Over the past several weeks, news media have buzzed with updates on the “fiscal cliff.” In the end, the President and lawmakers were able to reach across the aisle enough to reach a deal and avert what pundits and news anchors painted as certain financial doom.
But the implications of the resulting legislation may still be unclear for small business owners, for whom the stakes are high. While it is tempting to reduce the bill to either a win or a loss for your business, the reality is that it may have both benefits and drawbacks.
One such drawback could be the imposition of higher tax rates for families with an income above $450,000 and individuals with income above $400,000. That income will be subject to a rate increase from 35 percent to 39.6 percent. If you are a sole proprietorship, that means more taxes. Indirectly, it also could leave other families, individuals and businesses with less expendable income to spend on your goods or services.
Similarly, individuals are likely to see their Social Security payroll taxes increase by 2 percent. This may not affect all businesses directly, but small businesses do face additional challenges when their potential customers have less income to throw around. Businesses may have to work harder to get or maintain clients who may have to limit their own spending.
However, not all news about the fiscal cliff deal is dire for business owners.
There are several potential benefits, including tax breaks and credits, that will give businesses a jump in 2013. We’ll discuss some of those next week.
If you have concerns about your business’ financial situation and how it could be affected by changes in law, it is wise to speak with someone who can help. Consider contacting a business law attorney.
Source: Free Enterprise, “5 Ways the ‘Fiscal Cliff’ Bill Affects Small Biz,” Andrew Lu, Jan. 3, 2012
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