Majority of Small Businesses Spend More Than $1,000 to Prepare Taxes

The big day is here — today is when Americans are required to have filed their 2017 tax returns. As time-consuming and frustrating as this process can be for individuals, it can be even worse for small business owners. To quantify that burden, a new study by the National Small Business Association (NSBA) sought to find out how much time and money the average business owner spends on administrating their taxes.

First the NSBA report found that the majority of small business owners spend upwards of $1,000 a year to have their tax prepared and filed. This includes accountant fees, administration fees, legal fees, and more. The most popular price point for these services was $1,000 to $5,000 with one-third of those surveyed pegging their spending at that level. Meanwhile 21% said they spend less than $500 on preparing their taxes and, on the other end of the spectrum, 15% report paying more than $10,000 annually for tax-related services.

The other part of the tax preparing equation is the amount of time it takes to get everything in order. Luckily this burden doesn’t seem to be quite as imposing, with more than a quarter of respondents report spending less than 10 hours on various tax prep. Another 22% said they spend 11 to 20 hours preparing and 18% take 21 to 40 hours to get their taxes in order. Unforuntately 11% say they invest 120 hours or more to complete their federal taxes.

Notably this survey comes just a few months after Congress passed Tax Cuts and Jobs Act. That legislation not only reduced certain tax rates but also attempted to simplify the tax code. In other words, one would hope that its passage would help reduce the amount of time and money small businesses have to spend on tax administration in the future. To that point, the NSBA said in their report, “While the law is far from perfect, NSBA ultimately supported it as a good start to what meaningful, broad tax reform should look like. America’s small-business owners have consistently ranked ‘tax reform’ among the top issues for Congress to address. Even with the reforms in the Tax Cuts and Jobs Act, more must be done to simplify taxes, achieve parity in taxation between large and small businesses, eliminate sunsets and make tax reform permanent, and address the deficit.”

For the record, the NSBA’s study was conducted online between March 23rd  and April 5th. Additionally only 953 small business owners participated. Still, despite that relatively small sample size, the study does highlight some of the headaches entrepreneurs face with the current tax code. As Tax Day 2018 arrives today, perhaps we can hope that further changes are in store and that small business owners can one day stop spending so much time and money prepping their tax returns.


Jonathan Dyer

I'm a small town guy living in Los Angeles looking to make solid financial decisions. I write for a number of finance websites, including HuffingtonPost and Business2Community. I founded in 2015 to focus on personal finance and the emerging FinTech markets.

Other Articles by Jonathan Dyer

Top 10 Personal Finance Articles of the Month — June 2022 

It’s time again for one of my favorite features here on Dyer News: a look at the top 10 personal finance articles of the month. To start, we'll take another look at financial independence and freedom. Then, with the housing market going a bit crazy lately, we'll feature a pair of articles on home buying. Lastly, we'll cover tips for one-income households, finance after death, fighting inflation, and more. As...

Bilt Rewards Launches Travel Portal with Benefits for Cardholders

Last year, the startup Bilt made a splash when it announced a new service that would reward users for paying their rent. That premise was then expanded upon with the launch of the Bilt Mastercard, which is issued by Wells Fargo. Now, continuing to capitalize on both the hype of their product and the demand for travel, Bilt has debuted another new offering for customers. This week, Bilt Rewards announced...

Cash App Introduces Round-Up Investing Feature for Debit Card

Debit card customers looking to grow their investments gained a new, automated option today as Block Inc. (formerly Square Inc.) officially announced a new feature for its popular Cash App. Now, customers with the Cash App Cash Card can opt into Round Ups as a means of growing their investments. When this feature is toggled on, Cash App will round up debit card purchases to the nearest dollar and invest...