Count Them: 5 Tax Benefits of The American Jobs Act

In a speech to the joint session of Congress on September 8, President Obama laid out his plan to spark the economy and put Americans to work with the American Jobs Act. This jobs bill contains several tax initiatives and incentives to promote investment, and hiring in particular. The President also wants to send billions to help states keep teachers, emergency workers and others employed and fund approximately $50 billion in infrastructure projects.

The plan is targeted more at small businesses than at large corporations – which may reflect the administration’s thinking that big companies have bounced back from the financial crisis more successfully than smaller businesses have.

These initiatives require Congressional approval. And while the President is making his case throughout the country with enthusiastic rallies and “Pass this Bill!” chants, even the savviest political pundit can’t predict how exactly this will play out.

If you’re a small business owner, the impact of the American Jobs Act may be significant. Here’s an outline of some of the initiatives you should be tracking over the coming months:

1. Payroll tax cuts: The plan cuts the employer share of payroll taxes to 3.1 percent on the first $5 million in wages. According to the White House, this tax cut would benefit the 98 percent of businesses with wages below $5 million. By halving the payroll taxes on the first $5 million, the President hopes to stimulate job growth among smaller companies.

In a U.S. News & World Report article, Todd McCracken, president and CEO of the National Small Business Association, was quoted as saying: “The impact of payroll tax cuts is fairly substantial. It gives [businesses] the cash flow that they need to think about expanding. If they’re thinking about hiring, it’s going to make it more affordable for them in the near term.”

2. Payroll tax holiday: The plan would eliminate the entire 6.2 percent payroll tax on any increase in payroll (for added workers or increased wages) up to $50 million above the prior year.

3. Extend 100 percent expensing into 2012: Companies can fully depreciate certain purchases in the first year (instead of having to amortize these purchases over as long as 20 years). The goal here is to encourage new investment.

4. Tax credits for hiring the long-term unemployed: The plan proposes a $4,000 tax credit for any business that hires an individual who has been unemployed for at least 6 months. And considering that a recent review of job vacancy postings on sites like Monster.com by the New York Times revealed that employers have a strong preference for people who are still employed or just recently laid off, the long-term unemployed need all the help they can get.

5. “Returning Heroes” tax credit for hiring veterans: If a company hires a veteran, the tax credit increases to as much as $5,600, and reaches $9,600 if the veteran became disabled in the course of serving. Unemployment rates among veterans are truly shocking (13.3 percent), so most would agree with the idea of encouraging the private sector to hire or train our veterans.

Of course, since the initial framework of the plan was first revealed, many in the small business community have expressed their disappointment that the plan doesn’t address one of the biggest challenges facing small business success and growth: the difficulty startups and small businesses face in securing credit from banks.

And here’s where one of the more compelling initiatives from the Administration comes in. The White House plans to ask the SEC “to reduce the regulatory burdens on small business capital formation in ways that are consistent with investor protection, including expanding ‘crowdfunding’ opportunities and increasing mini-offerings.”

I know that many are skeptical of Washington’s ability to help the private sector. But the potential to get money flowing to startups and Main Street businesses could be a game changer. Small businesses should closely monitor the progress of the above proposals over the course of the next few months.

Image from Mishchenko Mikhail/Shutterstock

About the Author

Nellie Akalp is CEO of CorpNet, her second incorporation filing service based on her strong passion to assist small business owners and entrepreneurs in starting and protecting their business. She has formed over 100,000 corporations and LLCs across the U.S.

Connect with Nellie Akalp:

 

View the Original article

Freelancers Ask Government to Count Independent Workers

This is a guest post by Bloomberg Businessweek reporter Victoria Stilwell.
The number of so-called contingent workers hasn't been measured since 2005, when the Bureau of Labor Statistics last calculated the population. And now that the bureau has requested funding to resume the headcount, the Freelancers Union advocacy group is calling for changes in the way these workers are labeled and how their contribution to the U.S. economy is measured.
In a new policy paper, Freelancers Union argues that the government is "ignoring a crucial, and growing, segment of the economy that is transforming the U.S. workforce."
The BLS's contingent work supplement was discontinued six years ago due to lack of funding. That year, contingent workers, which the BLS defines as laborers who consider their jobs temporary, made up about 4 percent of total employment.
But Sara Horowitz, founder of the Brooklyn, N.Y.-based Freelancers Union, says the BLS figures don't accurately represent the many types of workers outside of permanent, full-time employees. She says the survey should be reinstated with a broader definition of what a contingent worker is, what the Freelancers Union calls an "independent worker." By this definition, independent workers constitute at least 30 percent of the workforce, based on a 2006 report from the Government Accountability Office. The GAO included the following categories of workers:

self-employed workers
temps
contract workers
day laborers
on-call workers
part-time workers

"What I find so profoundly unsettling is that the number one issue that human beings are having in America right now is the lack of work," says Horowitz, whose union boasts almost 160,000 members. "And to not have a clue about how people are really working, and that this isn't a huge focus -- why isn't the Department of Labor making this front and center?"
The debate hinges on the lack of legal protection afforded to contingent workers, such as unemployment insurance, minimum wage and overtime protections, and anti-discrimination laws, according to the GAO report. Furthermore, these workers are less likely to have access to the health insurance or pension benefits that traditional full-time workers have.
Tom Nardone, assistant commissioner for current employment analysis at the BLS, says the bureau funded the supplement for each odd numbered year beginning in 1995 until money ran out in 2005. He says there have been other proposals to have the supplement re-funded, but Congress didn't pass them. The BLS has requested to reinstate the supplement in President Barack Obama's 2012 budget submitted in February, though Congress has yet to act on it.
Nardone says BLS data has been interpreted in different ways to get the higher numbers that the GAO and the Freelancers Union report. He says that while the bureau doesn't have a monopoly on the definition of contingent, some of the categories that other groups like the union are adding don't "square" with the concept of contingency. For example, the broader measure counts all part-time workers alongside full-time business owners who work for themselves.
"Someone could have a restaurant and be self-employed," Nardone said. "Do you want to count that person as a contingent employee because they don't have an employer? It's not for us to say that's incorrect, but the onus is on them to make sure they're being transparent in terms of what they're doing."
Horowitz argues that the term "contingent" is outdated and should no longer be used to describe workers. If the supplement is reinstated, she says people should be categorized as independent based on their work, not whether they think of themselves as business owners.
"It shouldn't matter what your mental state is," Horowitz said. "It should matter what your action is. You should be asking questions that are: What are you doing now? How are you filing your taxes? How many hours do you want to be working, and how many hours are you working?"
]]>

View the Original article