60% of Small Businesses Expect Revenue to Grow in 2021 https://bit.ly/3vuktkh
60% of Small Businesses Expect Revenue to Grow in 2021 https://bit.ly/3vuktkh
Well over half of small businesses expect their revenue to increase over the next 12 months. This compares to fall of 2020, when just 34% of small business owners were confident of increasing revenue. This positive statistic about the outlook of small businesses after the unprecedented disruption of 2020 and early 2021, was unveiled by the Bank of America.
Bank of American Small Business Owner Report 2021
Bank of America’s 2021 Small Business Report was based on a survey of nearly 1,000 small business owners. The survey was conducted in March 2021. It reveals that economic confidence and business outlook is witnessing a rebound. 56% of participants say they are confident the local economy will improve, which is a significant rise from 39% last fall. Half of respondents anticipate the national economy will expand, up from 37% in fall 2020.
Small Business Planning on Hiring in Forthcoming Months
Such is the confidence among small business that 21% plan to hire in coming months, a 7% rise from fall 2020. These heartening figures confirm just how much the small business community is progressing as the nation continues to lift lockdown restrictions. The research also shows what small businesses are doing to help aid recovery. 62% say they have been building a digital strategy, and 30% have been accepting forms of cashless payments. The Bank of America’s report provides important insight into strategies small businesses are adapting to pave the way for a rebound.
The Backbone of the US Economy
Talking about the resilience of small business and the moves they are taking to secure recovery, Sharon Miller, head of Small Business at the Bank of America commented:
“Small business owners have showed time and again during the pandemic that they are the resilient backbone of our economy and of local communities throughout the country. From providing essential services to revamping operating models, I am inspired by the dedication and passion of entrepreneurs across the country and encouraged to see their renewed optimism about the future of their businesses.”
“Almost 80% of those surveyed say a widely available vaccine and/or herd immunity in their community will play a pivotal role in bringing business back to pre-pandemic levels,” Miller continued.
The research also looked at the leading concerns small businesses are facing. The political environment and health care costs are among the top concerns, with 71% and 64% reporting such concerns, respectively. These figures are consistent with those reported in the fall of 2020. Worries that have witnessed a drop in prevalence since last fall are those about the pandemic. 55% of those surveyed in the last Bank of America report highlighted such concerns, down from 75% last fall. Fears about consumer spending has also dropped 75% last fall to 55%.
Steps to Aid Recovery
The report also explores the steps small business owners are taking to help aid recovery. It found that 62% of business owners have adopted new digital tools and strategies to optimize operations in response to the pandemic. Such digital initiatives include 47% of small businesses interacting with customers virtually, and 36% interacting with employees virtually. 30% have started accepting digital payments, and 26% have enhanced their social media presence. While the report presents a positive picture of small businesses gathering momentum after months of hardship, it confirms the value of taking savvy steps to gain momentum and boost revenue, such as taking operations online.
After years of low examination rates, the IRS announced it will increase audits of small businesses by 50 %. This news comes during a time when complex tax law changes and economic stimulus programs, in response to COVID-19, have made businesses’ books even more complicated than usual.
The Illinois CPA Society cautions this could lead to audits and enforcement actions against many different businesses. These businesses range from long-held family-owned operations to the many online businesses launched as the pandemic drags on.
With the IRS planning to hire more specialized auditors to begin strengthening its enforcement efforts, ICPAS offers the following tips to safeguard your business interests and help avoid an audit:
Keep Clear Records
Accurately and honestly reporting all income, deductions, credits, expenses, and other figures can help keep an audit at bay. Make sure you have adequate documentation to support the figures reported on your business’ information return. This will make your individual tax return less likely to be have errors or be audited.
Mind your deductions
Unusual itemized deductions raise red flags for auditors, especially now that most taxpayers only claim the standard deduction. If your small business is driving you to seek unique deductions or report business losses, enlist the help of a CPA to guide you. Reporting losses for three years or more could increase your risk of an examination into whether you’re actually in business.
