Community News
Go Back

Recent changes can affect small business owners

Special to the Courier

A number of new laws and regulations affecting small businesses take effect in 2012, and will most certainly affect the small business owner's bottom line.

According to an article by Andrew Chow at, one of the most significant changes will affect how a small business calculates its federal taxes.

New Internal Revenue Service rules will cut by 75 percent the amount a small business can deduct upfront for the cost of purchasing new equipment, according to the Los Angeles Times.

The new IRS limit for new-equipment deductions is $125,000 - down from $500,000.

In 2013 the new-equipment deduction limit will be cut even further, to $25,000.

Why is this happening? Because the $500,000 deduction cap was part of the original stimulus package that's set to expire, Chow reports.

Another tax-related new small business law for 2012 aims to deter businesses from under-reporting their sales income, said Chow.

If a business processes more than $200,000 in credit-card payments and conducts more than 200 transactions each year, the IRS will now compare the business's accounting records with those kept by credit-card processing companies.

Third-party payment services like PayPal are also included in this IRS cross-check, which means online businesses may feel this law's impact the most, according to Business Insider.

According to a story by Angus Loten in the Wall Street Journal, there are signs that more banks may be loosening the purse strings for small firms, as business conditions improve and as borrowers become more willing and able to take on debt.

Small-business lending hit a four-year high in November, according to the latest Thomson Reuters/PayNet lending index, Loten reported.

The total volume of small-business financing increased by 18 percent over the same period last year, and reached the highest level since Feb. 2008.

Rohit Arora, chief executive of Biz2Credit, a small-business lending broker based in New York, says demand for loans from small firms is picking up as sales improve and businesses become more credit worthy.

But these are small signs at best, says Lohen. For some small firms, significant barriers to credit remain.
Bank of America Corp. is requiring some small-business owners to pay off their credit line balances in a lump sum, rather than monthly installments, or face higher interest rates - a move that appears to buck the industry-wide trend of easing access to credit for small firms.

Access to credit tightened dramatically for small firms in the wake of the financial market crisis and the plunge in housing values. A study by Pepperdine University found that more than 60 percent of small-business loan applications last year were denied.

According to the National Federation of Independent Business, a Washington, D.C.-based small business lobby group, most small-business owners have either foregone seeking investment capital from banks due to weak prospects for growth, or simply given up trying after being rejected multiple times.

One in five of more than 500 small firms recently surveyed by SurePayroll, a Chicago small-business payroll firm, said they were planning to borrow to grow their business in the months ahead, said Loten.

Still, some caution that ongoing weaknesses in the housing market, along with uncertainties about the federal budget and the Euro zone crisis, among other issues, could derail any renewed optimism among borrowers and lenders alike in the coming year.

"If there's too much uncertainty, no one will want to take the first step," John Paglia, a small-business researcher at Pepperdine University, says of kick-starting the cycle of credit, spending and growth.