Tax Issues/ Strategies
for Small Businesses
Tax Issues/ Strategies for Small Businesses
Small businesses face tax issues and have to figure out strategies to combat these tax issues.
To begin, the first issue is with tax compliance issues that a small business has to deal with.
From an article on Forbes, it said, “The IRS estimates that businesses with less than $1 million
in revenue bear almost two-thirds of business compliance costs” (1). The compliance costs,
when it comes to taxes is a big problem for small firms. The way the compliance costs are
structured is unfair for small firms compared to larger firms. Another issue facing small
businesses is the issue of underpaying taxes. This can be either intentional or unintentional.
Small businesses are more likely to deal with transactions that are not always reported to the
IRS. For example, a job where there is a cash transaction. The problem with this is that at year
end the company will have understated revenues and overstated expenses. This leads to a
company underpaying their taxes, and it is a way to cheat the system. From an article on
Forbes, it mentioned that, “High compliance costs disadvantage responsible small businesses,
while the greater opportunity to underpay taxes advantages less responsible ones” (1). There is
an incentive to deal with transactions that do no involve the IRS because a business will not
have the transaction show up on their taxes. However, if transactions like this get to be common
place the IRS will know something is up when they see overstated expenses. Small businesses
owners have to be careful. Sometimes business owners make mistakes, as it is difficult to follow
the complicated tax code; however, other times business owners are looking to cheat the
