A new bill was recently introduced in the House of Representatives that would allow companies with less than 500 employees to take an additional 20% tax deduction. Under this new proposal, small businesses would have the option of taking a 20% reduction on their annual domestic business income after they have taken all other available tax credits. The new deduction would be optional, so if for some reason the company would save less by taking the 20% reduction, they could opt not to use it.
While both Democrats and Republicans have been interested in talking about business tax breaks, it is unclear whether the two parties will come together to pass this bill. While it actually seems to support President Obama’s efforts to strengthen American manufacturing through changes in tax policy, it contradicts his desire to do this though the elimination of tax breaks while simultaneously lowering the corporate tax rate from the current 35% to 28%.
Proponents of this new bill say it will stimulate small businesses by giving them the cash they need to grow their business and create new jobs. They also say that, by allowing companies with as many as 499 employees to use the 20% tax deduction, the bill will provide cash to those companies that are most likely to expand and hire new workers. Those that are opposed to the bill say that is yet another temporary tax break when what is needed is a new long-term tax policy that will allow businesses to project and plan.
Regardless of whether this new bill passes both houses of Congress and is signed into law by President Obama, it is clear that business tax preparation is a complicated endeavor. Tax law, especially as it applies to businesses, is so complex and fluid that it often takes a qualified business tax preparation professional to interpret it correctly. Without professional help, many business owners do not know how to effectively use available credits and deductions to reduce their tax liability and therefore end up with tax balances that are more than the business can afford to pay. Once this happens, the business is subjected to the often harsh penalties imposed by the IRS when tax obligations are not met.
If your business is seeking any type of business accounting or business tax services, our experienced Certified Public Accountants and Enrolled Agents can provide you with the help you need. For more information about our full range of business tax preparation and business accounting services, visit businesstaxpreparation.com today. Contact us by phone at (866) 676-9417 or by email at info@businestaxpreparation.com to receive a free, no obligation consultation.