House GOP Payroll Tax Fix Averts Small Business “Nightmare,” Protects Jobs

Speaker Boener Press Office: Bipartisan legislation extending payroll tax relief for working Americans will now include a fix secured by House Republicans that ensures small businesses, already struggling in the current economy, won’t face added confusion and compliance costs.  Without this fix, employers would have been hit with a costly new reporting burden that independent tax experts have warned against and employees’ tax cuts would have been in doubt at a time when millions of Americans are already out of work.

THE PROBLEM: On Saturday, the Senate passed a bill that generated a costly new reporting burden for small businesses through temporary new caps on the wages that are subject to payroll tax relief.  Even if followed by a year-long extension, tax experts and leading small business groups say the Senate approach would create substantial problems and prevent many Americans from seeing their tax cut until new software and accounting systems are put in place:

• “The Senate bill would require extensive new record-keeping, and multiple calculations of employees' wages, payroll officials say. … The two-month extension could increase tax-compliance costs for small firms, which already pay proportionately more than large businesses to comply with tax rules, said Kevan Chapman, a spokesman for the National Federation of Independent Business, a small-business group.  Particularly for small firms that do their own taxes or rely on software, ‘it's just going to be very complicated,’ he said.” (The Wall Street Journal, 12/22/11)
• “For payroll processors, the two-month option because of the $18,350 cap is the toughest to implement. … Many payroll systems may not be able to make all the needed changes in January, the [National Payroll Reporting Consortium] believes.  And some may even struggle to get the job done by February.” (CNNMoney, 12/22/11)
• “[Sherry Dwyer, software support manager for Brentwood-based Optimum Solutions] said it is the worst possible outcome for companies like hers.  … Software vendors, she said, will be forced to ‘drop everything’ to implement the changes.  Further complicating matters is that not all of a company’s clients are on the same pay schedule, so changes will have to be made in waves.  ‘It’s going to be a nightmare,’ Dwyer said.” (Nashville Business Journal, 12/22/11)

HOUSE GOP SOLUTION: Under the House fix, employers will be able to process and withhold payroll taxation under the same accounting structure that is currently in place. No costly payroll systems or updates will be required.

While this two-month extension still falls short of providing the certainty Americans need, this solution will at minimum prevent small businesses from bearing a new administrative burden and ensure American workers will see their tax relief as soon as possible.   Just as important, the Senate will now join the House in immediately appointing conferees to reach agreement in the weeks ahead on a full-year payroll tax extension.

Speaker Boehner, a former small business owner, has warned all year against short-term Washington gimmicks and quick fixes that create uncertainty and threaten American jobs.  That’s why Republicans worked to fix this legislation, and will continue to press for the nearly 30 House-passed jobs bills that remain stuck in the Democratic-controlled Senate and other long-term solutions to help our economy get back to creating jobs.

---

Tags: House Speaker, press release, payroll tax, jobs, To share or post to your site, click on "Post Link". Please mention / link to the ARRA News Service. Thanks!