Washington Watch - April 18, 2012

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Washington Watch - April 18, 2012

Tax Games the Focus Of Congress This Week

In an effort to capitalize on tax day, April 17th, Democratic and Republican leaders scheduled two votes for the week that are largely deemed as political theater.  

Up first the “Buffett Rule”, named after billionaire Warren Buffett who has championed for an increase in taxes for the wealthy, individuals with $2 million or more a year in taxable income would be taxed a minimum rate of 30%. The Joint Committee on Taxation estimated that, over 10 years, the “Buffett Rule” would result in the collection of about $47 billion and with the current estimates placing the daily growth of the national deficit at $3.8 billion. Many argued that the “Buffett Rule” was purely political rhetoric aimed at the November election rather than addressing the fundamental issue at hand: the broken and unfair tax system.  The “Buffett Rule” failed to reach the threshold to cut off debate in the U.S. Senate (60 votes required), 51 Senators voted for the measure and 45 against (four Senators were “no votes”).

Later this week, the House is expected to vote on a proposal by Majority Leader Eric Cantor (R-Va.) to provide a 20% tax cut for small businesses (defined as 500 or less employees). The details of the Cantor proposal are scare and, once again, experts believe that even if the measure was to pass the U.S. House of Representatives it would be unlikely that the U.S. Senate would address the legislation.

All and all, the political posturizing does have an upside; it once again highlights the massive inequities in the tax code, especially for the self-employed. The NASE strongly argues for changes to the tax code that mean real reform, especially for the 22 million self-employed individuals, the largest employment sector in the U.S.  Simplification and equity are the cornerstones of our advocacy positions.  As the calendar year grows closer, the NASE will continue to stress the importance of true tax reform, individual and corporate.  Our hope is that elected officials in Washington will represent their constituents and get the work done in a timely, fair fashion. 

Quick Look: Postal Service Overhaul

The Senate is expected to take up a bill to overhaul the U.S. Postal Service. Lead sponsors of the bill have introduced new measures to help slow and delay changes to overnight delivery and office closures. The amendment would make cutting Saturday delivery more difficult.

Postmaster General Patrick R. Donahoe had previously set forth a proposal to close many rural post offices and mail-processing centers. Some lawmakers have responding by asking that post offices be kept in rural areas but that some urban areas that have numerous post offices should see cuts.

File An Extension

By Keith Hall, NASE National Tax Advisor

Millions of us, particularly us small business owners, have not completed the return yet, and for millions of different reasons. But regardless of your reasons, there is no need to panic. The IRS will give you extra time to file your tax returns just by asking. If you were unable to file your return yesterday, simply complete IRS form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. The form is easy to complete and will give you an extra six months to finsh all of those forms that the IRS is looking for.  

Keep in mind that the completed form is an extension of time to file, but not an extension of time to pay.  So if you anticipate that you will indeed owe some money with your final tax return, take a few minutes to estimate what you will owe and include that amount with the extension.  If you choose not to estimate the tax that will be due, you may very well be subject to interest and penalties on the amount that is unpaid, so take the time to make a good guess and send that amount to the IRS.

Tax Outlook For Small Biz

Tax season reminds us that small businesses are disproportionately affected by tax compliance. For small business owners, tax rates can drive business decisions. Higher tax rates can mean that small firms have less capital to create jobs and invest back in their companies. Small companies can also be adversely affected by tax paperwork and recordkeeping requirements. This hearing will provide Members with an opportunity to learn more about the tax policies that small businesses will face.

Read more about this House hearing here

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