Everyone has to pay their taxes, and small businesses are no different. But the ways in which those companies have to deal with that annual burden differs greatly from that of their larger competitors because they often don’t have an in-house accountant. Instead, owners often have to spend a lot of time and money dealing with paying their firms’ tax bills.
Today, about 1 in 3 small business owners report spending at least 80 hours on preparing their taxes this year, and about 1 in 4 said they paid more than $10,000 just to do their federal filings properly, according to the latest Small Business Taxation Survey from the National Small Business Association. Furthermore, 85 percent of these companies said they had to hire an outsider to handle this work, and many have had to plan these steps out months in advance.
“It is no surprise, given Congress’ inability to effectively address tax legislation last year, that there was an increase in the administrative burden associated with federal taxes,” said NSBA president and CEO Todd McCracken. “The tax code is irretrievably broken and now is the time for lawmakers to act.”
How do owners feel about the burden?
Perhaps understandably, the time and financial undertaking required has often been frustrating to entrepreneurs that have to divert time, attention, and resources away from the running of their business to this kind of work instead, the report said. Owners consequently favor reducing tax rates and scaling back deductions, but they believe that it would be problematic for lawmakers to only focus on reforming corporate tax code, as most smaller firms aren’t corporations. Timothy Reynolds, chairman of the NSBA and a small business owner himself, added that meaningful tax reform at the individual level will really be what helps smaller companies succeed going forward.
Owners who want to make sure their companies are well-positioned to deal with the burden of paying taxes every year might want to consider the benefits of improving their bottom lines overall. For instance, by taking the time to find more affordable small business insurance, including policies for general liability insurance, they may be able to free up thousands of dollars annually that they can then contribute to paying for whatever tax preparation services their firms may end up needing when filing season rolls around.