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Small business: What you need to know about the tax cuts


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Friday, December 3, 2010 — (ABC News: Money) –


By Rhonda Abrams, USA TODAY



Dec. 4, 2010#151



Listen to politicians talk about taxes, and sooner or later, they’re going to tell you the real victim or beneficiary is “small business.” Never is this more true than in the current debate over the extension of what are commonly-referred to as the Bush era tax cuts. Politicians are grandstanding that failure to extend these tax cuts are going to cripple small businesses — lead to an end of all small business hiring — virtually be the end of small companies as we know it.



Before you close your doors in despair, what’s actually the truth? How will the proposals to extend or end these tax cuts truly affect your own small business?



First, a bit of background: Under President Bush, temporary tax cuts were enacted in 2001, when — believe it or not — the federal budget had a surplus! As the economy slowed, additional tax cuts were enacted in 2003. These tax cuts had a built-in expiration date: December 31, 2010.



There are two main sets of cuts at the heart of the discussion now:



• “Middle class” tax reductions — applying to all Americans with taxable incomes of $250,000 for couples, or singles with taxable incomes of $200,000, or less.



• Tax cuts applying also to those with taxable incomes of more than $250,000/ $200,000.



The Obama administration has proposed that the middle class tax cuts should be extended. Republicans want the tax cuts for those in the top brackets also extended. Some Democrats propose a compromise — extending tax cuts only to those making less than a million dollars.



So what does all this mean for your small business?



First — you personally are almost certainly not going to see a change in your tax rates. Not if you’re one of the 98% of all small business owners who have less than $250,000 a year in adjusted gross income — $200,000 if you’re single. Most Democrats and Republicans support the extension of these middle class tax cuts. The only way you’ll see your taxes go up is if these cuts are held hostage to cuts for wealthier Americans.



To view the original article, click here: http://feeds.abcnews.com/click.phdo?i=c63d3951749ba611419da344a602de6b


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