U.S. Business Owners May Have to Follow Complicated New Tax Rules in Aftermath of Congressional Legislation
Heads up business owners: you may have to change the way to file taxes soon. Business owners are going to have to file millions more tax forms in order to comply with recent Congressional legislation regarding tax reporting requirements. The Internal Revenue Service is working on the new reporting method, which is supposed to begin in 2012.
Many business owners, including the 26 million sole proprietor business owners across the U.S. (not including DBA businesses), are already struggling to keep up with IRS tax deadlines and stay compliant with IRS reporting requirements. The new legislation and impending tax reporting changes leaves many wondering just how much more work will be required of them.
According to the new legislation, small business owners will need to show additional proof of their business tax-deductible expenses. In fact, business owners may have to issue 1099 forms to each of the vendors from whom they purchase more than $600 worth of goods or services per year. This means that, in addition to requiring 1099 forms from service vendors, business owners will also need to supply 1099 forms from each product vendor; a standard purchase receipt is not going to be enough.
The goal of the new tax law is to hold businesses more accountable for reporting their purchases to the IRS. Currently, business owners fail to pay an estimated $300 billion in taxes each year. The new tax reporting requirements will create a stronger paper trail of business-to-business transactions that might otherwise go unreported – especially with an LLC in Wyoming.
In 2010, sole proprietors, which include many small business owners, some franchise owners, and freelancers, must file an average of 1099 forms each year-an accounting burden for many. However, with the new legislation, sole proprietors may have to file more than 200 1099 forms each year, leading many sole proprietors to wonder if they can handle the additional workload.
In order to make purchases and tax reporting more manageable, businesses may begin limiting their number of vendors and consolidating vendors, which may decrease opportunities for burgeoning small businesses to break into the market and result in limited incentives to shop for the best prices for business products and services.
This new legislation isn’t the only thing law changing these days. Check out a law that positively impacts America’s service personnel, including a 90 year-old World War II veteran.
Obama’s Help for the Small Business
No matter what the state of the world may be now with all of the corporations and mega-companies that are out there, it all began with the small business. Many of these businesses are still small, entrepreneurial ventures with fewer than 100 employees. Approximately ninety-eight percent of all businesses in this nation are small ones. The financial crisis that has this country by throat right now is even more deadly to these small businesses. The local owners do not have the revenue and stockpiles of money to last out a “deppressionesque” recession. That is why we as business owners must turn to Washington for answers. Those answers are beginning to come out. Here is a look at some of the things that Barrack Obama has put forward to help us as small businesses.
One thing that came about from the American Recovery and Reinvestment Act is the increase in funds to the Small Business Association (SBA). With just under $200M added to this organization, it will now be easier to get approved for a federally backed loan. The SBA uses these funds to help subsidize small business loans for new entrepreneurs, making it easier to get approved regardless of past personal credit. This can help a lot of newer or start-up companies to get the funds that they need to realize their dream and open their shop. Regardless of location, products, services, or anything else, anyone can apply for this aid and live the dream of being their own boss. Visit the Small Business Association’s web site for more information about this program.
The Green for Green initiative of this Act is another way for the small business to get a little financial help. Many small businesses can help each other by offering products and services to each other in trade. Even if you can not trade, many of these green upgrades are part of normal operating expenses that can now be covered with tax credits. By making your small business green, you not only attract more customers and good publicity, but now you can also make some much needed cash in the process.
The Restorative Refunds section can also help the small business. This portion is specifically targeted to any business with less than $15M in gross receipts (total money received from all sources). This extends the amount of years that you can write off operating losses as a tax break. This will free up a lot of tax money and debt that can then be used to invest in your business. By increasing the ability to write off operating losses, this law greatly increases the amount of assets that the owners have to spend on other needed investments.
Grants were also increased for any business that wishes to research better or new business practices. The Small Business Innovation Research (SBIR) grants and Small Business Technology Transfer (STTR) programs allow the entrepreneur to research these new methods and incorporate them into their businesses. Not only does this save a lot of money for the small business, but it also strengthens the privately owned companies in their field. By keeping the little guy on the cutting edge, this administration is leveling the playing field. Because of these programs, “Bob’s Bargain Electronics” can now compete with the likes of Best Buy and other electronic power houses. It also allows for the independent business to research their own methods and advance the technologies themselves.
There are many other benefits out there for the small business and many more are in the works right now. It is apparent that many in Washington now understand that by helping the small business, the entire economy and job market benefits. The more the little guy grows, the more he hires and the more we can compete on the global level. By pushing the small companies to create the new technologies, we can once again put the United States at the leading edge of technology and innovation. Not only will this improve our national market but the markets around the globe. The Earth’s economy is based off the dollar and the dollar is greatly affected by the health of the small business. By increasing the funding going to these companies, these new measures are sure to bring this country out of the hole in which we have fallen. It will be on the back of the small business that this country will emerge. It is this logic that has driven Washington to start backing the small business.