As your business grows, the responsibilities of managing it administratively and the complex regulations grow too. For many digital business owners, having to manage tax compliance while thinking of ways to grow the company and retain clients is a daunting task. On the other hand, you don’t want to be tax incompliant and end up with hefty fines and penalties.
This is where online tax compliance solutions come in. Without an automated solution to handle tax compliance for you, you’d have to manually work through the entire process, going over every employee’s paycheck and calculating deductions. However, manual processing is quite prone to human error, not to mention incredibly time-consuming.
The Importance of Tax Compliance
Tax compliance is important for any business, but it’s especially important for digital businesses. Why? Because the taxes digital companies pay often go toward funding vital public services and infrastructure that these businesses rely on to function. Additionally, tax compliance helps ensure that businesses are playing by the rules and not unfairly taking advantage of loopholes.
Not being tax compliant can result in some pretty steep penalties. For instance, if you’re caught evading taxes in the USA, you could be fined up to $500,000 by the SEC or the IRS and receive imprisonment for up to five years. Moreover, if you’re found guilty of willful failure to file a return, supply information, or pay taxes owed, you could be fined up to $100,000 and/or imprisoned for up to one year.
Clearly, it’s not worth the risk to be non-compliant. So how can you make sure your digital business is compliant? Read on for some tips.
Best Practices to Ensure Tax Compliance
There are a number of best practices you can follow to help ensure your digital company is tax compliant. Here are some key things to keep in mind:
Understand The Relevant Tax Laws and Regulations
In simple terms, understanding tax laws means keeping up to date on any changes or updates to the law. Many digital businesses have employees in multiple states or even countries, so it’s important to be aware of the different tax laws that may apply.
Withhold The Right Amount of Taxes from Paychecks
Properly calculating the right amounts for taxes refers to much more than just your income tax – it also includes federal, state, and local taxes for your employees. Withholding too little could result in penalties while withholding too much could cause financial hardship for your employees. Usually, the easiest way to ensure you’re withholding the right amount is to use an online tax compliance solution that can calculate the appropriate amounts for every aspect of the business.
File all required tax forms on time.
Filing required tax forms include state and federal tax returns, as well as any other required forms (such as payroll tax forms). Filing late could result in penalties from the SEC or a similar institution, so it’s important to set up a system to ensure all forms are filed on time.
Use an automated tax compliance solution
As you can see, there’s a lot to keep track of when it comes to tax compliance. Fortunately, there are online tax compliance solutions that can automate the entire process for you. These solutions can help you with everything from withholding the correct amount of taxes from employee paychecks to filing required tax forms on time.
Using an automated solution can save you a significant amount of time and effort, not to mention help you avoid costly penalties for non-compliance. Moreover, an automated tax solution will make all the suggestions we mentioned above for you without lifting a finger. It will automatically inform you on which tax forms you’re supposed to file, while also keeping accurate financial records of your expenses.
We can conclude that managing tax compliance is no easy task for any business, especially for growing ones. However, with the right guidelines, you can make sure that your business is on the right track regarding tax compliance. Keeping accurate records of your documents while understanding tax laws for digital businesses goes a long way, and the best way to manage all of this is to use an automated solution.