Masonry Magazine June 2011 Page. 33
Congressman Tom Latham addresses a small group of MCAA members at the Capitol Hill Club. Rep. Steve Austria of Ohio chats with Paul Odom.
3% Withholding Tax
This payment is due to government service providers. This provision, effective in 2011, affects payments for goods and services under government contracts as well as payments to any person for a service or product provided to a government entity.
This presents a particular problem for small businesses in an industry such as construction which is extremely competitive. The 3%, subject to government withholding represents the estimated profit or operating cash flow on a construction project. This 3% could be used by contractors to compensate for material costs, supplies, and other operating expenses; instead, construction contractors will in essence be "floating" the government a 3% interest free loan.
This withholding provision applies to the total contract, not to the net revenue generated from the project which unfairly penalizes construction contractors. For example, on a $1 million dollar project, $30,000 will be withheld from payment. If the contractor is fortunate enough to achieve a 4% profit, $40,000 will be realized before paying for supplies, services, and other business expenses. Tax generated on the $40,000 is $14,000 (35% of $40,000). The government has (over)-withheld $30,000 for only $14,000 in tax obligations.
Misclassification of Employees as Independent Contractors
Some contractors in the construction industry are deliberately misclassifying workers as independent contractors rather than employees to avoid payroll taxes, insurance premiums and other employment expenses on order to boost company profits. This practice grossly undercuts honest, law abiding contractors and, in addition, deprives the federal, state, and local governments of millions of dollars in revenue.
Alternative Minimum Tax
The Individual Alternative Minimum Tax (AMT) operates parallel to the regular income tax, with different rates and definition of income and deductions. Although the AMT has historically applied to few taxpayers, the tax will grow
Jon Davenport, Calvin Brodie and Congressman Tom Latham meet at the Capitol Hill Club
John Smith talks with Rep. Blaine Luetkemeyer of Missouri
Mark Kemp, Jeff Buczkiewicz, Congressman Joe Walsh of Illinois, and Jim O'Connor
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June 2011
MASONRY 31