While your small business taxes may not exceed your payroll expenditures this year, the sum will probably be more than your mortgage payment (or yearly rent), marketing costs, and vehicle expenses. It is a reality that you have to walk down this plank every year at this time.
A primary concern to be taken seriously:
Taxes are the number one concern to small business owners – millennials as well as baby boomers – far outweighing the stressors of governmental regulations, customer service, marketing, or profits. In addition to the income taxes on profits you must pay the government, as a small business you are also responsible for Social Security, Medicare, sales taxes, property, taxes, and excise taxes. The mechanics of compliance are a serious undertaking and cost.
That is why approximately 88 percent of small businesses employ professional tax preparation services in order to prepare their tax returns. And it doesn’t end with yearly income tax preparation – most small business owners outsource payroll service providers and assistance with the estimation of quarterly personal estimated taxes.
Due diligence for tax preparation requires substantial time and resources. Tax return preparation requires several tasks that can only be undertaken by a small business owner or their trusted employees. For instance, all record keeping duties, tendering of prompt payments, and time required to consult with tax preparation service providers.
These tax preparation duties drain a small business’s human resources:
• Record keeping man hours required for self-employed individuals to prepare a Schedule C accompanying Form 1040 averages 3 hours and 36 minutes according to the IRS.
• Return preparation time invested in compiling and sending in a Form 1040 exceeds 3 hours.
• Most small business owners spend approximately 32 hours per year to organize and prepare their tax reports.
What the future holds
The tax consequences for 2015 are not even settled because over 50 tax rule that expired in 2013 only to be extended through 2014 have yet again expired. The House is attempting to favor small business such as:
• The Sec. 179 deduction, and
• The 100 percent exclusion for gain on the sale of small business stock options.
The Senate has not addressed making these benefits permanent and whether or not President Obama will uphold any permanent tax legislation is uncertain.
Tax to-do list for 2015
• Attend to taxes year round because they will always have a direct impact on your profits margin.
• Seek a professional tax preparation (and payroll) service to help you save time and money.
• Pay attention to tax reforms throughout the year – post April 15th.
• Keep abreast of the new and watch for Congressional tax reforms.