January 12, 2005
NASE Announces 2005 Legislative Priorities
With the swearing-in of the 109th Congress, the NASE announced its legislative priorities for 2005, focusing on access to affordable health coverage and tax relief.
“We are reaching a national consensus that the cost of health coverage for micro-businesses and their employees is skyrocketing beyond control,” said Kristie Darien, executive director of the NASE legislative office. “Without some of the legislative remedies supported by the NASE, the number of working uninsured will only continue to increase to a crisis level.”
The NASE advocates for the elimination of the self-employment tax on health insurance premiums, tax credits for health insurance purchases, and the formation of association health plans to curb the cost of health coverage for the self-employed and micro-businesses. The first solution stems from the inequity that sole proprietors cannot deduct health premiums as a cost of doing business, as all other corporations can. This means the self-employed pay an additional 15.3 percent more for their health premiums than someone who incorporated their business.
Other ways the NASE hopes to provide tax relief for micro-business owners is through supporting a simpler home office tax deduction, an increase in the tax deduction for business meals, and making permanent the current level of business equipment expensing.
Along with simplifying the complicated home office tax deduction, the IRS rules for categorizing a worker as an employee or an independent contractor are confusing and hard to follow. The NASE supports clarifying the definition of an independent contractor so that micro-business owners do not unintentionally use the wrong category, resulting in fines and audits.
The NASE intends to be part of the Social Security debate in Washington this year. Without increasing payroll taxes for micro-businesses or the self-employed, this segment of the small business population can benefit from allocating a portion of their Social Security taxes to personal retirement accounts that workers would own and control themselves.
For more information on any of the NASE legislative priorities for 2005, visit http://advocacy.NASE.org.
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IRS Web Site Offers Guidance for Filing 2004 Taxes
In an effort to educate and help small businesses with filing their 2004 tax forms, the IRS offers several publications on their Web site, www.IRS.gov. The articles and publications offer guidance on 2004 tax law changes, comprehensive rules for 401(k) contributions, and tax deductions for tsunami relief charity contributions.
Publication 334, Tax Guide for Small Business: This publication will assist in filing Schedule C or C-EZ. Also, find out what's new for 2004/2005
http://www.irs.gov/publications/p334/index.html Aid for Tsunami Victims May be Tax Deductible : Contributions to domestic, tax-exempt, charitable organizations that provide assistance to individuals in foreign lands qualify as tax-deductible contributions for federal income tax purposes provided the U.S. organization has full control and discretion over the uses of such funds. Under a new law enacted on Jan. 7, donors who itemize are allowed to claim on their 2004 tax returns charitable donations made during Jan. 2005 for the relief of the tsunami victims.
http://www.irs.gov/newsroom/article/0,,id=133273,00.html Treasury and IRS Finalize Comprehensive Rules for 401(k) Plans: The comprehensive final rules are the result of gathering input from retirement plan participants, sponsors, and service providers. These final regulations will make it easier for employers to sponsor plans to help employees save for their retirement and will assist administrators in keeping the plans qualified.
http://www.treas.gov/press/releases/js2171.htm E-File: There are many benefits of filing your return electronically: accuracy, quick, acknowledgement of receipt. The information on this website is intended to help Individuals, Businesses, Tax Professionals, Charities and Nonprofits, and Software Developers find alternatives to paper returns.
http://www.irs.gov/efile/index.html
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Large Federal Contractors Miscoded As Small Businesses
Over $2 billion in federal contracts were awarded to large businesses and mistakenly credited towards the government’s small business contracting goals in 2002, according to a new report by the Office of Advocacy of the U.S. Small Business Administration. The report found the disparity was not intentional, but often caused by a loophole in the procurement coding process.
The 44 business coded erroneously as small were the result of human error, of a large firm’s acquisition of a smaller firm during the fiscal year, or of a small firm’s outgrowing of its size classification. In the existing process, after a business self-certifies itself as “small” in the initial phases of contract bidding, it maintains that classification even if it merges with another firm.
Before the report was released, the SBA announced changes to way the government credits a small business contract award to fix this loophole. The SBA amended its size regulations and appeal procedures for size determinations, and now requires small businesses to reaffirm their small business status to contracting officers once it has been acquired by another business.
For the complete report, Analysis of Type of Business Coding for the Top 1,000 Contractors Receiving Small Business Awards in FY 2002, visit http://www.sba.gov/advo/research/rs246tot.pdf.
For additional information on the new SBA policy to close the reporting loophole, visit the SBA’s Office of Size Standards Webpage at http://www.sba.gov/size, and click on “What’s New?
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