Tax Software vs Professional Accountants

McRuer CPAs writes:  As we enter into the peak of tax preparation season, we are often asked about the difference between using tax preparation software and using the services of a professional accountant.  Today there are dozens of preparation software options online and in software packages that can help a taxpayer complete their tax return.  This as today's tax liabilities and concerns are growing more complicated than they've ever been. 

A recent Wall Street Journal article revealed as taxpayers try out new tax software tools, they are making more and more mistakes.  Often, it has to do with not knowing the right questions to ask to discover their best options.  Many times, incorrectly entered numbers cause automatic equations to produce the wrong totals.  

Don't misunderstand, there are good reasons to choose tax software to help you complete your income tax return on your own.  There are also good reasons to choose a professional accountant.  We came across an interesting and concise article online on Investopedia that explains your options clearly.

Here is that article for your consideration as you choose the best steps to take regarding the preparation of your federal and state income tax returns. 

Tax Software Vs. An Accountant: Which Is Right For You?    By Jason Steele | Updated January 29, 2014
""With every important job comes the question of whether or not individuals should do it themselves or hire a professional. While the ever-improving selection of tax preparation software certainly makes it easier to do your own taxes, it has hardly put Certified Public Accountants (CPAs) and other personal tax preparers out of business. 

The Advantages of Using Tax Software Price
There is no way around the fact that you will pay less for a software package than you will to hire a CPA or another qualified tax professional. The price of tax preparation software ranges from the $10 to $120 range to websites that offer the service for free. On the other hand, the least expensive tax preparers will cost at least $100 and a CPA is likely to charge at least twice that amount. The upfront savings of using tax software over an accountant is one of the most attractive benefits of filing your own taxes. 

The Advantages of Using Tax Software Price
There is no way around the fact that you will pay less for a software package than you will to hire a CPA or another qualified tax professional. The price of tax preparation software ranges from the $10 to $120 range to websites that offer the service for free. On the other hand, the least expensive tax preparers will cost at least $100 and a CPA is likely to charge at least twice that amount. The upfront savings of using tax software over an accountant is one of the most attractive benefits of filing your own taxes. 

The Benefits of Hiring a Professional Accountant Better Software
Accountants pay around $1,000 to $6,000 for their software, which is far more sophisticated than the products sold to consumers. These more advanced programs have the ability to quickly scan your information and organize line items and forms correctly. By automating much of the data entry and organization, there's less chance for human error to hurt your tax return.

Human Touch
Like a good family doctor that knows your medical history, you can develop a relationship with an accountant so that he or she understands your family's financial situation and future goals. According to Wehner, who has been preparing taxes for 45 years, "A tax professional is often able to make valuable tax savings suggestions that a software program just can't anticipate." The value of this advice can easily exceed the additional cost of consulting with a professional. For example, a tax accountant can provide you advice on tax-friendly ways to save for your children's education, or how to reduce taxes on your capital gains.

Accountants Can Answer Your Questions Year Round
As a trusted professional, a good accountant will be able to answer important questions that arise not just during your annual consultation, but at other times during the year.

A CPA Saves You Time When Handling Complicated Issues
Taxpayers who find themselves at the center of complicated business and investment matters may even have the skill to sort through their taxes on their own, but is it worth their time? A professional tax preparer is so familiar with the system; he or she can quickly and easily accomplish tasks that might take even skilled taxpayers hours of research. For busy non-tax professionals, their time can generally be better spent earning money in their area of expertise. Even if your tax situation is straightforward, hiring a professional will save you the time and stress of doing your taxes.

The Bottom Line
Ultimately, there is no universally correct answer to the question of hiring a tax professional or doing your taxes yourself with software. Your comfort and familiarity with IRS rules will be part of your decision, but the complexity of your finances should be the key deciding factor. Those with a single employer and few investments may save hundreds of dollars by preparing their own taxes, while those with business income or rental properties will find the expense of hiring an accountant to be worth their peace of mind and potential tax saving.""

Tax deductions for Self-Employed and Freelancers

Ron Friedman for RiverJournal.com writes: Taxes for the self-employed and freelance worker can get pretty complicated. For those in this segment of the economy often combine their personal and business lives and, as a result, reporting to Uncle Sam can get pretty complicated. Freelancers usually work out of their own home, use their own car to get to and from sales calls and don’t have a separate bank account to conduct their business affairs.

