This week's business tip: Did you know that there are over 10,000 tax jurisdictions within the United States? Many times your sales tax payments are based upon the shipping address, not your location. Even if you are not based in the U.S. you should check out tools to help you automate your sales tax information. My faves are Xero integrated with Avalara to avoid headaches and fines.
This past week, I had a blast partnering with Xero and the U.S. Small Business Administration to teach a three-hour bookkeeping workshop at the Renaissance Entrepreneurship Center in San Francisco. We went through some of the accounting terminology that every entrepreneur should know, how to set-up your bookkeeping program and how to maintain your books throughout the year.
And we discussed why it is so important to keep organized records of your business finances.
I shared an example of how I was mistakenly hit with a $1300 tax fine.
Another individual in class shared that the IRS mistakenly thought his company has received $407,000 from a client as opposed to $4,700, and sent his company a bill to reflect the former amount. Yikes!
But, because we each kept organized books, we were able to remove the tax fine. If we did not have organized records, we likely would have to pay the fine.
One area that causes a lot of headaches for business owners, and consequently mistakes, is their sales tax filing.
According to the Tax Foundation in 2014, there are nearly 10,000 tax jurisdictions. In the United States alone.
As an entrepreneur, especially with an online-based business, it is impossible to keep tabs on the various sales tax codes and their various rates. In my immediate area, one street block has a sales tax of 9.25%. While the next block is 9.50%.
It is your responsibility as a business owner to stay on top of these rates and withhold the appropriate sales tax. Yes, you need to add this task to your mile-long to do list.
But, don't fret. Take a deep breath.
This is why technology is so amazing. There are tools available that sync to your e-commerce platform and bookkeeping program that automatically calculate the sales tax based upon the shipping address and other relevant factors.
AND it will file it for you.
My favorite program is called Avalara. Their AvaTax solution is a fabulous tool for entrepreneurs who want to reduce headaches and costly mistakes as it relates to their sales tax filing.
Check it out and let me know how it works for your business. I'd love to hear your feedback.
In the meantime, I'd love to learn more about the tools you use to automate your bookkeeping. What tools help you stay on top of your finances? Let me know in the comments below. Sharing is caring.
Cheers to your wealth and wellness,
Danetha Doe (@danethadoe) is a business strategist and was named one of the Top 40 under 40 accounting professionals in 2015 by CPA Practice Advisor. She is the creator of, Organize your Bookkeeping in 7 days.
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