There are many file formats, the most common ones may be .COM for a command file or .DAT for a data file, but what is a tax exchange format (TXF) file? TXF files are utilized in certain accounting programs and imported to accountants or tax preparation software.
Purpose of the TXF File
TXF, stands for Tax Exchange Format. In financial accounting software, such as Quicken, QuickBooks, and industry specific software, all of your accounting records may be saved as a TXF file depending upon the software utilized.
When your accounting data is backed up, if you watch the process on your computer or network, you may see two forms of back up files, TXF and BAK for backup file. If your network goes down and you need your accounting information back, the system will utilize the BAK file which converts your data back to its original form.
A tax exchange format TXF file on the other hand, is a file format recognized by tax preparation software and accountants who can use the data contained within these compressed files to help prepare your tax return. Tax preparation software such as TurboTax and H&R’s TaxCut also recognize the TXF file format if you complete and file income taxes without the services of a tax professional.
Limits of the TXF File
Often, some financial accounting records saved in a TXF file format may need further clarification once received by the tax preparation software or accountant. For example, when capital gains from stocks or bonds purchased are sent in a TXF file, the file doesn’t recognize the date purchased or date sold. In cases such as these it’s important to either review your tax form from the tax preparation software you utilized or contact your accountant to verify purchase and sold dates.
Save time throughout the tax year by entering and keeping both your personal or business accounting records up-to-date so the year-end rush won’t delay your TXF file transfer.
Using the TXF Format
First find out if your accounting software, personal or business, accepts a TXF format. You can do this by calling their customer support line or reading the help section. If it does support the TXF format, when you are ready to upload the data to the tax preparation software, make sure you save the information with the TXF file extension. Again, after you utilize the tax preparation software to complete your tax return, review it to ensure information has pulled over correctly.
If you are sending your business accounting records to your accountant, also choose the TXF file extension when saving. You can email business accounting records in a tax exchange TXF format. This often saves your accountant a manual review of your accounting records as most accounting firms are familiar with TXF file formats and are able to convert the data into both simple and complicated tax returns.
Before you purchase or download any accounting software whether you intend to use it for personal or business accounting, make sure it will create a tax exchange format (TXF) file. Further, choose a tax preparation software or accounting firm that accepts at TXF format to ensure your data is correct and easily read by the program or tax professional.