The president’s recently-unveiled American Jobs Act promises tax cuts for businesses and families and to create new jobs to chip away at the country’s stubbornly high unemployment rate.
Earlier this week, Treasury Secretary Timothy Geithner testified to the Senate Small Business and Entrepreneurship Committee regarding the legislation, saying it “includes specific provisions targeted towards small businesses that provide direct support for firms to hire, invest, and expand.” Reading through the secretary’s prepared remarks, I found a lot of great ideas that will indeed help our country’s small businesses.
But then I look again, and I think, “Ah yes, just what we need: Another zillion pages, plus or minus, of legalese-ridden, complicated, confusing, contradictory and morale-crushing tax code.” Yeah, go ahead, just climb up this here ladder and toss it on that mountain of paper over there. Doesn’t everybody want to be a tax person, bookkeeper, pencil pusher, or specialist in law and advanced mathematics? Oh wait, you just want to be an ice cream man? You’re into creating flavors and establishing a brand? You’re not into filling out forms and tracking expenses and following rules? Oh well. Better get with the program because things are about to change. Again.
So here you go: Here are some highlights of the American Jobs Act that will appeal to entrepreneurs:
1) Jobs – If you are thinking about hiring new employees, you will have great motivation to do so.
2) Payroll tax liabilities will be cut in half on the first $5 million of payroll for existing staff.
3) Employer-paid payroll taxes will disappear completely when you add new workers (this caps at the first $50 million in payroll increases).
4) If you hire a “Returning Hero” you will enjoy tax credits ranging from $5,600 to $9,600 for all veterans employed.
5) There will also be a tax credit of up to $4,000 for hiring workers who have been looking for a job for more than six months.
6) The president will expand “work-sharing,” a program that utilizes unemployment benefits to keep employees on the job at reduced hours, rather than laying them off.
7) Additional funds as well as flexibility in policies will be provided to the states to put the long-term unemployed back to work.
8) The president proposes a new “Pathways Back to Work Fund” to provide hundreds of thousands of low-income youth and adults with opportunities to work and to achieve training in growth industries.
Treasury’s Geithner anticipates the creation of 1.9 million jobs as a direct result of this legislation. In addition, Obama is reiterating his call to extend unemployment insurance to prevent six million people from losing their benefits.
1) Last year Obama extended 100% expensing of depreciable assets. He proposes extending this tax break into 2012. A client of mine spent close to $100,000 on a showroom build out in 2010 and back in the day, this expense would never fly as a current deduction. It would have to be depreciated over 15 years which results in a write off of roughly $6,600 per year. By deducting the entire amount immediately, he saved a huge sum in taxes, which truly helps during these bad economic times.
2) More government contracts for small business, a one-stop online portal for small business to access government services, and programs to help small business raise additional capital.
This economic crisis wasn’t created overnight, nor will it be repaired overnight. There is a lot of resistance to this plan and in fact, in order to make a go of it, the entire bill is being diced and sliced and parceled out in separate packages for the vote.
Bonnie Lee is an Enrolled Agent admitted to practice and representing taxpayers in all fifty states at all levels within the Internal Revenue Service. She is the owner of Taxpertise in Sonoma, CA and the author of Entrepreneur Press book, “Taxpertise, The Complete Book of Dirty Little Secrets and Hidden Deductions for Small Business that the IRS Doesn't Want You to Know,” available at all major booksellers. Follow Bonnie Lee on Twitter at BLTaxpertise and at Facebook.
Bonnie Lee is an Enrolled Agent admitted to practice and representing taxpayers in all 50 states at all levels within the Internal Revenue Service. She is the owner of Taxpertise in Sonoma, Calif., and the author of Entrepreneur Press book, “Taxpertise, The Complete Book of Dirty Little Secrets and Hidden Deductions for Small Business that the IRS Doesn't Want You to Know.” Her new e-book Taxpertise for the Creative Mind Murder, Mayem, Romance, Comedy and Tax Tips for Artists of all Kinds is available at all major booksellers. Follow Bonnie Lee on Twitter at BLTaxpertise and at Facebook.