Businesses, consumers prepare for tax season

With tax season approaching, it's no surprise that a considerable number of Americans are planning to use the money from their returns to pay down debts. Last week, the National Retail Federation reported nearly four in 10 surveyed taxpayers - 39.4 percent - plan to use the money to pay off consumer debts, such as credit card balances and student loans. "After a rocky few years, consumers are now more vigilant about how they spend their money and the importance of preparing for future financial stability," said Matthew Shay, president and CEO of the NRF. "Increased consumer savings proves extremely beneficial to shoppers and businesses in the long run." This may point to more business for debt collection firms, especially as the volume of student loans and credit card dues continues to rise. As the economy begins to recover it remains to be seen whether greater consumer activity will lead to larger debt levels - due to heightened confidence - or tighter budgets. The situation may be more dire among small businesses, which have suffered tight lending conditions for years now. On top of an adverse credit market, small businesses are facing a larger regulatory environment and, in some cases, larger tax liabilities. A survey released this week by the Small Business Authority shows business owners are largely confused about the tax filing process. Specifically, the report shows as many as 55 percent of surveyed small business owners admit to not fully understanding the tax returns that they sign off on. This is important because it suggests many business owners may be overpaying on their taxes. Some firms may even be short on their dues, which would stoke even more debt collection activity among public agencies. Despite the daunting nature of tax reporting, small business owners appear averse to flat tax rates and would like greater simplicity throughout the process. "It is clear from the results of our poll that the majority of business owners, despite wanting tax simplification, would prefer not to have a flat tax and give up all their deductions," said Barry Sloane, chairman, president and CEO of the SB Authority. "The fear of the unknown, which is what their effective rate would be versus tax simplification, is not a trade-off that they are prepared to make at this point in time."