Understanding business taxes can be difficult. The tax system applied by IRS is complex and often unfair. Some tax reforms have a huge negative effect on the small businesses. Let us discuss a few small business tax issues:
Tax compliance places a greater burden on Small business
According to the IRS estimate the businesses with less than $1 million in revenue bear almost two-thirds of business compliance costs. When these costs are divided on the base of worth of the business, they apply a greater burden on small businesses than the large ones.
Small businesses get a greater chance to underpay their taxes
Small businesses usually deal in cash; they do not maintain a proper record system or bills. In this way they can understate their revenues and overstate their expenses and thus underpay their taxes.
New Tax Code has a positive impact on small businesses
Provisions such as Section 179 expensing, cash accounting, graduated corporate tax rates, and special capital gains taxes benefit businesses that are small in terms of investment, income, or assets.
Advantages that are part of the current “tax extenders” debate
These provisions include expanded eligibility for Section 179 expensing and larger capital gains exclusions for investments in qualifying small businesses. Allowing these provisions to expire and then retroactively resuscitating them is a terrible way to make tax policy. If Congress believes these provisions are beneficial, they should be in place well before the start of the year, so businesses can make investment and funding decisions without needless uncertainty.