3 Best Tax Software Tools for Small Business Accountants

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What season do small business accountants dread the most?

That’s easy: Tax filing season.

With heaps of invoices, receipts, and expenses, to assess your tax obligation, filing taxes is a daunting task. It becomes more complicated with all the various tax forms to fill out and figuring out which ones are specific to your small business. Transferring data from the pile to the correct forms accurately and quickly is impossible without a dedicated tax tool.

3 Top-Rated Tax Tools for Small Business

Filing federal taxes is a productivity killer for small businesses. One in three businesses spend more than 80 hours on it per year—equal to a productivity loss of two full work weeks.

Small businesses that fail to adopt the right tax accounting tool face a greater risk of financial compliance issues resulting from a lack of understanding about tax filing requirements.

Choosing an accounting tool that is user-friendly, integrates with existing tools, and can be used to automate existing tax workflows effectively, should be central to your small business’s tax management strategy for avoiding piles of paperwork and filing taxes incorrectly.

In this article, we’re highlighting the top-rated tax solutions for small businesses, based on accounting software user reviews on Capterra. We’ll take a look at the features each tool offers, who should consider each, and what small businesses like about these solutions, as well as their suggested improvements.

The three top-rated tax management tools for small business accountants are:

(Please note: The feedback given in each of the “Common user feedback trends” sections are the opinions of the user reviewers and do not represent the opinions of Capterra. Read more about our methodology at the bottom of this article.)

Top-rated tax tools for small businesses

1. Xero: Customized sales tax and tax filing tools for small businesses

Xero is an online accounting solution that offers capabilities for invoicing, receipt management, and bank transfers. In addition, it offers customized sales tax and tax filing options for small business through dedicated sales tax modules. Xero also offers a dedicated tool for accounting practices called Practice Manager.

Key features of Xero’s tax management modules include:

  • Automatic sales tax calculation: Automatically updates sales tax rates in real time to reflect changes based on the current tax rate. Enter the sales tax rate for your state or region by changing the default settings, and then the platform automatically calculates the sales tax for each transaction.
  • Integrations with other business solutions: Xero integrates with Avalara TrustFile, dedicated sales tax software with more features to help you quickly file sales tax returns and stay compliant.
  • Default tax rate: Set the default tax rate for sale or purchase transactions.

Xero tax reporting dashboard

Xero’s Reports dashboard, which provides a summary of all reports, including tax reports (Source)

Common user feedback trends

Based on analysis of user reviews on Capterra from tax software users at small businesses, here’s an overview of what they like about Xero software, as well as those areas they feel could use improvement.

What users like

  • Ease of filing tax returns: Capterra reviewers appreciate that they can share their consolidated tax statements with their accountant, who can then make or suggest changes for end-of-year handoff. Reviewers also like that Xero links to the Internal Revenue Service (IRS) website, making all tax forms readily accessible.
  • Specialized sales tax features: Reviewers like that they can use the dedicated sales tax module to automate sales tax management.
  • Streamlined interface: Reviewers find Xero easy to work with, but also point out that it gives small businesses all the needed accounting tools. They find the interface to be streamlined and user-friendly; they like that it describes each tax component when they hover over it. Reviewers go on to point out that the streamlined interface makes filing tax returns much simpler and reduces the amount of help needed from an accountant.
  • Easy integration with other software: Capterra reviewers like that Xero offers multiple integration options with other cloud-based software apps such as CRM and project management tools. They also mention that the solution offers strong security options with multiple layers of data encryption through TLS (Transport Layer Security) while integrating financial data from other software platforms.

What users think could be improved

  • Customer support could be more responsive: Capterra reviewers indicate that the online help forum is difficult to navigate and is slow to answer customer queries. Many Capterra reviewers also say they’d like to see a swifter response time to emails or phones calls, so they could resolve their issues within 24 hours.
  • Improve reporting on tax report errors and exception handling: Capterra reviewers indicate there is no explanation or error report generated when something goes wrong, e.g., if a pension filing doesn’t go through successfully, Xero will notify them that it has failed but give no indication as to why.

Who should use Xero?

If you are a small retail or e-commerce business, and you worry about applying the right sales tax rates across state lines or internationally, then Xero is a good option. It offers default tax rates which can be customized by sales managers if there is a change in the sales tax rate, and you can add as many components and tax rates as you need.

2. QuickBooks Online: Maximizes small business tax deductions

QuickBooks Online is cloud-based accounting software that features a dedicated dashboard for tax management, which small businesses can use to file taxes, manage sales tax, and automate tax deductions on a quarterly basis.

Key capabilities of QuickBooks Online for small business tax management include:

  • Tax deduction automation: Automatically arranges business expenses into the correct tax deduction categories to reduce manual data entry.
  • Upgrades for self-employed individuals with TurboTax: If you are self-employed and want additional help with tax management, QuickBooks offers packages that will export Schedule C directly into TurboTax.
  • Quarterly tax management: Helps you plan and save for taxes throughout the year by providing quarterly tax calculations.

QuickBooks Online tax reporting desktop and mobile interfaceDashboard and user interface of the mobile app for tax management of QuickBooks Online (Source)

Common user feedback trends

Based on analysis of user reviews on Capterra from tax software users at small businesses, here’s an overview of what they like about QuickBooks Online software, as well as those areas they feel could use improvement.

