NASE on Micro-Business

“Making Work Pay” for the Self-Employed [Commentary]

Posted on: June 23, 2009

Often times when policymakers are putting together economic recovery and stimulus packages, it is usually micro-business and the self-employed that are left out in the cold. This is not because legislators don’t care about micro-businesses, but rather because they are do not realize that the needs of the self-employed differ greatly from a small business with 25, 50 or 150 employees.

In February, President Obama signed into law the American Reinvestment and Recovery Act (ARRA), a stimulus package which included various spending projects and tax cuts to spur our ailing economy. In addition to some changes to various SBA loan programs, the big stimulus provision touted for small business was an extension of the $250,000 limit of Section 179 expensing. Of course, for some businesses that use expensive equipment such as construction or manufacturing this is an important provision. However, the average micro-business owner is not likely to purchase that much equipment in one year. Yet there is one new tax credit included in ARRA that, I am happy to report, will benefit the self-employed.

The “Making Work Pay” tax credit is a temporary refundable tax credit available in the 2009 and 2010 tax years that will allow the self-employed to receive a credit of up to $400 for individuals and $800 for married taxpayers filing jointly. To qualify, your gross income must be less than $75,000 or $150,000 for married couples. The Corporation for Economic Development’s (CFED) Self-Employment Tax Initiative estimates that the “Making Work Pay” tax credit could positively impact up to 15 million self-employed taxpayers or 68% of all Schedule C filers. Interestingly, it is not well known that this tax credit applies to the self-employed; yet, for all those entrepreneurs struggling in this difficult economic time, it could offer welcome financial assistance.

The “Making Work Pay” tax credit is the realization of the Obama administration’s promise to offer economic assistance to the middle class. We are pleased to see that they did not exclude the self-employed from their efforts.

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