Whether you prepare your own taxes or have someone prepare them for you, it’s still a good idea to know what deductions you might be entitled to. The following is a list of common tax deductions for those in their own business. Every profession and industry may have its own unique characteristics; here’s a general list of what is available to most:

Home Office: In order to qualify for the home office deduction, you must have a dedicated space devoted to your business and absolutely nothing else. Deducting the den in your house that contains the family computer and serves as a guest bedroom is an invitation for trouble. The deduction is calculated by the amount of square footage devoted to your office divided by the total square footage of your home. That fraction is applied to the costs of running your home will be the basis for your home office deduction.

Automobile: The deduction for use of your automobile is the greater of the actual costs of owning and maintaining it compared to the standard mileage rate the Internal Revenue Service publishes every year — 56 cents per mile for 2014. Actual expenses may include lease or loan payments, registration fees, insurance, gas, maintenance, repairs, garage fees and depreciation. The caveat here is that the only deductible portion of the costs are those associated with the business use of the automobile. It is advisable to maintain a car log or diary, to distinguish business miles from personal miles.

Meals and Entertainment: The rules regarding meals and entertainment can get fairly complicated, however, here are some guidelines to determine if the expense qualifies:

1)    The expenses has to be an ordinary and necessary expense that is common in your industry/profession and is helpful and appropriate to your business.
2)    The expense has to be directly related to your business, meaning it occurred in a business setting, or the primary goal was to do business or for a particular business outcome. It does NOT have to result in business transacted.

Equipment: Normally business equipment (phone systems, computers, furniture, copiers, scanners, etc.) is tax deductible (depreciable) over the useful life of the equipment. The IRS publishes tables covering all kinds of equipment and their related tax lives. However, one of the nuances in the tax code allows for 100% depreciation in the year of acquisition.

Retirement Contributions: While not directly a cost of business, the tax code allows those self-employed and freelance workers the ability to lower their tax bill by contributing to a retirement account. Whether one utilizes an IRA, SEP or KEOGH plan, those contributions can lower your overall tax bill.

Health insurance: Premiums paid for health insurance by freelancers are deductible. In fact, for those who are collecting Social Security while freelancing, your premiums paid for Medicare coverage are also deductible.

Insurance (other than health): Premiums paid for business insurance (general liability, errors and omission, malpractice, worker’s compensation, etc.) are deductible.

Advertising: Any expenditure for advertising and promotion of your business would fit into this category, including digital advertisements, business cards, promotional items, brochures, etc.

Fees and commissions: If your state or county requires you to carry a license or business certificate to do business, this is the place to deduct those expenditures.

Contract labor: This includes all the independent contractors and freelancers you hired to conduct your business and is separate from anyone whom you treated as an employee. It includes the computer consultant you hired to set up your network, or any subcontractors you used to create a final product.

Wages: If you hire someone in your business (assistant, administrator, etc.) even temporarily, you can deduct not only the wages you paid but also, the related payroll employment costs (employers’ share of Social Security and Medicare, Federal and State Unemployment Insurance, etc.).

Interest: If you borrowed money to start or expand your business, the interest you paid during the year is fully deductible.

Legal and professional services: Fees to lawyers and accountants used to initiate or continue a business are deductible, including bookkeeping and tax preparation.

The most important part of managing the financial operations of your business should be planning. Tax planning should be part of that. One of the key short term strategies employed is knowing when and how much to pay for your quarterly estimated taxes. It will go a long way to avoiding surprises come tax day and more importantly, penalties and interest to the government. Once you’ve gotten your business off the ground, you should talk to your accountant about ways to maximize cash flows and minimize taxes from year to year. Sole proprietorships are the most common business organization form for the self-employed, however, there are other corporate structures a freelancer can adopt and gain significant tax and legal advantages.

5 Robust Accounting Software Systems Fit For Your Business / Quickbooks, WorkFlowMax, Financial Force, FreeAgent, Kashflow

Finances Online writes: Small businesses usually start with manual accounting systems and then add programs such as QuickBooks or Microsoft Excel as their business expenses become harder to monitor. However, it is always best to plan ahead of time. Your organization’s accounting software system must be able to handle your current needs and quickly adapt to future growth.

 

Look for a robust system that can quickly grow along with your business. The system you select should well integrate with many of the business processes your businesses uses to save time and reduce data entry errors.

