The hits just seem to keep on coming for Long Island’s small business owners. If it’s not lockdowns and restrictions, or supply chain issues and inflation, it is interest rate and tax hikes.
In particular, one new hidden tax on small business could cause serious financial problems for many next year.
Keep reading to find out what it is, and what you can do about it…
Commercial Property Taxes
Even giant retailer Amazon has admitted defeat, and has had to give up its $11M property tax break in Nassau County. Due to failing to even employ 150 workers.
If they are struggling, we know there is even more pain among small business owners. Though there are certainly many more big corporations and developers receiving millions in property tax exemptions each year. Which have to be paid for by local small businesses and homeowners.
The New Hidden Tax On Small Business Owners
Two Forbes contributors just discovered a new hidden tax on small business owners that was snuck into last year's budget reconciliation bill.
In addition to establishing a new minimum corporate tax, the bill mandates a new tax for those with five or more employees.
If you fall into this category, beginning in 2023, you must automatically enroll all of your employees into a retirement plan. Further, 6% of their pay must be automatically rolled into this specified and managed plan. Which automatically rises to 10% in the next couple of years.
Like Obamacare, those caught not doing this, even if it is because they cannot afford it, will be taxed $10 per day, per employee. That’s an extra $36,000 in taxes per year, if you have just 10 employees.
What To Do
How can your business survive this barrage of extra expenses and taxes?
One option is obviously just to follow the mandate, and then give your workers a 10% plus pay raise to ensure they can still survive on their take home pay. Of course, they may need a far larger pay raise than that, just to keep up with inflation in groceries, energy costs, and their own property taxes.
The alternatives may be to layoff workers, and bring your headcount down to no more than four workers. Others may choose to relocate their companies to lower tax jurisdictions. Or sell off your business property before the market goes down further, and work from home. Either solo or with a fully remote workforce of independent contractors.
Many business owners will need to upgrade the accounting help to deal with the complexity of all these new taxes.
One step that all can make right now to offset some costs, and preserve more free cash flow is to challenge their home and business property tax assessments and bills.