From ERA CEO Tom Shanahan

May 31, 2007

The Small Business Legislative Council (SBLC) has issued a brief bulletin regarding the recently passed federal minimum wage increase. There's a tax relief measure included, so we are passing this along for your information.

Here are the highlights of the bulletin.   

Congress has passed, and sent to the President for signing, a bill to increase the minimum wage. The increase was included in the Iraq war funding bill. The measure also includes some small business tax relief and "pay-go" revenue increases.

The minimum wage will increase to $5.85 an hour 60 days after the President signs the bill into law. It increases to $6.55 one year later and to $7.25 a year after that. (Where states have adopted higher minimum wage ceilings, those higher rates remain unchanged.) 

The principal highlight of the tax relief is that the temporary increase in the direct expensing allowance is pushed up to $125,000 and extended through 2008. (You might want to discuss this with your accountant.)

May 23, 2007

ERA has just received a Small Business Legislative Council (SBLC) bulletin with two items that warrant your attention. As you'll see, these could be labeled "good news, bad news." 

* HOME OFFICE DEDUCTIONS
The SBLC has learned that the IRS is trying to respond to taxpayers' complaints that taking a deduction for a home office is way too complicated. The IRS hopes to create a "standard" home office deduction that would greatly reduce the amount of record-keeping now required. (Taxpayers would still have to meet the basic rule of using part of their homes regularly and exclusively as their principal pace of business.) This proposal is working its way through the internal process at the IRS, and the SBLC is providing input and suggestions. If approved, the new rules would affect 2008 tax returns.

* INDEPENDENT CONTRACTOR CLASSIFICATIONS
The SBLC also reports that the IRS is "clearly increasing the number of employment tax audits." The IRS is apparently using the traditional 20-point common law test to examine worker classifications. (In the mid-1990s, the IRS issued a training manual for its examiners that changed the emphasis to three general themes.) As the IRS returns to a more traditional analysis, the form SS-8 will emerge again as a critical tool. Both the individual, who is either an employee or independent contractor, and the small business owner, who might be either the employer or the payor of the independent contractor, would complete the form, depending on how the IRS decides to rule.

Also, the IRS has established information-sharing relationships with the U. S. Department of Labor and with States' agencies for various programs, including unemployment compensation and workers' compensation. As a result, issues raised in any of these forums will be more likely to be questioned by the IRS.

As always, we will keep you posted about further developments related to these and other legislative matters that could impact your business.

May 11, 2007

Whenever the federal government seeks new (or old) ways to increase its tax revenue, one particular issue that could significantly affect manufacturers' reps keeps surfacing ... and it's happening again.

The "misclassification" of independent contractors as employees is once more being debated in Washington, and ERA is keeping a close watch on this activity on your behalf. 

This past Tuesday, May 8, John Satagaj, president of the Small Business Legislative Council (SBLC), testified before the House Ways and Means Subcommittees on Income Security and Family Support and Select Revenues, reinforcing the fact that independent contractors are often the critical first step in the "ladder" of small business ownership. He emphasized, "Public policy should be built around the presumption that Americans should be encouraged to start, own and manage a business, not the presumption that they are 'misclassifications.' "

Mr Satagaj also stressed that forcing independent contractors to be classified as employees would cause a decline in the creation of successful small businesses and would damage their proven potential to provide numerous jobs and opportunities for other individuals.

ERA is a long-time member of the 30-year-old SBLC, which develops legislation, testifies before Congress and monitors federal government activities on behalf of its member associations. We will continue to watch and keep you posted on activity regarding the independent contractor issue.