TIP: Taxes, Healthcare, Federal Regulations Key Issues for Small Business Owners

Tip of the Month

June 2012

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TIP: Taxes, Healthcare, Federal Regulations Key Issues for Small Business Owners

The end of May marked National Small Business Week, and the National Federation of Independent Business marked the event by identifying key issues facing small business owners across the nation. Not surprisingly, taxation, healthcare costs and the increased burden of compliance with Federal regulations were all noted as major concerns for small businesses. As the election process draws closer, presidential candidates and others dependent on the ballot box might do well to pay attention to the NFIB’s findings.

Taxation

The NFIB noted that the short-term tax policy that has come out ofWashingtonfor the past few years inhibits long-term business planning and is generally unpopular with small business owners. Apart from their unease with Congress’ short-term viewpoint, the NFIB also wants to see steps taken to extend bonus depreciation for small businesses. Launched in 2010 when businesses were allowed to write off 100 percent of investments up to $500,000 in equipment the year after the investment was made, the write-off declined to 50 percent in 2011. It is slated to fall to $139,000 in 2012 and further to $25,000 in 2013. Taxmageddon is on the horizon for small businesses, and the NFIB urged lawmakers to take heed to avert a “very bad environment for small business if no action is taken.”

Complexity in the tax code is another key issue for small business owners who tend to pay disproportionately greater amounts to comply with the tax code than larger companies. And finally, the potential increase in estate tax is considered a threat to family businesses with tax on the estates of deceased business owners set to increase to 55 percent with a $1 million exemption (from 35 percent with a $ 5 million exemption).

Healthcare Costs

The burgeoning cost of providing health care coverage for employees has been a crucial concern for small business owners for the past two decades. The NFIB advocates solutions that are simple for both employer and employees. Specifically, the federation suggests that employers be given the option of contributing dollars to employees’ health insurance without being involved in actively choosing or managing the plan.

The NFIB also is a proponent of equal tax treatment in the individual market where many small businesses and self-employed people buy healthcare coverage. Currently employees may only use pre-tax dollars to buy insurance if the policies are chosen, purchased and administered by their employers. Insurance portability is another issue that commands the NFIB’s attention. The federation would like to see changes made to insurance laws to allow those who maintain their coverage to do so after changing jobs or stopping work without incurring excessive cost increases.

Using the precedent established by large businesses, labor unions and government agencies that self-insure and pool their risks across state lines under the Federal ERISA law, the NFIB would like to see a similar model that allows small businesses to purchase insurance across state lines. Such a move would help develop more stable risk pools and lower costs.

Excessive Federal Regulations

Finally, like many of their counterparts running larger business enterprises, small business owners chafe against what they see as excessive Federal regulations and red tape. As part of this sentiment, the NFIB is calling for common sense regulatory reforms in Congress. The Regulatory Flexibility Improvements Act passed the House in December and is currently awaiting consideration in the Senate. It would require Federal agencies to estimate the direct and indirect economic impact of new regulation on small businesses. It is also calling for government to include more feedback from the small business sector about the review and enforcement parts of the regulatory process.

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These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact their CPA regarding the topics in these articles.