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What Do Tax Stats Tell Us about Small Business?

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The IRS released statistics on 2014 income tax returns filed by individuals.

It includes income and losses reported by sole proprietors on Schedule C, farmers on Schedule F, and items passed through to owners of partnerships, limited liability companies, and S corporations on Schedule E.

By comparing 2014 statistics with those for 2013, we can see how small business owners are doing.

Income and losses

For 2014, there were over 24 million Schedule C filers. This represents about 16% of all individual taxpayer. The number of filers shows a little bit of growth. In 2013, there were 23.5 million, which means there were a half a million more sole proprietors in 2014. Net income (income less loss) also grew a little, from $302 billion in 2013 to $317.3 billion in 2014.

For 2014, there were nearly 8.7 million individuals reporting income from pass-through entities, up from nearly 8.5 million in the previous year. Net income was also up: $583.8 billion in 2014 compared with $531.6 billion in 2013.

However, the number of returns for farmers declined (1,784,000 for 2014 compared to over 1,813,000 in 2013. Net income also declined.

The number of net operating losses claimed on individual returns was about the same, but the dollar amount was larger ($196 billion in 2014 compared to $189 billion in 2013).

Self-employment tax

The number of individuals paying self-employment tax was up: 19.3 million in 2014 compared to 18.8 in 2013. The tax paid was also up. This was due in part to an increase in the wage base from $113,700 in 2013 to $117,000 in 2014.

Tax credits

There is no breakdown of the types of business credits claimed on individual income tax returns. Statistics are available only for the general business credit, which is the total of most allowable business credits. Here, the numbers are down somewhat. In 2014, 34.8 million returns showed a general business credit; that number was 46.2 in the previous year.

Conclusion

Overall, what do the numbers show? In my view, the numbers demonstrate that there has been very little growth in small business. The number of businesses has not expanded dramatically and the revenues are not up substantially. Let’s hope things change.

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