This year’s federal income tax rate is highly favorable to small businesses. If your company pays you a dividend in 2010, the maximum federal income tax rate will be only 15%. Likewise, 2010 corporate payouts or stock sales that generate long-term capital gains will be subject to a maximum 15% federal tax rate.

Those rates are set to expire after this year. Wall Street Journal columnist Bill Bischoff suggests three ways to take advantage of these low tax rates.

• Take Low-Taxed Dividends This Year
  If your profitable C corporation has a healthy amount of earnings and profits (or E&P), shareholders should consider taking dividends this year, instead of risking a bigger (though deferred) tax hit down the road.
• Low-Taxed Stock Redemption Deal This Year
  Another way to convert some of your C corporation wealth into cash is with a stock redemption deal, where you sell back some or all of your shares to the company, says Bischoff. To the extent of your corporation’s E&P balance, any stock redemption payment is generally treated as a taxable dividend. The IRS provides several exceptions to this general rule, so you might want to consult your tax adviser.
• Sell Stock This Year
  From a federal income tax perspective, selling shares this year and paying no more than 15% on the resulting gains (assuming you’ve held the shares for over a year) beats paying more than that on gains from sales in later years.

Small businesses hit with big fines for not disclosing their use of questionable tax shelters are getting a temporary break from the IRS.

Some small businesses have been the unintended victims of a 2004 law meant to penalize big businesses that abused shelters to hide profits, said the Associated Press.

The IRS will suspend fines through September on businesses that gained less than $200,000 a year from the shelters. Lawmakers asked for the temporary waiver while they rewrite the law, saying many small businesses have had to pay massive penalties for relatively small gains.

National Taxpayer Advocate Nina Olson cited a case in which a small business owner saved $45,000 over three years from a tax shelter and was fined $900,000 by the IRS, said the Associated Press.

It’s traditional to rate a new administration at the conclusion of its first 100 days in office.

But the Obama administration might want to take a closer look at how they are faring with small business owners.

A new survey highlighted in an April 13 edition of Bizjournals found widespread displeasure with the president among small business owners.

Nearly 60 percent thought the president didn’t understand the needs of small firms and more than 40 percent were less optimistic about the national economy than before President Barack Obama took office, the survey said.

The Internet survey was conducted in March by City Business Journals Network and involved interviewing 301 CEOs and presidents of companies with five to 499 employees. Follow up phone interviews showed clear anger over the federal bailouts.

Pat Moore, owner of a private-duty health care firm in Kansas, worried about the specter of inflation, while others believed the large bailouts set a terrible precedent.

Several small business owners said even huge companies should be allowed to fail.

“If you didn’t run your business properly and you can’t survive, go away and let the strong survive, because that’s the way it’s always been, and that’s the way it should be,” Ronnie Nudelman, owner of a Buffalo printing company, told City Business Journals Network.

Not every review was negative.

One small business owner gave Obama credit for reaching out to small businesses to try to understand their needs, the report said.

Naturally, other concerns included loosening the credit market and that perennial small business woe — the high cost of health insurance.

The survey found that two-thirds of respondents were concerned that health care reform would mean higher costs for them.

A new requirement by the Obama administration will hopefully spur the 21 largest banks receiving U.S. government money to lend more to small businesses.

The new rules, outlined in a March 16 Associated Press story, have those banks reporting monthly on how much they lend to small businesses. All others are being called upon to make an “extra effort” to boost small business lending.

The announcements came March 16 as part of a broad package aimed at small business that was being unveiled by President Barack Obama and Treasury Secretary Timothy Geithner, the AP said. The package also includes reduced small business lending fees and an increase on the guarantee to some Small Business Administration loans.

“We know that small businesses are the engine of growth in the economy, and we absolutely want to do things to help them,” Christina Romer, who heads the White House Council of Economic Advisers, told the wire service. “There are already a lot of things to help them in the recovery package, and some of what will be coming out are the things that were in the recovery package: increasing the SBA loan guarantees, lowering fees.”

Republicans appeared to embrace the efforts, but with some qualifications.

U.S. Rep. Eric Cantor of Georgia said: “We’ve got to do something to help these small-business people. We know that they’re the job creators in this economy. And the problem … I think we’re seeing out of the Obama administration is a lack of focus on how to get things going again.”

