Bush tax cut & small business owners

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Republicans are now arguing that letting the Bush tax cut expire for those making over $200,000 per year will hit small business owners and thereby interfere with job creation. It seems to me that if taking more than $200 K (for an individual -- $250 K for a family) results in higher taxes, that would make it more attractive to plow some of that extra income back into the business by hiring. And if that does not follow automatically, why not introduce legislation specifically directed at encouraging job creation rather than extending the general tax cut?

OP most small business owners, like myself, need to declare and pay income taxes on all income after expenses each year - there are no "retained earnings" in a small business (Subchapter S). Hiring a new employee, or making a capital expenditure which too stimulates the economy, often is an activity that needs to cross tax years. So if I am 'saving' for new office equipment, or whatever is needed (computer, desk, other equipment, space, first x months of wages as they get up to speed) for a new employee, say I get 80% of the way by Dec 31. By January 1 that number, after taxes, might only be 55%.

But you don't save up wages. As for equipment, the administration is proposing that equipment can be expensed, which is a huge tax benefit.

I definitely save up for wages - in my field a new employee is not fully productive for several months. So revenues lag behind the expense and the expense needs to be paid for somehow. And so equipment can be expensed - big deal. I still need the money in the first place to buy it in the first place. The administration is not giving it to me.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Republicans are now arguing that letting the Bush tax cut expire for those making over $200,000 per year will hit small business owners and thereby interfere with job creation. It seems to me that if taking more than $200 K (for an individual -- $250 K for a family) results in higher taxes, that would make it more attractive to plow some of that extra income back into the business by hiring. And if that does not follow automatically, why not introduce legislation specifically directed at encouraging job creation rather than extending the general tax cut?

OP most small business owners, like myself, need to declare and pay income taxes on all income after expenses each year - there are no "retained earnings" in a small business (Subchapter S). Hiring a new employee, or making a capital expenditure which too stimulates the economy, often is an activity that needs to cross tax years. So if I am 'saving' for new office equipment, or whatever is needed (computer, desk, other equipment, space, first x months of wages as they get up to speed) for a new employee, say I get 80% of the way by Dec 31. By January 1 that number, after taxes, might only be 55%.

But you don't save up wages. As for equipment, the administration is proposing that equipment can be expensed, which is a huge tax benefit.

I definitely save up for wages - in my field a new employee is not fully productive for several months. So revenues lag behind the expense and the expense needs to be paid for somehow. And so equipment can be expensed - big deal. I still need the money in the first place to buy it in the first place. The administration is not giving it to me.

If this is the case for you, then you should talk to an accountant about changing classifications for your business. S corps and sole proprietorships works best when you have business losses, because those get passed straight through to your tax return. You have the opposite problem, and there are tax classifications more appropriate for you.