National Taxpayer Advocate: IRS Not Helping Entrepreneurs in the Sharing Economy
WASHINGTON – The National Taxpayer Advocate told members of the House Small Business Committee today that the Internal Revenue Service (IRS) has not been helping Americans navigate tax rules and regulations in the new sharing economy. Today’s hearing was the second in a two-part series held by the Committee examining tax compliance challenges for entrepreneurs in the sharing economy.
“When the IRS is behind the times, it puts small businesses behind the eight ball,” said House Small Business Committee Chairman Steve Chabot (R-OH). “This failure has left on-demand platform companies and their workers confused and frustrated as they try to do the right thing and pay the taxes they owe.”
“Here’s the real kicker: many on-demand companies say they would gladly provide tax compliance training but they don’t because they are afraid the IRS will reclassify their relationship and subject them to whole new host of regulations and obligations,” Chairman Chabot observed.
“Congressional committees like ours have a duty to provide robust oversight of the IRS and ensure they are providing small businesses with clarity and treating them fairly,” Chabot added.
THE NATIONAL TAXPAYER ADVOCATE’S VIEW
“If a person working in the sharing economy called the IRS toll free line today, he or she would hear a recording saying the IRS is not answering any tax law questions after April 15th, so please check IRS dot gov,” testified Nina Olson, the National Taxpayer Advocate at the IRS. “The same message is given to people asking questions at IRS walk-in sites. For a tax agency to not answer questions from taxpayers trying to learn what they need to do to comply is beyond unacceptable, it’s absurd.”
Under current IRS rules, Olson explained, “An Airbnb host would have to sift through a 24 page publication 527 residential rental property and an Uber driver would have to navigate through the 50 page publication 463 travel, entertainment, gift and car expenses and they still might not understand how these rules apply to themselves as service providers in the sharing economy.”Read More
WASHINGTON—House Small Business Committee Chairman Steve Chabot (R-Ohio), joined by House Oversight and Government Reform Committee Chairman Jason Chaffetz (R-Utah) today asked the Office and Management and Budget for a long overdue status update on the federal paperwork burden.
Chairmen Chabot and Chaffetz, whose Committees have jurisdiction over the Paperwork Reduction Act, pointed out to OMB Director Shaun Donovan that “the Office of Management and Budget (OMB) is required to annually submit a report to Congress on the paperwork burden imposed on individuals, small businesses and others by federal agencies and efforts to reduce those burdens.”
As Chabot and Chaffetz noted, “OMB’s report, which it calls the Information Collection Budget, is long overdue. Congress did not receive a report in 2015.”
Read full text of the letter here.
May 26, 2016
The Honorable Shaun Donovan
Office of Management and Budget
Washington, D.C. 20503
Dear Director Donovan:
As Chairmen of the Committees with jurisdiction over the Paperwork Reduction Act,
5 U.S.C. §§ 3501-21 (PRA), we write to inquire about the Office of Management and Budget’s annual report on the federal paperwork burden. Pursuant to the PRA, the Office of Management and Budget (OMB) is required to annually submit a report to Congress on the paperwork burden imposed on individuals, small businesses, and others by federal agencies and efforts to reduce those burdens. OMB’s report, which it calls the Information Collection Budget, is long overdue.
Congress did not receive a report in 2015. The last report that OMB issued was in 2014 and covered the paperwork burden imposed on the public in Fiscal Year (FY) 2013. We are concerned that OMB is not fulfilling its obligations under the PRA. Congress needs the Information Collection Budget to evaluate the overall federal paperwork burden and determine whether legislative changes are necessary to ensure the PRA operates as Congress intended. Therefore, we request that OMB provide the following information:
1. Why did OMB fail to issue a report to Congress on the federal paperwork burden in 2015?
2. On what date will OMB publish the Information Collection Budget that covers the federal paperwork burdens for FY 2014?
3. On what date will OMB publish the Information Collection Budget that covers the federal paperwork burdens for FY 2015?
4. Please explain how OMB will ensure that it provides Congress with an annual report on the federal paperwork burden as required by 5 U.S.C. § 3514 from now on.
