• NASE Responds to Bush Proposals on Narrowing the Tax Gap
• NASE Offers Health Care Education to Women Business Owners
• Congress Passes Boost to SBA Disaster Loan Funding
• National Women’s Business Council: Small Business Tax Tips Conference Call Next Week
• Member Poll: Looking Back at 2005

NASE Responds to Bush Proposals on Narrowing the Tax Gap

To help close the $345 billion tax gap, micro-businesses need a simpler tax system with more education and assistance to improve tax compliance and lessen the tax gap, not more paperwork and administrative burden of third-party reporting, as the Bush Administration proposed last week. Mandatory third-party reporting on expenses paid would place an undue burden on micro-business owners, those likely to utilize independent contractors. “Clarifying tax regulations allows those preparing their taxes to more readily understand the law and their responsibility of complying. Both the IRS and taxpayers will benefit from a simpler system with less administrative burden,” said Kristie Darien, NASE executive director of the legislative office. “We believe that those willfully cheating on their taxes should face penalties, but we do not want to punish micro-business owners who may make good faith errors due to being bogged down in an overly complex system. A balance between simplification, compliance education and measured enforcement is the best approach in dealing with the tax gap.” The latest IRS figures found that in Tax Year 2001, the tax gap came to $345 billion. Additionally, nonfarm sole proprietors, those filing a Schedule C, had a net misreporting percentage of 57 percent, contributing around $68 billion to the tax gap. The research also found a 15 percent overall noncompliance rate with all tax returns filed. Underreporting was the largest cause of noncompliance. Understated income accounts for more than 80 percent of underreporting, not overstated deductions. Some of the Administration’s proposals for lessening the tax gap include: Requiring increased information reporting for certain non-wage payments made by federal, state and local governments to procure property and services. Requiring credit and debit card companies to report to the IRS on gross reimbursements paid to certain businesses. Expanding the requirement that paid return preparers sign returns beyond income taxes and impose a penalty when they refuse to do so. Authorizing the IRS to require payment of employment tax debts prior to any collections proceedings. In addition, the Treasury Department will be reviewing regulations on worker classification in attempt to shore up withholding. “For sole proprietors and business owners hiring independent contractors, various proposals for imposing withholding on payments made to contractors will only add to the compliance burden with a whole new set of perplexing and – for many – unmanageable and costly filing requirements,” said NASE National Tax Advisor Keith Hall in a Congressional hearing last year. The NASE is also concerned with any move to shift funds from tax assistance and outreach programs to enforcement activities. “The more assistance offered to taxpayers and the simpler it is to understand and comply with tax laws, the more taxpayers will accurately meet their tax obligations,” said Hall. “However, increased enforcement at the expense of taxpayer education will not in the long term accomplish sustained, improved compliance.” The complexity of the tax code remains the ultimate reason for the tax gap. The NASE supports tax code simplifications to ease the time and cost burden of tax compliance for micro-businesses. For more information on the NASE’s position on tax reform, visit http://advocacy.NASE.org. NASE Offers Health Care Education to Women Business Owners The NASE joined women business owners from across the country assembled to discuss important policy issues with members of Congress at a public policy conference this week. The owners gathered as part of the National Association of Women Business Owners (NAWBO) Public Policy Days. NASE executive director of the legislative offices, Kristie Darien, discussed how the tax code affects health care decisions for micro-business owners and how critical education is in making those decisions. “At the NASE, we promote simplicity. We promote practicality. We promote education,” Darien said at a panel discussion titled Health Care Insurance: Tax Credits and Other Tax Incentives. The seminar prepared women business owners with a background and tools to use during meetings with their members of Congress to lobby issues important to them. Darien highlighted the need for transparency in the health care system including costs, insurance companies, and success rates of doctors and hospitals as well as the importance of wellness and preventative medical options to promote health. She also explained the process of obtaining a health reimbursement arrangement and the option of a health savings account used in conjunction with a high-deductible health plan. Darien stressed the need for understanding legislative issues and the impact of constituent contact to get bills moving through Congress. She encouraged the women business owners to push legislators to pass the elimination of the self-employment tax on sole proprietors’ health insurance costs. Tools to help micro-business owners get involved, as well as up-to-date legislative information, are available to NASE Members at the online Legislative Action Center at http://advocacy.nase.org. Congress Passes Boost to SBA Disaster Loan Funding Last week, both chambers of Congress passed legislation that will allocate $712 million to the Small Business Administration (SBA) disaster loan program. These funds would be redirected from the Federal Emergency Management Agency (FEMA) and would not add to the budget deficit. This draws on the $60 billion FEMA received in two emergency appropriations supplemental bills last fall and will allow the SBA to make an additional $4.8 billion in disaster relief loans. “I hope this bill gives some peace of mind to those in the Gulf waiting for help,” said John Kerry (D-MA), Ranking Member of the Senate Small Business and Entrepreneurship Committee. National Women’s Business Council: Small Business Tax Tips Conference Call Next Week With tax season in full swing, the National Women’s Business Council’s February conference call will address small business tax concerns. Speakers include Angela Kraus and Phyllis Grimes of the IRS Small Business & Self-Employed Division and Stephanie Harrison-Colbert, the lead Tax Analyst for Minority and Women organizations at the national level. To listen to this call on Tuesday, February 28 at 3 PM (EST), call toll-free 1-877-326-2337 and enter code 3687613#. If you have any questions, contact Chris Andrews at the NWBC at christina.andrews@sba.gov or visit www.nwbc.gov. Member Poll: Looking Back at 2005 With a new year ahead, many business owners take the time to evaluate the previous year and determine their business strategy for the year ahead. Tell the NASE how you your business fared in 2005 in this month’s online poll. Let the NASE know your opinions by visiting the MyNASE Web site at http://my.NASE.org/. Log in to your free MyNASE Web Account. If you have not set up an account, you can do so at http://my.NASE.org/ with your member number. Let your voice be heard in the association by taking this survey during the month of February.