Increasing Education, Compliance Assistance Will Reduce 'Tax Gap'
WASHINGTON, April 27 /PRNewswire/ -- A confusing and complex tax code is
at the heart of why the typical small business with fewer than 20 employees
spends over $1,200 per employee to comply with tax paperwork, recordkeeping,
and reporting requirements. It is also much of the source of the so-called
"tax gap" of uncollected revenue from small businesses, according to testimony
given today by Thomas M. Sullivan, Chief Counsel for Advocacy of the U.S.
Small Business Administration before the U.S. House of Representatives
Committee on Small Business.
In his testimony, Sullivan noted that, "Small businesses, as defined by
the SBA size standard, make up over 99 percent of all U.S. businesses and
employ over one-half of the American workforce. Perhaps even more
importantly, small firms create over two-thirds of the net new jobs annually,
and recently led the American economy out of a recession. Yet, small business
accomplishes this even while facing a regulatory compliance burden that is
roughly 60 percent greater per employee than that faced by larger firms, and a
tax compliance burden more than twice as large."
He added, "At issue then is how compliance can be improved and the tax gap
narrowed without adding to the burden of small business. My office favors a
balanced approach -- one that includes commensurate doses of education,
compliance assistance, and enforcement."
Sullivan said that the source of the so-called "tax gap" is, "the
uncertainty and confusion in how to comply that creates the biggest compliance
burden. It is also this uncertainty that increases non-compliance rates for
small business filers over what they would be under a simpler code."
He concluded, "The best way to ensure that small business compliance rates
increase is to simplify the tax code, thereby removing the ambiguity filers
face when determining what to report, and to increase education and assistance
programs aimed at informing small business owners what the IRS expects them to
do when preparing their taxes."
The Office of Advocacy, the "small business watchdog" of the government,
examines the role and status of small business in the economy and
independently represents the views of small business to federal agencies,
Congress, and the President. It is the source for small business statistics
presented in user-friendly formats and it funds research into small business
issues.
For the complete testimony, visit
http://www.sba.gov/advo/laws/testimon.html.
The Office of Advocacy of the U.S. Small Business Administration (SBA) is
an independent voice for small business within the federal government. The
presidentially appointed Chief Counsel for Advocacy advances the views,
concerns, interests of small business before Congress, the White House,
federal agencies, federal courts, and state policy makers. For more
information, visit http://www.sba.gov/advo, or call (202) 205-6533.
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