5. Please provide all policies and guidance documents explaining how OMB approves information collection requests.
Please provide your responses no later than June 23, 2016
Committee on Small Business
Committee on Oversight and Government Reform
cc: The Honorable Howard Shelanski, Administrator
Office of Information and Regulatory Affairs, Office of Management and Budget
TaskRabbit, Experts Describe Challenges of the Sharing Economy to Congress
WASHINGTON – A representative for the on-demand platform company TaskRabbit told the House Small Business Committee today that the current tax, regulatory and legal climate threatens the success of entrepreneurs in the new sharing economy. The panel of experts described to lawmakers the bevy of new tax compliance challenges faced by small employers, employees and their customers as they navigate the online, app-driven sharing economy.
“No matter what you call it, the sharing economy is changing the face of American entrepreneurship and small businesses before our very eyes,” said House Small Business Committee Chairman Steve Chabot (R-OH). “The dizzying pace of this change has presented many new opportunities and new challenges for the millions of Americans who participate in it.”
“These new platforms have dramatically changed the way companies provide goods and services, giving their workers unprecedented freedom and independence. However, in their enthusiasm, these entrepreneurs are running smack-dab into the buzz-saw of an outmoded tax code that is not designed to accommodate them,” observed Chabot.
“Unfortunately, the IRS has not been part of the solution for entrepreneurs in navigating this new sharing economy. Too often, it has been part of the problem. Our current tax system isn’t working for these new small businesses. In many ways, it is working against them. We can do better, we must do better,” Chabot added.
ENTREPRENEURS TASK WASHINGTON WITH TAX & REGULATORY REFORM
“Tax compliance is just one area of many where our Taskers could benefit from better training. Our Taskers also are looking for direction on how to better market themselves and their services, access health care, and plan for retirement,” testified Rob Willey, the Vice President of Marketing for TaskRabbit.“We at TaskRabbit would like to be a resource, a partner, and a collaborator for that training – it is one of our main areas of focus in determining what types of services we can provide for our Taskers. We hesitate to pursue the kinds of training services we want to provide simply because the threat of litigation and the risks tied to worker classification laws and regulations at the federal and state level are real.”
Pointing to a proposal by economist Joseph V. Kennedy, who also testified at today’s hearing, Willey called for a legal and regulatory “time-out” for new sharing economy companies.
“In the early years of the Internet, Congress imposed a moratorium on federal and state taxation of Internet transactions. Doing so helped a young, nascent sector of the economy develop and provide real benefits for consumers,” explained Willey. “A limited period of legal and regulatory relief would enable platform economy companies to pursue innovative ways to develop and provide services and benefits to those small business owners and entrepreneurs who utilize platform services.”
“What we want to avoid is a situation in which the burdens of tax compliance become so great that it forces Taskers to scale back on their tasks, if not compel them to leave the network altogether,” added Willey.
NEW STUDY: SMALL BIZ GETTING “SHORT-CHANGED” IN SHARING ECONOMY
“The current tax administration system isn’t working for a significant percentage of on-demand platform small business operators or Treasury or IRS,” noted Caroline Bruckner, the Managing Director of the Kogod Tax Policy Center at American University. “At the root of this problem is a lack of information and understanding of tax filing obligations, which is compounded by an information reporting regime that results in widespread confusion. And these tax compliance challenges are only going to continue to grow and impact more and more self-employed small business owners.”
“Everyone is losing under the current rules. Both on-demand economy players and the IRS deserve greater efficiency and less hassle. We can do better,” said Bruckner.
Bruckner is the author of a brand new study released this week titled“Shortchanged: The Tax Compliance Challenges of Small Business Operators Driving the On-Demand Platform Economy.”
“Although millions of Americans are engaging in the on-demand platform economy every day as sellers and service providers, the tax compliance challenges this new frontier presents have gone relatively unnoticed,” Bruckner’s study found. “At the same time, these challenges will grow with this fastest growing segment of the labor economy—creating unnecessary and ongoing burdens for the small business operators who power the on-demand economy.”
“At best, these small business owners are short-changed when filing their taxes; at worst, they fail to file altogether. In addition, these taxpayers face potential audit and penalty exposure for failure to comply with filing rules that are triggered by relatively low amounts of earned income and inconsistent reporting rule adoption,” the study concluded.