Data storage

When selecting a software-based accounting system, you have to make sure the system would encrypt your confidential financial information. That software system should also have the capacity to schedule backups so important information cannot be simply lost during a computer crash. Consider your organization’s physical storage needs, such as having file cabinets to lock up confidential documents and fireproof cabinets so you can have software backups. You can likewise store a copy of a recent data backup off-site that you can retrieve in case there is a catastrophic event that happened at your main office. However, you should also sure the location not too far away to get if you need to swiftly restore the information.

Reporting

Detailed accounting reports can help your managers make better informed decisions. For instance, printing a daily cash report can help you decide when to switch funds to your company checking account to handle payroll checks or even bill payments. Make sure the accounting system has the capacity to generate an entire package of financial statements including an income statement, balance sheet, cash flows statement as well as statement of owner’s equity. In addition, you may want to generate customized reports using the rich information located in your software’s database, such as cost of goods sold, inventory reports, accounts receivable aging, budget variance reports, open accounts payable for your company’s cash flow management, as well as tax reports for the CPA.

Internal Controls

For security purposes, the accounting system you should be getting should offer the choice of limiting permissions by user. The same user should not be allowed to handle deposits as well as reconcile bank accounts. If the system has the capacity to print the person’s initials or provide identification number on reports, this information can be used when auditing incorrect transactions. Your company’s supervisors should be able to have hard copies of reports to ensure the work of their employees. The organization should also have a process for checking out unusual journal entries as well as keep documentation in the accounting files.

Accuracy

The usefulness of an accounting software system would mainly depend on the data accuracy it contains. Start by getting professionals whom you trust to provide the information perfectly the first time. Do not try to save money by shortchanging your data entry personnel because you think any person can do the job correctly. Saving money by giving low wages may even cost much more in terms of accounting fees especially if you need to correct financial statements. Periodic review by your company’s supervisors can also catch various errors before they can have an effect in your company’s period-end closing numbers.

Do you have a B2B product you’d like to add to our listing?
If you are a vendor and have an interesting B2B product that hasn’t yet been listed on our review platform feel free to let us know about it. You can add your product to the listing here. Our experts will be happy to preapre a detailed review of your product free of charge. Here’s an example of accounting software review by us.

Here are five robust accounting software systems and their solutions.

1. Quickbooks Pro

QuickBooks Pro is established on the simplicity as well as popularity of Intuit’s QuickBooks, which is regarded as the entry-level software system for many small businesses. It brings additional features to the table, specifically by enabling business accounting to become easier by providing windows you use to track common business transactions, including invoices, check writing, and purchase orders. It integrates with a number of third-party products, scalable, and expandable.

QuickBooks Pro SmartScore and Customer Satisfaction
Our B2B experts reviewed QuickBooks Pro features, user experience, customer support and other key elements of the service. Final results as summarized by the SmartScore system gave QuickBooks Pro a score of 9.0/10 while the results provided by the Customer Satisfaction Algorithm place the overall user satisfaction rating at 98%.

2. WorkflowMax

WorkflowMax is a project management solution that has been built to handle all your business management needs, which includes project tracking, invoicing, job monitoring, timesheets, reporting, and all various aspects of project management. It flaunts a seamless integration with Xero’s business software as well as systems, including Xero Accounting software.

It is a wide set of project management tools that works perfectly with companies from different industries. It has an extensive list of applications designed to boost the potential of any enterprise.

WorkflowMax SmartScore and Customer Satisfaction
Our B2B experts reviewed WorkflowMax functionalities, user experience, customer support and other key elements of the service. Final results as summarized by the SmartScore system gave WorkflowMax a score of 7.3/10 while the results provided by the Customer Satisfaction Algorithm place the overall user satisfaction rating at 100%.

3. FinancialForce Accounting

FinancialForce Accounting for Salesforce is quite easy to learn, use, as well as maintain. It is a simple yet powerful cloud accounting system. FinancialForce provides an an end-to-end solution that is ideal for small and large sales as well as service-oriented companies that are looking for ways to make their business operations more effective at less cost.

It has the Salesforce Accounting app, leveraging the power as well as the flexibility of the efficient Force.com cloud platform. FinancialForce Accounting also integrates with Salesforce CRM to enable your employees to work as one team.

FinancialForce Accounting SmartScore and Customer Satisfaction
Our B2B experts prepared a detailed review of FinancialForce describing its features user experience, customer support and other key elements of the service. Final results as summarized by the SmartScore system gave FinancialForce Accounting a score of 6.7/10 while the results provided by the Customer Satisfaction Algorithm place the overall user satisfaction rating at 98%.

