WASHINGTON, D.C.— Today, U.S. Sen. Al Franken (D-Minn.), along with Sens. Olympia J. Snowe (R-Maine) and Mike Enzi (R-Wyo.), introduced legislation that would allow entrepreneurs to focus on growing their businesses and creating jobs instead of trying to figure out confusing IRS deadlines.
The bill—called the Small Business Election Simplification Act—would give entrepreneurs more flexibility when classifying their business as an S Corporation (S-Corp) on their taxes, which can save a significant amount of money in helping them start small businesses. Currently, restrictive IRS deadlines often make it harder for companies to earn this classification.
“Passing my Small Business Election Simplification Act will make it easier and more straightforward for entrepreneurs in Minnesota to start businesses, and it will save them money that they can use to grow their companies and create jobs,” said Sen. Franken.
“Small businesses are the engine of our economy and are huge job creators, so we need to make sure that they can get off the ground without having to worry about the burden of unnecessary IRS rules.”
“I have long been a champion of small business interests in general and S corporation concerns in particular,” said Sen. Snowe. “As we well know, small businesses are the heart and soul of American enterprise and for these firms, cash flow is their life blood.
“It is critical that they have maximal organizational flexibility and that, in choosing the way in which they want to do business, they have ready access to capital to help achieve their dreams.
“This bill will help them do that by reducing existing burdens and making it easier to acquire the capital they need to grow their business and create jobs. I am proud to support this bill and look forward to working with my colleagues in the Senate and the House to see this necessary change through to fruition.”
“Red tape and regulations should never get in the way of ingenuity and job creation,” said Sen. Enzi. “I am pleased to join Senators Franken and Snowe to make sure that America always puts small businesses first. Their work on this legislation is just another sign that partisanship does not always get in the way of doing what is right.”
Under the current rules, small business owners must go through what’s called an “election process” and submit an election form to the IRS to become an S-Corp. The deadline to submit the election form is currently set a year inadvance of the regular tax deadline.
Many first-time business owners are unaware of this rule and therefore miss the election deadline. These taxpayers must wait an additional year before they can save money on their taxes or must go through a time-consuming and costly late election process with the IRS. This is money they could have used to grow their businesses and create jobs. In 2009, nearly 100,000 entrepreneurs and small business owners missed the election deadline.
The Small Business Election Simplification Act would:
Extend and coordinate S-Corp deadlines. The Act would match the S-Corp election deadline for new businesses with the deadline for tax returns. This would reduce the number of taxpayers who inadvertently miss the S-Corp election deadline and suffer negative tax consequences.
Reduce paperwork. The Act would allow new small businesses to elect to become an S-Corp simply by designating the election on their S-Corp tax return. This would eliminate the need for these business owners to fill out an additional election form.