Make your estimated tax payments
If you anticipate owing more than $500 in taxes for your business entity throughout the year, you should be making quarterly estimated tax payments. Failing to make these payments raises your risk of an audit and/or penalties.
Today’s bookkeeping software utilizes tools to keep your records accurate and secure. This helps your CPA electronically prepare and file your tax returns—the best method for preventing the filing of erroneous returns that might trigger an audit.
Read up on the rules
Since many small businesses are formed as partnerships, it’s important to determine if yours is subject to the Centralized Partnership Audit Regime, which dramatically changed IRS partnership audit procedures.
Which States Did America Flock to in 2020?
States compete with each other in a variety of ways, including attracting (and retaining) residents. Sustained periods of inbound migration lead to (and reflect) greater economic output and growth. Prolonged periods of net outbound migration, however, can strain state coffers. This can contribute to revenue declines as economic activity and tax revenue follow individuals out of state.
United Van Lines, the largest moving company in the United States, keeps track of its clients’ migration among the 48 contiguous states. It publishes that data each January, comparing the number of inbound moves to outbound moves for each state. Because those who use United Van Lines are individuals and companies, this data is only a subset of all moves. However, the National Movers Study still provides a targeted look at the types of interstate migration patterns we can expect to see in government-issued data once it becomes available.
The 2020 National Movers Study shows Idaho, South Carolina, Oregon, South Dakota, and Arizona as the states with the highest proportion of inbound moves. New Jersey, New York, Illinois, Connecticut, and California saw the highest proportion of outbound migration. Inbound and outbound moves were nearly balanced in Colorado, Wisconsin, and Michigan. (Vermont also saw a high percentage of inbound moves but it was excluded from the survey’s rankings because the sample size was too small.)
Reasons for the Moves
In this study, United Van Lines tracks a few of the most common reasons that people pack up and move to a new state. While “state tax climate” is not a listed reason in this study, we can see glimpses of how taxes can affect decision-making.
Taxes may have limited influence on whether someone takes a job, but they can influence where jobs are available. They can also influence where a person taking a position might locate. The latter is perhaps most visible in smaller states and states with metropolitan centers located near state borders. For example, tens of thousands of individuals work in greater Chicago but live in Indiana. Many interstate commutes are attributable to stark differences in tax landscapes, particularly property taxes. While it is difficult to measure the extent to which tax considerations factor into individuals’ moving decisions, there is no doubt that taxes are important in many individuals’ personal financial deliberations. With the rise of remote work, individuals are likely to be more mobile than ever. They are able to make decisions about where to live that are independent of where their employer is located.
Another reason people moved was retirement.
|Note: Source: United Van Lines, 2020 National Movers Study|
It’s unsurprising that retirees gravitated toward states with good climates, but many of these top states also have tax climates that would be attractive to retirees. Nine out of these 10 states either exempt a large portion of Social Security from income taxes, exempt Social Security completely, or have no income tax at all. Retirees, moreover, are freer to consider factors like taxation than those who are tied to a job.
States and Tax Rates
Our State Business Tax Climate Index uses over 100 variables to evaluate states on the competitiveness of their tax rates and structures. Four of the 10 worst-performing states on this year’s Index are also among the 10 states with the most outbound migration in this year’s National Movers Study (New Jersey, New York, Connecticut, and California). Seven of the top 10 ranked inbound migration states also rank in the top half of states on the Index, which measures tax structure. And the three which do not (Alabama, Arkansas, and South Carolina), while having significant room for improvement in the structure of their tax codes, generally feature low tax burdens. Conversely, all but one of the top outbound states rank in the bottom third of the Index, the only exception being North Dakota (17th), where outbound migration has been driven by a decline in energy markets.
While certain factors are outside a state’s control (sunny Florida may always have a certain competitive advantage in attracting retirees, for example), every state can foster an attractive economic landscape through wise tax policy decisions.