With every newly re-elected president comes new policies and actions with Obama been is no different. These new tax related policies and actions often affect the small business owner but some businesses aren’t always aware of these changes. Below are 3 proposed policies we have summarized for your ease of reading.
(1) Social Security Payroll Taxes
As of January 1, 2013 the amount of the employee’s portion paid for social services has reverted back to its original rate of 6.2%, as was intended when the original reduction period was set out. During the reduction period the rate was 4.2%. The increase will slightly lower the take home amount of paychecks for the average American, but the important point to take out is that this is Not a tax hike, rather the taxes returning to their intended level.
(2) “Wealthy Tax”
One of the key policies that will be implemented is the “wealthy” tax. Even though an increase in the tax rate for certain individuals will have an impact, many small businesses will not be affected because of one of the key changes made by the president. Where previously there was going be an increase on the tax rate for any person (including sole proprietors and small business owners) earning over $250,000; the floor has now been increased to those earning over $400,000. This change will allow for smaller businesses to continue on without having to take the extra hit of an increased tax rate.
(3) Affordable Care Act
Coming into effect in January 2014 is the Affordable Care Act. What this will do is require any business that has more than 50 employees working full time to implement a medical coverage plan. Failing to offer a plan of this nature will result in heavy government penalties faced by the business. Although this is not a policy that will affect very small businesses, it is still important to understand for many who are currently expanding and are reaching close to or have already reached this 50 employee marker.
The return to the normal rate for the payroll social service taxes is one that will affect all businesses, but the other two policies focus on those small businesses that are growing in size and revenue and may have no effect on those businesses on the smaller end of the scale. If these policies affect your business be sure to stay up to date with any information that becomes available to stay prepared for their implementation.