NOTE: I wrote this post in 2013, so be aware of its age. I am leaving the post up because this is an interesting topic of discussion.
Should lawmakers provide a standard deduction to sole proprietors? The author of an article in USA Today last fall thinks so. Quoting the article:
Instead of having to keep piles of receipts and track every expense, set a sliding scale of standard deductions that sole proprietors can take based on business income up to a set amount, say $75,000 or $100,000.
That would get rid of a lot of paperwork.
Robert Flach at The Wandering Tax Pro blog first commented on this story in his November 10th “Buzz”. I agree with Robert’s take:
A terrible idea indeed! Small business owners should NOT be discouraged from keeping receipts and tracking expenses. It is often hard enough to get them to do so as it is. Small business owners MUST keep records and track expenses for a variety of very important reasons – preparing their tax return is only one, and not the most important one at that.
I don’t have much else to add to what Robert says, other than to reiterate that this is a bad idea, and to add to his last sentence, about how tracking expenses is important for more than just tax purposes. Tracking expenses is also important for management purposes.
Paperwork is annoying. I think we can all agree with that. But for businesses, the paperwork and tracking of expenses is a vital part of managing the business.