On the surface, the Tax Increase Prevention and Reconciliation Act of 2005 passed by Congress and signed by President Bush this year, looked liked a good thing. After all, it extended the life of reduced tax rates on capital gains and dividends and extended the alternative minimum tax(AMT) tax reduction.  And for small businesses, it provided a two-year extension on Enhanced Section 179 Expensing which deals with depreciable assets.

Unfortunately, tucked away in the small print, and even unbeknownst to some who voted for the bill in Congress, was a little provision which stated that any business that has a contract with government at the local, state or federal level will have 3% of their payments withheld starting in 2011.  And, to add insult to injury, there are even some in Congress who are now trying to push  leglisation to move that implementation date up.

So, if you are a small business contracting with local, state or federal government, the fact that you will be paying for other governmental programs to continue is probably of little solance as you struggle to make ends meet.  Be sure to keep an eye out for efforts to move the implementation date up to even starting in the next couple of years.