Some of my recent earlier proposals are designed to clearly foster small business job creation in the US.
My Explosive Jobs and Investment Tax Credit proposal has much higher Jobs Tax Credits ceiling amounts for smaller businesses than for larger businesses.
Many potential small business people are stymied in starting or expanding a business by having Underwater Home Mortgages. My Explosive Incentives to Spur Principal Write-Downs of Underwater Home Mortgages helps them relieve a lot of this financial pressure. Also, it has higher Accelerated Loan Loss Provision federal income tax deductions for smaller financial institutions than for larger ones. And further, it allows a front-end refundable tax benefit for these Accelerated Loan Loss Provisions of smaller financial institutions that can’t get the immediate tax benefit from them.
My Improving the US Livable Wage Deficit proposal eliminates the entire 6.2% payroll taxes on the first $35,000 of wages of all employees in 2012.
My Turning First-Year Steeply Accelerated Tax Depreciation into a True Job Creator proposal lets small businesses elect an upfront tax equivalent tax credit in lieu of 100% tax expensing for their equipment purchases in the rest of 2011 and all of 2012.
Now let me add to these small business job creation proposals.
Upfront Refundable Tax Benefits for Research Expenditures
Many business start-ups aren't able to receive the tax benefits from their research and experimental costs in the first year, or even in the first several years, because they are operating at a taxable loss in the initial years of their businesses.
The tax benefits here relate to both the federal income tax deduction for research and experimental costs incurred as well as the tax credit related to the increased research expenditures.
A significant part of these research expenditures relate to the hiring of new employees, who perform the necessary research to grow the innovative business.
This lack of upfront cash inflow is a clear obstacle to start up or to expand an innovative business, where substantial upfront research expenditures are necessary, but the economic benefit to the business can be way down the road.
Thus, my proposal to make US businesses more competitive, and at the same time to increase job hiring, is to permit small and medium-sized businesses to get an upfront refundable federal tax benefit for both the tax deduction of their research costs incurred and also the tax credit for their incremental research expenditures incurred, in either the remainder of 2011, or in all of 2012.
The upfront cash infusion from these refundable research tax benefits will spur innovative small business start ups. With the Great Recession, and saddled with a high debt load from financing their college educations, and perhaps from even having underwater home mortgages, prospective entrepreneurs are devoid of the cash necessary to start up a new innovative business.
There is another key initiative that would add juice to the job creation coming from this Research Tax Incentive. Since 40% of the graduate students in the country’s very best research universities are foreign students, then the last thing we should be doing is kicking these foreign students out of the country after they get their graduate degrees. They are needed here to grow the US economy. They are prime job creators.
There will be no long-term CBO cost to the US Government for a clear majority of these upfront research tax benefits granted by the US government. These businesses are getting the same research tax deductions and research tax credits in the long run, it's just that under this proposal, they are just being accelerated to spur business start-ups, immediate job creation and innovation.
Seven IRS Processes Severely Hurting Small Businesses
During the Bush/Cheney Presidency, I had two years of my micro small business tax returns audited by the IRS in a 100% tax audit of every item. When I think about this tortuous, extremely lengthy tax audit process, seven items come quickly to mind, explained in detail below, which I think will be extraordinarily helpful for small business success, and job creation.
As I’m sure you will conclude here after reading all of my below comments, that the question that has to be asked is…..why in the world would anyone in their right mind want to start a small business, when there is such an unfriendly-to-business, harassing, incompetent, and patently unfair IRS audit process just waiting to pounce on, and consume so much time of, the small business entrepreneur?
#1 Safe Harbor Total Home Office Federal Income Tax Deduction
So many small businesses are run out of the owner’s home. And with the Internet, this trend is growing, and will continue to explode.
A small business owner should not have to spend the incredible amount of time necessary to support all of the many tax deductions for having his small business operating out of his home. I spent hundred of hours researching and supporting all of my many home-office tax deductions.
And I spent many hundreds of additional hours defending my tax deductions in an incredibly grueling IRS audit running nearly four years of time. I’m not kidding.
The logical solution here is for the IRS to allow as a simple option a standard “Safe Harbor” Home Office Total Federal Income Tax Deduction.
Thus, the small business owner can spend his time growing his business, and creating jobs, rather than continually having to deal with incompetent, bungling, harassing IRS Agents in a clearly unnecessary IRS tax audit, involving so many issues that are so immaterial in amount.
Under my proposal, a small business owner can elect to claim his/her Home Office federal income tax deductions in the very lengthy, time-consuming way. It’s just that a very simple “Safe Harbor” amount could be elected instead.
#2 Safe Harbor Total Automobile Expenses Federal Income Tax Deduction
So many small businesses have one or more automobiles that are used in their small businesses.
