Tax season is here and the nation's smallest businesses should take note of significant tax changes for 2008 as they get their paperwork in order.

The National Association for the Self-Employed put together a handy list for micro-businesses and the self-employed. It's also hosting a series of tax seminars around the country beginning mid-March.

First-Time Homebuyer Credit - More than half of all U.S. businesses are based out of an owner's home, so new home buyers should note this 2008 tax incentive: Offices located inside a first-time home purchase might qualify for tax incentives if the house was bought between Apr., 2008, and June 30, 2009. The $7,500 credit is very similar to a 15-year interest-free loan, according to Keith Hall, tax advisor to the NASE.

Standard Mileage Rates - The standard mileage rate for business use of a car, van, pick-up or panel truck is 50.5 cents per mile from Jan. 1, 2008, to June 30, 2008. The rate is 58.5 cents for each mile driven during the remainder of the year.

Contribution Limits for IRAs/Other Retirement Plans - If an IRA contributor who is not covered by a workplace retirement plan is married to someone who is covered, the deduction is phased out if the couple's income is between $159,000 and $169,000.

AMT Exemption Increased for 2008 - For tax-year 2008 only, the exemption for a married couple filing a joint return is $69,950, up from $66,250 in 2007; $34,975 for a married person filing separately, up from $33,125 and $46,200 for singles and heads of household, up from $44,350.

Talk to the IRS - The IRS is reaching out to taxpayers who are unable to meet their obligations during this economic slump with tax credits, deductions and additional outreach. Visit www.IRS.gov or its small business page for more information on how the agency is working to help business owners in financial distress. Another good resource is Business.gov, which offers small business resources for the self-employed and home-based businesses, among other things.

The Small Business Administration's Office of Advocacy has compiled data for each U.S. state and territory, giving an excellent snapshot of each region's small business activity.

For example, California had 718,220 small businesses in 2006 and created 87.6 percent of the state's net new jobs from 2004 to 2005. (The SBA defines small businesses as employing fewer than 500 people.)

The health care and social assistance industry was Louisiana's largest small business employer in 2006, while the construction industry was Virginia and Maryland's biggest small business employer that year.

The report pulls together information on each region's number of firms, demographics of business ownership, small business income, banking, business turnover, industry composition and employment gains and losses by business size.

It's worth a visit to check out that status of small business in your state.

My 4 ½-year-old daughter recently embarked on a gardening project at preschool, which found its way home as a dirt-filled pot. She promptly placed it smack in the middle of the dining room table as the not-yet floral centerpiece.

"What's this on the table?" my puzzled husband asked when we were getting ready for dinner a few weeks ago. My daughter replied: "It's paperwhites. They're in there. You know, growing."

"It does look like a paperweight," he said, which prompted the wail: "No, not a paperweight, a paperwhite!" But I think she's overheard me on a few too many interviews, because she added: "It's dirt now, but give it a chance. It's a startup."

Paperwhite LLC turned into a fine looking bouquet and spurred the job creation of a constant waterer.

I'm happy to report that the nation's leaden economy is being lifted by other, less dirt-filled startups.

A new Kauffman Foundation-funded U.S. Census Bureau study reports that startup companies are a major contributor to job creation. The statistics also indicate that while business startups decline slightly in most of the cyclical downturns, they remain robust even in severe recessions, according to the sample period of the early 1980s.

"Our research into the early years of business formation consistently shows how vital new firms are to our economy, and this data should give policymakers and budding entrepreneurs alike great hope for how we can solve our current crisis--create and grow jobs through entrepreneurship," said Robert Litan, a vice president with Kauffman.

The data show that employment accounted for by U.S. startups from 1980 to 2005 was about 3 percent per year. That's a small fraction of overall employment, but the jobs from startups reflect new jobs, which is a large percentage compared to the average annual net employment growth of the U.S. private sector for the same period -- about 1.8 percent. This pattern suggests that -- if you exclude the jobs from new firms -- the U.S. net employment growth rate is negative on average, according to the study.

