We are all well aware that the 2016 presidential election is only a few months away. And, with only a short time before we hurry to the polls to place our vote, we can be certain that we will continue to be flooded with the competing candidates’ views on international, social and tax-related issues.
In order to explore business owners’ concerns about changing tax codes, both nationally and locally, and also to examine the cur- rent concerns that exist, Friedman LLP conducted a web-based survey asking senior leaders of U.S.-based businesses about their hopes and fears as we approach the 2016 election.
Surprisingly, we found that many local business owners seem to be more concerned with how they are going to be taxed individually than with how proposed tax changes could directly affect their businesses. As such, they are focusing more on what the candidates are saying about individual income taxation rather than corporate tax rates or changes to partnership or S corporation regulations. The truth is that business owners should be aware of these issues and how they can impact their businesses. For example, they may have con- tracts with customers or vendors whose businesses can be adversely impacted by some of these potential tax changes.
Further, many local taxpayers may not be following the candidates’ views on the international tax landscape and the effects these proposals can have on the U.S. economy. Again, many may think that these topics are irrelevant to their circumstances; however, any action, or inaction in the international tax arena can affect all of us. As businesses continue to move overseas to more tax-favorable environments, jobs are lost, overall American economic growth is reduced and tax revenues disappear. All of this creates the need for the U.S. to look for alternative ways to generate tax dollars.
Specifically looking to the Pennsylvania and New Jersey areas, changes in state taxation continue to be something that business owners should be monitoring. Hot topics like state nexus and sales tax rules are matters that business owners need to be aware of in order to ensure proper compliance.
As an example, now may be a good time for businesses in the state of New Jersey to see if they may have enough nexus with the state of Pennsylvania to require them to file with that state. Pennsylvania recently incorporated an amnesty program into its 2016-2017 budget bill that would provide taxpayers who have delinquent filings the opportunity to make things right without penalty and only half of the normal applicable interest. Business owners who have delinquent filings should be aware of this pro- gram and should stay tuned for more information, which will be available sometime in September.
When all is said and done, as our survey clearly indicated, tax- payers are mainly looking for clarity—both in the tax code and in its application. They want to understand how they are being taxed, and more importantly, they want to be informed early enough so they can plan accordingly.
For the past several years, we have seen individuals and businesses operating without even knowing what tax rules would or would not apply. Many businesses waited until December to find out what type of depreciation rules would apply to the assets that they purchased earlier that year. Meanwhile, individuals had to wait to receive distributions from their individual retirement accounts to see if they could donate these distributions to charity. Taxpayers don’t want to make decisions for themselves and their businesses in this environment of uncertainty.
As the final words of our survey state, is this really too much to ask?
Read more about the exclusive findings that Friedman LLP’s report uncovered, along with six key insight messages from our accountants and advisors by downloading our white paper at FriedmanLLP.com/2016Election.
About the survey:
Friedman LLP accountants and advisors conducted the survey in the fall of 2015 among companies across the U.S., focusing primarily on the Pennsylvania, New Jersey and New York metro areas. The survey compiles responses from 116 senior leaders of companies across industries, including financial services, con- sumer goods, computer science and engineering, education, food services, health and pharmaceuticals, IT, legal services, marketing and advertising, non- profit, and real estate, among others. The respondents include business owners, company presidents, chief executive officers, partners, directors, chief financial officers, controllers and managing directors.
Published (and copyrighted) in South Jersey Biz, Volume 6, Issue 9 (September, 2016).
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