Will Plans to Consolidate Federal Commerce, Business and Trade Agencies Help or Hurt Small Businesses?

Posted on February 15, 2012 by admin

Dept of Commerce LogoThe Small Business Administration would be rolled into a new business- and trade-related department made up of a portion of the current Department of Commerce and several other now-independent federal agencies, under a plan floated by the Obama administration a few weeks ago. A related move on January 13 re-elevated the head of the SBA to a cabinet-level position. Small business consultants differ as to what these changes mean, and many question whether the consolidation of agencies will actually ever happen.

Having the President’s cabinet include the SBA administrator, as it did during the Clinton administration, may turn out to be a symbolic move that won’t actually accomplish much for small business advocacy. The cabinet is not the exclusive club it once was, having doubled in size just since the 1970s. The SBA administrator would bring membership in the cabinet up to 24 officials, and it’s generally agreed that a body that large can’t do and doesn’t do much in the way of actual policymaking. Even so, the Financial Services Roundtable, an association of the 100 largest U.S. financial companies, praised the move and said “We look forward to working with the SBA … to continue providing benefits, education and lending opportunities to small business.”

But any influence the SBA administrator might gain from becoming part of the cabinet could be more than offset by a reduced emphasis on helping small business when and if the agency reorganization takes place. The president and CEO of the National Small Business Association, Todd McCracken, expressed just this concern in a response to the President’s proposals. The president of the American Small Business League, Lloyd Chapman, went even further, saying that the reorganization would “reduce the power of the only federal agency that helps small businesses” and would lead to the eventual elimination of the SBA.

The Department of Commerce is more than 100 years old, having been created in 1903 during the administration of Theodore Roosevelt. The SBA came along 50 years later under President Eisenhower. No name has been chosen for the new consolidated department that President Obama’s proposal would create, although the Department of Competitiveness is one of the leading contenders. A similar proposal for business-agency realignment put forth last year by an outside group suggested the name Department for Business, Trade and Technology. If the consolidation of federal business agencies does occur, it’s expected to create efficiencies that would save taxpayers $3 billion over 10 years.

A related idea announced by the President in the same speech in January is more likely to see implementation in the near-term. That’s the creation of a comprehensive business services website, Business USA, that would serve as “a one-stop shop for small businesses and exporters” looking for information about government programs designed to encourage entrepreneurship, especially for companies that export to other countries or would like to do so. The current SBA website would presumably become a subdomain of this larger site.

Padgett Business Services has been on the side of small business since 1966. We offer expert small business bookkeeping services including tax preparation and contract payroll services. We can foster your success by taking care of some of the details while you focus on building your company. Let us help you write your small business success story — call Padgett Business Services at 800 PADGETT (723-4388).

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Mixed Outlook for Lending to Small Business in 2012

Posted on February 2, 2012 by admin

Small Business Credit OutlookMoney for capital investment is the lifeblood that allows a small business to prosper, grow and perhaps create badly needed jobs. But the credit squeeze that began several years ago in the wake of the “great recession” has made it difficult for small business owners to include growth and expansion in their financial planning.

Unfortunately many banks that provide financial services to small business, especially the bigger banks that have accounted for a large volume of business lending in the past, seem unlikely to increase their lending activities in 2012. While the overall picture for small business credit in the coming years seems murky, some small business consultants see the more hope for improvement than any time in the last several years. Small business owners may just have to look to less conventional or less familiar sources of credit if they want to expand operations or upgrade equipment.

Earlier this month, Bank of America was the subject of unwanted attention from business news outlets after several small business owners reported that BofA was calling in their established lines of credit. A BofA spokesman responded to the report by saying that the bank was severing a small, select number of small business credit lines, not making across-the-board reductions. But the BofA actions would be consistent with a trend towards a continuation of heightened risk aversion among the bigger banks.

Even before the financial crisis, a Small Business Administration study found that a decade of bank consolidation had the effect of reducing the availability of credit to small business. Larger financial institutions with international dealings must focus more on global economic conditions, sometimes to the detriment of the local markets in which they do business. Today, those conditions continue to be especially shaky, as evidenced by Europe’s long, ongoing financial crisis.

Big banks also claim that increased capital requirements that federal regulators put in place following the financial meltdown of 2008 restricts the amount of lending they can do. Banks’ greater selectivity rules out extending credit to many businesses whose financial reporting of their last few years of operations merely reflects the overall economic downturn rather than problems specific to those particular companies.