Firms with one to four employees accounted for a large percentage of new jobs in any given year -- about 20 percent on average. Although substantially larger startup firms (those with 250 to 499 employees) created a considerably smaller percentage of jobs -- about 1.3 percent of employment -- their numbers are substantial relative to net growth.

There's an interesting court case in Oregon that has piqued the interest of the small business community.

The case before the Oregon Supreme Court addresses whether an employer should be held liable for unlawful employment practices. In Emerald Steel Fabricators v. Bureau of Labor and Industries of the State of Oregon, the employer chose not to hire a temporary drill-press operator as a full-time employee after the worker disclosed that he would not be able to pass a drug test because he uses medical marijuana to treat his anxiety, nausea, cramps and vomiting. Oregon has a law on the books allowing medical marijuana use.

Lower courts favored the worker and said the employer was liable for discharging the temp worker because of his disability and for failing to accommodate the disability. The drill-press operator performed satisfactorily, according to the shop foreman. The operator used marijuana one to three times a day and never used marijuana at work or while on the employer's property.

The National Federation for Independent Business has filed a friend-of-the-court brief asking the state supreme court to overrule the lower court's decision. The association says that employers have a right to maintain a drug-free workplace and should not be forced to make accommodations for workers that use marijuana pursuant to the Oregon Medical Marijuana Act.

"Requiring employers to accommodate patients who use marijuana compromises an employer's ability to provide employees and the public with a safe workplace," said Karen Harned, executive director of NFIB's legal center. "Further, impaired employees miss more work than their drug-free coworkers and are more likely to make mistakes when they are at work. Employers may also be liable for misdeeds committed by drug-using employees."

Small Business readers, what do you think? Take the poll and leave your thoughts in the comments below.

The Small Business Administration has added a couple of new online courses, including "Downshifting in a Slowing Economy: A Business Planning Guide." That course is designed to help business owners reorganize and streamline business strategies. Other tools include a new automated business plan template, and an assessment and strategies guide for surviving in a sluggish economy. The agency also offers resources to small firms that are uncertain about what actions to take in the current economy.

In other SBA news, the agancy is hosting National Small Business Week in Washington, D.C., May 18-22. Not many details are available yet, but they will be rolled out at www.nationalsmallbusinessweek.com.

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The Washington D.C. Economic Partnership will release the Asian editions of the "Doing Business in D.C. Guide Book" on Jan. 28. The free manual, distributed to local universities, business resources providers and foreign embassies, has been translated into Mandarin, Korean and Vietnamese. It is already available in English and Spanish. To register for the book release event at the Chinatown Cultural Center taking place from 9:30 to 11 a.m., please click here or contact Natalie Cofield at ncofield@wdcep.com or 202-661-8679.

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As of Jan. 1, the D.C. government requires all businesses that pay business taxes to have a valid D.C. Basic Business License. The D.C. government estimates 12,000 unlicensed businesses will be required to obtain a General Business License. The Department of Consumer and Regulatory Affairs has created an information page to assist with compliance.

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Making Cents International, a group dedicated to youth enterprise, is looking for sponsors for the February publication of "State of the Field in Youth Enterprise Employment and Livelihoods Development: Market-Driven Approaches; Monitoring, Evaluation, and Impact Assessment; and Youth Financial Services." It will include toolkits, portals and learning events related to youth enterprise, employment and livelihood development.

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The National Federation of Independent Business has named Dan Danner to replace Todd Stottlemyer as its next president and CEO. Stottlemyer is returning to the private sector on Feb 1. Danner currently oversees the group's public policy and political activities, as well as its non-profit operations: Research Foundation, Small Business Legal Center and Young Entrepreneur Foundation.

