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  • NASE Comments at Senate Committee on Small Business and Entrepreneurship Roundtable on Health Reform
    Roundtable on Health Reform Thursday July 09 2009 Senate Committee on Small Business and Entrepreneurship Roundtable on Healthcare Reform The Concerns and Priorities from the Perspective of Small Business Comments by Kristie Arslan Executive Director National Association for the Self Employed NASE The National Association for the Self Employed NASE has been representing micro businesses those with ten or less employees and the self employed for over 25 years For the last decade the cost of health care has been consistently been selected by our members as the top issue affecting their business The economic downturn has made it even more crucial that Congress provide relief to the self employed from the high health care costs that are strangling their businesses The self employed understand the importance of having health coverage According to a June 2008 study conducted by the NASE 67 of micro businesses currently have health coverage Yet we found that 71 had gone uninsured at some point in their lives Additionally we saw a massive drop in employer sponsored coverage amongst micro businesses In 2008 only 18 6 offered health insurance to their employees down from 46 2 in 2005 The primary reason for dropping group health coverage was cost A number of business owners also indicated that the administrative burden of managing a health plan played a role in their decision to forgo group coverage In order for reform to be meaningful for micro businesses it must address the issues in the individual insurance market where the majority of the self employed and their workers now access health coverage The self employed need health reform to accomplish the following Lower Costs the self employed need immediate financial assistance with health care costs and further cost growth must be contained Create Parity the tax treatment of health coverage must be reformed so that all receive the same tax benefits regardless of whether coverage is purchased on their own or accessed through an employer Allow Choice the self employed must have their choice of doctors choice of plans and the ability to choose what is best for their business and family when it comes to health coverage Increase Access market reforms must be implemented that will provide more coverage options for the self employed and allow individuals to obtain coverage regardless of their health status Provide Meaningful Coverage the self employed need access to quality affordable health policies not bare bones coverage Promote Transparency and Simplicity the self employed need a health care system that makes accessing purchasing and utilizing health care simple and easy Trustworthy information on costs and coverage options must be readily available Cost is key for the self employed Approximately 60 of micro businesses in a June 2009 NASE survey on health reform chose cost containment as most important to them and their business The median household income for an NASE member is 62 500 and their business is the main source of income for the majority of our members Thus cost is often

    Original URL path: http://selfemployed.nase.org/nase-in-action/advocacy/2009/07/09/NASE_Comments_at_Senate_Committee_on_Small_Business_and_Entrepreneurship_Roundtable_on_Health_Reform (2016-02-14)
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  • How the Complexity of the Tax Code Hinders Small Businesses
    Obama by December 4 2009 As Congress and the Administration review ways to reduce to the tax gap we encourage lawmakers to focus on the great compliance benefits associated with tax simplification rather than on proposals which increase the regulatory burdens placed on small businesses According to the General Accounting Office a small business owner faces more than 200 IRS forms and schedules that could apply in a given year Many of these forms are complicated to understand The IRS Form 4562 which relates to Depreciation and Amortization and its corresponding publications are a prime example of vague forms and publications that would benefit from simplification and plain language A small business owner who purchases a 1 500 computer will have to read 16 pages of obscure instructions to fill out this two page form Additionally the IRS indicates that the estimated burden for taxpayers who file this form is approximately 47 hours Let me reiterate 47 hours to fill out a two page form Minimizing the complexity of the tax code and paperwork burden faced by small business is one solution that policymakers and taxpayers alike have endorsed The first step in this effort to reduce confusion surrounding the tax code should be to ensure that all forms and publications are in clear concise language that is easy to understand by all The National Association for the Self Employed strongly supports H R 946 the Plain Language Act of 2009 Use of plain language will allow all citizens to more accurately understand and comply with their responsibilities while also fostering more accountability within the federal government Most importantly it will boost the bottom line for businesses and government alike Plain language will require less time and money spent on education preparation and compliance Micro business owners do not have the luxury of an extensive accounting and human resources department which can focus their time on recordkeeping and complying with regulation Typically the business owner is responsible for every aspect of their business taking on the role of CEO HR manager accountant and even janitor Every hour spent wrestling to understand complicated rules and regulations is less time spent managing and growing their business Every dollar they spend on experts and professional assistance is less money they have to reinvest into their business The home office deduction is a prime example of a provision of the tax code that needs simplification The forms and instructions