Over the past few months, many small business owners or executives across the country have likely poured significant resources or time into preparing all the documents necessary for their annual tax filings. However, new data suggests that a large portion of these entrepreneurs might have considered themselves to be in tough positions in this regard.
Nearly one in every three small businesses across the country say they spend more than $10,000 every year when it comes to dealing with their federal tax filing, and the vast majority go through external professionals or accountants to get that work done, according to a new survey from the National Small Business Association. In addition, 83 percent of companies are so small that the owners actually pay their small business income as individuals, and all such executives cited either income or payroll taxes as the two biggest burdens they face at this time, both in terms of the financial cost and from an administrative perspective.
“Given that 40 percent of small firms report spending in excess of 80 hours per year on federal taxes, it is no wonder that a clear majority support broad tax reform that will ease complexity by reducing both corporate and individual tax rates, coupled with reduced deductions,” said NSBA chairman Jeff Van Winkle of Clark Hill in Grand Rapids, Mich.
Which deductions are being claimed?
Of course, small business also have many options when it comes to reducing their liability, and the ways in which these were taken advantage of varied widely, the report said. For instance, more than one in three wrote off Sec. 179 expenses, and 22 percent claimed the home office deduction. Another one in five used the bonus depreciation write-off. However, more than a quarter said they took no deductions. At the same time, more than three in five think that giving small businesses the ability to fully deduct their health insurance costs will help to improve small business growth nationwide going forward.
Owners looking to reduce their costs in any way might want to consider what they pay for other aspects of their companies, such as their small business insurance expenses. By shopping around for more affordable liability insurance coverage, for instance, they might be able to trim thousands of dollars from their bottom lines and then devote that money to more pressing needs overall.