Taxes may already be a fond memory for you if you’ve filed your 2011 tax returns, but unfortunately there’s no time to rest. The clock keeps ticking as tax obligations continue unabated for this year and beyond. According to a recent NFIB survey, tax uncertainty continues to plague small business.
Here are some of the survey’s findings:
- 20% of small business cited taxes as the single most important problem facing them today.
- 22% said it is the single most important external impediment to growth.
- Small businesses spend on average $74 per hour to comply with the federal tax code, which is the most expensive paperwork burden imposed on small businesses by the federal government.
- 88% of small business owners use paid preparers to complete their tax returns.
What does this uncertainty do to small business and the economy? The NFIB fact sheet says that it
“hinders long term planning and create[s] uncertainty which prevents small businesses from making investments.”
It drains small businesses of valuable resources that could otherwise be spent on hiring, research, and other activities that would benefit the nation.
What’s up for 2012?
If Congress fails to take action now, the more than four dozen tax breaks that expired at the end of 2011 will not apply for 2012. This means:
- Many small business owners will owe the alternative minimum tax (AMT), especially those living in high-income tax states; higher taxes on owners means less money for hiring, etc.
- Businesses won’t be able to claim the research credit or many employment-related tax credits; the incentives won’t be there to incentivize.
What’s up for 2013?
If Congress does not make changes for 2013, it will be “taxmaggedon.” What to expect in the absence of any Congressional action:
- The Bush-era tax cuts will expire. This pushes the top tax rate up to 39.6%, the capital gains rate to 20%, and many other unfavorable tax rules.
- The Medicare surtaxes on earned and unearned income (as created by the Patient Protection and Affordable Care Act of 2010) will take effect for the first time.
What to do!
Become political. Whether you fall on the left or the right, you must urge your representatives to act. Just like a parent’s torment when a child goes missing, the uncertainty (not knowing what the tax rules will be) is killing us.