The new measures have the government stepping in to buy loans, temporarily eliminate upfront fees of up to 3.75 percent and some processing charges on certain SBA loans typically passed along to borrowers, the AP said. It also increases the government guarantees on certain loans to 90 percent, up from 85 percent for loans below $150,000 and 75 percent for larger loans.

The federal government is pouring cash into huge financial firms with very little oversight while even the slightest hand out to small business owners brings “we-need-scrutiny naysayers” out of the woodwork, says journalist JJ Ramberg of “Your Business.”

Ramberg, who anchors the MSNBC weekly show on small business, continued in her March 18 blog post:
“Maybe I’m missing something here, but small businesses are the lifeblood of the economy, and they are struggling right now largely through no fault of their own. They can’t get loans because the big boys messed up the system; and the faltering economy — caused in large part by the big financial firms — is also taking a big bite out of their sales,” Ramberg wrote. “All they want is a little bit of a break. So many entrepreneurs I’ve profiled in this blog — and many of the ones who post comments here — are struggling to keep their doors open.”

The impetus for her outrage came from a recent proposal by President Barack Obama to boost declining lending on Small Business Administration-backed loans. The idea was to do such economy-stirring efforts as directly purchasing up to $15 billion of securities backed by loans from the SBA, eliminating fees and increasing loan guarantees.

But it soon ran into criticism, she said, citing a Wall Street Journal story that worried the Obama administration could be creating incentives for another run on unwise credit and create a huge pool of unregulated money.

“I’m all for putting a lid on the bailout free-for-all with tougher standards and regulations,” she wrote, “but isn’t it odd that when small businesses want a helping hand suddenly the scrutiny reaches a fever pitch?”

The massive $789 billion stimulus package just passed by Congress contains plenty of cash to shore up ailing banks, but little in the way of direct spending for small businesses, a Feb. 11 report by The Associated Press said.

“The plan does extend two provisions of 2008’s economic stimulus bill that allow small businesses to take a bigger upfront deduction for the cost of new equipment,” the AP said. “But companies whose sales are hurting may be reluctant to make big expenditures, putting those tax breaks out of reach.”

Raymond Keating, chief economist with the Small Business & Entrepreneurship Council, told the AP small business owners needed something better. “We need incentives in the private sector for people to take risks and expand business. Unfortunately, there’s very little of that in this package,” he said.

The savior for small businesses, economists say, will come when consumers start dusting off their wallets.
“The best thing to happen to small business is if customers come in,” William Dunkelberg, chief economist with the National Federation of Independent Business, a Washington-based small business advocacy group, told the AP.

The big problem with the economy now is “the guy whose job is not at risk has been scared into not spending,” he said, adding the recession’s grip will ease when they start buying again.

In the meantime, small business advocates say extending the Section 179 and bonus depreciation provisions into 2010 because makes more sense because it is unlikely small businesses will be investing much in the near term.

The head of the U.S. Treasury is making good on a promise to take billions worth of toxic assets off the books of U.S. banks.

In a Feb. 10 Reuters story carried by Businessworld , Treasury Secretary Timothy Geithner was set to lay out a rescue plan based on a mix of public and private funds to wipe clean $500 billion of such troubled assets.

While details were light, Reuters reported that sources said the plan would also extend a Federal Reserve program allowing the U.S. central bank to extend up to $1 trillion in loans.

But what was clear in the days following the announcement was that the U.S. had learned from the shocking failure of investment bank Lehman Brothers, which went under in September, marking the largest bankruptcy in U.S. history, and would not let other banks fail.

The plan also included a huge boost in the government’s stakes in one key bank, Citibank, bringing it up to a possible 36 percent, reports said.

Geither’s plan follows a Feb. 9 press conference where President Barack Obama told reporters that cleaning up banks’ balance sheets was a priority and didn’t rule out the possibility that it will take more money than the $700 billion Congress already has approved to complete the job, Reuters said.

“We don’t know yet whether we’re going to need additional money or how much additional money we’ll need until we see how successful we are at restoring a level of confidence in the marketplace,” Obama said.

