A Surprising Look at Tax Burden on Small Business

Drawing of a large jar with a few coins at the bottom. Title - Taxes: time and money

Taxes are your favorite, right? Okay, maybe it’s not the best part — yeah, you’re right it’s one of the worst parts of owning a business. Bookkeeping and taxes are most likely one of your (or one of your staff’s) greatest hassles.

According to the National Small Business Association, 40% of small business owners spent at least 80 hours doing their federal taxes in 2013. As a business owner or HR professional, isn’t there something better you could do with that time? Here are some scary statistics proving the tax burden on small business. Information provided by the NSBA 2014 Small Business Taxation Survey.

24% of small business owners said they spent 120+ hours dealing with federal taxes in 2014. That includes payroll, self-employment or any other business-related tax, filing reports, working with their accountant, estate planning, etc.

31% of small business owners said they spent $1,001 – $5,000 in 2014 on the administration of federal taxes. This cost does NOT include their actual owed taxes. It does include accountant fees, internal costs for administration of taxes, legal fees, etc.

Taxes Cost Your Business Time and Money

Top Tax Administrative Burden on Small Business Owners

  1. Income taxes (in a pass-through entity)
  2. Payroll taxes
  3. Corporate taxes (in a c-corp)
  4. State and local tax compliance
  5. Sales tax

Top Tax Financial Burden on Small Business Owners

  1. Payroll taxes
  2. Income taxes (in a pass-through entity)
  3. State and local tax compliance
  4. Property taxes
  5. Corporate taxes (in a c-corp)

47% of small business owners said the biggest burden on their company posed by the federal tax code is the sheer financial cost to their business.

39% said federal taxes have a significant impact on the day-to-day operation of their business.

Are You Feeling the Tax Burden on Your Small Business?

It’s worth examining how you currently address the financial and administrative burden taxes place on your business. Could you handle them in a more cost-effective manner? Maybe it’s worth evaluating whether the cost of outsourcing this burden is more profitable for your business than keeping it in house. Whatever you choose, it’s important to consider how an extra 120 hours and a few thousand dollars each year could impact your business.

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