Tax Preparation Software Saves You Time & Money
With the start of a new tax season here upon us, many people are looking at using tax preparation software. Though still a novelty as recently as five years ago, tax prep software has become big business offered by many well known names.
There are a number of reasons that ‘do it yourself’ tax software has taken off despite tax forms that seem to get more complicated, with that in itself, perhaps being one reason. As more and more people have begun using ‘at home’ tax software, news of use has traveled virally as more people now feel comfortable with it’s use as others confirm it’s validity. Accountants, as with many professionals, have slowly been raising their rates and the cost for an individual or family tax return has become a significant expense in many cases. This is especially true for small businesses.
Pulling Your Hair Out at Tax Time by Nick See
Another significant problem is that many qualified accountants get inundated by their larger corporate clients, and individuals as well as small business clients get shuffled to the rear. This is somewhat understandable from the accountants standpoint, but this doesn’t help relieve the stress and concern of the smaller client. In fact this just increases their frustration level.
They all offer the ability to e-file your taxes which is a big advantage and cost savings, since you now don’t have to worry about sending by certified mail, not to mention that you should receive your refund much quicker. Plus they all offer the ability to do your state returns also, usually for a small extra charge.
What’s even more amazing is that the price from most the leading vendors is almost nothing or even free for a basic federal filing. But the price for even the full blown version from most the bigger names is less than $120.00. That’s less than an hours time with most accounting firms. Some services also offer phone or online support if you have questions while using the software.
The result is that you’re now seeing the online tax services and software reach far beyond just filing your tax returns and tax preparation software as more of them now offer everything from retirement advice to family tax strategies. Even industry leader H&R Block is now strongly pushing its ‘at home’ service for even investors and rental property owners. Both them and industry leader TurboTax spend heavily on promoting their product during tax season.
You can expect to see the market for tax preparation software continue to grow as the features continue to grow, as well as the fact that you can now download it right off the internet in just a few minutes doesn’t hurt either. The net result is that the software can save you both time and money. Price is no longer prohibitive and as more and more people become familiar with the products and what they offer then I expect to see this market continue to grow.
Tax Accounting Software and Company Tax Return
Tax accounting software for a private limited company in the UK includes using accounting software to produce the required quarterly vat returns and annual net profit and tax software to automate the calculation of the tax liability and complete the CT600 corporation tax return.
Company Accounting Software.
All types of business accounting software produce a net taxable profit being the difference between sales income received and purchase expenses. To become a complete accounting package there should also be a facility within the program to calculate tax allowances.
Since tax allowances change then not all accounting packages cope well with this aspect as either it is ignored and any claims for capital allowances need to be input manually which often requires knowledge of the tax system. In any event many systems require the current year tax allowances to be input.
There are packages available where the tax accounting is automated by a package that includes all the current financial year tax rules. Such tax accounting software either has to include an upgrade service to incorporate the different tax rules that apply each year or a new package has to be purchased for each new financial year.
Every quality tax accounting software package should calculate the corporation tax liability which is one of the most significant costs of every business. If the accounting software does not produce an automated calculation of the tax liability then the tax due has to be entered manually usually by journal entry.
Manually entering the tax liability is a function frequently best dealt with by an accountant since the transaction also involves the final completion of the company accounts and potentially journal entries to account for distributions from the after tax profit and retained profits.
Vat Tax Return Software.
It would be unusual to find a company accounts package that did not automatically generate the quarterly figures for the vat return since almost all companies are vat registered.
Vat registration is not a legal requirement for a limited company however as the vat threshold is based upon a fairly low sales turnover which for 2008 was 67,000 pounds; most companies sales turnover exceeds this threshold at which point vat registration is mandatory.
The accounting software must be capable of satisfying the requirements of the taxation authority which in regard to a vat return includes the provision of an accounting audit trail of financial transactions.
Tax Software and CT600 Corporation Tax Return.
In the UK a private limited company has to complete a corporation tax return each financial year. Known as the CT600 companies with a sales turnover which qualifies as a small company can complete the CT600 short return.
Completing even the short version of the CT600 tax return is a specialist accountancy area which few non accountants are familiar with or find easy to deal with since it demands intimate knowledge of the tax system. Completing the corporation tax return can be a daunting task for a non accountant including several hours study of the accompanying notes. It is no simple task for many accountants who do not specialise as a tax accountant.
Few accounting software packages have the necessary tax software encrypted within the packages to produce the corporation tax return although in recent years the major companies have tended towards producing online feeds.
Using the right tax software the CT600 corporation tax return can be completed automatically.
To do so the company accounts package has to include all the relevant tax rules and rates applicable for fixed assets and the calculation of the tax liability. Those tax rules have a strong tendency to be changed every year. Suitable tax software is essential to perform this annual process.
The tax accounting takes the tax rates and rules automating the work of a tax accountant to produce the tax liability. The term tax software indicates automation based upon data input which the computer package then processes to produce the desired output. Company tax software produces the tax requirements of the company including both the corporation tax liability and completion of the tax return.
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DIY Accounting specialises in producing tax accounting software for company accounts and self employed business that incorporate tax software to automate tax returns. Simple tax software designed to produce accounting solutions and CT600 corporation tax return to enable non accountant business clients to complete their tax affairs without recourse to the services of a specialist tax accountant.
Use Tax Accounting Software To Produce Tax Returns
Tax accounting software has three elements. Accounting being the production of the financial accounts in a template format suitable for the tax system. Tax and tax software denotes the inclusion of the tax rules with software being a description of the fact that the process is automated.
Self employed accounting
To be most effective the self employed accounts should be in a format that can eventually be used by the accounts program to produce the financial information required to complete the tax returns. Tax returns vary in individual countries and the tax accounting software shpould account for all variations.
Database accounting software is frequently based upon a chart of accounts which is not necessarily tax return friendly. Accounting template spreadsheets being more fixed in nature do offer an opportunity to be tax friendly.
A means to distinguish between revenue transactions and fixed assets is required as fixed assets are subject to capital allowances which written off against the net taxable profit according to the tax rules as opposed to being able to deduct the whole cost of that asset in the one financial year.
Income Tax and Vat Tax Return Software
In the UK the self employed accounts need to supply the numbers for up to three different variations of the self employed tax return. With effect from the financila year 2008-09 the self assessment tax return has been replaced with the self employed tax return short and full versions.
The short tax return is completed according to the sales turnover of the business. Less detail then the full return is required with only totals required for businesses with a sales turnover under 30,000 pounds.
Where sales exceed the vat threshold the accounting package has to produce vat tax returns. With various types of vat schemes available the accounts package and tax software should be capable of dealing with different vat schemes.
Database accounting packages invariably have the facility to deal with value added tax and various schemes where other types of accounting software may be limited. Tax accounting software is a serviuce provided for the self employed client and must meet that clients requirements.
Tax Software
To be effective in satisfying the description of tax accounting software the system should also include the tax rates and rules applicable. The tax accounting can then take those tax rates and produce an estimate of the potential tax liability which is a principal concern of all self employed business when the time for filing taxes approaches.
The term software indicates automation based upon data input which the computer package then processes to produce the desired output. Tax software produces the tax requirements of the user.
A tax accounting software package takes the prime financial transactions, converts those numbers to the format required to produce the year end self employed tax returns and quarterly vat returns as required. In addition the tax software function would also use the tax rates to automatically calculate the income tax and national insurance liability
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Terry Cartwright designs Tax accounting software for self employed accounts and company accounts that produce automated tax returns. Simple automated tax software designed to produce accounting solutions and self assessment tax returns for business clients, accountants and bookkeeping services.
