SelfInformed

March 2012


NASE Advocates Tax Changes In 2012 To Help Small-Business Owners

Monday, March 05, 2012

By Kristie L. Arslan

The nation’s 22 million self-employed business owners are building companies and contributing to the economic turnaround. However, they are disproportionately challenged
by burdensome regulatory compliance, including an unfair tax burden and excessive paperwork requirements.

The NASE continues to advocate for simple changes to federal law that would address these challenges and ensure an even playing field for small businesses. Building on 2011 advocacy efforts, below is the NASE’s 2012 Self-Employed Tax Agenda. We’re working to educate lawmakers and encourage legislative and regulatory changes that will allow small businesses to unleash their full potential.

Issue: Self-Employed Health Insurance Deduction
The premiums paid for health insurance by small-business owners remain a deductible item Form 1040 in 2011, however those same premiums will not be included on Schedule SE, Self-Employment Tax. That means net earnings from self-employment will be higher and the related self-employment tax will be higher. This is, in effect, a 15.3 percent tax hike on small-business owners.
Legislative Action: Advocate for legislation that permanently secures the deduction.

Issue: Payroll Tax Relief Extension
The payroll tax cut for 2011 expired at the end of February 2012.
Legislative Action: The NASE strongly supports the full year extension of the payroll tax deduction as an easy and necessary step in supporting economic recovery.

Issue: Standard Home Office Deduction
Entrepreneurs managing businesses out of their home face added burdens at tax time. The current home office deduction has the words “See Instructions” more than 10 times on a one-page form. Bipartisan legislation has been introduced in Congress to allow business owners the option of a $1,500 standard deduction, but would not preclude taxpayers currently qualifying for the home office deduction from continuing to itemize their expenses should they choose.
Legislative Action: More than half of the self-employed work from an office at home, so Congress should pass and the president should sign legislation simplifying the deduction.

Issue: Tax Deduction for Startups
Passed as part of the Small Business Jobs Act of 2010, this provision allowed individuals to take a $10,000 deduction for startups in 2011. In 2012, the deduction will decrease to $5,000.
Legislative Action: Seek renewal of the deduction at the $10,000 rate. This deduction is vital to encouraging individuals to continue to start new companies and contribute to the growth of our economy.

Issue: Alternative Minimum Tax (AMT) Exemption
For tax year 2011, the AMT exemptions increased for married couples filing jointly and for single filers. For tax year 2012, the AMT exemptions are scheduled to decrease to year 2000 levels for many taxpayers.
Legislative Action: Advocate for the AMT to remain at the 2011 deduction rate. A decrease in the AMT would unfairly burden the self-employed with a higher tax rate.

We all know 2012 is a pivotal year for the economy, and for the politicians who help shape policies designed to boost growth. If our elected leaders are concerned about keeping their jobs into 2013, they should focus on the tax policies the self-employed need to keep growing their businesses in 2012.


Kristie L. Arslan is president and CEO of the NASE and provides critical insight to policymakers on issues affecting our nation’s self-employed. You can contact her at advocacy@NASE.org.