The tax deadline is less than a week away, but small businesses have been struggling to complete their paperwork for months.
This week, the National Small Business Association (NSBA) released its 2011 Small Business Taxation Survey which found that many small business owners are weary from the complex nature of the U.S. tax code, as well as the inconsistency of the process. This, they say, is leading to time and money being wasted—two resources that small business owners just don't have enough of. The survey was conducted among more than 300 small business members of the association, representing every industry in the U.S.
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Molly Brogan, vice president of Public Affairs for NSBA, said the amount of time that small business owners actually spend on doing their taxes was eye-opening. One in three small business owners annually spend two full work weeks on federal taxes, according to the survey results.
"That is a lot of time," Brogan said. "It's not insignificant for a small business."
Even more, 87% of small business owners reported they have to pay an outside accountant or return preparer because the forms are too complicated to do independently. Brogan said large corporations rarely face this type of adversity and complete their own taxes in-house.
"It’s a pretty significant chunk of change just to be compliant with the tax code," she said.
The most burdensome taxes, according to the small business owners surveyed, are payroll taxes, financially and administratively. Only 44% of small business owners use an external payroll company, and even those that do hire outside firms reported a lot of time spent on payroll taxes.
Less than half of eligible small business owners (47%) use the home office deduction on their forms, because of concerns it will "red-flag" their return for an audit, the survey found.
Brogan said that major reform is the only way this process can be streamlined and made more efficient for small businesses. The NSBA strongly supports "Fair Tax" reform, she said, that replaces income and corporate tax with a 23% sales tax on any good sold.
"We think this is just a smarter, fairer way to tax," she said. "Our members are strongly committed to broad reform."