Tax accounting software has its basics in each of the three elements of
the title. Accounting being the production of the financial accounts in
a template format suitable for the tax system. Tax and tax software
denotes the inclusion of the tax rules with software being a
description of the fact that the process is automated.
Self employed accounting
To be most effective the self employed accounts should be in a format
that can eventually be used by the accounts program to produce the
financial information required to complete the tax returns. Since in
the UK as in many countries there are several types of tax returns then
the accounting software should cope with all variations.
Database accounting software is frequently based upon a chart of
accounts which is not necessarily tax return friendly. Accounting
template spreadsheets being more fixed in nature do offer an
opportunity to be tax friendly.
Facility should be available to distinguish between revenue
transactions and the purchase of fixed assets as fixed assets are
treated differently for tax purposes being subject to capital
allowances which are tax allowances written off against the net taxable
profit according to the tax rules as opposed to being able to deduct
the whole cost of that asset in the one financial year.
Income Tax and Vat Tax Return Software
In the UK the self employed accounts need to supply the numbers for up
to three different variations of the self employed tax return. One of
two tax returns has to be completed each financial year, those returns
being known as the short tax return and the full tax return which have
replaced the self assessment tax return.
The short tax return is completed according to the sales turnover of
the business. Less detail then the full return is required with only
totals required for businesses with a sales turnover under 30,000
pounds.
In addition to the financial year end tax return self employed business
whose sales are above the vat threshold must also complete a quarterly
vat return. With various types of vat schemes available the accounts
package and tax software should be capable of dealing with different
vat schemes.
Not all accounting packages have the facility to deal with diffenent
value added tax schemes which is important to produce the desired
results of an automated tax software package. Tax accounting software
is a serviuce provided for the self employed client and must meet that
clients requirements.
Tax Software
To be effective in satisfying the description of tax accounting
software the system should also include the tax rates and rules
applicable. The tax accounting can then take those tax rates and
produce an estimate of the potential tax liability which is a principal
concern of all self employed business when the time for filing taxes
approaches.
The term software indicates automation based upon data input which the
computer package then processes to produce the desired output. Tax
software produces the tax requirements of the user.
A tax accounting software package takes the prime financial
transactions, converts those numbers to the format required to produce
the year end self employed tax returns and quarterly vat returns as
required. In addition the tax software function would also use the tax
rates to automatically calculate the income tax and national insurance
liability
Article Source: http://www.articlesbase.com/finance-articles/using-tax-
accounting-software-to-produce-self-employed-tax-returns-542042.
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About the Author
Terry Cartwright designs tax accounting software
for self employed accounts and company accounts that produce automated
tax returns. Simple automated tax software
designed to produce accounting solutions and self assessment tax
returns for business clients, accountants and bookkeeping services.
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