IS THERE AN APP FOR THAT?
“Congress and the IRS should take great care to make sure that the federal tax code enables—rather than stifles—the sharing economy,” testified Morgan Reed, the Executive Director of ACT/The App Association. “Specifically, the treatment of all sharing economy workers as 'employees' under the federal tax code would be detrimental to the sharing economy, especially small businesses.”
“Congress should work to advance legislation that would provide taxpayers with certainty and transparency in the tax resolution process and would provide the ability to settle disputes with the IRS in an effective and efficient manner,” Reed suggested.
*Today’s hearing was the first in a two-part series on tax compliance for small businesses in the sharing economy. On Thursday, the Committee will hear from the IRS’ National Taxpayer Advocate Nina Olson.
WASHINGTON - House Small Business Committee Chairman Steve Chabot (R-OH) made the following statement on House passage of the 55th National Defense Authorization Act (NDAA):
“The contracting reforms included in this year’s NDAA will provide new and improved opportunities for America’s 28 million small businesses to compete for defense contracts so that we can get the best possible products in the hands of our war fighters and make sure the tax payers get the most bang for their buck. I want to thank Chairman Thornberry and the House Armed Services Committee for their work in putting together this year’s NDAA and for including these common sense small business contracting reforms. I look forward to continuing to work with them and our Senate colleagues to get this vital national security bill to the President’s desk post haste.”Chairman Chabot penned an op-ed for Defense News this week in outlining the key contracting reforms included in this year's NDAA. Read More
WASHINGTON – Today, entrepreneurs shared their personal stories with the House Small Business Committee about providing employment opportunities for adults with autism, Down syndrome and other intellectual or developmental disorders, syndromes, or disabilities. Witnesses told members of the Committee how these individuals boost morale and productivity in the workplace while raising awareness about the untapped talents and abilities of this often-overlooked community.
“For adults with intellectual or developmental disabilities or disorders, finding sustaining employment can be a real challenge,” said House Small Business Committee Chairman Steve Chabot (R-OH). “These individuals can be overlooked when employment opportunities arise, and too often they are shut out from the workplace all together.”
“Yet across the country we are seeing examples of how small businesses, with their ability to adapt and accommodate, are able to provide employment opportunities to those who might not otherwise get a chance,” Chabot added.
ONE CINCY SMALL BUSINESS OWNER’S STORY
“We need to educate others so they begin to take the “dis” out of disabilities and replace it with ‘abilities,’ said Terri Hogan, the owner of Contemporary Cabinetry East in Cincinnati, OH, who was accompanied today by Mike Ames, an employee who has Down syndrome. “We also need to make small businesses aware of the huge untapped resource that is people with diverse abilities. Hiring people who are physically, genetically or cognitively diverse is not just the right thing to do, it is the smart thing to do.”
“Mike has raised morale, brought community awareness, caused others to have broader perspectives and has developed many friends at CCE. For the business, Mike has helped to develop a healthier ‘bottom line’; everyone works harder because of the example he sets. Mike has raised everyone’s standards at Contemporary Cabinetry East and hiring Mike was the best business decision I have ever made,” testified Hogan.
“POPPIN’ JOE” SHARES HIS STORY WITH CONGRESS
Joe Steffy, the owner of Poppin Joe’s Gourmet Kettle Korn in Louisburg, KS, shared his personal entrepreneurship story with the Committee.
“In high school, my IEP (Individualized Education Plan) team began to plan for my transition into adulthood. The team had very low expectations. The worst disability there is that of low expectations. They said I would never hold a job, that I had no attention span, could not focus, would need to live in a group home and go to a sheltered workshop. My parents disagreed. They knew I was capable of working and that I learned by watching. They also knew I would do exactly what I saw done, so teaching me the right way to do things would be important. I am happiest when I am busy and my parents knew this. I would work, they said,” recalled Steffy.
“My business works for me. It creates new opportunities for me to grow as a person, and to be an engaged, valued member of my community. With the right support system, being a self-supporting entrepreneur can be, and is, a reality for me,” he added.