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The IRS announced that taxpayers in four states will file to different processing centers this year. Taxpayers in Delaware, New York and Rhode Island will now send their tax returns to the IRS Kansas City Service Center in Kansas City, Mo. Taxpayers in Illinois will now send their tax returns to the IRS Fresno Service Center, in Fresno, Calif. E-filers in those states will experience no changes.

Karen Gordon Mills is on tap to become the next chief of the Small Business Administration, but an investigative news report questions whether she's the right person for the job.

ProPublica, an independent, non-profit newsroom, reports that the private equity fund run by Mills when she was head of Solera Capital has raised about $250 million for its sole fund, much of it from public pensions, "but has made meager payouts to investors thus far."

The giant California pension fund CalPERS has put more than $72 million into Solera, but by the end of June had received just $102,345 in distributions. The Oregon Public Employees Retirement System has invested about $51 million and has gotten back less than $2 million, according to reporter Robin Fields.

Solera, started by Mills and two other women, bought controlling interests in Latina Media Ventures, the publisher of Latina magazine, organic pasta brand Annie's Homegrown, The Little Clinic (a chain of walk-in health clinics), clothing retailer Calypso Christiane Celle and YOLO, an eco-friendly paint manufacturer.

But the fund does not appear to have cashed out of any of them, either through public offerings or sales to other investors.

"Most investors would not be happy with that type of performance," according to a financial expert cited in the article. "Eventually, it's almost all about the cash out."

A spokeswoman for Obama's transition team said Mills, currently president of MMP Group, another private equity firm, would not respond to questions until her confirmation hearing, for which no date has been set. The transition team also declined to comment, either about Mills' work with Solera or more generally about her qualifications to lead the SBA.

Dear Readers: This is part of an occasional series of articles looking at different tools small businesses are using to help automate their administrative and back-office tasks. These aren't the only tools in their field, but an example of what some small firms are doing to make their daily operations run more smoothly.

A 2000 law gave digital signatures the same legal weight as those made with ink on paper, and Jason Lemkin is predicting that 2009 will be the year that electronic signatures and e-contracts become boring "in a good way."

Lemkin is the CEO and co-founder of EchoSign, a 16-employee business largely serving small and medium-size firms with a way to offer simple, electronic, binding contracts.

The service offers basic contract documents like a rental agreement, which a user can edit and upload it to the EchoSign Web site in a way that's similar to uploading an attachment to an e-mail.

Jason Lemkin's e-signature company aims to help small firms do more business online. (Courtesy of EchoSign)

"Our idea was to do for small and medium businesses what the shopping cart had done for e-commerce in the '90s and make a way for businesses anywhere in the country or world to close a contract," said Lemkin, a serial entrepreneur who began his professional life as a corporate attorney working with startups. Today, about 80 percent of Palo Alto, Calif.-based EchoSign's customers are smaller firms and about 20 percent are segments of larger firms like Dell, SAP and Dun and Bradstreet.

Lemkin said he realized that in 2005 a large part of the business world was doing business via e-mail plus attachments, but there was still a lot of printing and mailing of contracts, insertion orders, human resources paperwork, ad orders and other documents requiring a signature.

"We wanted to do something more exciting than faxing online," said Lemkin, who started parenting Web site Babycenter.com and a firm that brought nano-sized batteries to market for things like implantable medical devices. "We love the boring, mundane and high volume. We're not trying to automate the big contracts, we're trying to automate the boring contract that you use to bring home the bacon."

He said the service can be an important tool for sales because "the more friction you take out of the sales process, the better chance you have of closing the deal." EchoSign's data show that the average amount of time to sign a contract via its service is 42 minutes. It stores the documents on its secure servers unless a client requests otherwise.

The fee structure ranges from free for five monthly e-signatures up to $99 monthly for more users, unlimited use, storing and tracking, and although it's not the only company in the field, it's one of the only ones to focus on small firms, according to Lemkin.

People generally are very receptive of electronic contracts because they've been e-mailing each other and talking to each other about a product or service beforehand. "It's not like these contracts are just being sent out like spam," he said.