are too complicated The paperwork requires too much recordkeeping and takes too much time to complete In addition NASE members expressed a substantial fear that claiming the deduction will trigger an IRS audit All of these obstacles cause many home based business owners who qualify to avoid the deduction altogether The creation of a 1 500 standard home office deduction option as proposed in the Home Office Deduction Simplification Act H R 1561 would address all of these barriers to utilizing the home office deduction In fact we found in a May 2008 online poll that over 60 of those home based businesses who were not currently employing the home office deduction would do so if they were offered a standard deduction option Last year the NASE nominated the home office deduction for the SBA Office of Advocacy s Regulatory Review and Reform r3 initiative As you may be aware after review of over 80 nominated regulations the SBA Office of Advocacy selected the home office deduction as one of their Top 10 Rules for Review and Reform in 2008 Micro business owners face stringent and confusing requirements to qualify for the home office deduction IRS publication 587 Business Use of Your Home devotes five pages in an attempt to explain and clarify the key requirement for taking the deduction exclusive and regular use of your home as your principal place of business While the IRS does its best to make clear what they mean by exclusive and regular many assumptions are left to the business owner In addition the overall qualifying provisions are very limited Once a small business owner qualifies for the deduction he or she then faces the complexity of the IRS form A self employed business owner must differentiate between direct and indirect expenses and also between deductible mortgage interest and excess mortgage interest Some of the expenses are deductible even if the business has a loss and some are not Many small businesses who qualify for this important deduction do not take it because it is too onerous to fill out the form The lack of clarity present in the requirements to take the deduction and the preparation of the form enhances the concern of the self employed owner that he or she may do something incorrectly In a May 2008 survey conducted by the NASE only 27 of members working from a home office took the home office deduction The fear of being red flagged by the IRS for review and or audit was the top reason why qualifying business owners did not utilize the home office deduction A second area of the tax code that creates considerable confusion and is excessively burdensome for micro businesses relates to the definitions of employee and independent contractor A majority of micro businesses and the self employed either utilize independent contractors or are themselves independent contractors Confusion about who is an employee and who is an independent contractor has cost small businesses more than three quarters of a billion dollars in IRS penalties and back taxes during the past 10 years The issues plaguing worker classification stem from the fact that classification of an individual into an employee or an independent contractor is subjective under the tax code The IRS has a complicated 20 point checklist the can be used as a guideline in determining whether or not an individual is an employee or an independent contractor Yet using this checklist does not guarantee that a person is correctly classified Other IRS materials published to assist in classification are equally as convoluted

    Original URL path: http://selfemployed.nase.org/nase-in-action/advocacy/2009/05/07/How_the_Complexity_of_the_Tax_Code_Hinders_Small_Businesses (2016-02-14)
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  • NASE Testifies Regarding Health Care Reform
    health insurance plan However since many micro business owners are unable to afford employer based health insurance a key benefit of an HRA is that they do not require the business owner to purchase a group health plan Thus business owners unable to afford insurance can offer some financial assistance to their employees HRAs are extremely flexible and easy for a micro business owner to set up and administer This is an important feature for a business owner who is responsible for managing every aspect of their business Plan designs are limitless as long as they are consistent with IRS guidelines A small business owner can write their own plan or obtain assistance from numerous vendors that offer prototypes of written HRA plans Since cost is such a crucial factor for micro business when it comes to health benefits an HRA gives the owner consistency when it comes to benefit costs An HRA allows the business owner to determine the maximum amount of annual reimbursement an employee will receive whether the HRA funds may be rolled over to the next year and if so how much of an employees HRA funds can be rolled over to the next year Furthermore the reimbursements are tax deductible for the business At present self employed persons are not eligible to participate in an HRA an inequity that negatively impacts millions of business owners and employees While there are a myriad of generous self employed business owners out there a key rule of thumb is that an owner is unlikely to set up a benefit for employees that he is unable to participate in as well An important component of HRAs is the non discriminatory rules that apply to them If an HRA is set up the benefits must apply to all employees A business owner is not allowed to offer the benefit to only certain employees or allow some to have a higher amount of annual reimbursement What is set forth in the plan will apply to all those working in the small business Therefore expansion of Health Reimbursement Arrangements to allow the self employed business owner to participate in the plan would likely significantly increase the number employees of micro businesses receiving health benefits and financial assistance with medical costs Additionally HRA annual reimbursement amounts