Tax season can be a time of stress for many business owners, but with the right preparation, it doesn’t have to be. Understanding the requirements and changes in tax laws, and adopting modern tools for managing your financial documents, can set you on a path to a smooth tax filing process.
The Importance of Proactive Tax Preparation
Jonathan Bello, Founder & CEO of One 8 Solutions knows that “savvy business owners understand that tax preparation isn’t just about checking off all the boxes and squeaking it out right up until the tax deadline.” He believes that with preparation and planning ahead, every business can be set up for success.
Key Considerations for Preparing Your 2024 Taxes
The Move to Mobile and Digital Document Capture
- Digital apps are gaining traction in the accounting space, and one we like is the QuickBooks Mobile App. It allows for easy capture of bills and receipts and uses OCR (optical character recognition) to digitize the text. One drawback is that images remain non-searchable, which could be a challenge when you need to find specific documents quickly.
- Third-Party Apps like DEXT are available on Smartphones and mobile devices, and provide superior OCR capabilities. They rely on the quality of the pictures taken by users – which isn’t always perfect. Blurry images or incomplete captures can result in lost data, and ultimately, lost time.
- Vanity email for vendor bills are gaining popularity and boost organization and efficiency. Bills are stored as searchable PDFs by third-party apps which simplify item searches, centralize invoices, and help streamline accounting. On the downside, multi-page documents may get fragmented and phishing risks are also heightened.
- ScanSnap scanners are a favorite of Jonathan Bello’s. Especially the newly launched ScanSnap iX1600, Receipt Edition which is optimized for those who use QuickBooks® Online. He calls it the “Swiss army knife of document capture.” You can set the parameters and control where the documents are saved, and it integrates with QuickBooks Online and DEXT for efficient and accurate data entry. This frees up valuable time during tax season.
- E-filing options will be expanded with the addition of 20 new tax forms. This will enhance the efficiency and ease of filing for a variety of tax situations, and will streamline the tax filing experience.
“I’ve used Adobe Acrobat on the smartphone to capture documents, and I find it kluge. So, I prefer the sheet feeding capability of a scanner like ScanSnap. It gives me much better quality and I can store it in the vendor folder, and then drag it into QuickBooks Online or DEXT to take advantage of OCR to speed up data entry,” states Jonathan Bello.
Unlock the opportunity to own a free ScanSnap scanner! Our partners at ScanSnap are here to make your wish come true. Simply complete the form for a chance to win the sleek iX-1300 ScanSnap scanner in a stylish white finish. Don’t miss out on this exclusive chance!
Keeping Up with Ever-Changing IRS Rules
Our team member and enrolled agent, Andrew Zaff points out the following changes:
- The IRS is ramping up its enforcement efforts, with an increase in audits. Businesses must be diligent in their record-keeping practices to be compliant with all tax laws to avoid penalties. This year the agency hired 4,000 new customer service reps to help answer phones and provide services for 2023 tax preparation.
- New lease accounting rules are in effect. Business owners must now include the full amount of leases over a year on the balance sheet, which is a complex shift from the previous method of simple expense recording on the P&L. It’s a bit more complicated than in years past.
- The Tax Cuts and Jobs Act provision for 100% bonus depreciation is winding down. This year, the benefit reduces to 80% with further decreases each subsequent year. Be sure to plan for these changes in your asset management strategies.
- Keep an eye out for changes in meal and business mileage deductions. The IRS has revised meal deductibility rules and updated the mileage rates to 65.5 cents up from 62.5 cents in the second half of 2022. These changes will affect expense reporting and require businesses to update their accounting practices accordingly.
You can read more about paperless filing here: The TCJA 100% bonus depreciation starts to phase out after 2022 | Our Insights | Plante Moran
The Future of Filing
The IRS’s paperless Initiative is strong with all efforts on digital submissions. By 2024, paperless operations will be the norm for interactions with the IRS. This advancement will streamline the filing process and reduce the administrative burden on taxpayers.
E-filing options will be expanded with the addition of 20 new tax forms. This will enhance the efficiency and ease of filing for a variety of tax situations, and will streamline the tax filing experience.
You can read more about paperless filing here: “IRS launches paperless processing initiative.”
Prepare for a Fully Digital Tax Era
With the IRS’s ambitious goal to digitize the tax filing process, businesses should make sure that their internal systems are compatible with digital submissions. This means investing in software that can handle e-filing and maintaining digital records in formats accepted by the IRS. Preparing now for a fully digital tax era will position businesses to take full advantage of the IRS’s modernized systems.
- The IRS’s paperless initiative isn’t just about convenience; it represents a fundamental change in how the IRS will interact with taxpayers. It aims to reduce errors, lower costs, and speed up the entire tax filing and refund process. Business owners who adopt these changes early will likely experience fewer filing errors and quicker refunds.
- The agency’s advanced analytics and pattern recognition will also intensify the focus on accurate record-keeping. This is yet another reminder for businesses to maintain clear and compliant financial records.
The Implications of IRS Digitization for Your Business
The IRS’s push towards advanced analytics means that tax compliance will be scrutinized more closely than ever. With the ability to analyze massive datasets, the IRS can identify discrepancies with greater accuracy. This underscores how critically important it is to maintain precise and transparent records, because any anomalies are more likely to be detected.
Finally, as you prepare for tax season in 2024, consider these additional changes and best practices:
Embrace Technology and Digitalization
Tax software is continuously evolving and offers more features and better integration with other business systems. By next year, it’s expected that these tools will leverage artificial intelligence and machine learning to provide predictive analytics, helping business owners make more informed decisions about deductions, income deferral, and other tax planning strategies.
Integrate Your Financial Systems
The integration of accounting, payroll, and other financial systems is also crucial for seamless tax preparation. As digital platforms become more sophisticated, be sure that your systems communicate effectively with each other for accurate and efficient tax filing.
Monitor Legislative Changes
As we all know, tax laws are subject to change, and new legislation can have a significant impact on your business taxes. It’s important to stay informed about these changes.
Comply with New IRS Guidelines
The IRS will likely continue updating its guidelines, especially as it moves towards a more digital and paperless system. Stay up to date on these guidelines to be sure you’re fully compliant and can take advantage of any new tax-saving opportunities.
The Bottomline this Tax Season
The key to successful tax preparation in 2024 will be to stay informed, leverage technology, and allocate time for strategic tax planning. By actively using digital technology, you can navigate the complexities of tax season with greater ease and confidence.
The transition to paperless tax filing may require an initial investment in time and resources, but the long-term benefits of a streamlined, error-reduced, and efficient tax filing process are invaluable.
If your company needs any tax season advice or guidance, schedule your initial complimentary Zoom consultation today.