AUTISM SPEAKS: ADVOCATE’S VIEW
“Small businesses are in a position not only to develop new models that employ individuals with autism, but also to innovate in a way that directly responds to local labor market needs,” testified Lisa Goring, the Executive Vice President for Programs and Services at Autism Speaks. “The connection many small businesses have with their community is vital to creating the partnerships necessary to transition young adults into the local workforce, share best practices with other local businesses, and nurture a workforce comprised of people with varying abilities.”Read More
Says Rule Threatens Success of Small Businesses and their Employees
WASHINGTON - House Small Business Chairman Steve Chabot (R-OH) made the following statement after the Department of Labor announced its final overtime rule, which will hurt small employers and their employees:
The new rule will increase the salary threshold for federally-mandated overtime requirements for white collar workers by over 100 percent, which means that small businesses with thin margins will be forced to make hard choices – such as shifting salaried workers to hourly status, reducing hiring, and cutting workers hours – to remain economically viable. The harmful effects of the rule will hit small employers and their employees the hardest and DOL plans to update the salary threshold every three years.
The Small Business Committee has vigorously opposed the DOL overtime rule for months. The Committee has held numerous hearings and roundtables and sent multiple letters explaining to the administration the damage that will be done to America’s 28 million small businesses and other small employers as a result of the rule. Chairman Chabot is also co-chairing a special House task force on reducing regulatory burdens.
By Chairman Steve Chabot (R-OH)
May 16, 2016
For 55 years, the National Defense Authorization Act (NDAA) has been the primary way Congress meets its constitutional responsibility to “provide for the common defense.”
As a vital national security policy bill, the NDAA has always provided our war fighters with the resources they need to defend the United States from the great and varied threats we face from adversaries around the word.
However, in the face of recent drastic defense cuts, known in Washington as “sequestration,” policymakers have had to look for new ways to meet our national security needs.
As chairman of the House Small Business Committee, I firmly believe that our nation’s 28 million small businesses can play a key role in meeting these needs in this era of declining defense resources.
Very often, small companies can provide better products and services to our military, faster and at lower costs.
Congress’ ongoing effort to improve acquisition and modernize procurement at the Pentagon is particularly important to small companies because it will enable them to deliver real benefits to our war fighters.
At a recent Small Business Committee hearing, we heard from a top official at the Office of Naval Research about two examples of life-saving technology developed by American small businesses that are now used by the US military.
“The Emergency Integrated Lifesaving Lanyard — called EMILY — is a robotic lifeguard deployed worldwide by Hydronalix, a rural Arizona company,” Robert Smith explained to our committee. “The tracking system, reconfigured as the Silver Fox Unmanned Air Vehicle (UAV), was deployed in 2007 to provide convoy protection to Marines in Iraq, saving three lives. The same basic technology package, reconfigured as EMILY, is supporting first responders throughout the US and other nations, and saving lives today in the Mediterranean Sea refugee crisis.”
Smith also pointed to Trek Enterprises’ Automated Celestial Navigation (ASN) system as another example of technology developed by a small company now used by the military.
“(ASN) provides a solution in GPS-denied environments through a fully automated star tracker for imaging individual stars both day and night to enhance navigation capability,” Smith testified. “Initially focused on Navy challenges, ASN attracted attention across the government: The result being a fellow agency ordering 15 systems, with applications in crime fighting and drug interdiction."
Success stories like these are a big part of the reason why promoting competition has been the guiding principle for defense acquisition and procurement policy.
We must allow companies of all sizes and expertise to compete for defense contracts in order to get the best possible products to the war fighter.
Contracting reforms such as those included in this year’s NDAA help us achieve this important goal for our military. They also benefit the taxpayers footing the bill, making sure they get more bang for their buck.
You don’t need to be an economist to understand that when the Defense Department has fewer offers, there is less competition, costs go up and choices are limited.
Unfortunately, we continue to see the number of companies competing for federal contracts declining, which threatens innovation and harms readiness.
Within the last three years, we have lost over 25 percent of the small firms registered to do business with the federal government.
Within the Department of Defense, the number of small business contract actions fell 47 percent from 2011, but the size of the average individual small business contract action more than doubled.
Not surprisingly, during the same period, the percentage of taxpayer dollars spent without competition has increased.
With this thought in mind, members of our committee introduced a series of bipartisan contracting bills this year.
