How Much Will Tax Refund Dollars Boost Consumer Spending in 2012?

Posted on April 5, 2012 by admin

Like Christmas, it seems that tax season starts just a little earlier every year. Anyone who works as a tax preparer for individual income tax filers is already very, very busy. On TV and elsewhere, advertising abounds for tax services available both online and at thousands of retail outlets across the country.

Naturally, the point for many early tax filers is to get their returns in to the IRS as soon as they have W-2 forms in hand, in order to get their tax refund dollars as quickly as possible. The earliest filers eligible for refunds have already received checks from Uncle Sam, meaning that some of the money is already flowing from consumers’ pockets back into the retail economy. This could be good news for small business owners, as some of them could see a boost in sales at a time of year that otherwise might be very sluggish.

Not surprisingly, those expecting large refunds are more likely to file early in the tax season. Ever since electronic filing and direct deposit became options, greatly speeding up the total time it takes to get a refund, there has been a spike in payouts from the IRS every February. In all, well over $300 billion has flowed back to taxpayers from the federal government in refunds each of the last two years, at an average of about $3,000 per return. Roughly the same amount of money will no doubt be in play again in 2012, with a large chunk of it again arriving in bank accounts in February.

Retail business owners understandably cannot help but wonder how much of that figure will find its way to their stores and shops. Of course, many businesses explicitly make a bid for a share of people’s tax refund checks at this time of year. For instance, many car dealership ads suggest that making a down payment on a car would be a good use for a tax refund. Other purveyors of big-ticket items, from appliance and electronics stores to travel agents, run similar ads, because as one financial writer put it, for many people this is the one time each year that they feel rich.

After hard economic times hit in 2008, survey statistics suggested that Americans were being more conservative with their refund dollars, putting more into savings and paying down more debt than they did in better times. In one 2010 survey, 58 percent of taxpayers receiving refunds said that’s how they planned to spend the money. By contrast, only 7 percent said they were going to splurge. By the 2011 tax season, an annual survey conducted by one maker of tax return preparation software revealed that the number of people planning to spend their tax refund on a vacation had doubled.

The slowly improving economy could mean that Americans will be more likely to spend their tax refunds a little more freely this year. And even people who won’t spend their entire tax refund on expensive luxuries or high-dollar necessities may just be that much more likely to spend the money shopping on Main Street, giving a much-needed boost to their hometown economies.

Since 1966, through bad times and good, Padgett Business Services has been a friend and ally of small business. Padgett provides bookkeeping, financial planning and payroll services for small businesses throughout the United States and Canada. We are one of North America’s most trusted small business consulting and accounting companies. Call Padgett Business Services today at 800-PADGETT (800-723-4388) to learn more about how we help small business owners to survive, succeed and thrive even in difficult times.

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Small Business Group Goes to Supreme Court to Challenge Administration’s Health Care Law

Posted on March 30, 2012 by admin

An attorney for National Federation of Independent Business (NFIB), a nationwide organization that lobbies on behalf of small businesses, was among those arguing before the U.S. Supreme Court this week in an attempt to convince the justices that the Obama administration’s main health care reform legislation should be struck down.

The NFIB and many other small business groups have opposed the Patient Protection and Affordable Care Act (PPACA) since it was first drafted. The PPACA was passed by Congress two years ago, but some of its most controversial provisions won’t go into effect until 2014, even if the entire law is eventually upheld. However, many commentators doubt the Act will make it out of the Court intact, based on the lines of questioning pursued by the justices during an almost-unprecedented six hours of oral arguments spread over three days.

Many business leaders and small business consultants have said that uncertainty over the health care law’s fate has made it difficult for small business owners to do accurate financial planning for things like growth and expansion. As a result, many businesses have been reluctant to add new workers to their employee payroll, keeping unemployment high and contributing to the slow pace of the economic recovery in the United States.

One of provisions most opposed by business groups would require companies with more than 50 employees to either provide an adequate health insurance plan for their workers or to pay a federal government penalty. Another would require every person not covered by an employer or government health insurance program to buy individual insurance. These two mandates are among parts of the health care law scheduled to kick in on January 1, 2014.

The NFIB attorney represented individual business owners on whose behalf it brought the original Florida lawsuit challenging the PPACA. It was the first time that the NFIB has argued as a lead plaintiff in a case before the Supreme Court. The NFIB is based in Nashville, Tennessee but has offices in every other state capital and Washington, D.C.  The organization claims about 350,000 members. Also arguing against the PPACA, which is often referred to as “Obamacare,” was lawyer Paul Clement, a former U.S. solicitor general, who was representing 26 states whose attorneys general sued the federal government over the law.

While the NFIB opposes in principle the coming health insurance mandate for businesses, its arguments before the Court this week were actually against the health care law’s individual mandate provision. Other plaintiffs argued not just that the individual mandate should be ruled unconstitutional, but also that it then follows that the entire PPACA must be struck down in its entirety.

Many small business owners are worried that if the law’s other provisions go into effect without the individual mandate, the cost of health care and health insurance will skyrocket, driving them to limit hiring, cut jobs or go out of business entirely. Many employers also think they will ultimately bear the cost of a tax that the PPACA would impose on insurance companies, because insurers would pass on the tax in the form of higher premiums.

It’s worth noting that some small business owners, including some NFIB members, support the health care law because of certain parts of it that have already gone into effect. These provisions have extended business tax credits to small companies to offset the cost of providing insurance to employees. For employers who were already footing some 50 to 80 percent of the costs of employee health insurance, the tax credit has reduced their costs.

The NFIB originally filed its lawsuit in opposition to the PPACA in a federal court in Florida. The suit eventually found its way to the U.S. Court of Appeals for the 11th Circuit, and then was chosen last fall, along with one other PPACA case, for this week’s review by the Supreme Court.

The justices’ decision on the fate of the Administration’s health care legislation is likely not to be handed down for another three months. The Supreme Court’s nine-month session usually finishes near the end of June, and historically the Court’s opinions on its most important cases are among the last to be issued each term.

Whatever happens in the legal or judicial arena, Padgett Business Services® is there to help small business owners run their companies as smoothly and successfully as possible. With small business consulting, business tax planning, employee payroll and bookkeeping services, Padgett can help your enterprise succeed and grow.  We have office across North America – to find one near you, call Padgett Business Services® at 800 PADGETT (723-4388) or use our online locator.

 

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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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