• Legislation Would Delay Withholding Tax
• Cost Gap Between Generic Vs. Brand Name Drugs Widens
• Veteran Business Owners Wealth And Income Remains Unchanged
• SSA/IRS Reporter – An Essential Resource for Business Tax Filing and Compliance

Legislation Would Delay Withholding Tax

Sole proprietors who do business with government agencies could breathe easy about the implementation of a 3 percent withholding tax on their contracts, if a member of Congress has his way. Congressman Kendrick Meek (D-Fla.) is fighting to delay a potential implementation from 2011 to 2012 of Section 511 of the Tax Increase and Reconciliation Act of 2005. Section 511 requires the withholding on certain government contracts. Meeks’ proposal would also require a report by the Treasury Department on the costs of Section 511. The language on the tax was included in the House-approved Tax Collection Responsibility Act of 2007, which would eliminate the ability of the IRS to utilize private debt collectors, among other measures. One of several proposals to narrow the tax gap – an estimated $353 million owed to the IRS - Congressional lawmakers have proposed the collection of 3 percent withholding for sole proprietors and business owners hiring independent contractors. The NASE believes this additional tax would significantly increase compliance costs for micro-businesses and could discourage the use of independent contractors entirely. The tax would also reduce funds for day-to-day operations since these payments would be made off the top. To read more about the NASE’s stance on this and other tax proposals, visit http://advocacy.NASE.org/.

Cost Gap Between Generic Vs. Brand Name Drugs Widens New research from the Government Accountability Office (GAO) shows that the cost of brand–name drugs is rising more than twice the rate of inflation while the cost of generic medications are decreasing. In a study of popular generic and brand-name drugs, the GAO found that the average monthly prices increased 21 percent in the brand-name drug sample and decreased by 13 percent for the generic drug sample. Increasing interest in health care costs is particularly acute in the prescription drug arena with the implementation of programs such as Medicare Part D, which requires greater financial input from the federal government though program enrollees are still responsible for some prescription costs. A similar GAO study on prescription costs was commissioned near the initial enrollment period for Part D in 2005. Read more about the latest study by visiting http://www.gao.gov/ and searching for “Prescription Drugs: Trends in Usual and Customary Prices for Drugs Frequently Used by Medicare and Non-Medicare Health Insurance Enrollees.”   Veteran Business Owners Wealth And Income Remains Unchanged   The business environment for veteran entrepreneurs has not changed very much says a new study from the Small Business Administration's Office of Advocacy. In a recent study of wealth and income from 1989 to 2004, Advocacy found little change in veteran small business households as opposed to non-veteran small business households. According to the authors of the study, veteran small business households demonstrated a lower likelihood of achieving high income or wealth. However, they did show growth in the area of multiple business ownership with that number increasing 20 percent over a 15-year period. "Hopefully, veterans who do choose self-employment will continue to utilize various federal small business assistance and support programs, such as SBA's Patriot Express loans," said Kristie Darien, executive director for the National Association for the Self-Employed (NASE). Possible explanations for the sluggish progress includes a decline in the overall number of veteran households from 28.6 million to 25.3 million, as well as a 22 percent decline in the number of households headed by business owners including the self-employed. Visit http://www.sba.gov/advo/research/rs310tot.pdf for the full report. SSA/IRS Reporter – An Essential Resource for Business Tax Filing and Compliance The SSA/IRS Reporter is a joint effort between Social Security Administration (SSA) and IRS. Its communicates messages to businesses with employees that support trust fund, employment tax, and business tax compliance, with an emphasis on educating and encouraging these stakeholders to file these taxes electronically. The Reporter carries general information about best payroll and employment tax practices and SSA products and services, such as changes in forms for reporting employee wages, W-2 Online, SSA filing procedures and Business Services Online. The SSA/IRS newsletter also includes timely information from the Department of Labor, Department of Justice, Health and Human Services, and other government agencies. Past issues, including the fall 2007 issue, are posted on IRS.gov http://www.irs.gov/businesses/small/article/0,,id=109886,00.html in English and Spanish. Check out the fall issue to read about minimum wage increases, the tax gap, tools for calculating overtime pay, and more. Focus On The Self-Employment Tax Did you know that you could be paying hundreds or even thousand dollars in additional taxes each year just because you are a sole proprietor? “The extra money would cover a large part the cost of continuing education – which often requires traveling out of the area, (since I live in a small town) incurring costs for travel, hotel and meals as well as the cost of the conference. [It] could also cover the cost of hiring an intern to work with me, which would help with the growth of my business.” - Gloria Wright, psychotherapist and NASE member Learn more about the self-employment tax and speak out for micro-businesses by visiting the NASE’s Legislative Action Center at http://advocacy.NASE.org/.