The good news is that business is terrific right now for the professionals paid to prepare tax returns. The bad news is that the tax code that ensures their success weighs down an essential sector of job creation: small business.
Fully 91 percent of small business owners surveyed recently by the National Federation of Independent Business reported they simply can’t navigate the twisted and tangled code. They’re left with no choice but to shift the task to experts.
The just-released NFIB survey on taxes and spending found that small business owners, by an overwhelming 85 percent margin, agree the code is too complex and in dire need of overhaul.
At the same time, these entrepreneurs view Washington’s ability to improve the voluminous law with deep skepticism. More than half — 55 percent — have no faith that politicians’ changes to the Internal Revenue Code will result in less complexity. Some actually fear lawmakers will make things worse by tinkering.
Typically, small business owners are an optimistic lot. But when it comes to trusting those elected to federal office, there’s a clear disconnect between what they hear about tax reform during campaigns and action after the polls have closed.
While the famous “fiscal cliff” deal brought needed permanency and certainty to much of the tax code, it actually increased the complexity of the code substantially. Small businesses might have an easier time planning for the future, but the tax code remains a complicated mess.
For small business owners to adjust to this situation, there are a few easy steps that can make filing for taxes in 2014 more palatable.
Whether owners get their advice from professionals or manage to fill out their own returns, it’s important they be sure to take advantage of temporarily extended provisions such as the Section 179 depreciation deduction, which was increased to $500,000 through the end of this year and is retroactive for 2012.
Although April 2014 seems far in the distance, it’s not too early to start paying close attention to how changes made this year to the code will affect future tax liability and requirements. Special notice should be paid to new rates and the requirements found in the new health care law.
In addition, small business owners need to become familiar with new estate tax rates and revised information reporting rules, especially the new Form 1099K that requires details about payment card use and third-party network transactions.
Right now, this is information that most small business owners will take to their accountants. Maybe, someday, that extra step, and that extra expense, won’t be necessary. A simpler code would move small business owners to the tax day winners column.