Small businesses are increasingly burdened with tax preparation costs, with a majority spending over a week per year on federal tax preparation and thousands of dollars on external accounting firms, according to the National Small Business Association’s (NSBA) 2014 Taxation Survey released last week.
According to the report, “the current U.S. Tax Code punishes work, investment, risk-taking and entrepreneurship, and is becoming an insurmountable hurdle for the growth of existing businesses and creation of new firms.”
This year “nearly 60 percent of small firms spend more than 40 hours per year on federal taxes alone,” while 40 percent spend over 80 hours, or two weeks.
Nearly half spend over $5,000 on the administrative side, while “just 12 percent report they handle their taxes within their firms”—the overwhelming majority pays external tax firms to handle taxes.
The complexities of tax preparation led 73 percent to report “federal taxes have a significant to moderate impact on the day-to-day operation of their business.” As such, 67 percent “support broad tax reform that will reduce both corporate and individual tax rates coupled with reduced deductions.”
The survey, conducted online last month with over 1,100 small businesses as participants, found that the most widely embraced deficit reduction proposals include entitlement-spending reforms and “an across-the-board budget cut for federal agencies.”
Heritage Research Fellow Curtis Dubay released a report last week outlining the benefits of tax reform, which would include a healthier economy that would yield higher annual incomes and a system where everyone pays “their fair share.” Meanwhile, the tax filing process would be easier, less burdened by government influence, and less likely to be impacted by the IRS’ “bad behavior.”
However, Dubay noted, “tax reform is unlikely this year because of the one-sided nature of current efforts”—namely Rep. Dave Camp’s (R–Mich.) proposal that is faced with “little willingness to advance the cause beyond what either President Obama or the Senate is prepared to do.”