09/07/10 Baltimore, Maryland – Just two business days after our post titled “The War on Small Business,” The Washington Post publishes an article headlined, “Small Businesses Feel Squeezed by Obama Policies.”
“As small businesses try to plot their recovery,” it says, “attention is turning to what many owners consider burdensome policies – higher taxes, new accounting procedures and health care mandates. Even as the government tries to help with an array of small-business initiatives, many owners say the intervention is as much a hindrance to hiring as the faltering economy.”
You don’t say? If you were on vacation last week and missed our laundry list of indignities large and small, it’s worth a look.
Elsewhere, we see the president is on the verge of announcing several proposals that aim to help small business…
- A payroll tax holiday
- Permanent extension of the (now-expired) research and development tax credit
- Accelerated write-off of new investment in plant and equipment through 2011.
Hmmm… Two of those three things look like quick-fix adrenaline shots, along the lines of the homebuyer tax credit. What happens after those incentives go away?
And where’s the proposed repeal of the requirement to send Form 1099s to every vendor from whom a businessperson buys more than $600 of goods and services each year?
Which brings us to the mail we invited from small-business owners…
“My husband and I are both long-haul truck drivers,” as we kick off our list of small-business horror stories, “and each fuels our trucks about twice a week, with an average weekly fuel consumption of $2,000-3,000. Can you imagine the horror of us having to send a 1099 form to EVERY truck stop we purchased fuel at for an entire year!!?? This is going to be a nightmare!”
“Nothing too drastic,” our next reader writes. “Just a 50% increase in health insurance premiums. Our provider informed us of this three weeks before we were due to renew our policy. Almost all of us opted for a new high-deductible plan with an HSA. Normally, this wouldn’t be an issue, but I’ve got a flex account that prevents me from having an HSA for another calendar year.
“So I have a flex account with a $900 balance versus a $3,000 deductible (formerly $500), and I can’t open an HSA until 2011. These costs will effectively eat up any raise I might receive at year’s end. At least I still have a job.”
“I’m self-employed, 63 and in fantastic health,” says another – “no meds, great diet and a runner – a 30% increase in my health insurance premium!!!!!!!!!!!!! At that rate, I’ll be working for health insurance only shortly.”
“I own and operate two commercial fishing boats in Alaska,” writes our next reader, “and yes, I am not just dreading the changes in 1099 filings, I am PISSED OFF at the thought! I do my own accounting, and a quick glance at my cannery statements suggests the number of 1099s I’m required to file will explode from the current seven per tax year (crew members only) to 40-plus in 2012 when I will send a form (for miscellaneous INCOME) to every VENDOR (not employees, mind you) that I buy from.
“The extra time and/or money I will be REQUIRED to spend (27 minutes per form, by IRS reckoning) on this redundant policy is an indirect tax on my business. Even more reviling is the stat you posted showing that even though an IRS auditor’s time is more efficiently spent (in terms of uncovering unreported income) auditing large corporations, their focus is increasingly turning to small businesses and sole proprietors.”
“I am a sole proprietor of a small Internet-based retail business located in Southern California. My income goes on a ‘Schedule C,’ as I am not incorporated.
“This is a second job for me, and based on all the questions and uncertainties, I am ‘coasting’ right now. My inventory is lean, I am spending nothing on advertising and have no plans to risk any money outside of normal operating expenses or to expand in any way right now.
“The 1099 is upsetting, but it’s certainly not the only worry. The thought of a VAT or even having to charge my out-of-state customers sales tax is frightening, as most of my business comes from out of state. Who is going to want to pay shipping charges (what I sell is heavy and expensive to ship) if they have to pay sales tax too? My California customers won’t be enough to keep the lights on.
“Sometimes I feel like I purposely want to make less money in both my sole proprietorship AND my day job just so the government has less of my tax money to do damage with!”
“[My wife and I] are realistically considering whether or not to continue our C-Corp as a going concern. By the time we account for compliance costs, the marriage tax penalty on our personal income, the increased payroll tax burdens and generally every expense of running a business…it’s about not worth it anymore.
“She (my wife) can stay home and not do anything, we can get the extra exemption on our income taxes, reduce our tax rate and the way it looks now we’ll actually come out better in the long run, without all the headaches and pressures of running the business. Not to mention I can free up my time spent on the business and focus more on my true passion, which is trading. It may be slightly less income at first, but just the change in quality of life may be worth it.”
Dave Gonigam
for The Daily Reckoning
Dave Gonigam
Treading a fine line between contrarian thinking and conspiracy theory, Dave Gonigam explores the nexus of finance, politics, and the media for Agora Financial's 5 Minute Forecast. He joined kindred spirits at Agora Financial in 2007 after a 20-year career as an Emmy award-winning writer, producer, and manager in local TV newsrooms nationwide.
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Having been one of the software guys running the show for 6+ yrs at one of the big commercial software companies back in the late 80′s early 90′s, my observation was immediately that these 1099′s would grind the fed’s computers down badly (reconciling and cross indexing all of these records. The hard drives would be sound like jet engines from so much spinning).
It would hit the commercial little guy programs heavily (Quicken, TaxCut, TurboTax etc…). They may benefit as it may tie folks into their product more securely. Carry forward of previous year data may become critical to a smooth end of year.
There may be challenges in international vendors who are not obligated in supplying a 1099.
I see extra expenses for small, medium and large businesses. It adds up for the big guys too. There’s no EDS transaction for these 1099′s….so how?
Accountants would win (more billable hours).
I see trouble in filing as waiting for a 1099 from a company may hold things up. I also see trouble with getting a 1099 from a company that has folded (how would this be handled? Does the business eat the expense? If not, how is this enforced and verified?).
Astronomical problems abound. I suspect this would be filed on the “Schedule Frustration” form.
our depression is designed to destroy small business and the competition it might give to big business….
the ruling class holds small businesses in contempt. it always has and always will…the subjugation of america requires the extermination of its entrepreneurs – except those chosen by the plutocrats to join their ranks.