The high tax rates and the complicated nature of tax codes are persistent tax concerns of a small business owner. As tax reform appears to be getting more complex, tax rates for small business owners continue to deplete the after-tax income that a business owner needs to re-invest in the business to allow growth and viability.
The actual out-of-pocket tax cost is an important issue, but many business owners seem to feel that the complicated nature of tax codes and the mountain of paperwork involved is actually a more significant problem. A study conducted by the National Small Business Association indicates that in the year 2012, sixty-four percent of small business owners reported that more than 40 hours per year is spent in dealing with federal taxes. Another forty-five percent reported spending more than 80 hours per year.
Important Tax Issues Facing Small Business
- Obama Care – Small business owners feel that the annual tax or fee placed on healthcare insurers will end up being passed along to them. If healthcare costs increase, it could possibly force business owners to trim personal insurance or employee benefits.
- Personal Tax Rate Increases – Many small businesses are viewed as “pass-through” companies since owners report all income on their personal tax returns. These companies would include sole proprietors, partnerships and S corporations. In these situations, all income is taxed at the owner’s rate. Single business owners with incomes of $200,000 or more and households with incomes over $250,000 will see their income taxes rise in 2013.
- Decrease in Deduction for Equipment Purchases – Section 179 of the Internal Revenue Code allows for a small business to deduct the cost of certain equipment in the year it was placed in service. These deductions are limited and the amount of this deduction seems to be decreasing each year. In 2011, the maximum deduction was $500,000, in 2012, the deduction decreased to $125,000. In 2013, the deduction for equipment purchases is limited to $25,000. Congress, of course, can increase this deduction at any time, but most small business owners aren’t counting on getting any big break.
The tax concerns of a small business owner continue to play a vital role in making important decisions concerning the business. Many are considering re-organizing the business, cutting employee benefits, re-thinking marketing strategies and other factors that can affect the profitability of the business.
At Roberts Tax Advisory we offer a broad range of services for business owners, executives and independent professionals. Our high standards, responsive service and specialized staff spells the difference between our firm and the rest. Our rates are affordable. We are experienced and we’re friendly. Please call us for a free initial consultation.