Small Businesses Missing Out on Tax Breaks
Small companies may be missing out on tax deductions because of the cumbersome, confusing, and costly process of actually obtaining the benefits, The Wall Street Journal reported today.
Although tax breaks have long been used as incentives to increase growth and hiring, the paper reported many small businesses simply can't afford the specialized accountants and lawyers required to work through the deduction complexity. In fact, for some, the cost of obtaining the tax deduction can be greater than the benefit it offers.
"I can't run a business based on what area the federal government is trying to juice," one small business owner bluntly told the outlet.
Recent numbers look particularly bleak. According the Journal, tax consultants estimate that eligible businesses receive as little as 5% of the main domestic tax breaks they deserve, leaving tens of billions of dollars needlessly unclaimed.
Take the federal Work Opportunity credit, for example. The credit was supposed to let employers get a break for hiring workers from "disadvantaged groups." But because the tax break requires extensive paperwork per worker, the small businesses that do take advantage of the credit reportedly only claim for about 20% to 35% of all eligible workers.
To navigate this complex landscape, small businesses typically turn to tax consultants— whose fees tend to range from 15% to 30% of a company's potential savings, according to the Journal.
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