How Delayed Congressional Action Costs Businesses Money

Congress returned to session on January 5; the rest of the working world returned on January 3. Maybe two days doesn’t amount to many hours, but the work that Congress doesn’t do in those days can cost businesses to spend money that ultimately will be wasted, or to miss out on opportunities.

Two cases in point:

Added cost. A provision buried in the Patient Protection and Affordable Care Act of 2010 (“Obamacare”) took effect on January 1, 2011. It requires businesses of all sizes (there’s no exemption for small companies) to report their purchases of goods and services during the year of $600 or more. This means if you buy $700 of supplies from Staples, you’ll have to issue Staples a 1099 for 2011.

Most observers agree that the provision will ultimately be repealed because it is an administrative nightmare. However, the longer Congress delays action on repeal, the more time and money businesses will have to devote to gearing up so they can track their activities and report properly, just in case there is no repeal.

Gearing up means:

  • Obtaining tax identification numbers and addresses for all vendors.
  • Updating accounting programs to accommodate the tracking purchases.

Missed opportunity. The recently enacted Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, which was signed into law on December 17, 2010, provides a two-year extension of many tax provisions that had expired at the end of 2009. This means the extension runs out at the end of this year. Without further action quickly, the fate of some well-used business tax breaks won’t be known in time for businesses to make plans.

The chief among these valued tax breaks is the research credit, which is relied upon by many small businesses to help pay in part for the cost of R&D. If Congress again waits until expiration, these businesses won’t be able to plan their 2012 projects and opportunities can be missed.

Bottom line
: If Congress is serious about helping the economy, it should become better acquainted with a business calendar so action can be taken in a timely manner that benefits, rather than hurts, business activity.

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