What users like

  • Easy to manage taxes from anywhere: Capterra reviewers point out that, since QuickBooks Online is cloud-based and available anywhere they have an internet connection, they have flexibility when filing taxes. They like that they can access their records while on a business trip and file their tax returns through their mobile devices.
  • User friendly and easy to set up: Capterra reviewers like that the back-end interface of QuickBooks Online does not require any prior knowledge of bookkeeping or accounting, and that it’s simple to set up by just filling in your business details and linking your bank account.

What users think could be improved

  • Make the online version as quick and efficient as desktop: Capterra reviewers mention that they find the online version of QuickBooks to be slower than the desktop version. Because of server issues or slowdowns, it can take longer for QuickBooks Online to process tax deductions. Many Capterra reviewers mention that they prefer the desktop version for this reason.

Who should use QuickBooks Online?

If you are self-employed and looking for a tax management solution, QuickBooks Online is a good option, as it helps you cross-check your tax deductions through the accountant assist feature. With this feature, you can invite your accountant through remote screen share and share your account details to make sure you’re ready to file.

3. FreshBooks: Robust mobile tax management

FreshBooks is cloud-based accounting software that—in addition to managing online invoices, expenses, payments, and project estimates—can help you e-file your taxes and manage sales tax to be better prepared for tax season.

Key small business tax planning features of the solution include:

  • Customizable tax rate: Helps you set a tax rate for different tax categories of sales transactions.
  • Multiple integrations with other tax tools: Allows you to explore more options for tax management and expand the product’s capabilities by integrating with other tax tools, such as Avalara TrustFile.
  • Tax report management: Prepare taxes more quickly by generating a consolidated report of all your financial transactions—including profit and loss, payments, and expenses—in one place.

FreshBooks sales tax management dashboard

Sales tax management dashboard of FreshBooks that allows you to view your sales tax report by particular date range, sales tax type, and currency (Source)

Common user feedback trends

Based on analysis of user reviews on Capterra from tax software users at small businesses, here’s an overview of what users like about FreshBooks software and those areas they feel could use improvement.

What users like

  • Convenient mobile tax updates: Capterra reviewers like that FreshBooks’ mobile app helps them keep track of tax reports when they’re on the go or meeting with clients.
  • Responsive customer service: Reviewers also indicate that FreshBooks’ customer service is very responsive when it comes to resolving technical issues related to filing their taxes.

What users think could be improved

  • Add more integrations with other business tools: Capterra reviewers would like to see integrations with project management and even more financial management tools, so they can get the most out of the software.

Who should use FreshBooks?

Agencies and consultancy firms, such as an advertising agencies, should consider FreshBooks to manage tax reporting, as it offers detailed tax reports that can be easily viewed on a mobile device.

Next steps

Before choosing new software, you must assess whether the features of a potential solution meet your business requirements, including your budget.

Here are some recommendations to help you choose the right tax management software:

  • Sign-up for a free trial: Many tax accounting tools offer free trials (including the three featured in this article), so you can test the software before buying it. Free trials typically range in length from 14 to 30 days, to give you enough time to gauge whether the features of the accounting software will meet your requirements. 
     
    Note: Not all features are available in a free trial period. However, the features given in the free trial should be sufficient for you assess the software interface, reporting tools, integrations, and other core features.
  • Evaluate multiple accounting tools before making a purchase: We recommend evaluating three to five options when shopping for a new software tool. By comparing multiple platforms, you are more likely to find a tool that offers everything you need and avoid overpaying for features you won’t use.
  • Choose a tax tool that integrates with your existing accounting platforms: If you already have accounting software, choose tax software that integrates with it. Integrations between multiple software tools can save you money, and you’ll also. For example you might already have an accounting software that takes care your tax compliance but have a business requirement for managing sales tax.


Methodology
The solutions highlighted in this article are the tax accounting tools that have the highest average overall user rating from small business users at the time of writing. For this article, we evaluated 718 reviews for all accounting software systems out of which approximately 403 user reviews on Capterra were exclusively from small business users.

Here’s an overview of our method for choosing this list of top-rated apps:

  • We analyzed reviews from tax accounting software users and shortlisted those products that had 4+ out of five stars with a minimum of 20 user reviews.
  • From that list, we considered only those which are listed on Capterra.
  • The “common user feedback” sections include “what users like” and “what users think could be improved” for each product, based on feedback from users who left reviews.
  • The “who should consider this software” section is a summary based on analysis conducted of the general comments from software users. This section highlights the most popular features of the software product and recommends who should consider buying that product and why.

Looking for Accounting software? Check out Capterra's list of the best Accounting software solutions.

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About the Author

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Abhishek Singh

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Abhishek has been writing blogs on Capterra to help SMB’s decide the best software for their business. He has over seven years of experience in writing and editing articles related to technology, education, and business domains.

Comments

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Thank you so much for sharing these ideas, I suggest one more accounting and billing tool Accountsbook it has multifunctional features such as Invoices, Reconcile Bank Accounts and File Tax Returns.* Inventory Management. Exhaustive Reports. Automatic Bank Feeds. Client Portal. Project Time Tracking. Purchase Order. Services: GST Compliant Invoice, GST Filing, Inventory Management. I am using it from the last five years and I found it so user friendly and easy to use even you are not an accountant.

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