About 30 percent of EchoSign's customers use its service outside of the United States since almost every developed country has an "e-sign" law similar to the one in the United States. But before rushing to pick up your digital pen, be aware that while many countries have made digital signatures legal, they won't necessarily be deemed exactly the same as what's been signed in the United States.

According to Lemkin, countries that accept the U.S. law are Canada, Mexico and the United Kingdom as well as the Benelux (Belgium, the Netherlands and Luxembourg). Australia also has a set of laws that are very similar to the U.S. electronic signature law.

Lemkin says U.S.-based firms can also do business with other countries using EchoSign's fax-back option allowing an e-signature and then a fax of the document with a signature between parties.

If there's a payment problem, a small business will have a binding contract that they can give to a collection agency if necessary, said Lemkin.

Here are links to some other "cool tools" I've written about recently:

* MuseWorx was formed to help small firms efficiently and effectively swap large files online.

* Cloud computing enables small firms to let someone else deal with computer servers and other technology infrastructure.

* Start-up Shoeboxed offers a way to digitize, analyze, store and export paper receipts.

* SuccessFactors offers online human resources tools for small businesses.

There's no shortage of ideas on how to generate more jobs to help boost the nation out of its economic doldrums, but many members of the small business community are waiting to follow the lead of the new administration before making any expensive or big-impact decisions.

"Main Street can not be forgotten," Ted Allison, who represents the business community of St. Joseph, Missouri, told the House Small Business Committee on Wednesday in reference to ways the government can help businesses get better access to capital.

"The vacuum has been leadership," he said, referring to a lack of direction from government leaders, especially the current presidential administration.

The hearing, which featured voices from entrepreneurs across many industries, examined the current state of the small business economy and identified what policies could help strengthen it.

"Small businesses will be instrumental to our nation's economic recovery," said Congresswoman Nydia M. Velázquez (D-N.Y.), chairwoman of the House Small Business Committee.

Allison said immediate action from Congress "is imperative," calling for an increase from 2.5 percent to 5 percent the amount of federal funding allocated for Small Business Innovation and Research grants and for more small business development counselors.

Allison, speaking to a packed conference room that forced many attendees to sit on the floor, also said government should provide a 20 percent tax credit to insured individuals and employers who contribute to health care coverage and to exempt the first $30,000 of a small business's net earnings from self-employment tax.

With the nation's unemployment rate reaching a 15-year high of 7.2 percent, "the viability of small businesses is more important that ever," said economist Paul Merski of the Independent Community Bankers of America. He noted that while community banks represent about 12 percent of all bank assets, they make 20 percent of all small business loans and about half of the loans under $100,000 made to small firms are made by community banks.

He said "costly and negative" changes to the Small Business Administration loan program in recent years have forced hundreds of community banks to drop out of SBA programs while a handful of the nation's largest banks dominated SBA lending.

"This gross imbalance in SBA lending was a recipe for disaster," he said.

He suggested that the SBA offer a loan program that guarantees 95 percent of the loan and reduces lender and borrower fees by half of their current level for small business loans up to $500,000.

Merski also noted that 60 percent of all small business lending is backed up by "some kind of real estate collateral," causing suffering for many small business owners whose finances are tied to the failing housing market.

Margot Dorfman of the U.S. Women's Chamber of Commerce echoed some of his concerns, saying the "freefall" happening in small business lending must stop.

"The SBA should be given the authority to directly process small business loans and when necessary, provide high government guarantees," she said.

One surefire way to boost the economy is to invest in the nation's infrastructure; it's an approach that creates jobs and improves daily life, according to contractor Steve Massie who spoke on behalf of the Associated General Contractors of America. Every $1 billion invested in infrastructure projects would create more than 28,500 new jobs, he said. Additionally, at least $100 billion of new infrastructure projects have been delayed because of constricted credit markets.

