Majority of Small Business Owners Expecting Tax Refunds
With the calendar now reading “March,” tax season is in full bloom. This not only means that individuals across America will be working toward getting their returns in by the April 15th deadline but so will numerous small business owners. While tax time may be a hassle overall, the good news is that the majority of business owners may soon be seeing a nice chunk of change in the form of a tax refund.
According to a survey by business lender Balboa Capital, 52% of business owners expect to be receiving a tax refund this year. That’s of course thanks in part to the numerous tax deductions that business owners can claim. As Balboa found, the most commonly-used of these deductions is office rent — with business equipment, office supplies, business vehicles, and employee benefit programs making the list of top deductions as well.
Of those who do anticipate a refund, 70% planned on applying the funds towards future growth — whether by buying equipment, adding inventory, investing in technology, or otherwise expanding. On the flip side, for business owners who expect that they’ll owe taxes, 35% say that they’ll seek a short-term small business loan to help pay their tax bill. Another 30% will seek an extension from the IRS instead.
Not surprisingly, asked what their biggest tax time-related challenge was, 65% cited the process of prepping and filing. On a related note, owners were fairly split on who they task with handling their returns. While 48% will turn to a tax professional for help, the other 52% have an in-house accountant or bookkeeper who completes filings. Notably Balboa didn’t specify if, in some cases, these in-house bookkeepers were the owners themselves.
Offering commentary on the survey’s results, Balboa Capital tax accountant Matthew Von Velasco said, “[W]hat we are hearing from business owners regarding their expected tax refunds is very encouraging. Seventy-percent of business owners said they are planning to reinvest their tax returns into their companies. This bodes well for their employees, suppliers, and vendors, not to mention their customers.” However, he added, “Obviously, not every small business owner is going to receive a tax refund from the IRS this year. [M]any of them will be hit by surprise tax bills that are bigger than originally anticipated.”
While it’s good news that more than half of business owners are looking forward to getting tax refunds, this survey once again showcases just how critical cash flow is for small businesses. Similarly it’s important for business owners to stay on top of their tax obligations and bookkeeping — even if they outsource this responsibility — so that they know what to expect ahead.