How Online Tax Calculators Can Tank Your Business

Online tax calculators
  • Why using online tax calculators is a bad idea for your business.

    Have you considered trying online tax calculators to get an idea of how much your business will pay next year? Don’t even consider it. These online tax calculators are seriously problematic for a variety of reasons. In fact, they can be a serious enough problem to impact your business for years. In extreme cases, relying on tax calculators can even lead you right into bankruptcy.

    What Are Tax Calculators?

    Online tax calculators are programs that use the various rules of the IRS to calculate how much you are likely to pay for next year’s taxes. You input various items, such as expenses, money earned, and other relevant information. The calculator will give you a quick estimate. Sounds pretty nice, doesn’t it?

    We can understand why so many people would want to use tax calculators like this to gauge their business payments. When you run a business, you often walk a thin line between profit and losses. However, these online tax calculators are seriously problematic, and you should avoid them at all costs.

    Why Are They A Problem?

    Online tax calculators are very inaccurate. That probably doesn’t surprise you, but you might not realize just how “off” most will be when estimating your tax payments. They can be wrong by thousands of dollars, money that you can’t afford to lose. While there are many reasons for these errors, we’ll take a look at how they can affect you before discussing them.

    Imagine getting an estimate from an online tax calculator that stated you’d be paying $5,000 in taxes. With careful deductions and skillful number crunching, you can work that down to about $500. Content, you go about your business operations like normal. However, when April 15 rolls around and you are ready to send in your taxes, you notice a problem.

    The online tax calculator was very wrong. You actually owed $10,000 in taxes and can only deduct a little over half of it. As a result, you’re stuck with a $5,000 bill that may make be impossible for you to pay. How did this happen?

    Online tax calculators don’t take into account your true earnings, just projected ones. They also ignore various tax credits and other items that you could have otherwise used to save yourself money. For an individual filing their personal taxes, these calculators may be useful. For a major business with fortunes that can vary wildly, it’s a different story.

    Are There Alternatives?

    Online tax calculatorsIf you are curious about using an online tax calculator, use the one set up by the IRS. While still imperfect, it at least has their seal of approval and is more likely to include updated rules and regulations. Personally, we suggest just talking to a professional about your taxes. In this way, you can get an estimate calculated by a person, not an algorithm on a website.

    Yes, even a professional can make mistakes that impact your business’ tax returns. However, these mistakes are likely to be easier to correct than the major blunders committed by online tax calculators every year.

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