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Survey Finds 30 Percent of Small Businesses Think They’re Overpaying Taxes

What's Hot in Small Business – Chris Crum
Chris Crum writes for Small Business Resources about what's new for small business. Chris was a featured writer with the iEntry Network of B2B Publications where hundreds of publications linked to his articles including the Wall Street Journal, USA Today, LA Times and the New York Times.

Survey Finds 30 Percent of Small Businesses Think They’re Overpaying Taxes

Survey Finds 30 Percent of Small Businesses Think They’re Overpaying Taxes

The United States tax code continues to be too complicated for a lot of small business owners, who have trouble figuring out exactly how much they need to pay the government. In fact, many are simply paying too much, which may be impacting their ability to run their business as effectively as possible.

According to a recent survey from business data analysis and service provider Clutch, nearly one third (30 percent) of small businesses believe they are overpaying their taxes.

The firm polled 302 small business owners and managers who are specifically "involved" or "very involved" with the financial decisions made by their business. As far as demographics go, of those polled, 58 percent are female and 42 percent are male. Levels of business ownership/management experience vary. Sixty percent of those who responded have owned or managed a small business for at least five years. Seventeen percent have done so for three to four years. Only 10 percent have done so for less than a year.

"Small businesses may be hesitant to seek outside help with their taxes due to cost and, instead, opt to file business taxes themselves," Clutch says. "Yet, the benefits of working with a tax advisor may offset the costs of working with outside help."

For starters, seeking help can prevent overpaying. As the firm notes, filing taxes can be a "confusing and overwhelming task" for many small businesses, and having someone who is an expert on the matter can make a huge difference.

Despite the amount of small business owners worried about overpaying taxes, the vast majority (93 percent) still say they are either "very" or "somewhat" confident in their ability to accurately file taxes. Furthermore, as many as 95 percent of owners polled are confident in the accuracy of their financial records. As Clutch notes, experts are skeptical that this is actually the case.

According to the findings, most small businesses (67 percent) use the recommended accrual basis method for tracking finances, though those with fewer than 10 employees are more likely to use the cash basis method.

Over a fourth (27 percent) of small business owners and managers indicate that they do not have bank accounts for their businesses that are separate from their personal accounts. This is considered to be risky to the financial health of one's business, and experts generally agree that it's best to keep business and personal finances separate.

Clutch also polled business owners on the challenges facing small businesses today. The top financial challenge cited was unforeseen expenses, which 35 percent of those polled named. The second challenge was the mixing of business and personal finances, which 23 percent cited. Twenty-one percent said the inability to receive payments on time is a top challenge.

The big takeaway from Clutch's poll is that, while most small businesses think they have a good handle on their finances, some are overestimating their abilities to take care of their finances without outside help. Unless you have a background in financial expertise, it's probably worth the expense to pay for professional assistance.