Our committee approved these measures unanimously and we are pleased they were incorporated in this year’s NDAA, which was approved by the House Armed Services Committee by a bipartisan vote of 60 to 2 last month.
Specifically, here are five ways this NDAA helps small contractors compete:
First, it modernizes the Small Business Act to ensure clear and consistent language is used in federal procurement programs.
Second, it strengthens the small business advocates within SBA, DoD and other federal agencies, to promote competition and make sure the laws on the books, including the NDAA, are followed.
Third, it improves opportunities for small businesses to compete for subcontracts, and then to build on that experience to compete as prime contractors.
Fourth, it improves coordination between the SBA and DoD mentor-protégé programs, which help small businesses better serve our military.
Finally, this NDAA implements reforms to promote integrity and accountability in small-business programs, such as veterans contracting programs and contracting officer training programs.
This NDAA gives our troops the resources they need to defend the United States while providing meaningful contracting reforms that help our small businesses and our national security.
Rep. Steve Chabot represents Ohio's 1st Congressional District in the U.S. House where he is chairman of the Small Business Committee. He is also a senior member of the Judiciary and Foreign Affairs committees. You can follow him on Twitter @HouseSmallBiz.Read More
Emmy-nominated actor and Made in America advocate
President & CEO
Elite Aviation Products
Dr. Ray Perren
Lanier Technical College
WASHINGTON—House Small Business Committee Chairman Steve Chabot (R-Ohio) today announced that next week’s full committee hearing, which will focus on small businesses that provide employment opportunities for adults with intellectual or developmental disorders, syndromes, or disabilities, will feature a local Cincinnati business owner.
Terri Hogan, owner of Contemporary Cabinetry East in Cincinnati, will share her story about how her company came to provide employment opportunities for individuals with special needs.
“We talk a lot about how small businesses are the biggest job creators in America,” said Chairman Chabot. “Even more inspiring are the opportunities they provide for people who too often get overlooked despite the enormous contributions they can make to the workforce. Terri Hogan’s story is a wonderful example of how small businesses can partner with individuals who face more adversity than most, and how those businesses and their employees can thrive from that relationship.”
In addition to Ms. Hogan, the Committee will hear from Joe Steffy, owner of Poppin Joe’s Gourmet Kettle Korn in Louisburg, Kansas, Lisa Goring of Autism Speaks, and Rajesh Anandan of ULTRA Testing in New York.
The hearing will stream live at smallbusiness.house.gov at 10:00 AM on Thursday, May 19.
John Ratzenberger Pitches American Manufacturing to Congress
WASHINGTON – Emmy-nominated actor and “Made in America” advocate John Ratzenberger told members of the House Small Business Committee that the face of American manufacturing has changed dramatically in recent years, presenting new job opportunities for millions of Americans. Ratzenberger, best known as Cliff Clavin from the sitcom Cheers and the voice of Hamm from Pixar’s Toy Story movies, testified alongside a panel of small manufacturers and experts about the importance of vocational training to close the manufacturing skills gap.
“When people think of manufacturers, too often they think of giant corporations with huge production facilities and steam whistles commanding shift changes,” said House Small Business Committee Chairman Steve Chabot (R-OH). “The truth is that the vast majority of American manufacturing is done by small businesses. In fact, 99 percent of all manufacturers are categorized as small. Though they might be considered “small” businesses, their effect on our economy is enormous.”
“We must do better job educating young people to improve the perception of what manufacturing really is and getting the word out that manufacturing is “clean and safe” and “high-tech” rather than “dirty and dangerous,” added Chairman Chabot.
Chabot noted that manufacturers in the United States employ over 12 million people and directly contribute over $2 trillion to our economy each year.
The New Face of American Manufacturing
“There are close to a million jobs available right now in small businesses around the country that rely on people with mechanical common sense skills that we've stopped offering in our public schools three generations ago,” testified Mr. Ratzenberger. “The most repeated complaint today from potential employers is that it's impossible to train someone for any of the jobs available when they graduate from high schools everywhere without the ability to even read inches and fractions from a simple ruler.”
