Business Owner Guide to Top Legal and Tax Trends

Starting and operating a small business is never easy, and all of the tax and rule-making authorities that get in your way don’t help. Legal and regulatory issues, trends and requirements are always changing, forcing business owners to run a new gauntlet each year.  To keep you on top of things, here are 11 trends and changes you need to know:

1. Rising unemployment insurance (UI) rates: UI funds in many states are at critically low levels. As a result, biz owners in many areas can expect to see UI contribution rates higher in 2011 to replenish depleted UI trust funds and repay federal loans taken to allow states to continue to pay benefits.

2. Changing tax laws: In 2011, business owners even greater complexity (if that’s possible), including a partial payroll tax holiday, the ability for businesses to expense 100 percent of their capital investments, and the retroactive extension of some temporary incentives that expired in 2010.

3. Health care reform: A new rule provides business tax credits for small companies that offer health insurance to employees. Grandfathering will remain an important component of health care reform. Health plans that existed on March 23, 2010 are grandfathered, meaning that they do not need to add many of the new protections under the health care reform law. To remain grandfathered, health plans cannot make any significant changes to the plan.

4. Flexible spending account (FSA) changes: Effective this year, over-the-counter medicines and drugs other than insulin (i.e., aspirin) are longer eligible for reimbursement from a health FSA unless the item is prescribed by a medical practitioner.

5. Employment law trend: The U.S. Department of Labor and many states have enacted or are considering measures to provide greater transparency to workers on the wages they are owed, especially in key areas such as minimum wage and overtime requirements, and to increase penalties on those who fail to pay their workers the compensation they are entitled.  Expect to see new rules enacted.

6. 401(k) disclosures: If your business offers a 401(k) plan, new regulations will require disclosures of fees being charged by the plan. In addition, plans offering “target date” funds will likely see further disclosure requirements around those investments.

7. States go revenue hunting: Many states are facing critical budget shortfalls, and are contemplating new tax and fee increases or filing changes to raise money. Also be aware that many state agencies are reducing staff, which could result in processing delays for businesses requiring licensing or other state services. Be sure to renew or apply for business licenses early.

8. Federal Trade Commission (FTC) requirements:  With the dramatic increase in the use of social media such as Facebook and Twitter, as well as blogs, the FTC has issued regulatory guidance around the use of advertising in social media, especially endorsements and misleading or dishonest product reviews. The agency has also recently proposed the creation of a “Do Not Track” tool for the Internet (similar to the telemarketing “Do Not Call” registry).

9. IRS enforcement: To help collect more tax revenue, the IRS is ramping up its enforcement efforts in several areas affecting small business. In 2010, the IRS kicked off an employment-tax audit program that will carry into this year and beyond. These audits are focusing on employee misclassification, executive compensation, fringe benefits, and adherence to general employment tax filing requirements.  The IRS is also accelerating efforts to increase tax compliance among employees who collect tips.

10. Privacy protection: Most states now require businesses to notify customers (and sometimes government authorities) when sensitive data is breached. Some have new laws requiring that businesses protect sensitive client data. Businesses handling protected health information are subject to additional requirements.

11. Employment verification:  U.S. Immigration and Customs Enforcement (ICE) continues to crack down on companies knowingly hiring undocumented aliens. Several different Congressional immigration reform proposals, which may present further employment verification obligations, are being considered.

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Filed Under: BasicsBizTaxesLegalManagingSmartOwners OnlyTroubleshooter

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About the Author:

Daniel Kehrer, Founder and Chief Content Officer of BizBest Media, is a senior-level leader in digital media, content development and online marketing with special expertise in startups, SMB, social media and generating traffic, engagement and leads. He holds an MBA from UCLA/Anderson and is a passionate entrepreneur (started 4 businesses), syndicated columnist, blogger, thought leader and author of 7 business and financial books.

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