Signs of Spring

It’s spring!!  Flowers are blooming.  Birds are singing.  "Real" baseball starts this weekend.  The days are longer thanks to mother nature and the federal government.  What could possibly spoil a wonderful season like spring? 

Sorry to bring this up, but the same government that brings us an additional hour of evening daylight is expecting to hear from you in the next two weeks.  It’s time to make our annual contribution better known as income tax.

I truly believe that most Americans have no problem with paying taxes.  Politics aside, we live in a pretty great country and somebody has to pay the bills.  That’s you and me.  Unfortunately our tax system has gotten entirely too complicated.  And the cost of that complication hits small business particularly hard.

According to The Small Business Advocate, a publication of the Small Business Administration, "Small businesses with fewer than 20 employees spent $1,304 per employee to comply with federal income taxes in 2004.  This amount is almost two times as much (per employee) as businesses with more than 500 employees spent."

The reason for this disproportionate spending?  The level of complexity of the tax code.  Big companies spread the costs of record keeping and other compliance-related expenses over a large number of employees where the smaller employer, who has fewer workers, can’t do that.  Just keeping up with the year-to-year changes can be a daunting task, especially for someone  who wears as many hats as the small  business owner.

According to the article, "The lack of emphasis on simplicity in recent times has led to a bloated tax code where compliance costs have become a significant portion of many taxpayers’ overall tax burden."  The theory is that the more complicated the tax code becomes, the fairer it is.  Every time a new deduction is added, the code gets a little more complicated.

So, what if you wade through all the forms, figure out what you owe, and you can’t pay?  Is there an orange jumpsuit in your future?  According to an AP article in today’s St. Louis Post Dispatch, there are options.  Paying your taxes with your Master Card isn’t the best choice.  The interest rates are way too high.  Tapping into your retirement account or taking out a second mortgage on your home are also options.  These can also be dangerous. 

The IRS wants your money, not your freedom.  They want you to keep the business going so you can pay more taxes next year.  If necessary, they’re willing to wait for you to pay up.  They offer installment plans for taxpayers short on cash.  Of course there are costs involved, so weigh your options carefully.

Even more important, if you find yourself in such a situation, it’s critical that you get the help you need to avoid a similar situation in the future.

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