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Tax Code Burden on Small Business

Tax Code Burden on Small Business. David L. Hurley, President. President’s Advisory Panel on Federal Tax Reform March 8, 2005 Tampa, Florida. Introduction. Landmark started business in 1984 80 employees Approximately $5 million in revenue Civil Engineering and Land Surveying Services

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Tax Code Burden on Small Business

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  1. Tax Code Burden on Small Business David L. Hurley, President President’s Advisory Panel on Federal Tax Reform March 8, 2005 Tampa, Florida

  2. Introduction • Landmark started business in 1984 • 80 employees • Approximately $5 million in revenue • Civil Engineering and Land Surveying Services • Labor costs represent 60% of total revenue

  3. Survey of Small Business Paperwork Burdens • NFIB Study - Coping with Regulations (2001) • Survey of small business members about greatest compliance difficulty • Survey results show that tax rules create the greatest difficulty for responding small businesses

  4. What types of regulations, federal, state or local create the greatest difficulty for you?

  5. Most Problematic Tax Regulations • NFIB Study - Coping with Regulations (2001) • Survey of small business members about greatest compliance difficulty • First five categories were supplied, next six categories were volunteered responses • Survey shows that income tax withholding represents a significant burden

  6. What type of tax-related regulations?

  7. Paperwork and Recordkeeping Burden • NFIB Study - Paperwork and Recordkeeping Burden (2003) • Survey of small business members about recordkeeping burden and who prepares tax records for small businesses • First Slide - Survey shows significant number of small businesses used an outside person to compile records • Second Slide – Survey Shows that per-hour recordkeeping costs were highest for tax-related records

  8. Who does your business's tax records?

  9. The Per-Hour Cost of Small Business Record-Keeping by Record Type

  10. Tax-Driven Business Decisions • Capital Acquisitions and Expenditures • Buy vs. Lease • Section 179 Expensing • Expiration in 2008 creates unintended consequences for equipment vendors • Volatility of ever changing rules creates uncertainty for buyers and sellers • Makes planning difficult • Vehicle Example • 6,000 lb. SUV vs. smaller vehicle for small business needs?

  11. Small Business Compliance Costs • Compliance Costs Related to Taxes for Small Business are Significantly Higher as a Percentage of Revenue • Costs for larger businesses are a smaller proportion of their revenues. • Federal Tax Compliance is Only One Layer of Burden for Small Businesses • S Corporation Example • $630 of compliance costs for other line of business with approx. $20,000 of revenue (3% of total)

  12. Conclusion • Important Role of Small Business in the Economy • High Compliance Costs to these Small Businesses • Don’t Forget the Important Role of Small of Business in Providing Information and Withholding to Taxing Authorities • Tax Collector for Federal, State and Local Governments

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