Making Work Pay Credit Woes

What has the making work pay credit done for you? Most of us received the equivalent of $800, through reduced withholding. The reduced withholding was just a vehicle to get the money back into the taxpayer's hands quicker. It was really a reduction in the FICA tax, but that was how they were going to pass it down to the masses, instead of issuing checks. This way they could assure that the credit only went to hard working Americans. Right.

How many of you married couples changed your W-4 withholding when this happened? So far this busy season, every married, no kids couple owes something close to $800. Dandy. We all know that most people think the competence of the accountant determines whether or not they get a refund. Now likely we will lose all of our married, no kid clients because they think it is our fault.

For a simple way to avoid this: When you get your next pay stub, bring it to me (both your's and your spouse's, if applicable). Ask me -- am I withholding enough tax? I can help.

Stimulate the Economy

I just read Mark Cuban's latest blog post (http://blogmaverick.com/2010/01/31/the-simplicity-test-a-simple-policy-guide-for-job-growth/) about stimulating small business. As a CPA, I have often joked that every stimulus plan presented seemed to be drafted by accountants or lawyers, as we can benefit by all the changes, and businesses have no idea what they are, or what the heck they need to do to comply, or take advantage of the new laws/proposals.

Honestly, I have several small business clients (I only do this part time), and none of the stimulus bills have done anything for any of them. One of them did better in 2009 than 2008, but that is really only because he willed himself to do better by working harder, longer, etc. What has any bill done for any of them?

Let's look at Taxes. The federal government can say what it wants, and while it hasn't directly meant to hurt businesses - what has it done?

1. Offered to pay part of Cobra. Bonus for the employee only if they use it (most don't). For the employer? We have to completely change our Cobra process. Twice as much paperwork. Thanks.

2. Making Work Pay Credit. Woohoo. We lowered everyone's withholding so they could get an extra ($40 or so) a month. Now everyone has to pay tax (or has a small refund) and is blaming us (because your tables didn't account for 2 income families properly - how many one income families, by choice, are there left out there -- really?). Thanks - we're the bad guy now, and we doubled our work on payroll processing this year.

3. Bank Bailouts. If you think any of this money went to small businesses, why don't you pose as a small business, decent cash flow, wanting to buy a new piece of equipment that will truly help your business. See if one of the banks that were "bailed out" will give you a dime. Normally all small businesses are asked to personally guarantee all loans by taking out home equity loans. Good luck finding any equity after the housing meltdown.

4. Credit Card Reform. In light of the pending reform, all major banks did a systematic reduction of available credit, and the remaining banks noticed that your percentage of credit was severely changed, and raised your rates. Kudos, now we have less credit at higher rates, that sure helped us. Also, new rules do not effect cards used for business.

5. Extended unemployment. Well this one might have helped a little. Not in an actual business way, but it gives us the ability to sleep at night, when we had to layoff good people.

One of the commenters on Mr. Cuban's blog mentioned a test drive instead of unemployment. This is very insightful. There are actual incentives to hire someone on public assistance (WOTC), but allowing a test market, or even a supplemental to unemployment (without effecting benefits) would be very useful.

The question on most perspective employer (small business) minds is whether they can afford a new employee. Will the time training the new employee be crippling, as usually this is the time when they cannot generate as much income as you are paying them. Other often thought questions - is this a guy that truly is a victim of layoff, downsizing, or "the guy" that employers used "downsizing" as an excuse to get rid of the bad seed. We've all been there.

Kudos for you Mr. Cuban for an insightful look at the problems of small business. Why don't you take on solving college football and the BCS now.