Answers to the most pressing questions about taxes for small businesses.
Tax policy. It’s one of the most significant factors determining whether small business owners succeed. In fact, half of the top 10 concerns identified by NFIB’s Small Business Problems and Priorities survey are tax-related. Nick Karellas, NFIB’s tax counsel, answers frequently asked questions on tax reform.
What are the biggest tax issues troubling small business owners?
High tax rates leave owners with less money to reinvest in their business. Most small businesses pay individual tax rates because they are organized as pass-through businesses, in which the owners report their business income on their individual tax return for the year. While large businesses pay taxes at the 35 percent corporate rate, small business owners can pay at rates as high as 39.6 percent.
Perpetual uncertainty surrounding business tax provisions makes long-term planning extremely difficult. For example, Section 179 small business expensing, which allows owners to deduct the costs of equipment purchases in the same year, must be continually extended retroactively at the end of the year. Enacting temporary tax policy on a backward-looking basis defeats the purpose of the incentive and frustrates business owners simply trying to run their business.
Tax code complexity means small business owners are forced to divert their attention from running their business to comply with their tax obligations. A complex tax code also increases the likelihood of
an IRS audit.
What tax reform measures would benefit small businesses the most?
Small business owners need tax reform that simplifies the tax code and lowers the high rates that hold them back from hiring and business growth. Tax reform must make small business expensing—Section 179—permanent at the current level ($500,000).
What are NFIB’s tax reform goals in 2015?
One of our major priorities is finishing the business left over from the last Congress. Unfortunately, Congress was only able to pass a single-year retroactive tax extender package that expired on
Jan. 1, 2015. Congress should address small business tax policy to give small businesses certainty.
We will work with tax-writing committees for a simpler, fairer code that’s more conducive to economic growth. NFIB will also educate new members of the House and Senate on the importance of tax reform for small businesses.
Visit NFIB.com/Taxes for more information on our tax reform efforts.
