You only have to glance at the Internal Revenue Code - otherwise known as the US tax code - to realise the system is a complicated web. There are so many different elements to consider with thousands of pages setting out various rules for businesses and individuals.
So how is tax managed and how is technology used to ensure tax systems and administrative tasks flow smoothly? Let's take a closer look.
Tax-filing software for businesses
Filling out the right tax forms is an important part of business, with many companies now utilising advanced software to help them meet tax regulations and master an orderly approach to taxation. QuickBooks, for instance, makes it possible to prepare and file your tax returns while running financial reports so you don't miss any important deductions, income or other expenses that'll affect your tax payments.
Enhanced e-administration
Indeed, e-administration is becoming increasingly popular in the United States with increased options for online filing of tax returns making life so much easier. Through the IRS website you can prepare your taxes and deduct expenses and you can also use the Income Tax Withholding Assistant spreadsheet to calculate the amount of federal income tax to withhold from employees' wages. With everything in one place, the process becomes much simpler.
Electronic payment systems
Tax payments can also be made online with the Electronic Federal Payment Tax System (EFPTS) - making it easy to pay all your federal taxes. EFTPS is a free system offered by the U.S. Department of Treasury which not only breaks down tax code explanations, making them much easier to understand, but also takes the hassle out of tax payments. The system is also safe and secure with multi-layer protection which includes the use of a Taxpayer Identification Number (EIN or SSN), Personal Identification Number (PIN) and Internet Password. This, coupled with a secure internet browser, increases security significantly.
Added benefits of using EFPTS that you wouldn't get without technological assistance include the option to pay through a voice response system, immediate information through FAQs, how-to features and downloadable documents.
The analysis of Big Data
With tax departments facing increased pressure to act efficiently, technological tools are being used to analyse large data sets in order to generate deeper insights and a deeper understanding of the industry. Many tax administrations also report the use of behavioural insights and analytics to better understand how and why taxpayers act in a certain way. This can potentially lead to the design of more practical policies and interventions.
Indeed, big data systems make it possible for enterprises such as the IRS to analyze huge amounts of tax-related data. Tax specialists can also use the IRS database packed with tax filings from the nation's enterprises to assess clients' risk for tax audits.
There's an abundance of technology behind the current tax system. Tech advancements make tax a lot easier to handle for businesses while simultaneously allowing those higher up the tax ladder to analyse data and smoothen out processes.