Obama then called on Congress to speedily approve both Geithner’s plan and an economic stimulus package to complement the revamped bank-rescue proposals, Reuters said.

“If you delay acting on an economy of this severity, then you potentially create a negative spiral that becomes much more difficult for us to get out of,” Obama said. “This is not your ordinary, run-of-the-mill recession, we are going through the worst economic crisis since the Great Depression.”

Geithner, the former president of the New York Federal Reserve Bank, said banks will be closely monitored and tested.

“The spectacle of huge amounts of taxpayer money being provided to the same institutions that helped cause the crisis, with limited transparency and oversight, added to public distrust,” Geithner said in remarks prepared for delivery after the release of the new measures, Reuters said.

President Barack Obama was set to sign into law his $787 billion economic stimulus package on Feb. 17 in Denver, emerging with a document bruised but alive after weeks of partisan fighting.

Republican lawmakers fiercely opposed the plan, while some Democrats joined the chorus, saying it didn’t go far enough.

It advanced earlier in the month after squeaking by in a procedural vote in the Senate with mostly Democratic support. But then business groups and GOP officials began seeking broader Republican backing, USA Today said in a story in its Feb. 9 editions. Key support appeared to come from GOP governors eager for federal dollars to help plug enormous state budget gaps.

To the administration, the plan perhaps couldn’t come together fast enough. Economic indicators continued to slide and Wall Street did little more than lurch day to day. In the week before the expected signing, the Dow shed 5.2%.

Here’s what’s inside the package, according to USA Today:

• $1 trillion from the Federal Reserve to buy bonds and other assets to boost consumer loans.
• $500 billion to $1 trillion from the government and private investors to buy distressed securities from financial institutions.
• $545 billion in spending, $293 billion in tax cuts in the Senate stimulus which was later reconciled with the $820 billion House version.
• $50 billion from the government to stem mortgage foreclosures.

If President-elect Barack Obama is looking for boosters to support his vision of a new New Deal, the U.S. Chamber of Commerce will not be the first in line.

The business group says the plan represents a look back, not the new vision the nation needs.

“The nation must avoid a big and permanent expansion of government payrolls and powers,” said U.S. Chamber CEO Tom Donohue said in remarks on the economy on Jan. 7. “We don’t need and can’t afford another New Deal. The 2008 election was all about change. It’s not change if you go backwards to the policies and approaches of the 1930s.”

But a key aspect of Obama’s nearly $1 trillion plan is federal spending on public works and transportation projects, aspect widely cheered by cash-strapped local governments. According to the Phoenix Business Journal local cities such as Mesa, Phoenix and Scottsdale have a list of so-called “shovel-ready” works they are hoping will gain funding by an Obama stimulus package.

Chamber officials do not oppose the public works aspect of the plan, but have called for it to be coupled with business-oriented tax relief, the Business Journal story said, including lowering the cost of Small Business Administration loans, keeping in place tax cuts passed in 2001 and 2003, and lowering business investment taxes.

Either way, the economic outlook only gets more dire by the day, it seems

“The chamber expects the fourth quarter of 2008 to show a GDP decline of at least 5 percent,” Donohue said. “GDP in the first quarter of 2009 will likely shrink by more than 3 percent. The economy should reach its low point around the middle of the year, but further problems in credit markets or other external shocks may prolong the recession into the second half of 2009.”

Despite its push for business aid, the chamber did not specifically back plans favored by U.S. Sen. John McCain, R-Ariz. and some business advocates to cut federal corporate income tax rates from 35 percent to 25 percent, the Business Journal article said.

This article was submitted by Kathleen O’Connor, a contributing writer for Biz2Credit. Biz2Credit is a small business marketplace that provides entrepreneurs with the latest industry news and financial advice. Send all questions to info@biz2credit.com.

A report published by www.bizjournals.com, small business owners in Massachusetts can claim state sales tax exemption on electricity, gas, heating fuel and steam purchases by filling a ST-13 form.The exemption is available to small business owners with five or less employees and generating less than $1 million in income.

This article was submitted by Kathleen O’Connor, a contributing writer for Biz2Credit. Biz2Credit is a small business marketplace that provides entrepreneurs with the latest industry news and financial advice. Send all questions to info@biz2credit.com.