Tag Archive for 'Barbara Weltman'

Small Business Advocate Poll: How will Obamacare impact your small Business?

The Question:
The Supreme Court has upheld most of Obamacare, how will this decision impact your small business?

44% - This will hurt my business

4% - This will be good for my business

42% - I don’t know, but I’m afraid of Obamacare

10% - I don’t know, but I’m not worried about it

My Comments:
Obamacare has survived a Supreme Court challenge and been judged to be constitutional. We wanted to know what our small business audience thought about that, so last week, in our online poll, we asked this question: “The Supreme Court has upheld most of Obamacare, how will this decision impact your small business?” Here’s what we learned.

Just 4% of our sample said, “This will be good for my business,” while 10% said “I don’t know, but I’m not worried about it.” But 44% reported that Obamacare, “will hurt my business,” and 42% allowed, “I don’t know, but I’m afraid of Obamacare.”

Obamacare is the law of the land, unless and until the next Congress and a new president repeals it. In fact, part of the narrative in Chief Justice Roberts’ ruling indicated that the ultimate decision about such a sweeping law should rest with the electorate.

There are 26 million small business owners in the U.S. and another 70 million small business employees. That’s a lot of votes that could be influenced by the anti-Obamacare sentiment - 86% - demonstrated in our poll.

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I’ve talked to several people in the last couple of weeks on the impact of the Supreme Court’s Obamacare decision on the economy, including Michael Reagan, son of Ronald Reagan and author of The New Reagan Revolution; and Barbara Weltman, small business attorney and author of J.K.Lasser’s Small Business Taxes. Click on the links below to download or listen.

Gobsmacked by SCOTUS with Jim Blasingame

Michael Reagan on the Supreme Court ruling on Obamacare with Michael Reagan

Obamacare my be constitutional, but businesses still uncertain with Barbara Weltman

What will Obamacare cost your small business? with Barbara Weltman

Check out more great SBA content HERE!

Take this week’s poll HERE!

Independent Contractor or Employee

If necessity is the mother of invention, a pink slip is the nagging parent of a great deal of entrepreneurialism. And even though there are many different paths to small business ownership, millions have been thrust into this independent state as a result of some form of cessation of employment.

The good news is many of those who find themselves unemployed decide to fend for themselves by starting a small business. The bad news is, some of them don’t know that.

“How could that happen?” you ask. Well, it’s because they hired themselves out as an independent contractor, possibly to their last employer.

Not to take anything away from all these entrepreneurial accomplishments, but for many who have been fired, sacked, canned, downsized, right-sized and consolidated, in the current state of our economy there often are only three choices: Either stay unemployed and ultimately become homeless; be underemployed; or start working for themselves.

A Personal Example
Having been one of the sacked back in the late ’80s, I decided that I didn’t need any help messing up my life, so I headed out on my own and started my own small business — a business consulting company.

For a few years I was my company’s only employee. My products were my time, advice, and personal service. My slogan was, “I’m a vice president you can rent.”

And even though I considered myself a business owner, technically speaking, until my company was incorporated, I was an independent contractor.

The Technical
So does anyone care whether you’re an employee, a business owner, or an independent contractor? Oh, yeah! You bet your sweet assets someone cares. The IRS cares - a lot!!

Every year there are millions of new reported contract relationships for the IRS to keep track of, plus millions of new unreported relationships to track down. Because there is often confusion about this issue, a whole new body of tax compliance by the IRS has been developed which includes a list of 20 ways to identify an employer/employee relationship. Sounds like a Paul Simon song, doesn’t it: “There must be 20 ways to find your employee!” Sorry.

If you’re selling your time and advice as a consultant, you may think of yourself as a contractor or a business owner, but you may actually be an employee, by the definition of the IRS. Do you know who is responsible for paying and remitting the payroll taxes on your income? Is that being done?

If your business is using the services of people you consider to be independent contractors, will the IRS agree with you? Do you know how many clients your “consultants” have? If you are their only — or most significant — client, and they are not reporting and remitting their payroll taxes, you may be in the queue for a visit from the IRS.

Here are those guidelines the IRS uses to determine if the relationship in question is employment or contract. Please note that paraphrasing is used for brevity, and to illustrate the concept. You and/or your financial/tax/payroll staff and advisors should use the actual IRS ruling and language.

20 rules that differentiate between an employee and a contractor

1. Instructions: If a worker must comply with when, where, and how to conduct the work, that is usually an employee.

2. Training: If the worker has to be trained by the company, that is usually seen as an employment relationship.

3. Integration: If the worker’s activity is integrated into the operation, this demonstrates direction and control, and is usually seen as employment rather than contract.

4. Services rendered personally: If the services must be personally rendered by the worker, then this is usually seen as an employment relationship.

5. Hiring, supervising, and paying assistants: If the hiring company or person also hires, fires, and pays assistants, that activity is seen as control by the hirer, and is usually seen as an employment relationship.

6. Continuing relationship: The continuity of the relationship between the hiring company or individual and the provider of services may indicate an employment relationship, rather than a contract relationship.

7. Set hours of work: This indicates an act of control. Control is typically seen as a function of an employer.

8. Full time required: When a worker must devote substantial full time to the business of the company or person receiving the services, this indicates an employment relationship.

