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.