April 15-The Real April Fool’s Day?

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Here in the heartland of America it’s a beautiful day.  As I sit here in my palatial office (actually a spare bedroom) I can hear the birds singing and almost hear the buds popping open on the trees.  All is well!

OK, maybe all isn’t well.  It’s April 15, sort of like April Fool’s Day on steroids.  As I prepare to send off a five figure check to the IRS, the beauty of the day seems to dim a little.  Maybe the birds aren’t singing.  Maybe they’re laughing at me.  It’s hard to say.

I don’t mind paying my fair share, I really don’t.  But my fair share was withheld from my IRA distributions throughout the year.  Yet, I still owe almost twenty grand because someone at my former employer didn’t feel the need to inform me that there would be a huge tax liability at the end of the year.  “Oops.  Sorry.”

It’s quite a hit for someone who didn’t actually earn a dime in 2009.

Then there’s my second son.  He owes $1,000.00.  That may not seem like a lot to you and me, but this young man made less in 2009, working two jobs, than I paid in taxes.  Like his old man, his tax liability is the result of someone at one of his employers dropping the ball.  In spite of his several requests, they failed to withhold taxes from his salary.  “Oops”, again.

I know many of you have similar nightmares and I guess having a blog gives me the opportunity to rant once in a while.  Here’s the thing, $1 billion of the “stimulus” money is going to hire thousands of new IRS agents.  Why?  Because a lot of us have had it up to here with a government that thinks our hard-earned money is somehow their money.  Because all of us, especially small business owners, feel like we contribute more than enough to Washington, our state capitals, counties, and municipalities.  Face it, most of us don’t trust the government.  By hiring thousands of additional IRS agents, the feds are making it painfully obvious that they don’t trust us either.

We’re shocked that the word “million” seems to have almost vanished from the national vocabulary to be replace by the word “billion” (1,000,000,000).  [Note:  “Millions” of Americans are out of work.  That seems to be the only place the “M word is still in wide usage.] Trillion (1,000,000,000,000), a number so big that most Americans can’t even comprehend it, is thrown around ever so casually by a government that acts like there is no limit to what you and I can be forced to pay.

I don’t mean to get all political on a business blog, but whatever we contribute to the government is money that we can’t use to build up our businesses.  And if we can’t build up our businesses, where are we going to find jobs for the millions of our friends and neighbors who are out of work?  Besides, this isn’t a liberal or conservative issue.  Both sides treat our paychecks like Monopoly money.

But, take heart, Tax Freedom Day occurs at about the same time as Tax Filing Day.  That means that everything you’ve made so far this year will go to pay the various taxes but what you make from now until the end of the year is yours.

Is it a coincidence that our tax day falls on the anniversary of the sinking of the Titanic?  I don’t think so.

Jelly of the Month Club

Merry Christmas from the Obama administration. Our “Christmas gift” make’s Clark’s jelly-of-the-month club membership look generous by comparison.

If you own a small business I urge you to contact your senator and congressperson before you go home today and point out that a vote for the so-called health care reform bill is an act of political suicide.

Maybe if they realize that they’re about to lose their uber-generous health care when they lost their jobs, they might reconsider.

Multi-Billion $ Small Biz Tax?

According to House Republican Leader John Boehner’s blog,

House Democrats plan on raising taxes – to the tune of “$540 billion over the next decade” – on small businesses, investors, and job creators in the midst of the worst economic recession in 30 years, all in an effort to cover some of the cost of their massive government-run health care proposal, which one independent study said would result in $3.5 trillion in added federal spending over the next decade.”

The author of the post, Kevin Boland, quotes from a Wall Street Journal editorial:

This would hit job creators especially hard because more than six of every 10 who earn that much are small business owners, operators or investors, according to a 2007 Treasury study. That study also found that almost half of the income taxed at this highest rate is small business income from the more than 500,000 sole proprietorships and subchapter S corporations whose owners pay the individual rate.

