Tax Simplification Bill Introduced

January 17, 2019

House Small Business Committee Chair Nydia Velázquez (D-N.Y.) and Ranking Member Steve Chabot (R-Ohio) introduced yesterday the Small Business Owners’ Tax Simplification Act, with the goal of simplifying and modernizing the U.S. tax code for small businesses, startups, and entrepreneurs. The legislation introduces a number of provisions to benefit small businesses, such as aligning estimated payment deadlines and tax filing thresholds, as well as tackling inconsistencies in reporting requirements.

Most small businesses do not have staff dedicated to taxes and accounting, and the current tax code has requirements that are difficult for many business owners to decipher and uphold. Many small businesses, particularly startups in the tech and sharing economy, have found that the tax code has not kept pace with modern day innovations. The Velazquez/Chabot bill aims to provide greater clarity for small entities. NSBA is pleased that this bill addresses the healthcare expense deduction, worker classifications for small businesses, and the extension of employee cafeteria plans —such as pensions, health savings, and other accounts with tax advantages — to employees and business owner.

Specifically, the bill:

  • Aligns quarterly reporting deadlines with actual quarter ends;
  • Aligns income tax filing thresholds for consistency (1099-MISC, 1099k, etc.);
  • Updates electronic signature requirements;
  • Outlines anti-fraud measures by requiring pre-notification testing of recipient information before direct deposits can be refunded;
  • Allows small business owners to both offer and participate in Cafeteria Plans (HSAs, dental plans, etc.) Current IRS interpretation prevents small business owners from participating;
  • Excludes self-employment income from Social Security Quarters Coverage;
  • Excludes loan forgiveness from being counted toward income for entrepreneurs who work in high-need and distressed areas;
  • Allows voluntary withholding agreements (withholding a certain amount from an employee’s payroll check) without impacting a worker’s classification status;
  • Allows voluntary training services (safety courses, tax compliance courses, etc.) to be offered to contractors without impacting a worker’s classification status.

NSBA applauds the Chair and Ranking Member for their continued bipartisanship to introduce legislation to improve America’s small-business climate.