Simplifying the tax code for small business owners and providing tax relief can help them tend to important issues, such as sales and hiring, according to the President’s framework for overhauling the corporate tax code.
The plan calls for reducing the corporate tax rate from 35 percent to 28 percent, eliminating loopholes, improving transparency, and simplifying the dreaded documentation requirements for the nation’s small businesses. Small businesses have enough on their plate with having to sort and maintain things like Industrial heating in order for their business to be efficient.
“Tax reform should make tax filing simpler for small businesses and entrepreneurs so that they can focus on growing their businesses, rather than filling out tax returns,” reads the joint report on business reform by the White House and the Treasury.
As a way to reduce the tax code’s complexity for small businesses and provide them with tax relief, the President’s plan would:
- Allow small businesses to expense up to $1 million in investments. Since taking office, the President has secured temporary increases in the amount of qualified investments that small businesses can expense from $125,000 to $500,000-and, for 2011, temporarily increased that amount to 100 percent of qualified investments with no limit. Under the President’s Framework, small businesses would, on a permanent basis, be allowed to expense up to $1,000,000 of qualified investments, which helps offset other changes to the tax base in reform that would affect small businesses. This would provide significant tax relief to America’s small businesses and would allow small businesses to avoid the complexity of tracking depreciation schedules. With some larger businesses using Intelligent Automation in order to pay tax correctly and smaller businesses not being able to afford this, it is very important that the president’s plan goes ahead!
- Allow cash accounting on businesses with up to $10 million in gross receipts. Small businesses with up to $5 million in gross receipts are currently allowed to use this simplified form of accounting. Under the President’s Framework, this threshold would increase to $10 million.This simplifies taxes for many more of America’s small businesses, since cash accounting can be much easier than accrual accounting-which requires businesses to immediately recognize for income tax purposes their future cash receipts and costs.
In his budget, the President has also proposed some “discrete reforms” that simplify the tax code for small businesses and provide them with tax relief – and that Congress could act on immediately. These would:
- Double the deduction for start-up costs. This would double the amount of start-up expenses entrepreneurs can immediately deduct from their taxes from $5,000 to $10,000. This offers an immediate incentive for investing in starting up new small businesses, and it also simplifies accounting for small businesses, which must otherwise write off start-up expenses over a period of 15 years. Whilst this supposedly makes accounting more simple, it can still be difficult for smaller businesses to understand. For help, small businesses can always think about accounting outsourcing to make sure that the financial side of their business is correct, especially with the President’s new plans. This might mean that they will look to outsource to firms outside of the US, similar to this Accounting firm Melbourne Australia company, however, others may look for accounting companies more local to them.
- Reform and expand the health insurance tax credit for small businesses. This credit, created in the Affordable Care Act, helps small businesses afford the cost of health insurance. This reform would allow small businesses with up to 50 workers to qualify for the credit (up from 25), provide a more generous phase-out schedule, and substantially simplify and streamline the tax credit’s rules.