Unless you're in the construction industry or involved in government contracting, you're probably not familiar with Section 511 of the Tax Increase Prevention and Reconciliation Act of 2005. Section 511, which was embedded in the legislation by NY Congressman Charlie Rangel, enacts a 3% withholding tax from payments for goods and services made by federal, state and local governments with total expenditures of $100 million dollars or more. This legislation will take effect on January 1, 2012.
Small businesses which depend on government contracts as part of their revenue will have an additional 3% of the total contract amount withheld for tax gap funding. Most small businesses will not be able to sustain this additional tax burden without adding an additional 3-5% to the cost for any government contract.
Example:
XYZ Contacting is awarded a $10 million dollar construction contract which is estimated to be completed in one year. This legislation requires withholding of $300,000 on that contract. The contractor expects to net 2.5% or $250,000 on the overall contract. The tax on the $250,000 of revenue, at most, is 35% or $87,500. Ultimately, the government is withholding $300,000 for $87,500 in tax liability.
You can do the math and see what kind of additional financial strain that this legislation will put small businesses which, by the way, employ 85% of our work force. We cannot let this happen.
There are currently two bill in congress to repeal this legislation (S.292 & H.R. 275). Write your congressional leaders at www.nwyc.com and let them know that we want Section 511 of TIRPA repealed!
"I'm Tired Of The Tax"
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