Many firms are waiting to invest because they're waiting to see "what will be the pattern of the new administration and what path" they head down, according to Massie.

The National Electric Contractors Association lauded President-elect Obama's stimulus plan for including green energy construction and high performance buildings. Timothy Ehmann of O'Connell Electric of Victor, N.Y., who spoke for the association, said his firm's revenues from clean energy technologies have increased from $1 million to more than $20 million during the last five years.

He also recommended a repeal of a 3 percent withholding tax that imposes withholding on all government payments, including government contracts.

Ehmann also said small firms should be given the opportunity to carry back their losses for five years, not the current two years allowed.

Executives from two telecommunications trade associations also called for investment in the nation's infrastructure, specifically citing the benefits of more broadband.

About 80 percent of the members of the Telecommunications Industry Association are small and medium size businesses, said group President Grant Seiffert.

"Start-ups and garage inventors are the lifeblood of our industry, innovation that results from high-risk endeavors many times leads to the household names we have become familiar with over the years," he said.

He also called for a $25 billion grant program for deployment of broadband infrastructure in unserved areas like rural regions.

The U.S. Telecom Association, whose two largest members are Verizon Communications and AT&T, also has many smaller company members.

Alan Roth, senior executive vice president with the group, largely agreed with Seiffert, adding that "broadband is now propelling forward virtually every category of the U.S. economy" including innovations in health care, education and environmental sustainability.

Velázquez said the findings from the hearing would be put in a report and given to Democratic leadership.

Entrepreneurs by nature are an optimistic group, but many of them seem to have misplaced their rose-colored glasses last year.

Forty-three percent of the self-employed and micro business owners say this is the worst economic downturn that they have ever experienced and 25 percent say it's the first slump they've experienced with their current business, according to a study by the National Association for the Self-Employed.

Seventeen percent responded that they might scale back the purchase of inventory or equipment, while 14 percent are considering dipping into personal savings to bolster their business. Eleven percent may cut staff or refrain from hiring new staff and 10 percent might lower prices of products or services.

Meanwhile, payroll processor SurePayroll reports that despite the economic woes, small businesses increased in size on average during 2008, but salaries declined.

SurePayroll said small business hiring was up 3.5 percent last year, although hiring increases declined with each passing month of the year. For example, October month-over-month growth was 0.28 percent while November dipped to 0.26 percent and December clocked in at 0.22 percent.

The company found that small business salaries declined 3.1 percent, with the average small business salary in the United States at about $31,610.

While that's not good news for many small business employees, it is for the many small business owners who can pay less for talent now than a year ago, said the SurePayroll report. Additionally, the data show that contractor hiring increased 8.3 percent from 2007 -- the biggest yearly increase since 2004.

"In times of uncertainty, small businesses will hire human capital on a plug-and-play basis," said the report. This is partly a way to avoid the longer-term liability of an extra full-timer on the payroll but it's also a way to lower expenses because contractors don't require payroll taxes and benefits.

All hail the Flowbee, billed as the "revolutionary home hair-cutting system," which you've probably seen in an infomercial on late night TV.

But now, advertisements for inventions like the Flowbee could be headed for prime time, thanks to recent dramatically reduced TV ad rates.

The lower ad rates could be an opportunity for small firms and entrepreneurs who have long wished to include a TV spot as part of their marketing plans, but couldn't because of the cost.

National Public Radio last week aired an interview with the top executive at TeleBrands, a direct response firm that's been in the business of infomercials for 25 years. President and CEO A.J. Khubani said car firms, which typically represent 40 percent of all TV advertising, have slashed their budgets in half, which is dramatically pushing up the amount of unsold airtime.

He said, he's now able to buy prime-time slots, which he called "beach front property at trailer park prices." Khubani said part of his firm's success is that it helps advertise products geared toward saving people money. People are still buying -- just differently. As Khubani noted, lipstick sales traditionally go up in a down economy because they're "inexpensive mood enhancers."