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Monday, May 11, 2009

Tax Law Complexity and Small Busineses

On May 7, 2009, the House Committee on Small Business held a hearing - “How the Complexity of the Tax Code Hinders Small Businesses.”

Complexity is a more serious issue for small businesses relative to large ones (where it is still a problem) because the costs of compliance might even exceed the tax owed (see links from the Tax Foundation).

Some of the suggestions from the people who testified before the House Committee on May 7 included:

  • Repeal the AMT
  • Simplify the ability to select the cash method by allowing taxpayers to base the decision just on gross receipts level (rather than also business classification)
  • Reduce the recordkeeping required for deducting the cost of using cell phones
  • Provide equal treatment for small business owners for costs of their health insurance as all other employees and employers get
  • Make permanent the current $250,000 expensing election of Section 179
  • Allow a standard deduction for home office expenses
  • Simplify the worker classification rules

I've blogged on this topic before (just as the committee has held hearings on this topic before) - here.

There are many ways that the tax law can be simplified and the burdens placed on small businesses and individuals by the tax law warrant reform. Time spent on complex tax calculations when simpler ones could generate the same amount of revenue could be better spent growing one's business.

What do you think are the top simplification changes that should be enacted for small businesses?

1 comment:

Monica Lawver said...

Just discovered your blog, and am very excited to start reading the research you've compiled on tax reform alternatives. I've been eager to get involved with pushing for simplification, and have talked with others about forming a group of Tax Professionals for Simplification. I hesitate, as I do not yet know what the best form of simplification is. Where should I start reading first?