In addition, many more smaller business owners with lower profits would be hit by the Rangel plan’s payroll tax surcharge.  That surcharge would apply to all firms with 25 or more workers that don’t offer health insurance to their employees, and it would amount to an astonishing eight percentage point fee above the current 15% payroll levy.”

I don’t know about you but this scares the hell out of me.  When one party (either of them) controls both houses of Congress and the White House, especially with the majority that the Democrats are enjoying right now, there are no checks and balances.

This is a business blog, not a political blog, but at some point they become one and the same.  If this economy is going to recover, the government must encourage job creation.  Piling tax upon tax on the very people who generate most of the new jobs isn’t going to work

The only way to make your feelings known is to contact your senators and representatives and let them know that you oppose any new tax increases, especially on small business owners.

Following up on yesterday’s post, I found this in the SBA’s summery of the Economic Stimulus Act concerning guaranteed SBA loans:

Under the Recovery Act, no funds may be used by any state or local government or any private entity, for any casino or gambling establishment, aquarium, zoo, golf course of swimming pool.

NO_ZOOI can understand excluding casinos and gambling joints.  They don’t actually create anything.  They just extract money from gamblers.  But I don’t get the other exclusions (or lack thereof).  A golf course or swimming pool is a no-no, but a go cart track or video arcade is ok?  What about one of those places that sells dirty movies and other “adult” products.  I guess those are alright.

One marvels at the logic used by our elected employees in Washington, DC.

Have a great weekend!

Financial Assistance for Small Business

At first glance I thought this article might be one of those deals where someone promises to tell you where the treasure is buried making you wonder, if he knows, why doesn’t he dig it up themselves.  I half-expected to be offered a special price on the latest how-to book.  So, I was pleasantly surprised when “How to Get Free Financial Assistance for Your Small Business” didn’t try to sell me anything.

While the advice here is pretty generic, without much new information, it never hurts to be reminded of what’s out there and this article does a good job of that.  There are links to a number of other articles offering similar advice.  There are also links to some useful resources.

To sum up this piece, the key is to find out what’s available, beginning with finding someone who can help you.  There are funds available as part of the “economic stimulus act” especially if you have a “disadvantaged” small business (meaning you’re a veteran, a woman, or a member of a minority group).  I’m not sure why a business run by a veteran, a woman, or a minority is considered “disadvantaged”, but that’s a subject for another time.

I’d say that persistence is the key.  Frankly, I don’t understand a “stimulus” package that contains so many secrets and makes you work so hard to find the money. At 400 + pages of legalese, it’s not exactly light reading.  But if you want to get part of your tax money back to boost your business, you’re going to have to play detective.  Keep reading MTS for more information.

Convoluted Logic, Sin Tax, and Small Business

cigar1It’s a balmy 70 degrees here in America’s Heartland today so I decided to move things outside. I also decided to treat myself to a Starbucks coffee and a good cigar. Does life get any better?

Let me say at the outset that I’m not what you’d call an avid smoker. The fact that I’m enjoying my first cigar of 2009 on March 5th is a pretty good indication of that. But I do enjoy treating myself to a good stogy once-in-a-while. My lovely wife informed me long ago that cigars are a pleasure best enjoyed outdoors (and I don’t disagree) so warm weather inspires me to light up.

Visiting my neighborhood retailer,(a local merchant, of course) I noticed a number of signs warning smokers that, as part of the “stimulus package” a huge tobacco tax increase is going into effect on April 1. “Best stock up now” the signs said, while prices are “low”. I haven’t thought prices were low in a long, long time, but I suppose it’s all relative.

This is not a rant about politics, or about smoking, but rather about common sense, or the lack thereof. There’s nothing new about a “sin tax”. Lawmakers have been using them for eons on the theory that the majority of people will support a tax that doesn’t hit them directly. Tobacco, alcohol, gas-guzzling cars, and other non-necessities are fair game in tough economic times.

But here’s where the common sense part comes in. This new levy is said to serve two purposes. First, the additional revenue is supposed to be used to fund health-care programs. Second, the prohibitive cost of a carton of Camels, or a box of Macanudos is supposed to discourage smoking.