Banks are understandably even more leery of funding new startup companies, and alternative sources of cash for startups may be hard to tap. For instance, the SBA reports that venture capital funding is down by 30 percent. For the near future, only the most impressive business plans are likely to get backing from traditional financial institutions. Small-scale entrepreneurs may need to look to their network of family and friends to invest in their ideas, or to explore the new worlds of “crowdfunding” or “social lending” to raise capital.

Many established small business owners report having better luck obtaining credit from more local sources such as community banks and credit unions. Such financial institutions are usually more responsive to local economic conditions, which are much more positive in some regions than in the country as a whole. A Wall Street Journal survey last year reported that approval rates for small business loans at these institutions were about five times higher than the rate of approval from big banks. Small, local financial institutions are often more willing to consider the specific financial circumstances of a local business seeking to borrow money, and to make exceptions where a bigger institution will not. Small businesses can also look to community development financial institutions (CDFIs) and microlenders as sources of capital.

Padgett Business Services has worked to understand the changing needs of small business owners since 1966. Padgett offers small business consulting services to help business owners make the decisions that are vitally important to the ongoing health of their enterprises. We also offer bookkeeping, business tax preparation and payroll services for small business, along with business financial software to keep your operation running smoothly and efficiently with less time and effort. Call Padgett Business Services today at 800-PADGETT (800-723-4388) to find out more about everything that we have to offer to you and your small business.

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More States Likely to Require Use of E-Verify System at Hiring Time

Posted on January 20, 2012 by admin

E-VerifyAn increasing number of state and local governments are implementing or considering laws that will make it mandatory for employers to check the information supplied by applicants on I-9 forms against the database of the federal E-Verify system. Small business consultants consequently advise employers to be aware of current or impending state and local E-Verify requirements where they do business.

At the very least, these laws will require businesses to spend time enrolling in and learning the E-Verify system, in addition to creating some additional bookkeeping chores going forward. The worst case, in some jurisdictions, will be imposition of serious sanctions against businesses for employing persons not legally authorized to work in the United States.

E-Verify is a free, internet-based system run jointly by the Social Security Administration (SSA) and U.S. Citizenship and Immigration Services (USCIS), an agency of the Department of Homeland Security.  E-Verify cross-checks data from applicants’ federal Form I-9, Employment Eligibility Verification, to make sure that the information and any documents supplied to support it are not fraudulent. For example, E-Verify compares an applicant’s name, date of birth and Social Security number against information in the SSA database to ensure that they match existing records.

The use of Form I-9 in the hiring process was mandated by federal immigration reform legislation that was passed in 1986, but there was no way at that time for employers to easily verify the information that applicants supplied. The pilot program for E-Verify was not started until 1997, after the advent of the Internet. Although it was an entirely voluntary program at its inception, by 2007 new regulations had been put into effect requiring federal agencies and most federal government contractors to use E-Verify.

In 2008, Arizona became the first state to require use of E-Verify by all employers. The Arizona law provides for the revocation of the business license of anyone who knowingly employs persons unauthorized to work in the U.S. In May of last year, the constitutionality of the Arizona law was upheld by the Supreme Court.

Other states requiring the use of E-Verify by most employers include Alabama, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee and Utah. Public employers are required to use E-Verify in Florida, Idaho, Indiana, Missouri, Nebraska and Virginia, while E-Verify is mandated for public contractors in Colorado, Minnesota and Oklahoma. Georgia requires E-Verify enrollment for both public employers and public contractors, with requirements for private employers phasing in this year. The state legislature in Kentucky will consider broad E-Verify legislation in its 2012 session.  Individual counties and cities have imposed local E-Verify requirements in Michigan, New York, Oregon, Pennsylvania and Washington. It’s worth noting that some of these laws exempt the smallest businesses and/or those holding relatively small government contracts.

On the other end of the spectrum, a California law passed in the last quarter of 2011 states that local governments cannot require the use of E-Verify, which rendered null and void  more than a dozen city and county E-Verify laws in that state. And at one time, the state of Illinois specifically prohibited employers from enrolling in E-Verify. The Illinois law has since been rescinded, leaving up to employers the decision whether or not to use the system.

However, with an overall trend toward more states considering various kinds of immigration-related legislation, it’s quite likely that more laws mandating use of E-Verify will come into force. Often these laws are opposed by unusual coalitions of business groups and immigrants’ rights advocates. Business leaders often express concern about the costs and paperwork burden imposed on business owners by any widening of the scope of employment verification measures. The uncertainty of the current situation complicates financial planning for small business owners.

Padgett Business Services has been an ally of small business owners since 1966. Padgett offers small business consulting services that can help entrepreneurs and employers navigate today’s complicated business environment. We also offer small business accounting services, payroll services, business tax services and business financial software.  To find out more about everything that Padgett Business Services can do for you, talk to one of our small business experts today at 800 PADGETT (723-4388).