would likely be more generous if the self employed owner receives the same benefit Health Tax Credits With the number of working uninsured rising every year the NASE supports health reform proposals which include health tax credits to assist the self employed in purchasing health insurance Again the primary reason small businesses go without coverage is cost Tax credits would assist owners and individuals employed in businesses that do not have employer sponsored health plans to afford health insurance Since over 5 60 of our nation s uninsured work for small businesses or are the dependents of workers in small business health tax credits would facilitate a large portion of our uninsured gaining access to coverage An effective tax credit must be advanceable allowing eligible individuals to receive their credit every month rather than in a lump sum at the end of the year to let them buy coverage without incurring extensive costs during the year The credit should also be refundable allowing individuals that do not pay income taxes but are subject to payroll taxes to be eligible to receive the credit as a refund from the Internal Revenue Service This would permit lower income workers who do not owe income taxes to receive the full value of the tax credit The credit could be used to purchase coverage through the individual or group market to buy into state purchasing pools or to join an insurance pool in the private sector or one established by a state for high risk patients Health tax credits do not impose a one size fits all standard but instead seek to enable and empower individuals to choose the policies and features that most appeal to them and that work best for their business As mentioned choice is another key component desired by micro businesses in health reform options Only health tax credits would allow the self employed to purchase insurance policies they own and control The individual maintains choice of insurance carriers from which to purchase coverage of doctors and of services she wants covered Health care tax credits are a more cost effective method of insuring workers who are able to pay some but not all of the cost of their health insurance and encourage business owners to provide an employer sponsored health plan The amount of the tax credit is essential to ensure affordability A targeted tax credit can provide quality coverage to low and middle income families and self employed individuals at a more modest cost How Insurance Market Reforms May Affect Micro Business As policymakers take a look at our health insurance markets as part of reform efforts it is important that they consider the potential impact of market reforms on micro business Key debates are ongoing in regards to the use of pooling mechanisms mandates and as to whether we take an individual and or employer based approach to health reform Individual vs Employer Based Coverage The self employed and micro businesses purchase health insurance in two markets the small group market and the individual market The definition of a small group is determined by each state though most define it as one with 50 or fewer employees Firms in this size range looking to offer employer based health coverage to their employees will look to the small group market for insurance options However of those currently insured the majority of self employed and micro businesses have purchased individual health coverage According to the NASE 2008 Health Care 6 Survey of the more than 46 percent of responding micro businesses offering health insurance only 18 6 percent offer coverage for full time employees That is a significant decline from 2005 when 46 2 percent reported

    Original URL path: http://selfemployed.nase.org/nase-in-action/advocacy/2009/02/05/NASE_Testifies_Regarding_Health_Care_Reform (2016-02-14)
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  • The NASE Urges the 110th House to Support the Economic Rescue Package
    of Representatives Washington D C 20515 Dear Representative Micro businesses those with ten or less employees and self employed individuals nationwide represented by the National Association for the Self Employed NASE are significantly troubled by the current economic crisis facing our country and our government s reaction to this debacle We urge you to support and vote for the Emergency Economic Stabilization Act of 2008 H R 1424 which was recently passed by the United States Senate Of most concern to NASE members is the effect this economic crisis will have on their savings their home values and their ability to access credit and loans However when asked about the proposed financial rescue plan the question that arises most frequently in their minds is why we the taxpayers should foot the bill to bail out these failing companies As a small business owner in our free market economy NASE members have the opportunity to succeed or fail based on their business acumen When their small business is not doing well no one bails them out Yet NASE members understand that our economy will likely get worse before it gets better causing irreparable harm to their small businesses and directly impacting their families if you do not vote yes on this bill The majority of our members utilize credit cards lines of credit from financial institutions personal savings and home equity loans to finance the operation of their business The current economic climate has caused a credit crunch which has slowly been suffocating the small business sector In addition with over 56 of NASE members operating their business out of their home many are concerned about their declining property values access to home equity loans and their ability to afford their home With home based businesses losing their home means losing

    Original URL path: http://selfemployed.nase.org/nase-in-action/advocacy/2008/10/03/The_NASE_Urges_the_110th_House_to_Support_the_Economic_Rescue_Package (2016-02-14)
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  • Regulatory Burdens on Small Firms: What Rules Need Reforms?
