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Washington Watch - February 24, 2011

NASE Featured In Wall Street Journal

The NASE was recently asked to take part in a WSJ blog article by Sarah Needleman titled, "How To Find A Qualified Tax Preparer." See the excerpt below or read the full article here.

According to Keith Hall, National Tax Adviser for the National Association for the Self-Employed, a nonprofit business group in Washington, D.C., you should hire someone experienced in preparing tax returns for start-ups. 

In my latest Accidental Entrepreneur column, I wrote about why entrepreneurs just starting out should consider hiring a tax specialist to prepare their businessís tax return. A number of readers have posted comments in response asking for advice on how to find a qualified professional to handle the job.

According to Keith Hall, National Tax Adviser for the National Association for the Self-Employed, a nonprofit business group in Washington, D.C., you should hire someone experienced in preparing tax returns for start-ups. Further, the more recent the experience he or she has doing this, the better. "Just because you passed the CPA exam some years ago doesn't mean you have the tax expertise to fit clients' needs," Mr. Hall says, referring to accounting professionals with the Certified Public Accountant designation.

Link to full post

SBA FY 2012 Budget Released

The Small Business Administration will be tightening its belt in 2012, according to SBA Administrator Karen Mills. President Obama recommended $985 million in new spending for the agency, or $818 million for small-business programs. This is just over half of funds allocated in 2010, during which time the SBA received stimulus money to grow and expand its outreach.

The following are highlights from the budget proposal:

• $16.5 billion in 7(a) lending (down from $17.5 billion)
• $25 million for the microlending program (same as 2011 proposal), but the counseling associated with these loans is $10 million (down from $22 million in 2010).
• 9 percent cut in funding for Small Business Development Centers (SBDCs)
• Programs to help businesses win government contracts would see modest increases next year.

Congress is beginning to hold hearings on the President's budget proposal and will determine the final budget amount for SBA as part of the annual appropriations process.

Read the entire SBA budget document here

A more detailed description of the budget outlook can be seen in this post from the New York Times' You're the Boss blog.

House Moves 1099 Repeal Legislation

Kristie Arslan, Executive Director of the NASE, released the statement below in response to the House Ways and Means Committee approval of two separate pieces of legislation repealing the IRS Form 1099 reporting provision contained in the health care reform law. The Senate has already passed legislation to repeal the provision. 

"NASE applauds the Ways and Means Committee for advancing legislation aimed at repealing the onerous 1099 reporting provision," said Arslan. "The 1099 reporting requirement would stifle small businesses, including the self-employed and micro-businesses, who are already struggling to keep their doors open. With the House joining the Senate to act on this small business priority, our nation's small business community is now looking forward to President Obama signing legislation into law."

Read Kristie Arslan's Huffington Post piece, Economic Recovery Starts with Small Business, which highlights this burdensome regulation. Click here to read the Ways and Means press release on its recent action.

Tips: Independent Contractor or Employee?

The self-employed contribute a mighty portion to the U.S. economy, nearly $1 trillion. There is no question that they are helping create jobs by growing and hiring new workers. The question is, by hiring additional workers, are micro-businesses (those with 10 or fewer employees) actually creating more paperwork for themselves?

"Determining whether a new worker is an employee or an independent contractor can be tough," says Keith Hall, National Tax Advisor for the National Association for the Self-Employed (NASE). "Keep in mind that you can't just choose which one is easiest.  It really depends on who calls the shots from day to day."

As a firm grows, many business owners decide to begin using other workers to help manage the needs of new and existing clients. At that point, the business owner must determine the tax classification for the new position he or she just created. Many small businesses think that this distinction is a matter of choice. Not so, says the Internal Revenue Service (IRS). 

If you are unsure whether to classify your newest worker as an employee or an independent contractor, click here to find out the NASE's tips on sorting them out.

House Committee Hearing On The Small Biz Economy

Chairman Graves (R-Mo.) stated that there are many problems that small business are facing in today's economy. The top concerns of small businesses are the complexity and magnitude of the tax code and increasing costs in health care coverage. Chairman Graves commented that our economic recovery is well on the way but businesses need security in order for them plan for the future, increase their spending, and expand their business endeavors. New health care costs are high and have the potential to hurt many small businesses. The new health care regulation must be addressed so that small businesses are not hurt from federal regulations.

Ranking Member Velazquez (D-N.Y.) commented that the nation's economy is recovering but there is still a long way to go. She also stated that this hearing would serve as the basis for future discussions regarding what should be done by the federal government to aid small businesses in their recovery. Many small business owners have been optimistic about the future as the GDP continues to grow and consumer spending is growing at an annual rate of 4.4 percent. According to the Ranking Member, this positive news is tempered by the problems that are occurring in the labor market such as high unemployment rates and the lack of job creation. Businesses need to be able to take risks in order to profit and expand; however, the lack of sales and cash flow in the small business sector prevents businesses from hiring new employees and spending money.

The small businesses and organizations testifying had several comments based on their experiences. One business owner commented that data shows there are still many issues in the economy and although small businesses are recovering, they are in a period of transition. Another said that the new tax code is too complicated for small business owners and trying to navigate through tax regulations costs too much time and money. When it came to health care reform, a business owner noted that he hoped health reform would create more competition, lower costs, and lead to a better quality of care, but the new plan does not achieve these goals and inhibits the small business market from thriving.

Read more about the hearing at the Committee's website.

Washington Watch Online

Visit NASE Advocacy to view archived editions of Washington Watch. While you’re there, read the latest updates from the Washington, D.C. office, write your Congressperson, and find out how you can join the fight for micro-business.