What About the Taxes on the Real Small-business Owners?

Most small-business owners do business as Sub S corporations or other pass-through entities. Changing the corporate tax rate will not help them.

I know that most of my clients and business acquaintances do business in a form that passes net income through to their personal 1040s where the tax is paid. But most of the political chatter we hear, view, or read keeps talking about reducing corporate taxes. That will probably not have a significant effect on the small businesses whose tax structures are based on their individual tax bracket. The two candidates’ position on this issue was recently raised in an AP article in the Washington Post. The article provides a quick analysis on the relative positions of Romney and Obama and how they will affect the actual taxes on small-business owners with pass-through income. The article concludes that under both candidates’ proposals, the big boys in C corps will get the biggest benefit.

It is pretty clear that, despite the lip service, neither candidate is addressing the individual tax issues related to small-business income. We all need to be alert, no matter what the election result, to review our business structure in the event of any tax changes. Assuming, of course, that Congress can ever agree on any.

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