    of my fellow self employed business owners prepare their taxes without professional assistance and thus must navigate the home office deduction on their own Key hurdles faced by the self employed in taking this deduction are the strict qualifying requirements the complexity of the form and instructions and the underlying fear that employing this tax benefit will flag them for review or audit by the IRS Micro business owners face stringent and confusing requirements to qualify for the home office deduction IRS publication 587 Business Use of Your Home devotes five pages in an attempt to explain and clarify the key requirement for taking the deduction exclusive and regular use of your home as your principal place of business While the IRS does its best to make clear what they mean by exclusive and regular many assumptions are left to the business owner In addition the overall qualifying provisions are a bit strict If I had a storefront or leased office space there are no penalties for putting personal use items like a television in my place of business or having a family member stop by for a visit and unexpectedly look something up on my computer Yet because I work from home the above circumstances could disqualify me from utilizing the home office deduction Micro business owners face stringent and confusing requirements to qualify for the home office deduction IRS publication 587 Business Use of Your Home devotes five pages in an attempt to explain and clarify the key requirement for taking the deduction exclusive and regular use of your home as your principal place of business While the IRS does its best to make clear what they mean by exclusive and regular many assumptions are left to the business owner In addition the overall qualifying provisions are a bit strict If I had a storefront or leased office space there are no penalties for putting personal use items like a television in my place of business or having a family member stop by for a visit and unexpectedly look something up on my computer Yet because I work from home the above circumstances could disqualify me from utilizing the home office deduction Once a small business owner qualifies for the deduction he or she then faces the complexity of the IRS form A self employed business owner such as I must differentiate between direct and indirect expenses and also between deductible mortgage interest and excess mortgage interest Some of the expenses are deductible even if the business has a loss and some aren t Some casualty losses go on line 9 and some go on line 27 I am not a tax expert and confusing questions such as these is what led me to seek professional help In addition the words see instructions appear on this one page tax form 14 different times Those instructions say the form will take an average of 1 hour and 15 minutes to complete I can tell you from personal experience it

    Original URL path: http://selfemployed.nase.org/nase-in-action/advocacy/2008/07/31/Regulatory_Burdens_on_Small_Firms_What_Rules_Need_Reforms (2016-02-14)
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  • NASE Sends Letter to House Ways & Means Committee Regarding Harmful Provision Affecting Micro-Business
    become concerned that the zeal of Congress to find funding in our strict budget climate has shifted the delicate balance from what is reasonable to what is detrimental for small business As an offset for various legislation you are considering a proposal to expand information reporting by requiring credit and debit card issuers to report business owners annual electronic payment transactions to the IRS This recommendation is likely to have significant unintended consequences It lacks clear details regarding its implementation which must be brought to light to accurately gauge its affect on both the micro business community and our economy Congress should require the IRS to prepare both a detailed implementation plan and a cost benefit analysis to allow for a clear understanding of how the proposal will be administered and its effect on the self employed This analysis should occur before this recommendation is considered for use in legislation Please find below our top concerns with this proposal Use of Data The IRS has suggested that the data could be utilized to create industry profiles taking the total credit card receipts from a particular business sector and then extrapolating this information to create industry averages These new profiles could then be used by the IRS to make judgments regarding other items on the tax return such as estimations on cash payments NASE Concern If this is the intended use of the data problems will arise Differing demographics of individual businesses will Verification and Withholding Credit and debit card companies would be required to verify the TIN of a business If this information is inaccurate they must backup withhold 28 of the gross transactions of that business No specifics have been released as to how the IRS plans to work with credit and debit card companies to effectively implement these components of the proposal There are likely to be reporting errors through this process of verifying TINs yet there is confusion regarding whether a small business owner must contact their credit card company or the IRS to address the problem NASE Concern Withholding on gross transactions will create a substantial cash flow problem for the self employed and could also place a severe financial strain on their families We do not support back up withholding for this proposal Cost to Consumers Credit and debit card companies are likely to pass on the cost of compliance to their micro business merchants in the form of higher user fees Increased fees will have a negative impact on revenues and sales of micro business owners forcing them to either minimize their acceptance of credit cards or increase prices of their goods services This could have significant consequences on our weakening economy NASE Concern Congress should reach out to credit debit card companies banks and other pertinent parties to determine the ultimate financial impact on consumers before moving forward with this proposal Effectiveness The majority of NASE s members feel that this recommendation will not increase tax compliance They are quick to point out

    Original URL path: http://selfemployed.nase.org/nase-in-action/advocacy/2008/06/19/NASE_Sends_Letter_to_House_Ways_Means_Committee_Regarding_Harmful_Provision_Affecting_Micro-Business (2016-02-14)
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  • Electronic Payments Tax Reporting: Another Tax Burden for Small Businesses
