The 2010 tax deadline is just a week away. That could mean some long nights ahead if you still haven’t finished getting your receipts together. Or, it could mean preparing for a heavy tax bill if you didn’t plan correctly.

But whether you waited to the last minute or have been prepared for April 18, 2011 since Dec. 31, 2010, it’s likely that you felt the impact of federal tax issues in some way, shape or form. That’s because tax codes are complex and inconsistent.

So much so, in fact, that the National Small Business Association figures that dealing with the administration of federal taxes is depleting small businesses of their time and money. In other words—and here is where the “death” part of the headline comes in—dealing with taxes is killing a measure of productivity and profits.

"One in three small-business owners spends two full work weeks every year dealing with federal taxes, and the overwhelming majority (87 percent) are forced to pay an outside accountant or other tax return preparer," says Larry Nannis, CPA, NSBA chair and shareholder at Levine, Katz, Nannis + Solomon, P.C. "The federal tax code is a massive resource drain for small businesses."

What’s the worst part of dealing with federal tax issues? Most small businesses point to payroll taxes as the most burdensome task, both financially and administratively. In fact, only 44 percent of small businesses report using an external payroll company. Even small businesses that use a payroll company spend plenty of time dealing with payroll taxes.

Sixty-three percent of small businesses handle payroll internally—and the new W2 reporting requirement that begins in 2012 will make dealing with federal tax issues even more draining. That’s because new W2 reporting requirements demand employers report health care spending.

But wait, it gets worse (as you already know). What happens when there is an IRS audit? Despite the fact that new research shows the IRS misappropriated an undue responsibility of the tax gap upon the small business community, audits are rising. Most small business owners don’t even take the deductions they could on their return for fear of an audit. Only 47 percent of eligible small business owners use the home office deduction, primarily due to concerns it will "red-flag" their return for an audit.

"The time for a serious debate on broad tax reform is now," says NSBA President Todd McCracken. "The ever-growing patchwork of credits, deductions, tax hikes and sunset dates is a roller coaster ride without the slightest indication of what's around the next corner. This is unsustainable and unacceptable."

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