Yesterday, the Senate cleared the way for passage of a "minor" tax bill that will extend certain tax benefits and add additional costs and penalties to small businesses.

The American Workers, State and Business Relief Bill extends several tax benefits that would otherwise have expired, including the increased Section 179 deduction and the research and development tax credit. Those in favor of this bill say that it will stimulate the economy. And it may help. There are a few provisions, however, that add an increased burden to small businesses that you should be aware of.

First, the bill expands and extends unemployment and Cobra benefits. This is a huge cost to small businesses who have had to reduce their work force because of difficult economic times. Let me give you a personal example. Over a year ago, we let an employee go in part to reduce our work force and in part because he wasn't measuring up to our standards. He has not found a job since. So, we continue to pay unemployment on him and continue to pay his Cobra benefits.

I'm not unsympathetic to his circumstances. Still - he can't find any job in a year? Sometimes I wonder if these extended benefits just serve to give people an excuse and means for not working.

Another provision in this bill that hits the small business is an increase in the penalty for not filing correct 1099's from $50 to $100 per 1099. With this increase in penalty, the IRS is sure to start enforcing this penalty in earnest. The issue is that it's very difficult for small businesses to get correct information from many of their vendors. Of course, this emphasizes the need for good bookkeeping and good compliance procedures in every small business. Can you imagine if you had 20 vendors that you couldn't get good information from so now you have a $2,000 potential penalty?

These so-called "little" tax bills can be huge for small businesses, so be sure to watch for them and all of their provisions. Most importantly, make sure your tax advisor is aware of them and informing you of these "little" changes.

Warmest regards,

Tom