Taxation Solutions in Online Accounting Software

Even the despised taxation is a hundred times easier with accounting software – and in this article you will see which options you have that can make even this process a quick and hassle-free task.

Multiple tax rates ready for picking

Almost all accounting solutions allow you to set up the tax rates of different states and countries either by entering them on a separate page within your account (i.e. Xero) or directly onto your invoices and expenses (like FreshBooks). Furthermore, if you want to, you can include more than one tax rates on a single invoice/receipt or the tax rate can have multiple components to be combined into one mutual amount on the invoice. If the accounting solution has a separate page for taxes rates (where they can be automatically updated if you have that option), you can also search for invoices/receipts a certain tax rate was applied on. Moreover, advanced accounting software can put invoices and expenses in order in their respective pages based on the tax rates too.

Just remember that no matter how many and what kind of tax rates you use, the amount calculated therefrom will always be displayed in your sales tax report.

Reports ‘n’ taxes

The amounts you see in sales tax reports are the so-called sales tax portions of any transaction made within your account (whether incoming or outbound), which are determined by the tax rate you choose when entering a transaction. The only difference is that when you charge a tax on an invoice, its amount is deducted from the total amount of your incomes (in other words, that amount goes to the state), but if you see a tax you have paid on purchases and payments that amount is deducted from your total tax you have to pay by the end of a business term. In even simpler words: unlike your profit and loss reports, your sales tax reports show your net profit and net loss alongside the amounts you paid/have to pay as taxes.

Hassle-free taxing with complementary solutions

Despite being able to perform all of the above within accounting solutions, more advanced features like sales tax deductions, creating 1099s etc. are often unavailable in accounting software. Thankfully the market is full of tax tools that could seamlessly integrate with your online accounting solution and do the most tedious tax related jobs before tax time. There is Avalara, a blockchain-based software supported by Xero, FreshBooks and QuickBooks or you can choose from regular solutions we talked about like TaxAct, TurboTax Online, H&R Block and Tax1099.