4. FreeAgent

FreeAgent is a web-based accounting and financial management tool that is well suited for those thatve small businesses and with up to 10 employees. Whether you are new to the business or are already successful in your business, this system is for you.

FreeAgent was created to respond to the difficulties of handling financial matters for those with small businesses as well as freelancers. It is currently being used by over 35,000 small businesses as well as freelancers in up to 80 countries who realized the tool is an easy and efficient method to handle their books and invoicing.

All your system data is backed up a lot of times every hour to the company’s secure server.

FreeAgent SmartScore and Customer Satisfaction
Our B2B experts made a full review of FreeAgent listing its features, user experience, customer support and other key elements of the service. Final results as summarized by the SmartScore system gave FreeAgent a score of 6.7/10 while the results provided by the Customer Satisfaction Algorithm place the overall user satisfaction rating at 98%.

5. KashFlow

Considered the top accounting and bookkeeping software solution in the United Kingdom, this tool has been giving topnotch online accounting software platforms for small business companies since 2005.

KashFlow is a top, cloud-based, and user-friendly accounting software solution designed to help small business owners really make sense of their business accounts. However, it has options for various businesses, full of automated features and well integrated with add-ons such as DropBox, PayPal, and many more.

KashFlow clients can generate quotes quickly, produce invoices that are fully customizable invoices, balance books, and check out their expenses.

KashFlow SmartScore and Customer Satisfaction
Our B2B experts reviewed KashFlow accounting software detailing its features, user experience, customer support and other key elements of the service. Final results as summarized by the SmartScore system gave KashFlow a score of 7.0/10 while the results provided by the Customer Satisfaction Algorithm place the overall user satisfaction rating at 93%.

QuickBooks Online Alternatives: Why SMBs Should Embrace Cloud ERP Accounting

Marie Alonso for CompuData writes:  If you are looking for QuickBooks online alternatives and think the best direction for your business may be Cloud ERP, you just may be right. Enterprise Resource Planning (ERP) solutions that deliver cloud-based functionality are ideal for small to mid-sized businesses looking to better automate and organize management processes – including financial management.

In fact, cloud-based ERP is an escalating trend. According to Gartner, a leading information technology research and advisory company, by 2018 at least 30 percent of service-centric companies will move the majority of their ERP applications to the cloud. The concept of a single ERP suite that meets all of an enterprise’s needs is incrementally being replaced by a hybrid ERP approach that combines cloud point solutions with on-premises ERP functions – like financial management.

Gartner predicts these hybrid ERP environments will be the norm within five years – as more and more small to mid-sized businesses take cloud ERP mainstream. Longer term, over the next 10 years and more, Gartner envisions a scenario where more of the market converts to the cloud.

Today, many enterprises of all sizes have already moved key elements of application functionality to the cloud, including accounting processes. Who are these cloud adopters? In some cases, they are companies that have outgrown QuickBooks and turned to QuickBooks online alternatives for better control, tracking and governance over their financial management.

Why Cloud ERP?

There are many reasons small and medium-sized businesses, specifically, should turn to cloud ERP to leverage an effective QuickBooks alternative.

Real-Time Productivity Gains: By automating key accounting processes and breaking away from the elements of QuickBooks that present time-consuming manual tasks, businesses streamline financial and operational tracking and management – eliminating wasted time, human errors and the dreaded reality of duplication.

Real-Time Visibility, Too! With cloud-based ERP solutions, business leaders and financial managers can view real-time data to delve into financial and operational performance. This level of real-time data scrutiny and sophistication presents 24/7 overview for enterprises – keeping businesses more informed than ever as accounting information is literally at their fingertips thanks to any mobile device.

Cloud Accounting = Cash Flow: Did you know a recent study shows that business owners who invoice and accept online payments through cloud accounting tools get paid nearly two weeks faster? Automating invoicing improves cash flow and saves time by eliminating the need to follow up on overdue invoices. Cloud-ERP solutions provide simple, easy, on-the-go financial management tools with 24/7 access – and the ability to reach your customers wherever they are to keep payments on schedule.