Now, I’m no economist, but it seems to me that there’s something wrong with the logic here. If smokers suddenly switch to chewing gum, doesn’t that mean that there won’t be any money for objective number one? Won’t they have to put an excise tax on Juicy Fruit?

This reminds me of the business owner who says that business stinks so he’s going to cut back on his advertising. A + B (or A – B) may equal C, but life is rarely that simple. The world is full of Ds, Es, and Fs that all have an impact on the equation.

Let’s not throw the baby out with the bath water. Government may be a lot of things, but it’s rarely a good example of how to run a business.

Now, if you’ll excuse me, I have to finish my cigar while I can still afford it.

The Section 179 Deduction Might Save You Some Money

[Official disclaimer] Keep in mind as you read this that I'm not a tax adviser.  I've never even played one on TV.  However, I have stayed at the Holiday Inn Express.

Aparently Section 179 of the IRS code isn't widely known or understood.  In fact, it's fairly simple and can save an entrepreneur some money.  Here's the deal.  It used to be that if you bought a piece of equipment, you had to amortize the cost over several years.

Now, under Section 179, you can deduct the full cost in the year that the purchase is made.  According to Section179.org, the provision in the tax code, sometimes called the "SUV Loophle" or the "Hummer deduction" is intended to encourage small business owners to invest in their businesses. 

The site gives an example of the way 179 can be used to save money.  There are some limits, for example the maximum amount of the purchase is $800,00 which makes it a benefit for smaller companies and the web site offers a list of qualifying equipment.

If you've been thinking about buying a new truck or some other expensive piece of equipment, you might want to take a look at Section 179 and consider making the purchase before the end of the year.

IRS Appoints New Small Business Commisioner

I know you’ve been waiting impatiently for this news so here it is.  According to the Washington Post, the IRS has appointed Christopher Wagner to the post of Commissioner of the Small Business and Self-Employed Division (SB/SE).  Wagner replaces Kathy Petronchak, who retired in August.

From the IRS Press Release:

"SB/SE is one of four operating divisions of the IRS, has about 28,000
employees and serves roughly 55 million taxpayers. SB/SE is a major
part of IRS enforcement activities, focusing on promoters of abusive
tax schemes, high-income non-filers and other serious tax compliance

Don’t say I didn’t warn you.  There are 28,000 IRS agents looking over your shoulder.

Small Business’ Top 10 Complaints

The National Federation of Independent Business recently polled 3,530 of their closest friends asking them to identify their biggest concerns.  Their top ten choices were:

  1. Cost of health insurance
  2. Cost of fuel
  3. Federal taxes on business income
  4. Property taxes
  5. Tax complexity
  6. Unreasonable government regulations
  7. State taxes on business income
  8. Cost of inventory and supplies
  9. Electric rates
  10. Workers’ compensation costs

There seems to be a pattern here.  Five of the top ten (highlighted) are directly related to the government.  You could make a good argument that the government is at least partially responsible for the other five as well.

We generally try to put a positive spin on everything here at MYOB so hopefully it will encourage you to know that everyone else worries about the same things that you do.

In case you missed it, the federal minimum wage increases to $6.55 per hour this week.  But since payroll expense isn’t one of your top ten concerns (according to the survey) and since you probably aren’t paying minimum wage anyway, it shouldn’t add to your worries.

IRS Raises Standard Mileage Rate for the Rest of 2008

WASHINGTON — The Internal Revenue Service today announced an
increase in the optional standard mileage rates for the final six
months of 2008. Taxpayers may use the optional standard rates to
calculate the deductible costs of operating an automobile for business,
charitable, medical or moving purposes.

The rate will increase to 58.5 cents a mile for all business miles
driven from July 1, 2008, through Dec. 31, 2008. This is an increase of
eight (8) cents from the 50.5 cent rate in effect for the first six
months of 2008, as set forth in Rev. Proc. 2007-70.

The IRS normally only makes these adjustments once a year.  But since gas prices have risen to an obscene level, we’re getting a break for the second half of the year.  It won’t solve the problem, but it will help.

Read the full press release here.