reliability of your accounting records.
Christopher Sioco, COO of Tax Robot
Various taxation executives have stated that they found it difficult to keep up with both changing policies and technologies altogether. They turned to manual keeping for what seemed best but eventually, they would have to get back to the technology. It was quite difficult, but they got around with ERP systems and found their solutions. Outsourcing was also an option that they turned to. This year, the growth of artificial intelligence also aided them thoroughly.
Markets are growing at a pace that sometimes becomes difficult to keep up with. This pace is not likely to diminish shortly. Things will only gain momentum and climb further on the ladder of success. However, for tax executives, keeping up with this pace was a headache. For this, they have come up with solutions like analyzing bundled and separately stacked services separately. They are not mixing invoices and categorizing their work.
Michelle Devani, Founder of LoveDevani.com
The tax season is a busy time of the year for both business owners and tax professionals. We all know that taxation is a complex process with many obstacles to overcome. As a business owner, I’ve seen how tax season is a stressful time, and I’ve noticed that there are two main tax challenges that everyone encounters.
The ever-changing tax laws and procedures. Tax law is not consistent, especially because it is revised regularly, and as a business owner, I see it as a problem since I need to stay up to date on the law to comply and not break it. When it comes to this, I believe employing a tax expert is the best course of action because they are knowledgeable and skilled in the law. Furthermore, filing is a time-consuming aspect of taxation, and patience is essential. The solution to this problem will be proper filing and the use of the software.
Edith Muthoni, Business Editor at Tradingplatforms
The continued rise of the gig economy and the shift towards independent contracting. This trend is likely to continue, as more and more people choose to be self-employed. Businesses will need to find new ways to account for this type of work arrangement when it comes to tax time.
The increasing popularity of artificial intelligence (AI) and machine learning. As these technologies become more widespread, businesses will need to figure out how they impact their tax liabilities.
The increasing popularity of cloud-based services and the move to a paperless office will continue to impact businesses’ taxable income. Solution: Businesses should consult with an accountant or tax specialist to determine which digital services qualify as business-related expenses.
Conclusion
The tax season is a busy time of the year for both business owners and tax professionals. We all know that tax accounting is a complex process with many obstacles to overcome. Many businesses usually prefer to outsource tax preparation services to streamline the tax process and overcome the above challenges. If you are also looking for solutions to manage taxes, tax preparation outsourcing can be the best option as it helps you save time, effort, and tax prep costs.
