From www.openforum.com by Courtney Rubin
By now you've probably heard plenty about Taxmageddon, Dec. 31, when the 2001 and 2003 tax cuts expire.
The Tax Policy Center says the cuts—which affect things including marginal income tax rates, marriage penalty rates and the estate tax—will result in 83 percent of U.S. households facing an average of $3,701 in tax increases. Ninety-eight percent of households with income above $50,000 will be affected.
President Obama has proposed extending many of the tax rates, but not for people with income over $250,000, which would impact thousands of small businesses.
Now you can figure out exactly what and how you'll be affected. The U.S. House of Representatives' Committee on Small Business has created what it calls a "one stop shop for information" on the tax cuts. The website has a list of expiring 2001 and 2003 tax provisions thatmost affect small business.
It also has a list of expiring tax extenders that will affect small business, plus a link to a report from the nonpartisan Joint Committee on Taxation, which found that the amount of flow-through business income that would be subject to President Obama’s proposed tax hike has increased from 50 percent in 2011 to 53 percent in 20
13, with the number of entities subject to the tax increase going up from under 750,000 in 2011 to approximately 940,000 in 2013. Most small businesses are organized as flow-through entities: partnerships, limited liability companies, S corporations and sole proprietorships.
Lastly, there is a link to an Ernst & Young study that predicts tax hikes would eliminate 710,000 jobs in 2013.
In June, one CPA who specializes in estate, trust and gift taxes told a hearing of the House Subcommittee on Economic Growth, Tax and Capital Access that the estate tax, at least, should not be a huge issue for small businesses.
“Over the last 10 years, a number of extremely wealthy families have done an excellent job of convincing small-business owners into believing that they will lose their businesses to the estate tax,” said Thala Taperman Rolnick, a Phoenix CPA. “In reality,
at its current level, it affects very few individuals.”
But a small business owner disagreed. Karen Madonia, CFO of Illco, a Chicago-area distributor of heating, ventilation, air-conditioning and refrigeration equipment, parts and supplies, talked about the uncertainties faced by her father in the family-owned business he has been operating since 1973.
“Over the last few years, my dad has spent countless hours and entirely too much money trying to navigate the estate planning waters. Instead of focusing on growing his business so he can open more branches and employ more people, he has had to strate
gize about how to pass his company on to his kids without having to dismantle it,” she says. “And if that isn’t enough of a challenge, he has had to do it with an ever-changing tax landscape."
