Small Biz Tax Simplification Act Introduced

February 7, 2018

House Small Business Committee Chairman Steve Chabot (R-Ohio) introduced H.R. 3717, 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. H.R 3717 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. Committee Ranking Member Nydia Velázquez (D-N.Y.) is an original co-sponsor of this bill.

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. H.R. 3717 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.

On Jan. 30, the Ways and Means Oversight Subcommittee held a Member Day hearing on “Legislation to Improve Tax Administration.” Full Committee Chairman Kevin Brady (R-Texas) has promised action on restructuring the Internal Revenue Service (IRS) this year, and Subcommittee Chairman Lynn Jenkins (R-Kansas) said she wants to include member ideas in forthcoming IRS reform legislation.

Members testifying about sponsored legislation included:

  • Rep. Jason Smith (R-Mo.) on the Preserving Taxpayer Rights Act (H.R. 3220) to establish new procedures and requirements for administrative appeals of IRS deficiency determinations;
  • Rep. Peter Roskam (R-Ill.) on the Free File Permanence Act of 2017 (H.R. 3641) to require continued operation, enhancement, and expansion of the Free File program;
  • Rep. Jim Renacci (R-Ohio) on the Stolen Identify Prevention Refund Act (H.R. 439) to require IRS to provide notifications, instructions, and forms to suspected victims of identity theft;
  • Rep. Tom Rice (R-S.C.) on the Electronic Signature Standards Act of 2017 (H.R. 3153) to require uniform standards and procedures for the acceptance of practitioner signatures in digital or other electronic form, as well as forthcoming legislation to require an automatic 30-day reset of the filing deadline in the wake of a major disaster declaration;
  • Rep. Steve Chabot (R-Ohio) on the Small Business Owners’ Tax Simplification Act of 2017 (H.R. 3717) to simplify income tax compliance for small businesses;
  • Rep. Bill Posey (R-Fl.) on the Seniors’ Tax Simplification Act (H.R. 2721) to make a simplified filing form available to taxpayers age 65 or older; and
  • Rep. Louie Gohmert (R-Texas) on the idea of eliminating the IRS.

The modernization of tax structures and simplification of the tax code is integral to the growth and success of U.S. small businesses. All of the bills presented before the Ways and Means Committee work to remove unnecessary tax burdens that hinder smaller companies’ ability to focus on innovation, growth, and development.