The small business community, including self-employed and micro-businesses, welcomed a major benefit this tax year: a new, streamlined IRS home office standardized deduction. The new, standardized deduction is available to small business owners and the self-employed as an option for the 2013 tax year (returns filed in 2014).
This standardized, $1,500 deduction will allow for nearly 9 million home-based businesses, representing over 50 percent of small business owners, to take the home office deduction if they so choose. The new option represents a big win for America's small businesses and is a great example of government at work for those Mom and Pop businesses on Main Street.
However, it is important that our elected leaders continue these actions. Congress can take immediate action in three important areas when it comes to our community that would make a significant impact:
The Flexibility of Health Care
Despite its fortune and challenges, the new health care system is law-of-the-land. Small business advocates continue working to ensure it is effective for all Americans, including the smallest of businesses that have benefited from the availability and access to affordable health care.
However, premium costs are not at the levels needed for the small business community constantly watching bottom lines. While we want heath care, we need it to be affordable. We are currently working with Congress to permit a less-expensive tier of coverage - the Copper plan - that would require plans to cover 50% of medical costs, 18% less than currently available Bronze plans. It is estimated with the Copper plan, "an additional 350,000 Americans could keep their employer sponsored insurance in 2016, and because fewer people would access exchange subsidies, taxpayers would spend $5.8 billion less, while employers and individuals would pay $5.5 billion less in penalties."
Further reducing options for small businesses, the Affordable Care Act (ACA) has changed the use of Health Reimbursement Accounts (HRAs) - a powerful and effective tool for small businesses. HRAs have long allowed small employers a way to offer financial assistance for medical costs (co-pays, prescriptions, and deductibles) to their employees. But the Administration issued technical guidance last year outlining that only employers who are compliant with the ACA's "Essential Health Benefits" can continue to offer HRAs, eliminating this option for employers with under 50 employees.
It is essential that Congress clarify these rules regarding the applicability of HRAs by employers with 50 or less employees.
Pro-Growth Policies for Women-owned Businesses
Self-employed women and women-owned businesses are a significant and growing number of the small business community. In order to help provide the fuel for this unique business demographic for our national economy, we need to give them the tools to start, save and grow their small businesses.
A recent U.S. Senate Committee report indicated that "women-owned business are a $3 trillion economic force and support 23 million jobs, but still face significant barriers compared to their male-owned counterparts when it comes to obtaining loans and growing their businesses." We are committed to working with both the Administration and Congress to support women and their businesses by providing the sound economic and financial advice they need in order to succeed.
Our message is clear: women require access to capital to start their ventures, and they must have procurement opportunities to ensure their continued success.
Fair and Simple Tax Reform
The tax code can be very complex and rigorous for many small businesses, and too often the discussions around tax reform center on corporations. But in order for our economy to strengthen and benefit the full workforce - small and large businesses, alike - our nation must take a comprehensive approach to a more equitable tax code.
Congress could make small tweaks to the tax code in any comprehensive package and those changes would have a substantial and across-the-board impact on our country's small business community. These changes, include:
• amending the definition of "employee" to include an owner of a sole proprietorship to take advantage of additional benefits;
• simplifying the definition of a independent contractor to clarify workers' status;
• streamlining the deduction process, such as creating a standard schedule C-Z by expanding as many deductions as possible for business expenses.
The rhetoric of tackling tax reform is often met with inaction by policymakers - and 2014 year was no different. After the Midterm elections, we may see progress - but that progress must include the small business community.
There are many priorities still outstanding for America's Main Street business community. The agenda items outlined above, if enacted, could put the small business community on a path to success as well as provide a major boost to our country's economic health as a whole. While time is running out on this year's legislative session, it is imperative that Congress work to address these issues early next year. They are too vital to the well being of our nation's economic engine for them to be left on the chopping block, sidelined by another election right around the corner.