    function of the affluence of their community regional disparities an owner s efforts in managing cash flow and even the decision of the business on whether to accept a particular credit card It will be very difficult to determine a relevant applicable average for a particular small business sector Therefore any action taken by the IRS based on these profiles such as examinations requests for additional information or even tax assessments would be both burdensome to microbusiness and most importantly could be negligent Verification and Withholding The Taxpayer Identification Number TIN verification process and backup withholding required of credit and debit card issuers under this proposal is also ripe for mishandling The proposal requires credit and debit card issuers to verify the TIN of a business If this information is inaccurate the issuer must backup withhold 28 of the gross transactions of that business Unfortunately no specifics have been released as to how the IRS plans to work with credit and debit card companies to effectively implement these components of the proposal There are likely to be reporting errors through this process of verifying TINs yet there is confusion regarding whether a small business owner must contact their credit card company or the IRS to address the problem In particular small businesses should have a reasonable amount of time to correct any errors before backup withholding kicks in The self employed business owner typically handles all aspects of their business including tax compliance They do not have the benefit of a team of accountants or administrative staff to assist them with compliance efforts Furthermore in 2007 an NASE member s business had median gross revenue of 62 500 and overwhelming their business was the main source of household income for their family Withholding on gross transactions will create a substantial cash flow problem for the selfemployed and could not only considerably harm their business but could also place severe financial strain on their family Thus we must have a clear understanding of the verification process and back up withholding procedures outlined in this recommendation Cost Concerns Overall implementation of this proposal will clearly require substantial financial and human capital resources by both the IRS and the credit debit card companies Questions abound regarding whether the IRS has the infrastructure to create a streamlined verification system and can handle the volume of paperwork they will receive should this proposal be enacted We think it is prudent for Congress to work with the IRS to prepare a cost benefit analysis of this proposal which would determine the potential costs of implementation and administration as it compares to projected revenue Moreover credit and debit card companies are likely to pass on the cost of compliance to their micro business merchants in the form of higher user fees NASE member Keith Kaufman owns a small business in Camp Verde Arizona that receives approximately 60 percent of its transactions through credit or debit cards Keith is worried about the additional financial burden in the form

    Original URL path: http://selfemployed.nase.org/nase-in-action/advocacy/2008/06/13/Electronic_Payments_Tax_Reporting_Another_Tax_Burden_for_Small_Businesses (2016-02-14)
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  • The NASE Submits Comments to the Senate Finance Committee
    consequences As they say the devil is in the details and this proposal lacks clear details regarding its implementation that must be brought to light to accurately gauge the affect on the micro business community and our economy Use of Data One of our chief concerns is the use of the data collected by the IRS There has been no clear indication of how this information would facilitate tax compliance The IRS has suggested that the data could be utilized to create industry profiles taking the total credit card receipts reported for a particular business sector and then extrapolating this information to create industry averages These new industry profiles stemming from credit card receipts could then be used by the IRS to make judgments regarding other items on the tax return such as estimations on cash payments If this is the intended use of the data problems will arise Our association does not support the use of any collected data for this purpose Use of these averages will only provide discrimination against those businesses that have higher than average credit card receipts This higher average could be a function of the affluence of their community regional disparities an owner s efforts in managing cash flow and even the decision of the business on whether to accept a particular credit card It will be very difficult to determine a relevant applicable average for a particular small business sector Therefore any action taken by the IRS based on these profiles such as examinations requests for additional information or even tax assessments would be both burdensome to micro business and most especially could be irrelevant and frivolous Verification and Withholding The Taxpayer Identification Number TIN verification process and backup withholding required of credit and debit card issuers under this proposal is also ripe for mishandling The proposal requires credit and debit card issuers to verify the TIN of a business If this information is inaccurate the issuer must backup withhold 28 of their transactions Unfortunately no specifics have been released as to how the IRS plans to work with credit and debit card companies to effectively implement these components of the proposal There are likely to be reporting errors through this process of verifying TINs yet there is confusion regarding whether a small business owner must contact their credit card company or the IRS to address the problem Small businesses should have a reasonable amount of time to correct any errors before backup withholding kicks in Withholding on gross transactions will create a substantial cash flow problem for micro business and considerably harm their business Thus it is very important that we have a clear understanding of the verification process and procedures outlined in this recommendation Cost Concerns Overall implementation of this proposal will clearly require substantial financial and human capital resources by both the IRS and the credit debit card companies Questions abound regarding whether the IRS has the infrastructure to create a streamlined verification system and can handle the volume of

    Original URL path: http://selfemployed.nase.org/nase-in-action/advocacy/2008/04/25/The_NASE_Submits_Comments_to_the_Senate_Finance_Committee (2016-02-14)
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