Working Together?
Roger Harris, President and C.O.O.
Padgett Business Services
Testimony before the
President's Advisory Panel on Federal Tax Reform
March 8, 2005
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• Padgett Business Services has provided tax and accounting services for small businesses for over 35 years
• Over 400 offices in the U.S. and Canada
• Over 100,000 customers
• 0 to 250 employees with an average of 6.5
• Annual sales from $10,000 to $10 million
• Average small business net income is $47,500
• 75% report business income on their personal tax return
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• Data from the U.S. Small Business
Administration, Office of Advocacy:
• There are over 5 million small businesses that employ less than 20 people
• These businesses account for over 89% of
U.S. employers
• Small businesses employ over 20 million people, roughly 4.5 per small business
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Complex Decisions
Before the Doors Open
• What kind of entity should I elect?
• Sole proprietor, S or C Corp., LLC, or Partnership
• How do I pay myself?
• Employee vs. independent contractor
• Salary, dividend, distribution of profits, etc.
• How do I pay my taxes?
• Withholding, business or personal return, estimated tax
• What accounting method should I use?
• Cash, accrual, hybrid
• What is my tax year?
• Calendar year, fiscal year, changes?
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The Next Hurdle
Hiring Help
• How do I classify my staff?
• Employee vs. independent contractor?
• What new tax registrations are required?
• Federal, state, local?
• What about withholding and employment taxes?
• What tax forms must I file?
• Federal, state, local
(monthly/quarterly/annually)
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• Record Keeping and Record Retention
• Revenues and expenses
• Capital expenditures
• Employment records
• How long? Permanent or temporary?
• Employee benefit plans
• Retirement plans, medical coverage, other benefits
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• Depreciation and Basis
• Alternative Minimum Tax
• Advanced EITC
• Phase In/Out
• Transitional Rules
• Income Thresholds
• Effective Dates
• Fear of making a mistake
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•Time Spent
•Loss of Productivity
•Professional Consulting Costs
•Penalties and Interest
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• Purchasing Equipment
• Timing
• Purchase vs. lease
• Deferring Income/Expenses
• Accelerating Income/Expenses
• Borrowing Money
• Source of Funds
• Collateral
• Payback Methods
• Deductibility of Interest
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Helping the Small
Business Owner
Get Back to Business
A simpler, fairer, and growth-oriented tax code will ease the compliance burden on the small business owner – allowing them to again focus on the one thing they love.
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