Who in the U.S. makes more than $250,000? And are they "wealthy"?
President Obama has raised the question with his recent statements on the campaign trail regarding the Bush-era tax cuts. The President supports an extension of the cuts for every American with the exception of those who make more than $250,000, or as he terms them, "the wealthiest Americans."
According to the Internal Revenue Service, fewer than 3 percent of tax returns in 2009 claimed more than $200,000 in adjusted gross income.
This issue, like most everything else these days, divides Congress along partisan lines and there are arguments for and against letting the tax cuts expire for upper-income Americans.
Republicans argue that returning the tax rates to their previous level on the over-$250,000 annual income group will hurt owners of small businesses, which comprise 99.9 percent of the 26.8 million businesses in the United States, according to the Small Business Association.
GOP lawmakers estimate that from 50 to 75 percent of the Americans in the $250,000+ income bracket own small businesses.
The Obama administration counters with these figures: 75 percent of small businesses report annual revenues of less than $1 million. On the average, 22 percent of those revenues are taken home as profits. So the great majority of small business owners would come in under that $250,000 threshold.
Regardless of which argument you accept, the impact of taxes on small business owners is an issue of great importance to lawmakers. Writing in his "Dean of Tax" blog on the Forbes.com website, Dean Zerbe says Congress has already taken a couple of steps to strengthen the rights of small businesses in their dealings with the IRS, including the Small Business Taxpayer Bill of Rights Act of 2012, introduced by Sen. John Cornyn, R-Texas.
The House Ways and Means Committee is looking into ways to make sure that tax reform benefits owners of small- and medium-sized businesses as well as larger corporations. This includes possible upcoming proposals on "pass-thru" business, where income passes through the business directly to investors or owners. About 90 percent of small business fit this description.
The bottom line, regardless of the outcome of the tax debate in Congress, is that small business owners must stay aware of tax laws for the benefit of themselves and their employees.
Horizon Business Solutions can help small business owners with their payroll needs and provide up-to-date advice on taxes and other payroll deductions. Call today to talk with one of our representatives about how we can meet your payroll and bookkeeping needs.
Keith Cannon | 07/14/2012