Complexity and inconsistency within the tax code continue to be a major problem for small businesses, with one out of four small businesses reporting that they need to spend 120 hours or more per year on the administration of federal taxes, or three full work weeks, according to a new survey.
The National Small Business Administration released its 2013 Small Business Taxation Survey on Thursday, offering detailed insight on how small businesses are affected by federal taxes.
Federal taxes have huge implications on small businesses, with 74 percent reporting that federal taxes have a significant to moderate impact on the day-to-day operation of their business, said NSBA president and CEO Todd McCracken in a statement. Our tax system punishes work, investment, risk taking and entrepreneurship and is unquestionably broken.
The overwhelming majority of small business owners said they support broad reform of the federal tax code, with both corporate and individual tax reform, in conjunction with a reduction in business and individual deductions. Reducing the deficit is another key issue for small business, and the number one method for doing that supported by small businesses (82 percent) is through tax reform that creates economic growth and generates federal revenues.
Underscoring the complexity of the federal tax code is the fact that 84 percent of small-business owners must pay an external tax practitioner or accountant to handle their taxes. Furthermore, when asked to rate the most significant challenge posed by the federal tax code to their business, the majority, 55 percent, picked administrative burdens while 45 percent said financial burdens.
Given that the overwhelming majority of small businesses (83 percent) pay taxes on their business at the personal income level, or are so-called pass-through entities, a broad reform of our tax system is the best way to truly help small business and ease the massive, and growing tax burden, said NSBA chair David Ickert of Air Tractor, Inc. in Olney, Texas.