It’s National Small Business Week, a designation meant to celebrate the critical contributions of entrepreneurs and small business owners to our economy. Those contributions are plentiful. Small businesses generate income for more than 50 percent of Americans who either own or are employed by them, and they create two out of every three new jobs annually. Small businesses generated 67 percent of all job growth between 2009 and 2015.
If we truly want to recognize entrepreneurs and small business owners as drivers of our economy, it’s appropriate that we go beyond applauding their impact to also discuss much needed small business reforms. Reforms that will enhance small business success.
Tax code complexity makes compliance unduly burdensome for small businesses. Small business owners that go it alone must navigate a daunting web of complex rules and regulations that cause confusion, wasted time and fear. The noncompliance risks are severe and, on top of other issues, result in many businesses closing their doors within the first 5 years.
Small businesses that employ the service of a professional accountant are less likely to fail than those who go it alone. Interestingly, these professionals are generally small businesses themselves. Which makes small business targeted tax reform a double reward. Let’s help small businesses that enable small business success. To start, here are a few ideas.
- Overall tax code simplification to help small business owners spend less time and resources on tax compliance and more on their business. A simplified and streamlined tax code, will likewise give small business tax practitioners time to spend consulting and adding value for their clients instead of navigating complex tax law and intricate calculations.
- Improve tax administration tools that enable accountants and tax professionals to better serve small businesses. For example, streamlining e-service tools for client account management will not only help professionals and their clients, but also cut down on resources the IRS needs to serve small businesses and collect revenue.
- Simplify expense tracking and reporting rules to make them easily undertstood by the rising number of “solopreneurs” who earn a living in the on-demand economy. For instance, deeming electronic records suitable for deduction verification would reduce time spent on paperwork management and enable smart solutions for tax compliance.
- Continue to accelerate the progress of the IRS Security Summit in the professional segment to protect small businesses and strengthen our tax administration ecosystem. The professional segment plays a critical role in security as 60 percent of all filings are generated in the professional segment.
The business tax reforms proposed last week in President Trump’s outline are the beginning of an important conversation about strengthening the economy and jobs creation. And while this is true for global competitiveness, it is particularly true for creating an encouraging environment for small business entrepreneurship to thrive here at home.
Regardless, policymakers should not forget about or overlook the importance of small businesses in tax reform legislation. Reform can help both small businesses and those that enable small business success. What better way to celebrate National Small Business Week than with reforms that enhance small business and entrepreneurial success?