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NASE Provides Comments to Joint Small Business Committee Hearing on Tax Reform
Last week, the National Association for the Self-Employed submitted the following statement for the record to the Senate and House Small Business Committee following a joint hearing on the Tax Cuts and Jobs Act extension that Congress is currently considering.
The statement included 5 recommendations for Congress to consider:
1. Make the Qualified Business Income (QBI) Deduction Permanent for All Self-Employed
The Section 199A deduction, which allows certain self-employed individuals to deduct up to 20% of their qualified business income, has provided essential tax relief. However, the deduction is currently set to expire after 2025. Congress should extend the QBI deduction to all self-employed taxpayers, regardless of industry classification.
2. Expand and Simplify Retirement Options for the Self-Employed
Per our 2024, member survey, retirement savings continues to be an area where small businesses are using a multitude of different ways to save for their future, underscoring the need for policy makers to continue to support creative ways for small business owners to save for their future. Self-employed individuals face unique challenges in saving for retirement. Congress should enhance and simplify tax-advantaged retirement plans such as the Solo 401(k) and SEP IRA, including increasing contribution limits, automating enrollment, and improving outreach to underrepresented entrepreneurs.
3. Establish a Standard Deduction for Business Expenses
Unlike traditional employees, self-employed workers must track and categorize numerous business expenses. A simplified standard deduction—akin to the home office deduction—would ease compliance and reduce the audit burden for gig workers and sole proprietors.
4. Ensure Fairness in Tax Audits and Enforcement
Data shows self-employed individuals, particularly those using the Earned Income Tax Credit, are disproportionately targeted for audits. The IRS should implement more equitable audit protocols and invest in taxpayer education and support services for the self-employed.
5. Modernize Estimated Tax Payment Systems
The quarterly estimated tax payment process is outdated and complex. Congress should direct the IRS to develop a more user-friendly, real-time tax withholding system for independent workers, similar to payroll withholding for W-2 employees.
Joint Small Business Committee statement for the record- for submission