With income tax increases likely on the horizon it would be useful to know how many businesses, which report their personal and business income as one entity, will see an increase in their tax liability. However, that’s not a number the Department of Revenue Services can currently provide.
The Department of Revenue Services was able to identify that in 2009 there were a total of 97,175 returns filed, of which 47,130 are LLCs, 33,398 are S Corps and the balance of which are other types of partnerships.
“You cannot assume, however, that these are the only source of pass through income for Connecticut residents, nor can you assume that all these entities generate pass through income that will be taxed by Connecticut,” Susan Sherman, legislative program director for DRS, said earlier this month.
It’s a frustration for small business owners trying to figure out what their tax liability would be under Gov. Dannel P. Malloy’s proposed income tax increases which expand the income brackets from three to eight. Anyone uncertain of their sales or business income this year may be unable to predict the tax impact. How many businesses based on last year’s data may be impacted by the increase is also a relative unknown. The income tax increases proposed by Malloy will be retroactive back to January of 2011.
Not having enough data to provide businesses is a frustration for both Commissioner of Revenue Services Kevin Sullivan and Secretary of the State Denise Merrill.
Merrill runs the office where businesses file forms to open or close a company, while Sullivan runs the office that collects the taxes.
In a recent interview, Merrill said there is legislation to begin to rectify the problem which results partially from not having computer systems in her office and DRS that talk to each other. Often times companies forget to dissolve a company once its disbanded, so the information about how many active companies there are in Connecticut is inaccurate, she said.
Merrill said she won’t be putting out any press releases regarding the churning information her office collects because of its inability to provide any accurate data. Her predecessor, former Secretary of the State Susan Bysiewicz, was fond of putting out that information on a quarterly basis.
But Merrill said her office currently knows next to nothing about the companies filing the information since there’s no where on the forms to say how many people are employed by the company or how much revenue is generated. They also don’t collect data on which industry the company belongs to, or if they have multiple locations where they operate.
UConn Professor Fred Carstensen, a critic of Connecticut’s data collection process, has said the information is “worthless.”
Merrill said that’s something she’s trying to change with legislation that would help her create an e-business portal so that the Secretary of the State’s office becomes a one-stop place for businesses to get started. She said Catherine Smith, the nominee to head the Department Economic and Community Development, was receptive to the idea.