9. Order or sequence set: Again, an issue of control over how work is performed. If the receiver of services sets the order or sequence, they are typically going to be seen as an employer of the service provider.

10. Oral or written reports: Requirement of reporting indicates employment control.

11. Payment by hour, week, month: How a worker is paid can indicate the nature of the relationship, whether employment or contract.

12. Work done on premises: Employees usually do all work on the premises of the receiver of services. This may be a tricky one in the case of teleworkers.

13. Payment of expenses: Employers usually pay the expenses of employees, while contractors typically pay their own, but may be reimbursed at the end of the assignment.

14. Tools and material: Employers typically provide tools and materials to employees, while contractors usually provide their own.

15. Significant investment: Employees typically do not invest in the facilities they work in.

16. Realization of profit or loss: A worker who has the potential to profit or lose from the delivery of a service is typically not seen as an employee.

17. Working for more than one firm: A worker who delivers significant services to more than one unrelated firm or person in the same period is typically not seen as an employee.

18. Right to discharge: The ability to fire a worker is seen as an employment relationship.

19. Making services available to general public: Availability of services to the general public is seen in independent contractors.

20. Right to terminate: The right to quit is seen as that of an employee.

Not that the IRS isn’t motivated to collect all taxes, but they are especially vigilant about collecting payroll taxes. When the IRS determines that a “consultant” is actually an employee, a surprise tax bill will be coming soon. And if that isn’t bad enough, there are also those two abiding companions of most delinquent tax bills: interest and penalties.

I’ve talked quite a bit with Barbara Weltman, small business tax attorney, radio host and author of many books, including her latest, J.K. Lasser’s Small Business Taxes 2012. To listen to or download our latest conversation, click here.

Check out more great SBA content HERE!

Tax reform: the hot topic in 2012?

As April 15th approaches, every small business owner is all too keenly aware of the symbolism of this day. Regardless of when you actually file and pay your taxes - many small businesses file extensions or are incorporated, in which case the due date is actually the Ides of March - April 15 has become a metaphor for the government’s hand being in your pocket.

Most agree that the current system is way too complicated. Unfortunately, our Rube Goldberg-like tax code, with it’s thousands of moving parts, is too handy for politicians to monkey around with to suit their political agenda. Consequently, generations of business owners have had to deal annually with any number of new provisions, changes, updates, repeals, sunsets, delayed renewals and court rulings ad nauseum, as they attempt to develop an operating budget, pricing, etc., for each new year.

We wanted to know what you thought about the current system and two of the alternative systems that have been debated over the past 15 years. So we asked this question: “As you prepare for National Income Tax Day, do you think it’s time for tax reform?”

The first option was, “The current system is okay with me,” which was selected by a whopping three percent. The next choice was the flat tax, which was chosen by 69% of our respondents (Steve Forbes, call your office). And finally, those who said a value-added tax system would be best, but only if the current income tax system was repealed, came in at a little less than one-third of our sample.

Based on the results of our poll, it looks like tax reform could be a hot topic in the 2012 elections.

On The Small Business Advocate Show, I talked with Barbara Weltman, tax attorney, columnist, author of J.K. Lasser’s Small Business Taxes, and publisher of Big Ideas for Small Business®, a free monthly online newsletter, about small business tax tips for 2010 and 2011. Take a few minutes to click on one of the links below and let us know what you think of the current tax code and how you think it should be changed.

Listen or Download: New tax planning tips for 2010 and 2011

Listen or Download: Small business tax and filing obligations

Navigating the uncertainty of small business taxes for 2011

Several months ago, I wrote an article that was titled, “The enemy of jobs creation is uncertainty.” In the article I identified several issues that were causing small business owners to be reluctant to invest or hire.  One of those things was - and still is - not knowing what the income tax burden will be in the future.  Today, there are several tax issues unresolved that will impact virtually every small business.

1.  The personal tax rate, the corporate tax rate and the capital gains tax rate: We still don’t know what Congress will do with the tax cuts from 2001-03, often called the “Bush tax cuts,” which are set to expire at the end of 2010.  Not knowing the tax implications creates frustration when trying to project profit margins or do retirement planning.  And if we have any assets that we might want to sell in the short-term, we feel pressure to sell them this year, since the cap gains rate may go up next year.

2.  The health care bill:  No one really knows how this new program will impact small businesses, both organizationally, financially or from a compliance standpoint.  Speaking of compliance, one of the big concerns involves the proposed 1099 reporting requirements that is an element of the health care bill. Every small business advocacy organization I’ve talked with in the past few months has said this new compliance requirement will be a nightmare for small businesses.

Recently, we polled visitors to my website about what the government should do with the expiring tax cuts. Over 80% of our respondents said the tax cuts should be extended.  If the government wants to get the economy going quicker, they will do everything they can to help small businesses understand what their future tax compliance requirements are as soon as possible.

Recently, on my radio program, The Small Business Advocate Show., I talked with small business tax expert, Barbara Weltman, about why current tax policies are creating a great deal of uncertainty among small businesses, including the new 1099 reporting provision. Barbara Weltman, is a tax attorney and author of many books on small business tax planning, including the J.K. Lasser series. I hope you will take a few minutes to listen to what Barbara has to say, and be sure to leave your comments. Listen Live! Download, Too!




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