Are You Overpaying Taxes If You Use Tax Preparation Software?

For many business owners the answer to this quandary is tax preparation software. Fill out a fairly simple interview, click "print" and out comes a completed return that will pass muster with the IRS. The answer to all your problems?or is it?

Can One Software Program Cover All Businesses?

Take a moment to consider the wide range of businesses that exist in the United States. Now cut that number down to those that can be categorized as "Internet businesses". If you were asked to write a business plan to provide web design services to each of these services, how long would it be? It would be huge and completely useless because each business would have different needs. A Internet business selling flowers would have completely different needs from an online bank which would have different needs from a hosting company and so on. The only way you could create a practical plan for all Internet businesses would be to offer a collection of general services they could all use on their sites. Tax preparation software designers have the same problem.

There are over 15,000 pages in the tax code and over 100,000 pages of regulations interpreting those pages. Changes are made to the tax code ever year, and new regulations are issued constantly. If one were to create a list of questions for every tax deduction and credit detailed in those pages, the list of questions would be the size of a phone book! Yet, tax software programmers have somehow boiled it all down to a simple 30-minute interview process? Common sense should tell you that doesn't make sense.

As practical matter, tax software programs are designed to make sure that you claim a general set of deductions that are applicable to businesses across all industries. Most programs try to mask this fact by asking you to identify your business before proceeding. For a lark, you might try selecting another industry and then running through the interview process. You will find that the interview process is modified a bit, but you are still being asked the same basic tax deduction questions.

If you are only claiming general business tax deductions, you are paying more than you should in taxes. Ask yourself if you have seen any of the following questions in a tax software program interview:

Q. Do you store business inventory in your house?

Hint: You may be able to claim hundreds or thousands of dollars in deductions.

Q. Did you start a pension plan for your employees?

Hint: You may be able to claim a tax credit for the next three years totaling $1,500.

Q. Do you have a home-based business and a second office?

Hint: You may be able to deduct your commuting expenses each day. Yes, commuting expenses.

Q. Do you have business meetings at your home?

Hint: Did you charge your business for the space?

Q. Should you claim the standard mileage rate for your auto or the actual costs?

Hint: The standard mileage rate may not the best option.

Q. Did you modify your business location to comply with the Americans with Disabilities Act?

Hint: You may be able to claim a tax credit AND tax deduction for tax savings of $20,000 or more.

Q. Did you refinance your home?

Hint: The points you paid on your original mortgage are fully deductible now, not over the length of the loan.

This represents only the tip of the iceberg of available credits and deductions available to you. Just one of these deductions could save you thousands of dollars in taxes. Yet, you are never going to see these questions raised in a tax software program interview. The tax code and regulations are simply too large to be incorporated into a usable software program.

Your business is unique. You face and overcome issues and problems that are unique to your size, financial situation and particular business needs. Don't short change yourself by limiting your deductions by using tax software programs.

Richard Chapo is CEO of http://www.businesstaxrecovery.com - Obtaining tax refunds for small businesses by finding overlooked tax deductions and credits through a free tax return review.

In The News:

Schools decry transport tax  Bangalore Mirror

The Tax Man Cometh... To Search

You're at your office, or home, and the doorbell rings... Read More

Rearrange Your Affairs For Maximum Tax Savings

One way to maximize your business profits is by reducing... Read More

Deducting Points On Home Refinances

Deduction of Refinance PointsAny points that you pay in the... Read More

Slash Tax when Buying a Business

When buying a business, how the "purchase price" is made... Read More

Tips and Simple Guidelines on How to Calculate Payroll Taxes

Managing a business small, medium or big requires you to... Read More

Render Unto Caesar

Once a year Canadian taxpayers are required, by law, to... Read More

Small Business Tax Issues for Self-Employed Individuals

The United States is a nation of entrepreneurs. There are... Read More

Tax Audits: What Signs Make You More Likely to be Audited by the IRS?

It's a major fear for most Americans: A notice from... Read More

Business Tax Deductions

As we enter mid-March, taxpayers begin to become very interested... Read More

Tax Time Tune Up

Excerpted from the new book, "How to Do Space Age... Read More

Truly Bizarre Taxes: The Tax on Illegal Drugs

One can never underestimate the enthusiasm that politicians have for... Read More

The Implications of Income Tax Charge on Estate Planning

OverviewIn the Pre-Budget Report of December 2003 the Chancellor Gordon... Read More

Income Tax Returns Your Accountant Should Not File

You've been feeling uneasy (perhaps even guilty) because you've failed... Read More

How To Get An Extension To File Your Business Tax Returns

Yes, the tax season is upon with the first filing... Read More

Know A Tax Cheat? Get Paid To Tell The IRS

According to the IRS, taxpayers underpay their taxes by some... Read More

Fiscal Deity: Tax Consultant

Strategic planning throughout the year results in a minimal tax... Read More

Employment Taxes ? Depositing With The IRS

If your business has employees, you must pay employment taxes.... Read More

Navigating The Internet Sales Tax Laws

QUESTION: I have been contacted by my local city... Read More

Access to E-records by Taxing Authorities: A Case for Pakistan (Part I)

Background issues of access to recordsTo assess the records at... Read More

Paying Workers ? What Can You Write-Off?

As your business grows, you are going to need help.... Read More

Small Businesses: Company Car Vs. Personal Mileage Reimbursement In Hurricane Katrinas Wake

With gas prices at an all time high before Hurricane... Read More

Complaince of Tax Return in Electronic Commerce Taxation

Emerging Legal issues of Tax compliance of e-business Self-assessment system... Read More

Correspondence From The IRS ? Yikes!

It's a moment every person dreads. You pick up the... Read More

Tax Investigation - What You Need To Do

The knock on the door from a Tax Inspector is... Read More

How Home-Based Businesses Can Avoid Giving Uncle Sam More than His Share

How Home-Based Businesses Can Avoid Giving Uncle Sam... Read More