Small business owners typically have a more complicated tax situation than others. In addition to managing personal income tax issues, owners of small companies must also take tax laws into account when making important decisions throughout the year because nearly everything will have a tax implication that impacts the bottom line of the company.

For example, hiring an employee means more productivity and possibly more profits, but it also means contributing to the payroll tax, so that cost is typically included as a part of the evaluation of whether a new employee is desirable. Other decisions implicate possible deductions, such as spending capital on new equipment or expending resources for research and development. Unfortunately at the end of 2013, deductions for various types of business expenses expired and have not yet been renewed. With no vote currently scheduled or in sight, many are worried that small businesses may not have access to these important deductions for the 2014 tax year.

Tax planning and tax law compliance are two very important issues in the small business world, so this uncertainty means that many companies are planning for both scenarios and trying to figure out how best to proceed in an uncertain regulatory environment. Business owners who have questions or concerns about this year’s tax law and the way it may change would be well served to work with a tax law expert to find the best way to plan for the various scenarios while maintaining strict compliance with the current situation. 

Source: New York Times, “For Small Businesses, a Road Without a Map,” Conrad De Aenlle, Feb. 7, 2014.