By Jason Bramwell
Approximately 23.4 million individual income tax returns for tax year 2011 reported nonfarm sole proprietorship activity, an increase of 1.8 percent from 2010, according to a new report from the IRS, Summer 2013 Statistics of Income (SOI) Bulletin
Profits reported on these returns rose to $282.6 billion in 2011, a 5.6 percent improvement over the previous year. In constant dollars, total nonfarm sole proprietorship profits increased 3.4 percent for 2011.
Profits as a percent of business receipts dropped by 0.1 percent to 22.3 percent in 2011, resulting in the second-highest level during a twenty-four-year period from 1988 through 2011. Total receipts increased to $1.3 trillion in 2011, up 5.9 percent from 2010.
According to Adrian Dungan, an economist with the Individual Returns Analysis Section of the IRS, all nonfarm sole proprietorship industries experienced increases in profits for 2011 with two exceptions: retail trade sector (down 2.9 percent) and all other industries (down 1 percent). The professional, scientific, and technical services sector reported the largest amount of profits ($72.4 billion), followed by the health care and social assistance sector ($51.3 billion).
Profits in the professional, scientific, and technical services sector rose 2.3 percent in 2011, accounting for 25.6 percent of the total profits for all industry sectors. The health care and social assistance sector realized the largest absolute increase in profits (approximately $2.6 billion) for the year, accounting for 18.1 percent of the total profits for all sectors. In comparison, the transportation and warehousing sector reported the largest percentage increase in profits, up 27.4 percent, from $9.3 billion in 2010 to $11.8 billion in 2011.
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For sole proprietorships as a whole, receipts increased 5.9 percent, while deductions increased 6 percent.
"The retail trade sector reported the largest percentage of total business receipts (15 percent) and total business deductions (18.2 percent)," Dungan wrote. "In comparison, the transportation and warehousing sector reported the largest rise in business receipts, up 17.3 percent. Among all industrial sectors, real estate and rental and leasing was the only one to experience a downturn in receipts, losing $0.2 billion, or 0.5 percent, for the year. This sector also reported the largest decrease in deductions, declining $1.2 billion, or 2.9 percent, in 2011."
Total business receipts for the finance and insurance sector in 2011 increased 10.9 percent, while deductions were up 10.2 percent over 2010, according to the bulletin.
The IRS report also reviewed wage income and elective retirement contributions from Form W-2 from tax years 2008 through 2010. In 2008, some 140.7 million individual income taxpayers earned approximately $5.7 trillion in wages, tips, and other compensation, as reported on Form W-2. Both the total number of taxpayers and the amount of wages declined 2 percent over the next two years, to 136.8 million taxpayers with total earnings of approximately $5.6 trillion.
However, average individual W-2 earnings rose slightly, from $40,532 in 2008 to $40,892 in 2010. When comparing the wages of men and women, men on average earned more. However, between 2008 and 2010, women reported an increase in their average W-2 earnings, whereas men reported a decline during this period.
Form W-2 also provides information on individual participation in employer-sponsored retirement plans. In 2010, almost half (65.8 million) of all taxpayers with W-2 income participated in an employer-sponsored retirement savings plan. Individuals who made a direct contribution to an employer-sponsored retirement plan contributed $209.2 billion, a decline of 4.5 percent from 2008.
Among those who contributed, taxpayers filing jointly participated at higher levels and, on average, contributed higher amounts than their counterparts filing nonjoint returns.