Small businesses pay higher costs when it comes to regulations and compliances compared to their larger counterparts. How much more do they pay? When it comes to taxes, a new infographic from SCORE says tax compliance costs are 67% higher for small businesses than for big businesses.
Titled, “Tax Reform’s Impact on Small Businesses” the infographic highlights the challenges of preparing taxes. But it also looks at the impact of the recent tax reform on small businesses.
With the tax filing and payment date extended until July 15 due to the coronavirus outbreak there will be a small reprieve. However, the compliance costs small businesses face will still be here come July 15.
In the press release for the infographic SCORE CEO Bridget Weston, explains the cost small business owners are facing. Weston goes on to say, “This data supports the fact that small business owners are spending a considerable amount of time and money to ensure compliance.”
The Tax Compliance Costs to Small Businesses
When it comes to time, over a third or 34% of small businesses spend more than 40 hours preparing federal taxes. For small businesses, this is a huge chunk of time owners could be using to grow their business.
Another 18% spend 21-40 hours, 22% 11-20 hours and 26% 1-10 hours preparing their federal taxes.
As for cash, there is 15% of small business owners who spend more than $10K on the administration of federal taxes. There are 49% of businesses that spend between $1,001 and $10K and the remainder 36% spend $1,000 or less.
The biggest obstacle small businesses face is the tax code. As businesses get more complex, the tax codes can get overwhelming. And this is why owners have to take advantage of the resources they have available to them.
Weston makes this very point in the release. Adding, “Luckily, there are a growing number of free tax assistance resources, including those available on SCORE.org, and the expert guidance of our mentors who are helping small business owners navigate their most timely and cost-effective tax compliance options.”
Take full advantage of these resources as you establish your small business and grow. They will keep you up to date on the latest news and any policy changes taking place.
Tax Policy Changes
Tax policy changes have a bigger impact on small businesses because of their limited resources. For the 2017 Tax Cuts and Jobs Act, 20% of businesses said it had a negative impact. Almost the same number or 25% were positive, with 51% saying it didn’t have any impact on their business.
However, they are more pessimistic now. More than a third (35%) said they expect tax policy changes to have a negative effect on their businesses in the next 12 months back in the second quarter or 2019. This was up by 12% from the same period in 2018.
With its army of 10,000 volunteer business experts, SCORE helps entrepreneurs across all levels of experience. You can take part in the mentoring sessions, workshops and educational services the organization provides at more than 250 chapters and 1,500 communities nationwide.
According to SCORE, its volunteers were responsible for helping to create 29,681 new businesses and 67,706 non-owner jobs in 2019.
Take a look at the infographic for more.