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The 2025 Small Business Taxation Survey: Key Findings and Implications

On February 26, 2025, the National Small Business Association (NSBA) launched its latest report titled 2025 Small Business Taxation Survey, bringing to light critical insights regarding the influence of federal taxation on America's small businesses. The research underscores that federal taxes significantly affect the operations and sustainability of very small firms, with the impact of the upcoming expiration of the 2017 Tax Cuts and Jobs Act (TCJA) being a major concern for vast numbers of small business owners.

Key Findings of the Survey

NSBA President and CEO Todd McCracken pointed out that most small business proprietors, approximately 83%, fall under pass-through entities—meaning that they report their business income on their personal tax returns. Consequently, with the potential for significant tax hikes looming if Congress does not respond to the expiring tax cuts, anxiety pervades small business communities across the nation.

1. Time Spent on Taxation: A telling statistic from the survey indicates that most small business owners devote over 20 hours a year just handling federal taxes. Notably, many opt to engage external tax professionals for assistance, although this still does not alleviate the time burden.

2. Impact on Operations: An overwhelming 90% of respondents acknowledged that federal taxes affect their everyday business activities, with one-third indicating a notably substantial impact on their operations and decisions.

3. Imports and Outsourcing: For small businesses sourcing goods internationally, China was identified as the primary country of origin. This finding is pivotal, considering the current economic climate and international trade dynamics.

4. IRS Communication Hurdles: Half of the surveyed owners mentioned the challenges they face in accessing clear information directly from the Internal Revenue Service. This lack of accessible resources further complicates their ability to navigate federal tax regulations.

5. Complexity Over Costs: Interestingly, the survey revealed that the largest burden for small businesses is not the financial aspect of federal taxes but rather their administrative complexity. Red tape and convoluted regulations often discourage entrepreneurs and can hinder their business growth.

Legislative Context and Recommendations

As NSBA has been sounding alarms regarding the ramifications of various tax laws set to sunset, these survey findings reflect an urgent plea for legislative action from Congress. Among the critical tax provisions that require attention are the 199A Qualified Business Income Deduction, which has emerged as a top priority after discussions during NSBA's recent Small Business Congress.

Michael Canty, NSBA Board Chair from Alloy Precision Technologies in Ohio, echoed the sentiment that any discussions about tax reforms or extensions must prioritize the need for stability, predictability, and equality in treatment for small businesses compared to their larger counterparts. He emphasized the necessity for permanent solutions aiming to support small enterprises instead of transient measures that leave owners in constant uncertainty.

In conclusion, the 2025 Small Business Taxation Survey presents valuable insights into the unique challenges federal taxes impose on small businesses in the United States. The call for federal lawmakers to act on these pressing issues is more critical than ever to ensure the survivability and thriving of America's entrepreneurial spirit.