Small and medium sized business owners have to wear many different hats to maintain profitability, from managing inventory, hiring, acquiring customers, to bookkeeping and creating financial reports. Some businesses are often penalized for not filing taxes on time to the IRS due to poor bookkeeping practices. Bookkeeping is a tedious task that takes time and focus which can be very challenging for entrepreneurs. Docyt provides the tools needed to file federal and state tax returns more simply than manual bookkeeping has previously done. Beyond federal and state taxes, there are also timely payroll and sales tax systems in place to ease end of month bookkeeping, for example Gusto helps this process for payroll.
There are two types of penalties for missing filing deadlines of federal tax returns. The amount for these penalties is determined by how much is owed to the IRS and how late the tax filing is. The more that is owed and the later the filing, the more costly the penalty will be.
Currently, businesses are estimating earnings based on the previous year and then filing a tax return based on those quarterly estimates. There can be discrepancies between years as earnings change year by year thus resulting in businesses over or underpaying, underpaying resulting in unwanted interest fees. Real time bookkeeping can help reduce any of the additional interest or tax penalties that you might be otherwise paying at year end when filing the federal and state tax returns. The IRS penalty for not filing a tax return is 5% of the unpaid taxes for each month the taxes remain unpaid. The penalty for not paying the business taxes on time is 0.5% of the unpaid tax amount every month. If both penalties apply in the same month, the maximum penalty is 5% per month which includes 0.5% for the failure to pay and 4.5% for the failure to file on time. The maximum amount of these penalties is up to 25% of the total tax owed. The IRS charges the 5% for the failure to file for 5 months until it reaches the 25% threshold and will continue to charge the 0.5% for the failure to pay for 45 months until it maxes out at 25% of the total unpaid amount.
Today, with cloud based real-time bookkeeping, business owners can avoid paying unnecessary penalties and fines imposed by the IRS. They can quickly generate monthly, quarterly, and annual financial reports and statements for tax income projections and fine-tune quarterly income tax payments with their tax accountants and professionals. Real-time bookkeeping eliminates the surprises for taxable income and mitigates the tax penalties a business may incur due to late filings or errors from inadequate financial reporting and bookkeeping. Docyt provides multiple benefits by allowing businesses to understand their earnings from the current quarter and projects earnings more realistically to file the correct amount on federal and state tax returns.
Real-time bookkeeping also provides valuable and on-demand insights and reports regarding vendors, customers, employees, departments, spends, and income. AI-Powered Accounting Automation Software such as Docyt offers many types of customizable financial reports to help entrepreneurs and their strategic partners to run their businesses, maintain best bookkeeping practices, and control who has access to sensitive financial data. P&L can be generated in real-time for business owners to understand every detail of their operations. A cloud accounting software such as Docyt offers the convenience to access all the financial information at an office or on the go. Docyt’s real time fashion bookkeeping and continuous reconciliation features gives businesses more accurate representation on what your earnings and net income are, reducing any potential interest and penalties that you would otherwise pay at year end.
Grow your business faster with a cloud based accounting automation software. Don’t wait 15 days after the month end to see your revenue and expenses. If you are still doing your books annually, consider shifting to quarterly or monthly reporting to catch and correct errors faster before they snowball into something less manageable. Avoid tax penalties by filing accurate tax returns on time using real-time bookkeeping and accounting automation.
If you are tired of spending too much time on bookkeeping and paying unnecessary tax penalties, check out Docyt’s AI-Powered Accounting Software and schedule a free consultation today.