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!