• House Committee Proposes New Small-Business Tax Package
• SBA Cautions Against Extensive Overhaul Of Current Programs
• President Bush Releases New Budget

House Committee Proposes New Small-Business Tax Package

The top two leaders of the House Ways and Means Committee are giving Congress a new tax package to consider tacking onto the minimum wage bill. Chairman Charles B. Rangel, D-N.Y., and ranking member Jim McCrery, R-La., say this bill would allow small businesses to receive more immediate tax relief than the Senate-passed measure. The proposal would allow businesses subject to the individual and corporate Alternate Minimum Tax (AMT) to claim a work opportunity tax credit and a business tax credit for that which is paid on tip wages that exceed the minimum wage. The work opportunity tax credit applies to the hiring of certain low-income workers who typically have a more difficult time finding employment. The text of the bill explains that this group includes disabled veterans, as well as recipients of certain public assistance programs. The bill would also permit married co-owners of unincorporated businesses to file a Schedule C jointly and separate from self-employed, which results in an increased revenue base. It also allows the spouse to gain Social Security and Medicare benefits. The House is set to markup the $1.2-$2 billion bill this week, which offers some alternatives to the small-business tax cuts contained in the already-passed $8.3 billion Senate wage measure. House lawmakers say it’s possible that Iraq resolution talks will cease temporarily to pass the bill before the Senate attaches it to their own version. Under the Democrats’ new House budget rules, new costs must be offset by other cuts. It is unclear what would be cut to make provisions for the tax package. To read more about the proposed bill, H.R. 976, visit the Library of Congress at http://thomas.loc.gov/ and search by “Bill Number.” SBA Cautions Against Extensive Overhaul Of Current Programs In the midst of battles with lawmakers over its financial future the Small Business Administration (SBA) recently released the 2008 fiscal year budget, which would be funneled to non disaster programs, as well as disaster loans and assistance. The operating program request is a 12% overall budget increase from years past. The FY08 budget request includes $464 million for new budget authority for “non disaster” programs, $329 million for disaster loans and assistance, $21 million in reimbursable revenue, and $814 million in overall spending. The proposed budget also includes modest increases for the programs related to the Small Business Development Center (SBDC), a program strongly supported by the National Association for the Self-Employed. A targeting of $85 billion in federal contracting dollars for small businesses is another highlight of the SBA budget. The agency also wants to increase the number of small businesses receiving federal assistance from the 7(a) loan program and increase the number of new loans the agency will fund. The NASE has long been a proponent of SBA loan programs. “The SBA is a major partner in the NASE’s efforts to create programs and resources that serve a specific need in the micro-business community,” said Kristie Darien, executive director of the D.C. legislative office. “The research and data they provide to us has been an invaluable snapshot of the business climate today.” The agency will seek to cater to groups that have traditionally been underserved. The Office of Women’s Business Ownership (OWBO) plans to utilize workers in the district offices to provide local oversight and support locally. Additionally, an increase in funds were requested for the Veteran’s Business Council to improve and enhance services to veterans returning from the War on Terror and to reservists and National Guardsmen called to active duty. For more information on the FY2008 Budget recommendations for the Small Business Administration, please go to http://www.whitehouse.gov/omb/budget/fy2008/sba.html. President Bush Releases New Budget Many tax filers spend a lot of time and money preparing their returns each year. Still, the IRS reports that the tax gap – the difference between what taxpayers should pay and what they actually pay on a timely basis – is close to $353 billion. President Bush recently released the Administration’s 2008 fiscal year budget and included several proposals to reduce the gap, many of which will negatively and unfairly impact the self-employed, according to the National Association for the Self-Employed (NASE). “We’d much rather see educational efforts used as a way to increase tax compliance than harsh enforcement procedures,” said NASE President Bob Hughes. “The problem we run into with erroneous compliance fees is that, even though this Administration claims it comes off the top, for the self-employed person that’s off the bottom line.” The tax gap has three key components including the underreporting of income, underpayment of taxes, and non-filing of returns. The Administration’s recommendations include three major proposals which the NASE wishes to comment upon: Increased information reporting by card companies to the IRS on the credit and card transactions of businesses: The Administration has proposed an increase in information reporting by requiring credit and debit card issuers to report their annual business payments in order to compare them with industry averages. The practice will cause some businesses to be unfairly penalized for having higher averages, which can be caused by the affluence of their community, their own efforts in managing the cash flow of their business and even their own decision of whether or not to accept a particular credit card. Information reporting requirements on all payments of $600 or more to corporations: Currently, corporations are exempt from the Form 1099 information reporting system, which requires all other taxpayers making payments of $600 or more for services to send a Form 1099 to the IRS. Based on a preliminary review, the NASE is encouraging the creation of a program that would allow individual corporations to apply to be exempt from this regulation or to allow a higher threshold for corporations to triggering information reporting. Requiring businesses utilizing contractors to obtain and verify an accurate Taxpayer Identification Number for those contractors receiving payments of $600 or more and creation of a voluntary withholding system: Under the current system, businesses that pay contractors (non-employee providers) $600 or more for services in a calendar year are required to report this income each year. The Administration recommends that contractors be required to furnish a Taxpayer Identification Number to businesses that hire them, but the NASE is concerned with the logistics required to set up this kind of requirement. The NASE also opposes implementation of a voluntary measure because it would more likely hurt rather than enhance compliance amongst the micro-business and self-employed communities. Considering the current tax code regulations, and those being proposed to shrink the Tax Gap, it is no wonder that micro-businesses struggle with their tax returns. A report by the General Accounting Office found that a small business owner faces more than 200 IRS forms and schedules that could apply in a given year. For more information on the current proposals, visit the Office of Management and Budget at http://www.whitehouse.gov/omb/budget/fy2008/. Become a media contact and get the opportunity to share your experiences as a micro-business owner. Visit www.NASE.org/mediarelations/contactsheet.asp to fill out an informational sheet on the background of your business. Then, send it back to us at the contact information listed on the sheet. 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