I think we can all agree that the tax code could be more fair for Americans who want to start their own small business. It's one of the pillars of the national self-employment initiative that I have been urging policymakers to adopt. One of the key components of President Obama's American Jobs Act is a further extension of last year's payroll tax cut for employees. In 2011, the employee FICA contribution stands at 4.2 percent, a cut of 2 percent. The President's proposal would cut the employee contribution even further to just 3.1 percent. Employers would also see their contribution halved to 3.1 percent. For the nation's over 22 million self-employed business owners, extending the payroll tax cut to employers is a big deal because they pay both the employee and employer portions of the FICA contribution. By extending the payroll tax cut to employers, the self-employed will see their overall tax liability decrease in the short-term, which will help these businesses generate growth for the long-term.
This tax relief will extend to the four different types of business structures that the self-employed have to choose from: sole proprietorship, partnership, corporation and Limited Liability Company. Each business structure pays the same amount in FICA taxes and each has certain advantages and disadvantages that a new entrepreneur must take into consideration. Tax advisor and legal counsel are just two of the hats that self-employed business owners must wear when starting out.
The tax relief included in the American Jobs Act may help some of the current unemployed and underemployed seek out self-employment as a job option. It will also help millions of current businesses generate economic activity and help our economy return to prosperity. There are resources available for those interested in starting a new small business navigate the current regulatory landscape to ensure they succeed. You are not alone -- and do not have to go it alone!
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