Thursday, September 1, 2011

Increased Taxes on Small Businesses a Possibility

A simple change of definition could mean increased taxes for small businesses. The Treasury Department is currently considering adopting a new definition for what constitutes a small business. Under the proposed definition, only businesses with less than $10 million in annual gross income or deductions would qualify as “small”.

This change could have a huge impact on closely held businesses such as partnerships, S corporations and limited liability companies. These business types are called flow-through entities because profits flow directly to the owners, who pay personal income tax without first being subject to corporate tax.

A recent study by a former Treasury official revealed that more than 90 percent of businesses are organized as flow-through entities, with their owners paying around 43 percent of all U.S. business taxes on their individual tax returns. If the new definition takes hold, there will be significantly fewer small businesses and fewer owners of these businesses will be included in top income brackets.

Thoughts?

LeAnn Gola, CPA MAcy, is a Member-Assurance Services with Cook, Gola and Company PLLC, Certified Public Accountants, with offices in San Antonio and Austin, Texas. www.cookgola.com

1 comment:

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