It’s Tax Day eve, which means most small businesses have already filed their taxes for the year. Here’s a look at how small companies manage their federal taxes, courtesy of the National Small Business Administration, which surveyed 350 of its members.
Surprisingly, the biggest beef small companies have with Uncle Sam isn’t the amount of taxes but how complicated it is to do them. When asked to rate the most significant challenge posed by the federal tax code to their business, the majority of NSBA’s members (56 percent) chose some type of administrative burden, while 44 percent cited financial burdens.
More businesses said their taxes were time-consuming this year than last year. This year, 64 percent of small businesses reported they spend more than 40 hours per year dealing with federal taxes, up from 57 percent last year. Forty-five percent report spending more than 80 hours per year — two full weeks — just on managing federal taxes.
The majority of small businesses — 85 percent — use a tax practitioner, with most spending between $1,000 and $5,000 on the administration of federal taxes. While income taxes were cited as the largest administrative burden, payroll taxes were actually cited as the biggest financial burden.
What’s more, a large segment of respondents — 40 percent — said they were not aware of the new 2012 requirement that all health insurance spending be reported on employees’ W2 forms. The data is strictly informational and won’t be taxed additionally, but it was included as a provision of the health care reform law with the aim of helping employees better understand the true cost of health coverage.
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