By Karen Axelton
Today is tax day. How do taxes impact your small business? The National Small Business Association 2011 Small Business Taxation Survey has the numbers.
“Small businesses consistently rank reducing the tax burden among their top issues,” the report notes. The cost of taxes is a factor in this, of course, but the report notes that and the increasing complexity of the tax code is increasingly becoming a major part of the burden. Fifty-seven percent of business owners in the survey said they spend one full work-week per year dealing with federal taxes; 38 percent spend two work-weeks; and 23 percent spend three work-weeks or more.
Dealing with taxes costs small businesses money as well as time. When asked how much they spend on administration related to federal taxes (preparation fees, legal fees, internal costs, etc.), one-third of small business owners surveyed said they spend more than $10,000 annually. (The majority – 52 percent—spend between $1,000 and $10,000.)
Good news—87 percent of respondents use professional tax preparers or accountants to handle your taxes. Just 4 percent do it themselves with software, and another 4 percent do it themselves on paper. Having a professional handle your taxes is a smart move for maximizing your savings and avoiding costly errors.
Payroll taxes were ranked most burdensome and state and local taxes second-most burdensome in terms of both finances and time. One in four businesses surveyed said they spend more than $500 monthly on payroll services.
Despite the availability of tax deductions, many small businesses aren’t taking full advantage of the deductions available. For example, just 47 percent of those who have a home office take the home office deduction. The primary reason for not doing so? Fear of being audited was cited by 58 percent, while 24 percent said the paperwork involved was too complex. However, if the requirement to itemize costs were removed, 75 percent of those with home offices said they would take the deduction.
In a similar vein, just 32 percent were taking advantage of a in the Small Business Jobs Act of 2010 that allows self-employed individuals to fully deduct the cost of their health insurance for 2010. Thirty-two percent were not planning to take advantage of it, and 19 percent weren’t aware of it. In regard to the new health insurance law, which offers some valuable tax credits to qualifying small businesses, a whopping 69 percent “weren’t sure” if they qualified for it.