Washington Watch - July 14, 2010


Washington Watch - July 14, 2010

Small Business Jobs Act Addresses Key Health And Tax Priorities For The Self-Employed

The self-employed and micro-businesses are often overlooked by lawmakers when it comes to policy, but that may be about to change. The Senate is considering legislation called the Small Business Jobs Act of 2010 (H.R. 5297). This bill contains key provisions that may help America’s smallest businesses in this difficult economic climate, according to the National Association for the Self-Employed (NASE).

A long-standing priority for the NASE has been included in the Small Business Jobs Act, allowing the self-employed to take a one-year business deduction for health care costs. Sole proprietors are unable to deduct their health insurance costs as a business expense, leaving them to pay more in payroll (self-employment) taxes than any other business. The NASE has been working for many years to allow the self-employed to receive the same tax treatment of health insurance costs as all other business entities. While the NASE has been working to permanently correct this inequity in the tax code, the one-year deduction in the Small Business Jobs Act is an important first step in leveling the playing field for the 23 million self-employed Americans. 

To further address the needs of our nation’s smallest businesses, Sen. Barbara Boxer (D-Calif.) has offered a vital amendment to the bill, S. Amdt #4430, which helps simplify the tax code for home-based businesses.  With over half of all small businesses being run out of the home, the home office deduction is an important tax benefit for small businesses. Unfortunately, the complexity and paperwork burden associated with the home office deduction drives many qualifying business owners to forgo this tax assistance. S. Amdt. #4430 would create the option of a standard home office deduction, allowing eligible business owners to avoid the complex calculations and simply opt for the standard deduction amount. The NASE is strongly urging passage of this amendment.

“Congress and the Administration give a lot of lip service to small business in regards to rebuilding the economy,” remarked Kristie Arslan, executive director of NASE’s Legislative Offices. “But here are two key proposals that would make a tangible difference in their bottomline. For a one- to two-person company, small tax benefits turn into real cash that can actually facilitate business growth.”

Other key provisions included in the Small Business Jobs Act which will provide entrepreneurs with a boost include:

  • Increased deduction for start-up expenses - currently, entrepreneurs can deduct up to $5,000 of expenses with a $50,000 phase-out.  The bill would increase the deduction to $10,000 with a $60,000 phase-out threshold beginning in 2010.
  • Increase of Section 179 expensing to $500,000 with a phase-out threshold of $2 million in 2010 and 2011.
  • Creation of a Small Business Lending Fund which would provide federal funding to community banks, credit unions and community development loan funds to increase small business lending.

The NASE strongly supports the Small Business Jobs Act of 2010 and S. Amdt. #4430. We believe the combination of tax incentives and financing options will help new businesses build a solid foundation and help existing businesses keep their doors open. Healthy businesses mean healthy families and communities.

Send IRS Feedback On Increased Reporting Law

The Internal Revenue Service invites public comment on how to most effectively carry out a law change that, starting in 2012, will require businesses to report a wider range of payments to contractors, vendors and others, usually on Form 1099. These comments will help the IRS issue guidance that implements this provision in a manner that minimizes burden and avoids duplicate reporting.

Under a proposed regulation, many business purchases made with credit or debit cards would be exempt from the new reporting requirement because they are already reported by banks and other payment processors. The IRS seeks comments on additional circumstances in which duplicate reporting might otherwise occur and on rules that would prevent such duplicate reporting.

The change, enacted in March but not effective until 2012, expanded existing reporting requirements to include a business’s payments related to goods and other property, and payments to most corporations. With some exceptions, payments to corporations are currently exempt from this requirement.

As part of the new expanded Form 1099 reporting requirement, businesses will also be required to obtain accurate Taxpayer Identification Numbers (TINs) from all qualifying vendors. Should the business owner be unable to do so, they would be required to withhold a portion of that vendor payment and send it to the IRS. A recent NASE survey showed over 40 percent of micro-businesses still prepare their own taxes. Thus, the added administrative workload will significantly increase the time business owners spend on paperwork and/or force them to hire an accountant, adding to the cost of doing business in this difficult economic time.

There are three ways to submit comments.

  • E-mail to: Notice.Comments@irscounsel.treas.gov. Include “Notice 2010-51" in the subject line.
  • Mail to: Internal Revenue Service, CC:PA:LPD:PR ( Notice 2010-51), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.
  • Hand deliver to: CC:PA:LPD:PR ( Notice 2010-51), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue NW, Washington, DC, between 8 a.m. and 4 p.m., Monday through Friday.

The deadline is Sept. 29, 2010. For more information on Notice 2010-51, visit IRS.gov.

Legislative Update: Financial Overhaul Set To Pass

The Senate has rounded up enough Democrats and Republicans in support of the financial reform bill (H.R. 4173). A previous holdout, Sen. Ben Nelson (D-Neb.) has announced that he now supports the bill. Three Republicans crossed party lines to make 60 votes in favor: Susan Collins and Olympia Snowe of Maine and Scott Brown of Massachusetts.The House and Senate are likely to begin considering the compromise bill, called a conference report, this week.

Closing Deadline Extended To Sept. 30 For Eligible Homebuyer Credit Purchases

Eligible taxpayers who contracted to buy a home, qualifying for the first-time homebuyer credit, before the end of April now have until Sept. 30, 2010 to close the deal, according to the Internal Revenue Service.

The Homebuyer Assistance and Improvement Act of 2010, signed by the President today, extended the closing deadline from June 30 to Sept. 30 for any eligible homebuyer who entered into a binding purchase contract on or before April 30 to close on the purchase of the home on or before June 30, 2010. The new law addresses concerns that many homebuyers might be unable to meet the original June 30 closing deadline.

The IRS reminds taxpayers that special filing and documentation requirements apply to anyone claiming the homebuyer credit. To avoid refund delays, those who entered into a purchase contract on or before April 30, but closed after that date, should attach to their return a copy of the pages from the signed contract showing all parties' names and signatures if required by local law, the property address, the purchase price, and the date of the contract.

For more information, including what forms and documentation are needed, please click here.

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Courtesy of NASE.org