2013: Another Tough Year For Small Business Owners?

With the recent re-inauguration of President Obama many small business owners are looking into the future to prepare their businesses for 2013. In the upcoming year lessening deductions, higher tax rates, and Obamacare are all set to affect the plans of small business owners.

Many small business owners are wondering about their personal tax rates. Those small businesses owned by sole proprietors, partners, and other small businesses known and S corporations report their incomes on their personal 1040 returns. According to Joyce Rosenberg of the Associated Press, in six months, there will be a fiscal cliff–which is the combination of billions of dollars in tax increases and budget cuts. This might mean higher taxes for small business owners, and thus higher taxes for the business themselves. Those small businesses taxed at personal rates and not at the rates that larger corporations are, may experience higher tax rate and they may turn out to be higher than the tax rates of larger corporations.

Tax rates may also affect the money spent at small and large business alike. The 2% point payroll tax cut that was in effect for the last 2 years have expired. That means potential consumers will have less money to spend. Small business may not see the money that is left after the full taxes are applied; it all depends on where people will choose to spend their consumer dollars—with the small businesses or at the large corporations.

However, where consumer dollars are going to be spent isn’t the only concern of many small business owners. The section 179 deduction is set to go down $25,000 in 2013 form $125,000. This deduction applies to equipment purchases. With less of a break for upgrading and replacing equipment, some small businesses may struggle to come up with the difference for the things they need.

In 2014 a prevision of Obamacare is set to go in to affect that requires small companies with 50 employees or more to provide affordable healthcare insurance to their employees. This year, small businesses that are affected by this provision will do best to find out how much it will cost. Some small business may find that the penalty for not providing a healthcare option for their employees may be more cost effective. These companies will pay the government $2,000 per employee. Additionally, companies may hold off hiring new employees in 2013 so they won’t break the 50 employee mark.

2013’s forecast for small business owners is shaping up to be another hard year, with the possibility for higher taxes, lower deductions, and higher payrolls. However, the American tenacity that has pushed many small businesses thus far will continue to fuel them though the coming year.

Joyce, Rosenberg. “5 Issues Facing Small Businesses in 2013”.nbcnews.com/. 28 Dec. 2012.