WASHINGTON – The U.S. Senate Committee on Small Business and Entrepreneurship today held a joint roundtable with the U.S. Senate Committee on Finance to discuss tax complexity for small businesses.
The roundtable examined the barriers small business face when interacting with the tax code and provided a variety of perspectives, including from tax professionals and small business owners. In addition to the small business tax literacy gap, the complexity of the tax code, and specific small business tax provisions, they spoke on tax preparation, small businesses’ ability to take advantage of tax incentives, and the way in which the Internal Revenue Service (IRS) and Small Business Administration (SBA) can better coordinate and improve services.
“Too often, small business owners miss out on benefits and fall out of compliance because of a complex and hard to navigate tax code system. Small businesses do not have the teams of lawyers and accountants that larger businesses do. These challenges perpetuate inequality and bring undue stress to already overwhelmed entrepreneurs; this is particularly the case for our minority and underserved small business owners,” said Small Business Committee Chair Cardin, who also is a member of the Senate Finance Committee. “We heard today from panelists that face unacceptable challenges, and I thank them for voicing their concerns. In a bipartisan matter, we will work with the Senate Finance Committee to ensure we can increase tax literacy; address the complexity in our tax code; and improve the effectiveness of tax services.”
According to a survey conducted by American University and Public-Private Strategies, 87 percent of small businesses hired someone, or bought software, to file their taxes while 62 percent of small businesses learned how to do taxes on their own. As highlighted by Senator Cardin’s invited panelist, Ms. Avonette Blanding, owner of Blanding Financial Solutions in Baltimore, MD, it is particularly difficult for minority and underserved small business owners to find tax and financial resources in their communities provided by individuals they feel they can trust. In 2019, AICPA released a study that showed only 2 percent of CPAs were Black, 4 percent were Hispanic or Latino, and 10 percent were Asian/Pacific Islander while 84 percent of CPAs were White.
As Chair of the Senate Small Business and Entrepreneurship Committee, Senator Cardin has led initiatives to expand access to resources and information for small businesses, particularly in our most underinvested communities. Chair Cardin has ensured resources are made available through organizations, including Historically Black Colleges and Universities (HBCUs) and Minority-Serving Institutions (MSIs), that serve underserved and minority communities. This includes leading the fight to open more SBA resource centers on these campuses like the Women’s Business Center in Morgan State University.
Roundtable panelists provided several recommendations for improving small business tax literacy and reducing tax complexity. Some are detailed below:
- Improve advertising and promotion of tax planning resources provided by SBA Resources Partners.
- Direct SBA to deliver tax information and resources to small businesses in a more concise and comprehensible manner.
- Create a dedicated IRS hotline or chat option for small business tax assistance.
- Direct the IRS to craft tax information resources specific to certain industries.
- Direct the IRS to coordinate with HBCUs and MSIs that run accelerator and incubator programs to deliver on-site tax trainings.
- Create tax policy that is simplified and more comprehensible for small businesses.
- Ensure predictability and stability in tax policy created by Congress.