24/7 Cloud Collaboration – Your Time Is Your Money. With cloud-based ERP solutions delivering financial management 24/7, the traditional and time-delayed back-and-forth document pushing and file sharing between colleagues during an average business day is no more. With financial management tools in the cloud, accounting professionals and financial management team members can collaborate on financial reports in real time and review up-to-date data. Plus, with cloud-accounting, small business owners still holding the reigns over all accounting tasks can get organized and stay organized 24/7 – giving them more time to run their businesses. [end]

Who is CompuData? A Different Kind of Technology Company

We believe that better technology solutions mean better business.  CompuData specializes in providing business software and technology solutions that is customer and solution oriented. CompuData offers a vast spectrum of IT solutions not limited to the areas of accounting, distribution, manufacturing, customer relationship management (CRM), hardware and data storage, systems integrations, network management, security, and cloud services. And with over 40 years of technology and customer satisfaction obsession, we have learned a thing or two about delivering technology solutions that provide scalability and ways to increase profitability.

Six Audit Red Flags and How to Avoid Them

Who is Bench?  "We’re a laid back group of people working hard on a tough problem. Bookkeeping is a universal point of pain for entrepreneurs, and we’re changing that." - Bench, visit Bench by clicking here.

Lindsay Angus for Bench writes: Being the subject of an IRS audit can be stressful, time-consuming, and potentially very expensive. While there is no foolproof way to avoid an audit, there are measures you can take to drastically reduce your chances of showing up on the IRS radar. Here are six measures that you can incorporate into your business habits today to lower your chances of receiving an unwelcome visit from the IRS:

Account For All of Your Income

Are you currently a small business owner but also doing some consulting on the side? If so, be sure to accurately report all of the money you are bringing in across your different income streams.The IRS uses the information on Forms W-2, 1098, and 1099 to compare the income and deductions you report on your return with the information reported by others, such as employers, banks, and businesses. Any discrepancies between reported income amounts is an obvious red flag for the IRS and will likely provoke further investigation.

Double Check Your Return

Making a careless error on your tax return is the easiest way to guarantee yourself a visit from the tax man. In the event of any omission, miscalculation, or error on your return, the IRS is obligated to further investigate your case. Accordingly, you can greatly reduce your chances of an audit by ensuring that all sections are correctly signed, sealed, and delivered. For business returns, acquiring outside help may be a good choice.

Maintain Organized Records

Keeping organized records makes for a much smoother tax season, reduces your chances of receiving an audit, and helps you substantiate your claims in the event that you are audited. One distinction that the IRS upholds is the difference between a hobby and a business. Sometimes referred to as the ‘hobby-loss rule,’ the IRS states that if you have an activity that is not designated as a business, then the “allowable deductions cannot exceed the gross receipts for the activity.” Keeping accurate books and using financial records to improve your profit margin will help convince the IRS that you are running a legitimate business and not a claiming deductions on a hobby. Also, if you do get audited in the future, you will have unflappable records to prove where the money was coming from and going to.

Separate Your Personal and Business Expenses

The IRS is very strict about business owners keeping personal and professional expenses separate. They define a business expense as something that is “both ordinary and necessary.” Some expenses can be hard to differentiate on a receipt or bank statement, but having an account or card that is solely used for your business, as well as keeping thorough notes of why this purchase benefited your business, will make an audit less likely and also safeguard you if you’re audited in the future.

Stay Consistent with Your Accounting Methods

As a business owner, you have the choice of two different accounting methods: cash or accrual accounting. Bouncing back and forth between the two can be seen as potentially deceitful and will likely incite further investigation. Whatever method you deem best for your business, just be sure to stay consistent; failing to do so will attract the IRS to your return and potentially make you the subject of an unwanted audit. Learn more about cash vs. accrual accounting here.

Keep it Straight - Employee or Contractor

Properly classifying workers is crucial because it determines the taxes that need to be paid, when they are paid, and who pays them. Generally, for an employee you must withhold income taxes and pay unemployment, Social Security, and Medicare taxes. With an independent contractor, you generally don’t need to withhold or pay taxes on their paychecks. The IRS is on the lookout for businesses who intentionally miscategorize employees (therefore skipping the taxes). If you frequently work with full-time independent contractors, be sure that they really are contractors and not employees. If you’re not sure whether you are working with an employee or an independent contractor, learn more about How to classify your team.

No one wants to be questioned by the IRS, but running an organized, professional, and informed business will reduce your chances of being audited, as well as prepare you if one does come along. Having a team of bookkeepers and accountants in your corner doesn’t hurt either, and at Bench, we’re always there for you.