Thursday, October 13, 2011

The American Jobs Act & Your Small Business Payroll Taxes

payroll taxes

What the American Jobs Act means for Payroll Taxes
Obama proposed on September 9th, 2011 to cut payroll taxes as part of his American Jobs Act. He proposes to cut payroll taxes down to 3.1% for all employers and declare a payroll tax free holiday for any business that adds new workers or increases the wages of their current workers. This would help regular taxpayers take home more money and dramatically decrease what employers have to shell out to the IRS on a quarterly basis.

But don't get too excited...
While it sounds like this could significantly improve tax matters for small business owners, you still need to be smart when it comes to your payroll taxes. I'm not saying that you should assume that your IRS tax issues will never get easier to handle. Instead, I'm saying that you should remember the classic military phrase "Prepare for the Worst and Hope for the Best." You will never be fully protected from IRS problems unless you prepare for those that could possibly arise.

Remember, Obama is still pushing for the cut in payroll taxes. It hasn't passed yet. Right now, you should be prepared to pay the current 4.2% that is in place for payroll taxes. If the American Jobs Act does pass, it should encourage you to hire more employees and reward some of your current employees with better pay. Just don't go crazy with it.

So, what should you?
Plan ahead! How will adding new employees and providing better pay to current employees help your business grow? What could be the drawbacks? If you can project that your company's profits will grow enough to cover in the long rung what a temporary payroll tax is covering now, then you are making some great decisions!

If you need help with your payroll taxes, you need to contact the best in the industry. Not only will the Hit Squad liberate you from your tax problems now, we will arm you against tax problems later!


Ask TaxGuru said...

this will definitely help them. But what do you think could potentially go wrong if the American Jobs Act passed?

The IRS Hitman said...

Well, the act as a whole has been tabled and will probably be broken up into smaller acts. But, I'll answer this in regards to the act in its current form.

Honestly, on paper, the American Jobs Act might be potentially great news for small businesses. I do see two potential problems though.

There are always going to be businesses that abuse tax breaks like this, which could ultimately hurt the economy. The money has to come from somewhere, right?

Also, people have a tendency to get too comfortable with a temporary situation. If a business gets used to these much lower payroll taxes, returning to the standard rate would hit them hard.

Ask TaxGuru said...

Yeah, good points there. Let's just wait and see what happens next.

Jimmie Menon said...

It is necessary to evaluate the complexity of the payroll system. If your employees work varying amounts of hours each week or if you pay employees who reside in multiple states, it may make sense to consider payroll providers that are current on differences in state tax regulations.

Payroll Providers Guelph.

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