Guide to Tax Preparation Software for Small Business

Assess your needs

Is your business small and simple? Expanding and complex? Are you a local operation, statewide, national, international? The size and complexity of your business will dictate how powerful your tax preparation software needs to be.

I recommend: Start by making a list of the taxes you may be responsible for paying or collecting. These should include federal, state and local income taxes; payroll taxes (if you have employees); and sales taxes. Business Owner's Toolkit has tips on determining your requirements.

Find income-tax software

Income tax software has become more sophisticated, particularly in dealing with businesses and business tax deductions. Look for a system that includes regular updates and a good online help service. Some major software providers have demos of their products online.

I recommend: A site like Amazon or Office Depot has descriptions of tax preparation software. You can also go on the sites of the more popular software packages like TurboTax or TaxCut and look for offerings geared toward small business owners.

Find payroll-tax software

If you have employees, you'll need to deal with withholding of income taxes and a number of other taxes. Fortunately, there are software programs that can do most of the work for you. Many payroll software companies have you use their software online for a monthly fee.

I recommend: Mastertax offers a complete payroll software package. Paychex, Paycycle and ADP all offer their automated payroll solutions to small businesses.

Find sales-tax software

Sales and use taxes differ by state and community, so it's important to assess the right amounts. Fortunately there are numerous software solutions to meet just about any need. Be sure your software provider gives regular updates to track changes by taxing authorities.

I recommend: One of the biggest providers of sales tax solutions is Sabrix. Numerous other companies compete in the sales tax space, including Independent Systems and Burr Wolf.

Going global

Today's global economy presents new opportunities for small business, but it also poses new problems in dealing with foreign sales and use taxes. Software solutions can help you cut through the overseas clutter.

I recommend: The leading supplier of global solutions, Sabrix, has an online service that lets you test-drive the system.