Valley businesses are concerned about lost profits if lawmakers in Washington fail to agree on a payroll tax cut extension.  One small business in Tempe worries returning to the old tax bracket could cause a trickle-down effect that hurts both local communities and businesses.

Karen Miller, Owner of Gold Bar Espresso in Tempe. (Photo by Nadine Arroyo Rodriguez/KJZZ)

On Tuesday, the House of Representatives rejected a bill that would have extended the payroll tax break of 4.2 percent for another two months into 2012.  Without an extension, businesses will have to adjust the payroll tax deduction back to its original percentage rate -of 6.2.  At the Gold Bar Espresso in Tempe, owner Karen Miller worries how the stand-off in Washington may hurt her employees and customers.  “Tips are a part of the food service industry, now if taxes and things affect other people out there so that they’re tipping less or they’re coming in less that’s where it affects the business and the employees maybe more than that extra two percent,” says Miller.

Tax experts are also concerned.  Aaron Blau is a certified public accountant in Tempe.  He says if congress votes to extend the payroll tax break for just two months, processers and accountants nationwide will have to spend twice as much time programming software and training clients.  “They’re [congress] doing what is best politically without really understanding the practical affects on both tax preparers and the overall affects on business owners who are gonna have to administer this through very complicated tax platforms,” adds Blau.

Blau says another concern is that these last minute payroll tax changes make it difficult for tax preparers to educate themselves and then share the information with clients during a busy tax season.