Payments Innovation Can Take Stress Out of Small Business Tax Prep

Small- to medium-sized businesses (SMBs) face a variety of challenges. Tax prep shouldn’t be one of them.

Yet for many SMB owners, tax season is synonymous with stress. Manual data entry, reconciliation of payments and the sheer complexity of tax regulations increasingly consume valuable time and resources, with business owners buried under stacks of receipts and dizzied by spreadsheets that won’t tie.

Many SMBs lack in-house expertise, often relying on external accountants or consultants. This reliance can lead to increased costs, communication gaps and potential delays.

However, a wave of payments innovation is rewriting the script on tax preparation, transforming what was once a tedious, paper-heavy ordeal into a streamlined, automated process.

As underscored by executive commentary during QuickBooks and TurboTax parent company Intuit’s Tuesday (Feb. 25) second-quarter earnings report, as well as marketplace news like Digits adding new features to its artificial intelligence accounting platform designed for startups and SMBs Feb. 13, advancements in automation and AI are increasingly providing SMBs with the tools needed to streamline tax preparation, reduce human error, and maintain compliance with local and global tax regulations.

Read also: Making Sense of FinCEN’s Jan. 1 Business Ownership Reporting Requirements

Payments innovation has emerged as a powerful antidote to the tax preparation headache.

By integrating smart payment solutions with accounting software, SMBs can automate much of the tax preparation process, from data collection to reporting, helping to mitigate mistakes in tax filings that can lead to penalties and audits.

As the SMB ecosystem becomes increasingly dynamic, small firms must consider taking proactive, rather than reactive, action. Corporate delinquencies are at the highest rate they have been over the past eight years, and regulatory changes like the Financial Crimes Enforcement Network’s (FinCEN) Small Entity Compliance Guide are now coming into effect under the Corporate Transparency Act.

“Anytime that there is something new in the tax law, there aren’t a lot of people who are really experts, which makes it easier to mislead taxpayers through false advertising and tactics like spreading it on social media,” Wendy Walker, vice president of Regulatory Affairs at Sovos, told PYMNTS in September, adding that businesses should ensure that their tax preparers are reputable and thoroughly vetted, especially when switching to a new preparer.

The marketplace itself is responding with innovative solutions. Over the summer, Docyt added an “AI bookkeeper” called GARY to its digital back-office solutions for SMBs. GARY is built on the Docyt AI software-as-a-service (SaaS) financial management platform that integrates expense management, revenue accounting, industry vertical reporting and financial reporting of key performance indicators.

See also: SMBs Need to Cut the Check Before Checks Cut Them

While tax season will likely never be a cause for celebration, payments innovation is making it more manageable for SMBs. By automating data flows from payment systems to tax forms, businesses can ensure accuracy and compliance.

New payment technologies like virtual cards and embedded FinTech are not just working to cut the stress out of tax prep, they are also helping businesses reclaim time and resources.

“For [SMBs], virtual cards are about control — managing spending and improving expense tracking through automation,” Widad Chaoui, vice president and general manager, corporate program product management at American Express, told PYMNTS in December.

For SMBs expanding internationally, AI tools can automatically adapt to local tax regulations, apply appropriate tax rates, and generate compliance-ready reports for each jurisdiction. This level of automation not only mitigates compliance risks but also simplifies the complex accounting processes associated with international trade.

“Everything’s going more cross-border and getting regulated, so tax compliance regulation is huge for new business models in new markets,” Sovos CEO Kevin Akeroyd told PYMNTS in April.

Faulty cross-border payments cost merchants in the United States at least $3.8 billion in sales last year, according to the PYMNTS Intelligence report “Cross-Border Sales and the Challenge of Failed Payments.”

Despite the advantages, some SMBs are hesitant to adopt automation and AI due to concerns about cost, complexity and data security. However, many modern solutions are designed with small businesses in mind, offering scalable pricing models and user-friendly interfaces.

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