Long hours and hard work comes with owning a small business. Few entrepreneurs would have it any other way. It's the price they pay to live their American dream.
But not everyone welcomes overtime and extra effort to get the job done. The IRS, National Taxpayer Advocate Nina Olson reported to Congress recently, is suffering "workload overload," chiefly due to the increasing complexity and frequent changes in the U.S. tax code. Between 2001 and 2010, the revenue rulebook was revised 4,430 times—an average of more than once a day.
That won't surprise small-business owners, who bear the brunt of unending alterations to tax requirements and paperwork. That's why nearly 90 percent now hire professional tax preparers to complete their returns.
Where Main Street and Washington differ is about the solution. Olson says the IRS needs more money. President Obama agrees. His FY2012 budget request for the agency jumped nearly 10 percent to $13.3 billion, partly to add 5,000 more employees to a tax-collecting force that already exceeds 100 thousand workers.
The National Federation of Independent Business, the nation's leading small-business organization, has been telling Washington for years that the solution is not more money or more agents and enforcers, but true tax reform. Don't fix just the incomprehensible code, but also enlighten IRS employees to appreciate the vital role free enterprise plays in creating jobs and stabilizing the economy. They need to realize that small businesses aren't miniature versions of big corporations; 75 percent file their taxes as individuals. Compliance with today's tax rules costs them nearly 70 percent more on average than large firms pay.
Since Tax Day, April 17, is close, perhaps it's a good time to offer some helpful tax tips, not for filers, but for members of Congress and the president. These simple, but crucial reforms can ease the burden on both small-business owners and government tax writers.
Tip No. 1: Simplify the code. This could save small-business owners much time and money that they will re-inject into rebuilding their enterprises and help lower unemployment. Plus, it could reduce taxpayer errors, bringing in more revenue to trim the federal tax gap.
Tip No. 2: Keep tax rates low for small businesses. Again, the more money they retain, the more they reinvest in growth and workforces.
Tip No. 3: Find a permanent solution to the estate tax that protects all family businesses. Future generations should be able to keep family businesses alive and contributing to the economy.
Tip No. 4: Get rid of the Alternative Minimum Tax. It has outgrown its original purpose and has now begun gobbling up middle-class taxpayers' earnings.
Tip No. 5: Allow self-employed business owners who buy their own health insurance to deduct 100 percent of their premium costs.
There are many additional repairs that can improve the tax code. New legislation by U.S. Reps. Aaron Schock and Bobby Shilling and Sens. John Thune and Maria Cantwell to revise 1099-K rules is among them. But by implementing these five quickly, Washington can restore certainty for America's entrepreneurs, pave the way for greater code improvements and unburden many overworked IRS employees.
-- Danner is president and CEO of the National Federation of Independent Business, which represents 350,000 small-business owners in Washington, D.C. and every state capital.