The time necessary to prepare Mileage Logs is an incredible time-consuming burden. My hunch is that many small businesses don’t prepare these Mileage Logs contemporaneously, as the IRS requires.
A small business owner should not have to spend the incredible amount of time necessary to prepare these contemporaneous Mileage Logs. This time is much better spent growing his small business and creating jobs.
And if you don’t prepare detailed contemporaneous Mileage Logs, in a tax audit, I found that the IRS will tell you to prepare them in detail, after the fact. However, after spending hundreds of hours recreating these Mileage Logs over a two year period, as best as I could, the IRS agent then decides not to accept the overwhelming majority of these Mileage Logs. And even when there is clear documentation where the automobile went on specific dates. I’m not kidding.
There clearly is something wrong here.
The logical solution is for the IRS to allow as a simple option a standard “Safe Harbor” Automobile Expense Total Federal Income Tax Deduction.
Under my proposal, a small business owner can elect to claim his Automobile federal income tax deductions in the very lengthy, time-consuming contemporaneous Mileage Log way. It’s just that a very simple “Safe Harbor” amount could be elected instead.
#3 IRS Appeals Process Stopping to a Halt
I appealed my tax audit findings. I was told that this Appeal would be completed by a certain date.
Instead, the IRS Appeals Officer elected not to do the necessary work on my Appeal.
In all fairness, there should be an IRS process in place where if the IRS asserts that the Appeal will occur within a certain period of time, and the work by the Appeal Officer is not done by then, and in my case it was not even started, then the whole amount in dispute should be thrown out.
#4 IRS Avoidance of Settlement of Items in Dispute
At every level of my IRS audit, the IRS refused to even attempt to settle any of the many items that were in dispute.
The logical solution here is that if the IRS refuses to try to settle an audit at any level, all the way up to and including the Tax Court, then the whole amount in dispute should be thrown out.
#5 IRS Lack of Technology Use in Communications with the Taxpayer
In a tax audit, all levels of the IRS communicates with the taxpayer only by snail mail. This archaic, ineffective process stops the audit progress to a walk, and no doubt contributed much to the more than 1,500 hours I spent on my IRS audit.
In addition, during my IRS audit, many IRS employees refused to return my phone calls. My hunch is that there were many more than 100 of my phone calls that were not returned by the IRS. I'm not kidding.
This clearly slows down the IRS audit process.
The logical recommendation is for the IRS to get with the times and use email and other technological advances in its communications with the taxpayer being audited. And as a common courtesy, all IRS employees should be required to return all US taxpayer phone calls.
#6 IRS Inappropriate Handling of Casualty Losses
What I surprisingly discovered in my IRS tax audit was a whole-scale, dishonest effort by the IRS to prevent clearly legitimate casualty loss tax deductions, like those caused by devastating tornadoes.
And in my case, it even went so far as an IRS Agent taking pictures of our severely damaged tornado property after the tornado hit, and backdating these pictures to a date before the tornado hit to make it appear to an IRS engineering expert making an evaluation of the casualty loss that the devastating damage to our property occurred before the tornado hit.
And this incredible strategy worked.....in her official report, the IRS engineering expert disallowed our whole casualty loss because she concluded that the devastating damage to our property wasn't caused by the tornado, but was there before the tornado hit. I'm not kidding.
The logical proposal here is that when a devastating tornado or other similar act of nature hits a community, and there have been so many of these in the US, instead of taking whole-scale measures to both discourage legitimate casualty losses from being claimed and to prevent legitimate casualty losses claimed from being allowed in tax audits, the IRS should instead take the high road and do just the opposite.
The IRS should publicly and widely communicate to the community devastated by tornadoes and other acts of nature the steps taxpayers should take to obtain legitimate casualty losses tax deductions for tornado and other similar damages. And the IRS should train its IRS Agents on the proper approach to fairly audit casualty losses claimed by taxpayers on tax returns.
#7 IRS Disallowance of Clearly Legitimate Items
I found that a widespread practice of some IRS Agents is to disallow certain items in a tax audit, even though it is clear that they know they have no basis for doing so. They will claim otherwise, but clearly on some items disallowed, they know they have absolutely no basis.
What I also found is a whole-scale effort throughout the IRS, and by other US Government Agencies, to protect an IRS Agent who follows such a tax audit strategy.
My proposal is that in such situations, there should be an automatic Federal Prosecutorial Process option, outside of both the IRS and the FBI, and directly with the US Dept of Justice, which is available for the US citizen being audited to be easily able to pursue.
What this will do is to stop a substantial amount of the widespread IRS disallowance of clearly legitimate tax deductible items in tax audits.
