How Tax Policy Uncertainty Today May Affect You and Your Business in 2025
Audio version available here (2 min. 5 sec.)
As the federal government prepares for major changes later this year, businesses are left wondering how potential tax policy changes will affect them in the coming year.
1. Planning Challenges:
Small business owners need stable tax policies for business strategization. Unfortunately, the upcoming Tax Cuts and Jobs Act expiration in 2025 has made this difficult. A lack of cooperation between government parties means solutions will be hard to come by, leaving business owners to delay expansion plans or investments that could otherwise drive growth.
2. Cash Flow and Budgeting:
Without knowing the future nuances of tax rates, deductions, and credits that directly impact a business’ cash flow, business owners are left uncertain of how to budget. Some may decide to be overly conservative about spending, but this risks limiting their ability to grow via investing in new opportunities, increasing wages, or hiring additional staff.
3. Compliance Costs
Small businesses with limited administrative capabilities will struggle with compliance if Congress makes frequent changes to tax laws due to the TCJA’s expiration. Increasing complexity will only drive up the cost of compliance for small businesses, as entrepreneurs will need to spend more on accounting services and software to keep up with changing regulations.
4. Risk of Retroactive Changes:
If the government decides that new tax changes it may sign into law are to be applied retroactively, it can cause significant disruptions for small businesses. Many business owners may have already made financial decisions based on existing tax regulations. Liabilities can be created from retroactive changes nullifying these decisions.
5. Impact on Consumer Spending:
Changes in consumer spending heavily impact a business’ profitability. If taxpayers are left with smaller refunds due to higher taxes and limited credits, then their spending power will be reduced. Without a reliable customer base with cash to spend, small businesses will see significant drops in revenue.
In conclusion, small business owners could be severely impacted by tax policy uncertainties created by a divided and changing government. While tax planning may be more difficult in these circumstances, it can be made easier by working closely with a tax professional. To get in touch with someone you can trust, reach out to the experts at XQ CPA. Give us a call or book a consultation at the link below.
Phone: 832-295-3353
Online Booking: https://xqcpa-bookme.acuityscheduling.com/schedule.php
Sources:
Want to pay less taxes? Read XQ CPA's official tax planning guidebook! How to Grow Your Wealth Through Tax Planning.
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