An electronic tax document refers to a digitally formatted file that can be securely stored and transmitted over the Internet, integrated software systems, or within a company's internal intranet. There are numerous practical benefits and time-saving advantages associated with maintaining tax records in a digital format. Read on to learn more about this and why it's so helpful.
Benefits of Maintaining Electronic Tax Documents
Having a digital tax record allows you to retrieve old tax documents more efficiently. In addition, it makes managing those forms and files in real-time much easier and more efficient in many ways.
Managing tax documents electronically can increase efficiency, reduce the risk of errors, and make it easier to find old records. Let's dive into some specific use cases.
1. Makes e-Filing Easier
When tax time and filing deadlines roll around, you have all your files in one place for e-filing your taxes. It's easy to pull documents up, check numbers, audit, and transmit to IRS and other agencies by deadlines to maintain compliance.
If you need to review or audit previous years, that's easier too. You can easily pull up past years to see all attached documents.
2. Key Signatures Without the Runaround
Vital tax documents are all managed in one place. So you can create, upload, and edit documents electronically and notify key individuals when the form is ready for signatures. They can then sign them electronically without having to print or scan anything. In addition, the document is automatically updated and time-stamped, so those completing the documents are notified when all signatures are received.
3. Sure Beats Paper
You risk tampering, theft, or loss when carrying paper through the building, using interoffice mail, or leaving vital documents in unattended trays or drawers. Keeping all this electronic is a simplified way to manage and maintain this critical information. With digital records, you know who's accessed it, when, and what's been done to it. It's all recorded and verifiable.
4. Cross-populating Automation
One of the notable features of electronic tax documents is their compatibility with finance and payroll automation software. In addition to being files that can be uploaded, electronic tax documents can seamlessly integrate with such software to facilitate automated data transfer and cross-population of information across multiple forms.
As a result, valuable time is saved, and the potential for human error is significantly minimized.
5. Send Electronic W-2s to Employees
The IRS requires you to send W-2s to employees you paid more than $600 the previous year by Jan 31. This includes the market value of non-cash payments provided as compensation.
Companies are responsible for filing this with the Social Security Administration by the same date, as well as filing with relevant state and local tax agencies.
Regulations may have once prohibited sending tax documents electronically. But the IRS now encourages you to do so. This is now safer and easier to track than paper when proper security measures are taken, like encrypting.
Making these available via the Internet can get them to the right places faster and make it easier for employees to save for their electronic tax documents. This is also safer when sent securely because physical mail can be intercepted, whereas encrypted transmissions are much harder (if not impossible) to view.
One side note; you are required to get employee electronic consent before sending employee records electronically. Some individuals have safety, privacy, and accessibility concerns when things are transmitted via the Internet, so approval allows employees to opt out and receive documents through the mail.
Payroll processing software can help you acquire consent and track who has agreed to electronic submissions.
6. Payroll Processing Integrated with Electronic Tax Documents
Finally, payroll processing software can integrate with other financial and tax software to auto-populate critical information from payroll into financial statements and e-tax forms, generating another efficiency and error-reducing measure by further streamlining your payroll and overall financial management.
Efficient Payroll Processing with a Digital Tax Record
By transitioning away from traditional methods to electronic documents, businesses can eliminate the frustrations caused by inefficiencies. The use of electronic tax documents enables streamlined payroll processes, saving both time and money.
To experience the advantages firsthand, we encourage you to reach out to Payday Payroll today. Our secure and efficient payroll solutions can not only optimize your payroll operations but also ensure your business remains compliant with the ever-evolving tax regulations. Take a proactive step towards efficiency and compliance by contacting us today.