But its ease of use throughout the year makes it especially an ally come tax time.
The National Small Business Association’s 2017 Small Business Taxation Survey found that one-in-three small businesses report spending more than 80 hours—two full work weeks—each year on federal taxes. That’s time spent organizing, planning and preparing taxes that could be spent working with clients, growing your business or enjoying life.
So how can cloud accounting help?
A cloud accounting solution stores all of your tax data in one place. That way it’s easily accessible to your employees, accountant, financial advisor, investors or anyone else you authorize to view the files. This means you spend less time finding and delivering the information needed to plan for and prepare taxes.
Whether you’re trying to decide the most tax-beneficial way to sell an asset or send year-end reports to your accountant, everyone involved has real-time access to financial data. It’s easier to assess extract necessary information and determine whether or not you can take advantage of legitimate tax deductions.
Cloud accounting is a single source of the truth for your business’ financial data. The result is not just convenience, but efficiency. Things that used to take hours can take just minutes on the cloud. That can fundamentally change the way you run your business.
Deciding on tax strategies and filing tax returns won’t take weeks of your life so you can spend more time doing what you love and less time caught up in day-to-day administrative burdens.
Creates Accurate Estimated Taxes
As a small business owner, you’re required to make quarterly estimated tax payments throughout the year. While paying at least 110% of the taxes you owed last year will typically prevent you from owing penalties for underpayment, if your business is more profitable this year than last, you could end up owing a lot at tax time.
Cloud accounting makes it possible to keep your business’s financial records in real-time, so you don’t have to guess what you’ll owe. Simply share your year-to-date numbers with your tax pro and get an accurate number for your estimated tax liability. You can avoid underpayment penalties and unpleasant surprises at tax time.
Tax time isn’t just about preparing your federal and state income tax returns. You may need to issue W-2s to employees and issue Form 1099-MISC to independent contractors, vendors and suppliers to whom you paid $600 or more during the calendar year.
If your records are in spreadsheets or on paper, figuring out who needs one of these informational returns and how much you paid them can be time-consuming and frustrating. But when your data is in the cloud, it’s a simple as running a report. FreshBooks integrates with several apps, from payroll software to time tracking tools, providing greater efficiency and the ability to automate.
In recent years the penalties for filing late or inaccurate 1099s have increased, and the deadlines for sending 1099s to recipients has moved up, so this is one tax-time benefit of cloud accounting you don’t want to ignore.
Cloud accounting helps you keep all invoices, receipts and deposits in one place and tie those receipts and records directly to transactions. Whether you’re in the office or have employees traveling around the world, you can snap pictures of receipts and attach PDFs to any transaction.
At tax time, your accountant can quickly validate and substantiate the transaction and ensure that expenses are assigned to the right categories. You won’t miss expenses, so you’ll have more money in your pocket at the end of the year.
There’s no guarantee that your return won’t be selected for an IRS audit, but you can rest assured that if you are audited, you won’t have legitimate deductions denied because you can’t find the receipts.
You may think your business is too small to be a target for identity thieves, but over the past few years, it’s become apparent that identity thieves are targeting small businesses and their accountants. Why? Because small businesses typically have less robust security systems in place and accounting firms are treasure troves of the kind of personal information scammers collect.
Don’t be fooled by the misconception that keeping sensitive financial records on your computer is safer than storing them in the cloud. When you need to share information with your accountant or bookkeeper, files sent via email or hand-delivered hard copies and digital files are vulnerable to falling into the wrong hands. Emails can be intercepted, you can lose information in a hardware crash or a lost or stolen USB drive or paper file. Worse yet, you may put the personal information of your employees or clients at risk.
Moving that information to the cloud with a secure connection gives you the same level of control over who has access to it. With FreshBooks cloud accounting, you can rest assured that security is rigorously maintained, and it’s not your job to stay one step ahead of identity thieves.
Most of the problems that come around during tax time stem from being ill-prepared and uninformed. Using a cloud accounting solution to properly manage your financial data can help you reclaim your time. So the only question that remains is, what will you do with the 80 hours you’ll get back this year?
Make this the year you don’t fret about tax time. With FreshBooks, you can automate your invoices and expenses to save time, easily create reports and know all your personal business information is secure on the cloud.
The tax deadline is only a couple months away—what are you waiting for? Try it free for 30 days.