Long hours and hard work comes with owning a small business. Few entrepreneurs would have it any other way. It’s the price they pay to live their American dreams.
But not everyone welcomes overtime and extra effort to get the job done. The IRS, National Taxpayer Advocate Nina Olson reported to Congress recently, is suffering “workload overload,” chiefly due to the increasing complexity and frequent changes in the U.S. tax code. Between 2001 and 2010, the revenue rulebook was revised 4,430 times — an average of more than once a day.
That won’t surprise small business owners who bear the brunt of unending alterations to tax requirements and paperwork. That’s why nearly 90 percent of owners now hire professional tax preparers to complete their returns.
Where Main Street and Washington differ is about the solution. Olson says the IRS needs more money. President Barack Obama agrees. His fiscal year 2012 budget request for the agency jumped nearly 10 percent to
$13.3 billion, partly to add 5,000 more employees to a tax-collecting force that already exceeds 100,000 workers.
The National Federation of Independent Business, the nation’s leading small business organization, has been telling Washington for years the solution is not more money or more agents and enforcers, but true tax reform. Don’t fix just the incomprehensible code, but also enlighten IRS employees to appreciate the vital role free enterprise plays in creating jobs and stabilizing the economy. They need to realize that small businesses aren’t miniature versions of big corporations — 75 percent file their taxes as individuals. Compliance with today’s tax rules costs them nearly 70 percent more on average than large firms pay.
Since tax day, April 17, is close, perhaps it’s a good time to offer some helpful tax tips — not for filers, but for members of Congress and the president. These simple, but crucial, reforms could ease the burden on both small business owners and government tax writers.
n Simplify the code. This could save small business owners time and money they could invest in rebuilding their enterprises and help lower unemployment. Plus, a simplified tax code could reduce taxpayer errors, bringing in more revenue to trim the federal tax gap.
n Keep tax rates low for small businesses. Again, the more money they retain, the more they’ll reinvest in growth and work forces.
n Find a permanent solution to the estate tax that protects all family businesses. Future generations should be able to keep family businesses alive and contributing to the economy.
n Get rid of the alternative minimum tax. It has outgrown its original purpose and has now begun gobbling up middle class taxpayers’ earnings.
n Allow self-employed business owners who buy their own health insurance to deduct 100 percent of their premium costs.
There are many additional repairs that could improve the tax code. That includes new legislation by U.S. Reps. Aaron Schock and Bobby Shilling and Sens. John Thune and Maria Cantwell to revise 099-K rules.
But by implementing these five tax tips quickly, Washington can restore certainty for America’s entrepreneurs, pave the way for greater code improvements and unburden those overworked IRS employees.