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Taking the Employee Retention Credit On Your 2011 Business Tax Return

Posted on January 11, 2012 by admin

Employee Retention Tax CreditCompanies that hired from the ranks of the unemployed in 2010 and subsequently retained those employees for at least 52 continuous weeks can claim a tax credit of up to $1,000 per qualifying employee on their business taxes when they file their 2011 returns.

The credit is one of the provisions of the Hiring Incentives to Restore Employment (HIRE) Act signed into law in March 2010. Under another provision, employers had already enjoyed a special payroll tax break for hiring the unemployed during much of 2010.

Businesses whose tax return preparation follows a non-calendar fiscal year may have already claimed the retention credit as early as February 2011, but the upcoming tax season will be the first chance for calendar-year taxpayers to take it.  Only hires that took place from Feb. 4, 2010 to Dec. 31, 2010 may qualify, but there is no limit on the number of employees for which the credit may be claimed.

To qualify, an employee must have affirmed that he or she was either unemployed or employed for no more than 40 hours total during the 60-day period ending on the date of hire. The IRS created a new form W-11 last year to make it easier for employees to certify this.

The credit can be claimed for employees who worked part-time as well as full-time, but an employee may not qualify if his or her wages were reduced substantially during the 52-week continuous employment period. The IRS requires that during the last 26 weeks of the period, an employee must have earned at least 80% of what he or she did during the first 26 weeks. This stipulation prevented companies from purposely hiring the unemployed with the intention of drastically reducing the hours or hourly wage of such workers later, just to qualify for the credit.

A tax preparer for a business should be vigilant as they put together the employer’s 2011 return to insure that the credit is taken for all qualifying employees, even ones who are no longer with the company. In theory, a qualifying worker could have been hired as early as Feb. 4, 2010 and subsequently separated as long ago as Feb. 3, 2011, thus having met the continuous 52-week employment criterion even though they have not appeared on the payroll for some time.

The amount of the credit for a qualifying employee is the lesser of $1,000 or 6.2% of the total wages paid to that employee during the 52-week period.

With such constantly changing laws and guidelines at the federal and state levels, tax preparation and bookkeeping are no easy tasks, even for a small business. Padgett Business Services can take those worries off your shoulders. We’re an experienced tax and payroll services company that has been helping small business since 1966.  To have a financial services expert in your corner, call Padgett Business Services today at 800-PADGETT (723-4388).

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Letting a Specialist Handle Your Payroll Makes Good Business Sense

Posted on December 28, 2011 by admin

Payroll ProcessingIf you own a small business, you probably started it because you were excited about making a certain product or providing a certain service. And what keeps you excited is making that product or service better, pleasing customers and growing your company. The routine business chores are probably not quite that inspiring. And even for business owners who do appreciate the nuts and bolts aspect of running their companies, the task of payroll processing that must be done every week or two is still not exactly something they look forward to. Payroll management also requires knowledge of a mass of rates, rules and regulations that change constantly, and the opportunities for making costly mistakes are many.

The solution for business owners is payroll outsourcing. It can be a cost-effective option even for small business. Letting an expert payroll specialist handle the collection of payroll data, the calculation of wages, taxes and deductions and the disbursement of compensation to employees frees up time for you and your staff that could be invested more profitably in strategizing, innovation and customer service.

When you make the choice to have a professional payroll administration company assume this important but routine burden, you’re literally buying time, perhaps the most valuable commodity of all.

A payroll specialist focuses on just one key aspect of your business, and their expertise will bring extreme accuracy to your payroll function. Having payroll done right the first time, every time can spare you a lot of frustration and contribute to basic employee satisfaction. Employees consider few things as important as being paid accurately and on time, after all!

A great payroll company that’s worthy of being one of your business partners should be able to offer these important services and conveniences:

  • Recordkeeping, accrual tracking and payroll calculation
  • Online entry of payroll data
  • Cutting and distributing payroll checks
  • Direct deposit
  • Tax calculation and remittance
  • W-2 preparation and distribution
  • Payroll withholding
  • Workers’ compensation
  • Compliance with federal, state and local government regulations

Padgett Business Services can provide your company with the convenience of any or all of these payroll processing options at an affordable price. Padgett keeps your cost low by letting you choose only the services that your business requires. Padgett Business Services has been helping small businesses with their accounting, financial reporting and consulting needs since 1966. Call us today at 877-244-5842 to learn more about the many benefits of having Padgett on your side.

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