Uncle Sam has a $353 billion tax gap and it’s looking to close that gap. Guess who they’re hoping will assist them in closing it? Yep, the self-employed business owner. If that’s you, you may want to tune into several of the proposals the Bush administration has put on the table.
One of the biggest ones is the proposal for a voluntary tax withholding system. Under this system, businesses would be required to withhold taxes on payments made to independent contractors. Contractors receiving payments of $600 or more each year from a business could require the business withhold a percentage rate of their gross payments. That rate could range from 15% to 35% as identified by the contractor.
What that means to the business owner is that you would have to spend time and money withholding and reporting taxes on the contractor’s payments. Some businesses unwilling to invest that time and energy may even decide not to work with independents any longer which would be devastating.
Be sure to keep an eye on this one.