“Manufacturing is the backbone of Western Civilization. Everything we do every single day is reliant first on someone's ability to not only put a nut and a bolt together but to make that nut and that bolt in the first place,” observed Mr. Ratzenberger. “The big worrisome question then is this: How do we reinstate the necessary programs in our schools to give our children a familiarity of the tools that built and maintain our civilization and way of life? If the average age of the people that keep our nation and the nation’s infrastructure working is 58 years old, then how long do we have before it all stops?”
One American Manufacturer’s Story
“As a nation we also need to do a better job of accurately characterizing the multi-faceted and exciting careers that exist within manufacturing,” said Dustin Tillman, the President and CEO of Elite Aviation Products. Despite our talent as a culture for crafting topnotch media, we do a poor job at shining a spot light on the exciting and fulfilling career paths that exist within modern manufacturing; full of all the intricate and challenging dynamics that would enthrall and captivate the young workforce entering the job market.”
“For us, and many other businesses out there, the best pool of talent that I’ve been exposed to have been veterans. These highly trained individuals who possess key characteristics for success in business, e.g., honor, integrity, discipline, and leadership are right in our own backyards, and, from what I’ve seen, eager to get to work,” added Tillman whose company founded the Elite Veterans Initiative Elite to support, empower, and employ veterans.
The Role of Education
“Today’s manufacturing environment requires highly skilled individuals who not only understand complex technological applications but also are adept at problem solving,” testified Dr. Ray Perren, the President of Lanier Technical College in Oakwood, Georgia. “Although the face of manufacturing is changing, too often the perception of manufacturing has not changed. Too often, people think of manufacturing jobs as being physically repetitive work, carried out in dirty environments, with little or no ability to utilize critical thinking to improve job performance. Nothing could be further from the truth.”Read More
“At the very heart of small business‒ what allows them to succeed‒ are the people; the men and women of this country who set out with an idea and the desire to turn that idea into a reality,” observed House Small Business Committee Steve Chabot (R-OH). “It is this enduring spirit of American innovation that continues to breathe life into our economy and create the jobs no government program can.”
“Each of our witnesses has taken the lessons learned from building their own businesses, and provide guidance to small business owners and aspiring entrepreneurs. The difference between a good idea and a good business is execution, and who do America’s small businesses turn to for help developing and executing a business plan? They turn to JJ Ramberg, to Ramon Ray, to Susan Solovic, and to Melinda Emerson. And so today, so do we,” said Chairman Chabot in kicking off today’ hearing.
THE EXPERTS WEIGH IN
“Let’s think about the husband and wife who start a business together, or a high school graduate working on an invention, or that laid off 50 year-old forced to begin their own business,” said Ramon Ray, the Editor of Smart Hustle Magazine. “The best thing our government can do for small business owners, is to have limited regulation, lower and simplified taxes and continue to invest in the education of small business owners at the local, state and Federal level.”
“Both on and off Main Street, we have heard a common refrain: difficulty finding affordable funding to expand, a challenge around recruiting top notch employees and a sense of loneliness and lack of community to help with business issues,” testified JJ Ramberg, an entrepreneur and the host of MSNBC’s Your Business. “That said, I believe we are in the beginning of a sweeping change when it comes to small business. Companies in the fintech and edtech space are working to address the issues of financing business and educating our workforce.”
“With millennials now making up the largest share of the American workforce and primed to take over an increasing share of small business ownership, much will continue to change when it comes to entrepeneurship,” added Ramberg.
“The regulatory burden in this country is in the trillions of dollars and small businesses pay 36 percent more than larger enterprises,” noted Susan Solovic, THE Small Business Expert and an advocate. “Could small businesses in the U.S. eventually become extinct? In my opinion, if we continue down this path of hyper-regulation, they will certainly become an endangered species. How can we protect this important market sector? As one long-time entrepreneur said to me when I asked what needs to be done: Get out of our business.”
“There are other regulatory challenges that small businesses face that should be reviewed,” said Melinda Emerson, the founder & CEO of Quintessence Group and the Melinda F. Emerson Foundation. “The expanded categorization of who can and cannot be considered a 1099 independent contractor is a challenge for small businesses and the cost of full-time employees is prohibitive to cash-strapped start-ups. The tax code needs to be simplified to help more small business owners; it costs a lot to be in business in the U.S.”
Last week, the Small Business Committee celebrated National Small Business Week:
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